In an 8–0 decision, the Supreme Court of the United States affirmed an en banc panel of the US Court of Appeals for the Federal Circuit and found the disparagement clause of the Lanham Act to be facially unconstitutional under the free speech guarantees of the First Amendment. Matal v. Tam, Docket No. 15-1293 (Supr. Ct., June 19, 2017) (Alito, Justice) (Kennedy, Justice, concurring) (Thomas, Justice, concurring).

The case affirmed the Federal Circuit holding that § 2(a) of the Lanham Act, which since 1946 has denied federal registration of trademarks that may “disparage . . . or bring . . . into contemp[t] or disrepute” any “persons, living or dead,” is facially unconstitutional under the First Amendment’s free speech clause (IP Update, Vol. 19, No. 1).

This has been a long-fought case for Simon Shiao Tam, the lead singer of the Asian-American dance-rock band The Slants—a band name that, according to Tam, was adopted to “reclaim” and “take ownership” of Asian stereotypes and slurs. In 2011, Tam filed an application for federal registration of the mark THE SLANTS in connection with entertainment services in the nature of live musical performances. When the US Patent and Trademark Office (PTO) and the Trademark Trial and Appeal Board (TTAB) refused registration of the mark under § 2(a) of the Lanham Act as disparaging and likely offensive to a “substantial composite” of people of Asian descent, Tam appealed to the Federal Circuit in 2015, where the en banc panel ultimately found the disparagement clause facially unconstitutional. In 2016, the Supreme Court granted the government’s petition for certiorari (IP Update, Vol. 19, No. 10).

Before tackling the three primary contentions set forth by the government, Justice Alito’s opinion dismissed a preliminary argument raised in Tam’s brief, which alleged that the disparagement clause does not reach trademarks that disparage racial or ethnic groups, since those non-juristic entities are not “persons” as contemplated by the language of the statute. Instead, the Supreme Court found that the “plain terms” of the disparagement clause do not target only marks that disparage a particular natural person, and that Congress did not intend such a confinement of the clause, despite prior “regrettable” and inconsistent decisions by the PTO granting registration of trademarks that clearly denigrate racial or ethnic groups, including African-Americans and Native Americans.

The Supreme Court then turned its attention to the government’s three primary arguments, which were aimed at eliminating any First Amendment protection or at least inviting only a rational-basis review of the disparagement clause.

Trademarks Are Private Speech

The government argued that trademarks are government speech, not private speech, as the government’s own speech is exempt from First Amendment scrutiny. The Court vehemently disagreed, noting that the PTO has made it clear that federal trademark registration by the government does not constitute approval of a mark, that registration under the Lanham Act is largely mandatory if a trademark meets the Act’s viewpoint-neutral requirements, and that trademarks have not traditionally been used to convey a government message. Citing examples of registered trademarks, Alito opined that if trademarks were indeed government speech, then the “Federal Government is babbling prodigiously and incoherently” and “unashamedly” endorsing a wide array of commercial products, while sending messages such as “Just do it” or “Have it your way” (referring to popular registered trademarks owned by Nike and Burger King).

Holding that trademarks are private speech, the Supreme Court distinguished the case at hand from government speech cases cited by the government, including the Walker Texas license plate case, and outlined the dangers of expanding the government-speech doctrine to any system of government registration, including the copyright registration system.

Trademarks Are Not Government Subsidies

The Supreme Court also dismissed the government’s argument that trademarks are a form of government subsidy. As noted in Alito’s opinion, all of the supporting cases cited by the government on this point pertained to cash subsidies or their equivalent, while the federal trademark registration system “is nothing like the programs at issue” in the cited cases, and instead requires that trademark applicants support the process through application, registration and maintenance fees.

No New “Government Program” Doctrine

Finally, the Supreme Court wholly rejected the government’s proposal to create a new “government program” doctrine under which to review disparaging trademarks and under which certain content- or speaker-based restrictions may be permitted. On this point, the Court opined that even if the government could analogize its proposal to cases in which the government creates a limited public forum for private speech, “viewpoint discrimination” is still forbidden in those instances. And, according to the Supreme Court, the disparagement clause discriminates on the basis of viewpoint since “[g]iving offense is a viewpoint.” Justice Kennedy’s concurring opinion also focused on “potent” viewpoint discrimination and argued that First Amendment protections under viewpoint discrimination render much of the Court’s discussion on other issues “unnecessary.”

Disparagement Clause Cannot Withstand Even Relaxed Scrutiny

On the question of whether trademarks are commercial speech subject to relaxed scrutiny, the Supreme Court declined to resolve that debate between the parties and instead concluded that the disparagement clause cannot withstand even relaxed Central Hudson review. In short, the Supreme Court noted that the thrust of the disparagement clause is improperly intended to prevent the expression of ideas that offend, and is not a “narrowly drawn” anti-discrimination clause but a “happy-talk clause” that goes “much further than necessary to serve the interest asserted.”

Justice Kennedy, along with the concurring opinion from Justice Thomas, made a point to note that even if trademarks are considered commercial speech, there is still no exception to the heightened scrutiny required whenever government regulation of speech is based on viewpoint.

Practice Note: As the disparagement clause has found itself in the center of other recent trademark disputes—most notably the 2014 cancellation of federal trademark registrations owned by the Washington Redskins—this affirmation of the Federal Circuit will undoubtedly affect other pending trademark litigation and may result in an influx of newly filed “offensive” trademark applications and re-filed applications that were previously refused registration. The PTO also will be working through a backlog of pending applications that were suspended pending the Supreme Court’s decision in the Slants case.