Ban on ‘Immoral” and ‘Scandalous’ Trademarks Ruled Unconstitutional

We do not often see “the F word” discussed in judicial opinions, but a ruling on December 15, 2017 was an important and somewhat comedic exception, which officially opened the floodgates to federal registration of many more (but still not all) trademarks regardless of their content.

Following the U.S. Supreme Court’s unanimous landmark ruling in Matal v. Tam earlier this year (which involved an Asian rock band that was refused trademark registration for its name, “The Slants,” and in which the Supreme Court found the Lanham Act’s “disparagement” clause unconstitutional for violating the First Amendment), on December 15, 2017, a three-judge panel of the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) issued its long-awaited (but not too surprising) opinion in In Re: Brunetti, unanimously finding the Lanham’s Act’s “immoral” and “scandalous” clauses unconstitutional for largely the same reasons.

At issue in Brunetti, was a trademark application for the term FUCT as used on apparel, which the applicant, Erik Brunetti, has continuously used as a trademark in connection with apparel since 1990. The United States Patent & Trademark Office (“USPTO”) refused to register the mark in July 2013, considering it the phonetic equivalent of the F word and therefore “vulgar” and within the Lanham Act’s ban on “scandalous” and “immoral” trademarks. Brunetti appealed to the Trademark Trial and Appeal Board (“TTAB”), arguing the term is neither scandalous nor immoral. After the TTAB affirmed the refusal, Brunetti appealed to the Federal Circuit in 2014, which put the case on hold after the Supreme Court agreed to hear Tam in 2016, as there was a strong possibility that the Supreme Court’s decision would resolve Brunetti.

At issue in Tam was Section 2(a) of the Lanham Act, which provides, in relevant part, that that the USPTO may refuse to register any trademark 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.” In Tam, the Supreme Court found the disparagement clause unconstitutional because it constituted “viewpoint discrimination” and the government failed to meet the exceedingly difficult corresponding level of judicial review known as “strict scrutiny.” While many Tam observers opined that the Supreme Court might find Section 2(a) unconstitutional in its entirety (thereby dictating a reversal by the Federal Circuit in Brunetti), its opinion was expressly limited to the unconstitutionality of the disparagement clause. The Court’s reasoning in Tam, however, strongly indicated that the immoral and scandalous clauses should also be considered unconstitutional for the same reasons.

After Tam was decided without expressly finding Section 2(a) unconstitutional in its entirety, the Federal Circuit requested additional briefing on the impact of Tam to Brunetti. The government argued that Tam did not resolve the constitutionality of the immoral and scandalous provisions “because the disparagement provision implicates viewpoint discrimination, whereas the immoral or scandalous provision is viewpoint neutral.” While expressing its doubts, the Federal Circuit did not find it necessary to resolve that issue because regardless of whether the immoral and scandalous provisions discriminate based on viewpoint (which requires strict scrutiny), they clearly discriminate based on content (which requires intermediate scrutiny) and the provisions could not survive either level of review. The government also argued that trademark registration constitutes a government subsidy program or, in the alternative, a limited public forum, which are subject to lower levels of judicial scrutiny. Peculiarly, these last two arguments were the same ones the government made, and which the Supreme Court rejected, in Tam. As the Federal Circuit noted, however, even if trademark registration constituted a government subsidy program or a limited public forum, regulations targeting expressive conduct cannot escape heightened scrutiny.

Nevertheless, echoing the Supreme Court’s conclusions in Tam, the Federal Circuit declared that trademark registration is not a government subsidy program within the meaning of the U.S. Constitution’s Spending Clause (under which Congress may lawfully attach certain conditions to the use of its funds “to ensure they are used in the manner Congress intends”) because trademark registration does not “necessarily and directly implicate Congress’ power to spend or control government property.” While federal registration of trademarks confers important legal rights and benefits, it is not analogous to the receipt of federal funds, tax exemptions or deductions, or other financial benefits from Congress, which case law demonstrates is necessary to justify an extension of the government subsidy doctrine. Trademark applicants cannot receive funds from the USPTO, but rather themselves pay fees to the USPTO, which uses them solely for operational expenses directly associated with registration. As the Federal Circuit noted, attenuated spending by the government in connection with merely operating a federal registration program does not automatically implicate the Spending Clause or transform a registration program into a government subsidy program. If that were the standard, then every government registration program, including for copyrighting expressive works, would provide the government with censorship authority.

Similarly, just because registered trademarks appear on the USPTO’s principal register “does not transform trademark registration into a limited public forum. The government does not open the principal register to any exchange of ideas—it is . . . simply a database identifying the marks approved for use in commerce.” (By “approved for use in commerce,” the Federal Circuit simply meant that the registered marks are capable of distinguishing sources of goods or services, are not likely to result in consumer confusion, and have met other statutory prerequisites for registration including payment of fees.)

Moreover, the Federal Circuit reasoned, while trademarks can convey both commercial and expressive messages, because “the immoral or scandalous prohibition targets the expressive component” of speech, a strict scrutiny analysis must be applied to it (i.e., whether “the restriction furthers a compelling interest and is narrowly tailored to achieve that interest.”) Presumably relying on Tam (which applied strict scrutiny to the disparagement clause), the Federal Circuit summarily declared that the provisions could not survive strict scrutiny. Quoting Justice Kennedy’s concurrence from Tam, the Federal Circuit stated that while the “central purpose of trademark registration is to facilitate source identification,” a prohibition against immoral, scandalous and disparaging marks “bears no plausible relation to that goal.”

While the Federal Circuit could have ended its opinion there, it went on to explain why the immoral and scandalous provisions could not even survive intermediate scrutiny if evaluated under the commercial speech doctrine (which, among other things, allows the government to prohibit false and misleading advertising). Chief among those reasons was that the government could not identify a “substantial government interest” satisfactory to the Federal Circuit, that would be furthered by a ban on immoral or scandalous trademarks.

For instance, the Federal Circuit asserted, protecting the public from “off-putting” marks and shielding UPSTO examining attorneys from being “forced to decide whether one drawing of genitalia is confusingly similar to another drawing of genitalia,” are not substantial enough interests to overcome the First Amendment. Further, even if these were substantial interests, the ban would still fail to directly advance those interests because it “does not directly prevent applicants from using their marks.” Applicants, like Mr. Brunetti, can still (and do) use any term or other source-identifier in connection with their goods and services, regardless of whether it is federally registered. Additionally, the ban is impermissibly more extensive than necessary to achieve its purpose, as demonstrated by the vagueness of the immoral and scandalous provisions, which have produced a remarkable number of inconsistent results over the years, and because determinations of what is and is not vulgar are inherently subjective and vary over time. Among other examples, the Federal Circuit discussed 40 trademark applications containing the term MILF, only 20 of which were refused under the ban.

The Federal Circuit also considered whether it could construe Section 2(a)’s immoral and scandalous provisions as confined to prohibiting “obscene” materials (i.e., of a sexual nature), which the Supreme Court has held can be regulated, and which Federal Circuit Justice Dyk advocated in his concurring opinion. The Federal Circuit majority, however, concluded that while Congress could rewrite Section 2(a) to prohibit registration of obscene marks, the Federal Circuit could not reasonably construe the immoral and scandalous provisions as confined to that category as “not all scandalous or immoral marks are obscene. All apples are fruit, but not all fruits are apples.”

While the government may appeal to the Supreme Court, as it did in Tam, the Supreme Court would not be required to hear the case, and even if it did, the appeal would likely fail given the Court’s unanimous ruling in Tam earlier this year.

While scandalous and immoral marks are now fair game, the Federal Circuit’s decision does not mean that any mark can suddenly become federally registered, such as marks used in connection with goods and services that are still considered illegal under federal law (e.g., marijuana). While the scandalous and immoral provisions of Section 2(a) have served as one basis for refusal of such marks in the past, among other criteria for federal registration (e.g., no likelihood of confusion with other registered or pending trademarks), the goods and services used in connection with applied-for marks must still be federally lawful. (37 C.F.R. § 2.69; TMEP § 907.) For example, marijuana-related trademarks may be permissible for clothing, but not for marijuana products and services, even though they may be lawful in some states.

While the USPTO still has many other bases to refuse trademark registrations besides the now defunct disparagement, scandalous and immoral clauses of Section 2(a), in light of Tam and Brunetti, we will likely soon see a lot more applications filed and registrations granted for arguably offensive and controversial marks. While the propriety of using such marks to distinguish one’s goods and services may be questionable and even result in the loss of would-be customers, in some circumstances they could actually provide value to brand owners.