Significant Trademark Decisions in 2017: Free Speech Trumps Lanham Act’s Restrictions on Disparaging and Scandalous Trademarks

Ben Natter, Haug Partners LLP

haug partners

During 2017, two heavily anticipated decisions came down from the Supreme Court and the Federal Circuit, respectively, concerning section 2(a) of the Lanham Act, which encompassed the disparagement and scandalous clauses. Section 2(a) of the Lanham Act, 15 USC § 1052(a), previously barred the registration of marks that contained or comprised of immoral or scandalous material or material that would be disparaging. As a result of these decisions, the United States Patent and Trademark Office (USPTO) can no longer refuse applications on the basis of either of the respective clauses or cite such clauses as the basis for cancellation of a mark because to do so would violate the First Amendment of the United States Constitution. 

Previously, the USPTO could refuse to register an application for a trademark under either of these grounds. For example, the USPTO would traditionally evaluate whether an application for a mark should be refused if a substantial portion of the general public would find the mark scandalous, or by establishing that the mark is “vulgar”. This determination would be made in the context of contemporary attitudes, which meant that the determination for scandalous or immoral content would change over time.

The future implications of these landmark decisions remain to be seen, but it is likely that there will be an immediate impact on the volume of trademark applications that are more overtly offensive. Furthermore, it remains an open question whether, in view of these decisions, there are any restrictions to marks that were once considered disparaging or scandalous, and also whether there may be additional challenges to the constitutionality of other Lanham Act exclusions. 

 

THE UNITED STATES SUPREME COURT’S DECISION IN MATAL V TAM: THE DISPARAGEMENT CLAUSE 

In June 2017, the United States Supreme Court delivered its decision in Matal v Tam, which addressed the issue of whether a disparaging trademark can be federally registered. The Court, in a unanimous opinion, ruled that the USPTO’s denial of an application for registration of a service mark for the mark “The Slants” on the basis of the mark being disparaging was incorrect, and that the disparagement clause of the Lanham Act violated the Free Speech Clause of the First Amendment of the United States Constitution, thus affirming the Federal Circuit’s opinion. 

As background, Simon Tam filed a service mark application for the mark “The Slants” in connection with entertainment services offered by his band, the Slants. The USPTO denied the application for “The Slants” on the basis that it was disparaging (as a note, the term “slants” can be used as a derogatory term for persons of Asian descent). Tam appealed the USPTO’s decision to the Federal Circuit, and the court sitting en banc found that the disparagement clause violated the First Amendment’s free speech clause. The USPTO appealed this decision to the Supreme Court, and the Supreme Court granted the USPTO’s petition for a writ of certiorari. 

The Court’s opinion, authored by Justice Samuel Alito, addressed three main arguments in determining the constitutionality of the disparagement clause: 

  • whether trademarks are government speech or private speech; 
  • whether trademarks are a form of a government subsidy; and 
  • whether the constitutionality of the disparagement clause should be tested under a new “government-program” doctrine. 

 

The Court rejected all three arguments and held that the disparagement clause of the Lanham Act was unconstitutional. First, the Court found that trademarks are private speech, not government speech. This finding was an important part of the constitutionality analysis because an exception to viewpoint discrimination is if the speech or expression at issue is government speech. Secondly, the Court also determined that trademarks were not a government subsidiary because the government does not confer a monetary benefit upon the trademark applicant. Lastly, the Court concluded that the disparagement clause would not be constitutional under a “government-program” doctrine, thus rejecting the government’s argument, and noted that the disparagement clause denies registration to any mark that a substantial portion of the public finds offensive. The Court found that this action by the government, here, the USPTO, constituted viewpoint discrimination and thus held that the disparagement clause was unconstitutional under the First Amendment. 

It is important to note that both the Federal Circuit and the Supreme Court in this case found that the disparagement clause constituted viewpoint discrimination and thus would be facially unconstitutional under the free speech clause of the First Amendment. The Supreme Court in other cases has noted that the First Amendment prohibits the government from regulating speech that favours some viewpoints or ideas and treats other viewpoints differently at the expense of others. Notably, Justice Alito in the opinion of the Court also concluded that because the disparagement clause constituted viewpoint discrimination, this clause “offends a bedrock First Amendment principle: Speech may not be banned on the ground that it expresses ideas that offend.” 

 

THE FEDERAL CIRCUIT’S DECISION IN IN RE BRUNETTI: THE SCANDALOUS CLAUSE 

The Federal Circuit decision in In re Brunetti came five months after the Supreme Court’s decision in Matal and concluded that the scandalous clause of section 2(a) of the Lanham Act was unconstitutional. As background, Mr Brunetti owns a clothing brand called fuct, and was assigned the trademark application for the mark “fuct” and amended the application to allege use of the mark. The USPTO refused the application for use of the mark on clothing apparel on the grounds that the mark was scandalous or immoral. Following the refusal, Mr Brunetti requested reconsideration and appealed the decision to the Trademark Trial and Appeal Board but to no avail. Mr Brunetti then appealed the decision to the Federal Circuit. 

Mr Brunetti’s main argument was that the substantial evidence relied upon by the Board to find the mark “fuct” vulgar did not support this finding. Additionally, Mr Brunetti argued that even if the court found the mark to be vulgar, section 2(a) did not expressly prohibit registration of vulgar marks, and where there is no doubt as to the meaning of the mark, as was the case with the mark “fuct”, the application for registration should be approved. In the alternative, Mr Brunetti challenged the constitutionality of the scandalous clause. 

The Federal Circuit did find that the mark “fuct” was vulgar and therefore scandalous. However, despite this finding, the court noted that the First Amendment protects private speech, even in cases where it is offensive to the general public and that the scandalous clause amounted to a content-based restriction on speech. The court here applied a four-part test from another Supreme Court case, Central Hudson Gas & Electric Corporation v Public Service Commission of New York, for deciding free speech challenges to provisions of the Lanham Act. In applying this test, the court ultimately held that scandalous provision discriminates based on content in violation of the First Amendment. The court here cited to Matal in various parts of the majority opinion in support of its analysis.

Although the Federal Circuit relied upon Matal as the basis for some of its reasoning, an important distinction between the Supreme Court’s decision in Matal is that the Supreme Court found that the disparagement clause constituted viewpoint discrimination, whereas the Federal Circuit here concluded that the scandalous clause was a content-based restriction. Unlike viewpoint discrimination, content-based restrictions regulate the substance of the message being communicated, as opposed to the limiting of certain ideas or viewpoints. 

Lastly, the majority opinion noted that statutes are construed as narrowly as possible in order to preserve their constitutionality; however, the majority concluded here that it was not reasonable to construe the scandalous clause as confined to “obscene” material (ie, material that is limited to that of a sexual nature). Interestingly, in a separate concurrence, Judge Dyk disagreed with this conclusion that there could be no reasonable narrow construction of the statute to preserve the constitutionality of the scandalous clause. Judge Dyk urged adopting a narrowing construction and suggested that one possible reading of the scandalous clause could be to limit the clause to cover obscene marks. However, in this case, Judge Dyk noted that Mr Brunetti’s mark was not obscene and thus agreed with the majority that the decision of the Board must be reversed. It is important to note that obscene marks fall outside the protection of the Free Speech Clause and are not covered by the First Amendment, and Judge Dyk’s dissent in Brunetti may provide an insight on how the USPTO may deny trademark applications outside the scandalous clause if the marks are considered “obscene”. Such denials may give rise to additional challenges to marks rejected by the USPTO. 

Following the Federal Circuit’s decision, the USPTO filed a petition for a full rehearing en banc; however, the court denied the government’s request on 12 April 2018. Whether the USPTO will appeal the case to the Supreme Court is yet to be seen. 

 

IMPLICATIONS 

Additional guidance from the USPTO for marks previously subject to refusal under the disparagement and scandalous clauses 

Shortly after the Supreme Court’s decision in Matal, the USPTO issued updated guidance in the form of Examination Guide 01-17, entitled “Examination Guidance for Section 2(a)’s Disparagement Provision after Matal v. Tam and Examination for Compliance with Section 2(a)’s Scandalousness Provision While Constitutionality Remains in Question”. In this guidance, the USPTO noted that although the provisions in the Trademark Manual of Examining Procedure regarding the disparagement clause would no longer apply, the provisions regarding the scandalous clause will still apply pending the Federal Circuit’s decision in Brunetti on the constitutionality of this provision. 

Although the USPTO has not yet issued updated guidance after the Federal Circuit’s decision in Brunetti, if there is no appeal of the court’s decision in Brunetti to the United States Supreme Court, it is likely that the USPTO will again issue updated guidance to supplement Examination Guide 01-17 regarding how trademarks with arguably disparaging or scandalous content will be examined in the aftermath of these decisions. 

 

An increase in trademark applications submitted to the USPTO 

Because of the benefits and protection of federal trademark registration, the USPTO may see an increase in the number of applications for trademarks that would before be refused registration. As a direct result of these decisions, companies and other trademark applicants may choose more controversial brand names moving forward, and seek to “reclaim” a gesture or term (similar to Simon Tam in Matal) that underlie stereotypes or meanings associated with such gestures or terms. Additionally, new applications may even include a more broad variety of industries now seeking to register their marks. Something to note is that because the mark at issue in Brunetti was not considered “obscene” and the court found the scandalous clause to be unconstitutional, it remains to be seen whether this will have an effect on applications that contain potentially obscene marks.  

The Supreme Court’s and Federal Circuit’s respective decisions in Matal and Brunetti marked a turning point on the interpretation of trademark applications and approval or denial of such applications, as well as the constitutional implications of such approvals or denials. The disparagement and scandalous clauses vested a kind of authority in the government to protect certain groups from disparagement in the public sphere and from highly offensive or immoral marks. Because these restrictions no longer exist, and as of yet, there are no apparent other restrictions on who can take advantage of the decisions in Matal and Brunetti, the effect of these decisions is that there appears to be little legal recourse to those dissatisfied in such instances where potentially disparaging or scandalous trademarks arise. The main question will now focus on whether there will be any restrictions to such controversial trademarks at all and the bounds of Matal and Brunetti for free speech implications. 

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