What’s the News?

In an opinion of potentially sweeping effect, the Court of Appeals for the Federal Circuit recently held that a key provision of the Lanham Act was unconstitutional under the First Amendment. In particular, the court’s decision in In Re Tam struck down a provision requiring the United States Patent and Trademark Office (USPTO) to refuse registration of any trademark deemed to be “disparaging.” The court held that the provision was an unconstitutional “viewpoint-based regulation,” authorizing the USPTO to deny registration—and the legal benefits that accompany it—to applicants based upon the expressive content of their trademarks. This decision opens the door to the registration (or re-registration) of numerous trademarks that have been refused or cancelled on grounds of disparagement in recent years—most notably, the REDSKINS registrations owned by the National Football League’s Washington Redskins until their cancellation by the Trademark Trial and Appeal Board (TTAB) in 2014.

Legal and Factual Background

Simon Tam is an Asian-American who fronts a “dance-rock” group known as “The Slants.” The group chose this racial epithet as its name in an attempt to “reclaim” the slur and bring attention to racism and discrimination against people of Asian descent. In November 2011, Tam filed an application with the USPTO seeking to register THE SLANTS as a trademark. Registration was denied under Section 2(a) of the Lanham Act, which prohibits the registration of a mark that “[c]onsists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.”  According to the examiner, refusal was required because the mark consisted of a long-established derogatory racial term that referred to people of Asian descent in a disparaging way.

The refusal was appealed to, and affirmed by, both the TTAB and the Federal Circuit. The Federal Circuit explained that even though Tam was not using the mark with disparaging intent—indeed, as Tam explained, the band’s name was an expression of racial pride—the mark owner’s intent was not the appropriate legal test. Rather, the question under Section 2(a) was whether a “substantial composite” of people of Asian descent would find the mark disparaging. According to the court, substantial evidence suggested that this was the case. The court also denied Tam’s request to strike down Section 2(a)’s disparagement bar as unconstitutional under the First Amendment. Under long-standing Federal Circuit precedent set in In re McGinley, 660 F.2d 481 (C.C.P.A. 1981), the refusal to register a trademark was not a restriction on speech because the trademark owner remained free to use the unregistered mark.

However, only a week after its opinion affirming the examiner’s refusal, the Federal Circuit surprisingly announced that it would revisit the constitutionality of the disparagement bar in an en banc review, signaling to many observers that the court was willing to overturn McGinley and strike down the provision.

The Court’s Opinion

Such predictions proved to be correct. In the court’s recent opinion, it rejected the reasoning set forth in McGinley, finding the disparagement bar to be a significant restraint on First Amendment-protected speech. While trademark owners remain free to use a mark after registration is refused, they do so without the benefits that accompany registration. For example, the owner of a federally registered trademark has a right to the exclusive nationwide use of the mark, whereas unregistered marks are entitled to exclusive use only in the geographic regions where they have actually been used. Registered marks also enjoy a presumption of validity, and are eligible for “incontestable” status after five years of consecutive post-registration use. The First Amendment, the court held, does not permit the government to bestow these “financially valuable” benefits based upon the expressive content of the applied-for trademark.

According to the court, the disparagement bar creates a strong disincentive to adopt a potentially “disparaging” trademark. “Faced with the possibility of being denied a registration—or worse, cancellation after years of investment-backed brand development—new brand owners are more likely to avoid brand names that may be arguably controversial for fear of later being deemed ‘disparaging,’” the court explained, quoting an amicus brief filed by the American Civil Liberties Union. The court found this “chilling effect” to be significant. Observing “the expressive power of trademarks,” the court explained that “[w]ords—even a single word—can be powerful.”  By disincentivizing the expression of ideas through “disparaging” trademarks, however, the disparagement bar prevented “cultural and political discussions” that are “within the heartland of speech protected by the First Amendment.” Of course, striking down the provision will lead to the registration of trademarks that, unlike THE SLANTS, are intended to be hateful. But “the First Amendment protects even hurtful speech,” the court held.

The court found the disparagement bar particularly problematic because it was a “viewpoint-based regulation.” That is, it permitted the USPTO to discriminate based upon the “idea or message expressed” in the applied-for trademark. The court rejected the government’s argument that the disparagement bar was, in fact, “viewpoint neutral,” noting that the law only prohibited registration of trademarks expressing a negative view of a particular group, as opposed to all views on that group. Viewpoint-based regulations are a “particularly egregious” form of discrimination, requiring a compelling justification to withstand the heightened scrutiny they receive from courts. The government did not argue that the disparagement bar could survive such scrutiny.

Instead, the government made a number of other arguments as to why the disparagement bar did not implicate the heightened scrutiny applied to viewpoint-based regulations. For example, the government argued that trademarks are “commercial speech,” which under settled First Amendment jurisprudence is entitled to less protection than “expressive speech.” The court rejected this argument, noting that the disparagement bar is “squarely based on the expressive aspect of the” trademark, rather than any commercial-speech aspects. Further, the court held that the provision could not survive even the more forgiving scrutiny applied to regulations of commercial speech. The government argued, alternatively, that a registered trademark is actually government speech—rather than private speech— to which the First Amendment does not apply. The court found this argument to be without merit, explaining that the “manifestations of government registration”—such as the right to append the ® symbol to the trademark—“do not convert the underlying speech to government speech.” Rejecting all of the government’s arguments in support of the disparagement bar, the court invalidated the provision as unconstitutional.

Notably, while the court limited its decision to the constitutionality of the disparagement bar, it acknowledged that other registration bars in Section 2(a) “may likewise constitute government regulation of expression based on message, such as the exclusions of immoral or scandalous marks.” Whether those provisions pass constitutional muster will likely be determined in subsequent challenges.

The Takeaway

This decision does much more than permit Simon Tam to obtain a registration for THE SLANTS. Indeed, it opens the door to the registration (or re-registration) of numerous “disparaging” marks that have been refused or cancelled, most notably the cancelled REDSKINS trademarks. As discussed in previous Arent Fox alerts, in June 2014 the TTAB cancelled six trademark registrations held by the NFL’s Washington Redskins, finding them to be disparaging to Native Americans. In July 2015, the team sought de novo review in federal district court, but the court affirmed the cancellation. That case is currently on appeal in the Fourth Circuit. The decision in In re Tam does not guarantee that the Fourth Circuit will follow its sister circuit in striking down the disparagement bar, but the development surely does not hurt the Redskins’ case. If the Fourth Circuit were to disagree, finding the disparagement bar constitutional, the resulting “circuit split” would likely be a top priority for Supreme Court review next term.