Brands that Bite

In the United States, trademark ownership rights arise from use of a mark in commerce in connection with goods or services. Federal trademark registration at the PTO is not a prerequisite to owning a mark, but it significantly enhances the trademark owner’s rights and generally increases the mark’s value as a business asset. In other words, Congress has incentivized trademark owners to register their marks by bestowing benefits upon registration. The registration process generally takes about a year and involves a multi-step evaluation. The PTO can refuse to register a mark based on several statutory grounds, one of which has been the disparagement clause.

The Matal v. Tam case began with just such a PTO refusal, in an application filed by the lead singer of an Asian-American dance-rock band which calls itself “The Slants.” The PTO refused to register the band’s name under the disparagement clause, even though the band deliberately chose the name in an effort to weaken the term’s offensiveness as an ethnic slur. The Federal Circuit Court of Appeals vacated the refusal, finding that the disparagement clause is unconstitutional under the freedom of speech component of the First Amendment. This week, the Supreme Court unanimously affirmed the Federal Circuit’s ruling.

The disparagement clause violates the First Amendment because it allows the PTO to engage in content-based discrimination when deciding whether to register a mark. The Court emphasized that “the government may not prohibit the expression of an idea simply because society finds the idea offensive or disagreeable.” The First Amendment shelters speakers from punishment for expressing disfavored viewpoints: “the proudest boast of our free speech jurisprudence,” said the Court, quoting Oliver Wendell Holmes, one of its most famous members, “is that we protect the freedom to express the thought that we hate.”

Since trademarks constitute commercial speech, the government argued it has a strong interest in restricting marks as necessary to protect consumers. The Court recognized the government’s compelling interest in restricting commercial speech which discriminates against persons based on race, gender, ethnicity, sexual orientation, national origin, or religion, but said the vague wording of the disparagement clause allows it to be applied too broadly to satisfy the First Amendment. The restriction in the disparagement clause reaches any trademark that disparages any person “living or dead,” and any institution, belief or national symbol. “It is not an anti-discrimination clause,” the Court said, but rather, “a happy-talk clause” which “goes much further than necessary to serve the interest asserted.”

This decision almost certainly will have an impact on the high-profile litigation over the registered trademarks of the Washington Redskins professional football team. In 2014, the PTO cancelled various registrations for the REDSKINS trademark under the disparagement clause, finding that the mark may be disparaging to Native Americans. The cancellation decision is on appeal in the Fourth Circuit, and Monday’s high court ruling in Matal v. Tam supports the team’s position that the disparagement clause should not bar registration of its marks.

The ruling also opens the door to a potential flood of registrations for trademarks that many people will find offensive, including a host of pending applications that already have received a disparagement refusal but had been suspended by the PTO while the Tam case proceeded through the courts. For example, refused applications for CERTIFIED STREET NIGGAS for “baseball caps, t-shirts” and NIGGAWOOD STUDIOS for “multimedia entertainment services” are now likely to proceed on to publication, the next step for those applications in the trademark registration process.

A different provision of the trademark law, not at issue in Tam, prohibits registration of marks that are “immoral” or “scandalous” and the PTO generally cites this clause as the basis for refusing marks that are vulgar, sexually explicit, or contain profanity. The PTO presumably still has the authority to block registration of marks on this basis, but it remains to be seen whether this restriction on commercial speech can withstand First Amendment scrutiny.