Federal Circuit Strikes Down Federal Ban on Disparaging Marks as Unconstitutional

In a landmark ruling that departs from decades-old precedent, on December 22, 2015, the U.S. Court of Appeals for the Federal Circuit held that the Lanham Act’s prohibition of “disparaging marks” violates the First Amendment’s guarantee of free speech. In re Simon Shiao Tam, Case No. 2014-1203 (Fed. Cir. Dec. 22, 2015). The decision is sure to be discussed by the Court of Appeals for the Fourth Circuit next year when it decides whether it was lawful for the United States Patent and Trademark Office (USPTO) to cancel registration of the marks owned by the NFL’s Washington Redskins, on the basis that the REDSKINS mark is disparaging to Native Americans.

The decision by the Federal Circuit involved the USPTO’s denial of trademark registration to an “Asian-American dance-rock band,” for their band name, THE SLANTS, a name the band intended to “reclaim” and “take ownership” of Asian stereotypes. Reasoning that the proposed mark was “likely disparaging to ‘persons of Asian descent,’” the USPTO denied federal trademark registration under the disparagement provision found in § 2(a) of the Lanham Act. A panel of three Federal Circuit judges affirmed, citing Circuit precedent that had rejected the constitutional argument on the grounds that the USPTO’s “refusal to register a mark under § 2(a) does not bar the applicant from using the mark, and therefore does not implicate the First Amendment.”

Sitting en banc, a divided Federal Circuit vacated the panel’s holding, overruled its prior precedent, and invalidated the disparagement provision, holding that the restriction cannot survive any of the levels of scrutiny applied to different types of restrictions on private speech. Starting with the premise that § 2(a) is a content and viewpoint-discriminatory regulation of speech, the Federal Circuit rejected the government’s arguments why the provision should not be subjected to strict scrutiny, an exacting standard that the government conceded the provision could not survive.

Citing the Federal Circuit’s prior precedent, the government contended that strict scrutiny does not apply because the Lanham Act does not prohibit expressive speech, but rather regulates commercial speech since the putative registrant is “free to name his band as he wishes and use this name in commerce.” Rebuffing this argument, the Federal Circuit found that federal trademark registration “bestows truly significant and financially valuable benefits upon markholders,” such as the right of exclusive nationwide use and the ability to recover treble damages for willful infringement, the denial of which creates a “serious disincentive to adopt a mark which the government may deem offensive or disparaging,” thus chilling private speech.

If trademark registration constitutes regulation of commercial speech, the Court held, the restriction would then be subjected to intermediate scrutiny, and even under that less exacting standard, the disparagement provision is still unconstitutional because the only interest the government has in prohibiting disparaging trademarks is its “disapproval of the message,” an interest that is not “legitimate” for First Amendment purposes.

Going forward, In re Tam is likely to have an immediate effect on other Circuits’ decisions when faced with similar issues, such as the Fourth Circuit’s future decision in the REDSKINS case. Moreover, the Federal Circuit hinted in a footnote that the decision may affect the other provisions of the Lanham Act that regulate expressive speech, such as the provision that permits the government to deny registration of a mark determined to be “immoral” or “scandalous.” The Government will almost certainly ask the Supreme Court to review the decision, but until the Supreme Court takes up the case, the USPTO will be barred from rejecting marks determined to be “disparaging.”

For more information on the Lanham Act or implications of In re Simon Shiao Tam, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com.

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