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Entries in Lanham Act (2)

Monday
Jun262017

Disparaging, Degrading, Derogatory Trademarks: They're Now Enforceable Says Supreme Court

 

Franchise and Trademark LawyerIntellectual Property Lawyer

 

 

by Tal Grinblat

(818) 907-3284

 

You may remember that several national sports franchises are under fire for trademarks and branding that is seen to be racially disparaging. The Washington Redskins are the first team to come to mind, and it wasn’t too long ago that we all thought they had an uphill, and probably losing legal battle to keep their name registered.

Trademark Law

That battle is likely over now that the U.S. Supreme Court weighed in on a trademark dispute for a rock band.

At issue? First Amendment rights. And the Court decided definitively and unanimously to uphold those rights, though the individual justices cited different reasons for doing so.

The Slants Challenge USPTO

Simon Tam is the lead singer for The Slants – a name the all Asian-American, Portland group was unable to register with the U.S. Patent and Trademark Office (USPTO) because the agency found the moniker to be disparaging, if not outright racist. In reaching its decision, the USPTO found that the word “slants” is a derogatory term for persons of Asian descent and that a substantial composite of persons would find the mark to be offensive.

It therefore refused registration relying on the Trademark Act provision, which allows for trademark registration refusals if a mark:

Consists 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; . . .

Tam appealed the refusal to the Trademark Trial and Appeal Board. When the Board sided with the Examining Attorney at the agency, Tam filed a lawsuit, which took him on a seven year trek through the justice system, and ultimately to the Supreme Court. “This journey has always been much bigger than our band: it’s been about the rights of all marginalized communities to determine what’s best for ourselves,” Tam said.

Why did the Supreme Court Side with The Slants?

Band members contend that though “Slants” is a racially-charged term to describe persons of Asian descent, using the term for the name of their band would dilute the denigrating aspects of the word. The Court Opinion said the band hoped to “reclaim” and “take ownership” of stereotypes about people of Asian ethnicity.

In delivering their opinion, Justices Samuel Alito, Clarence Thomas and Stephen Breyer sided with the Band and against the government, ruling:

We now hold that this provision violates the Free Speech Clause of the First Amendment. It offends a bedrock First Amendment prin­ciple: Speech may not be banned on the ground that it expresses ideas that offend. . .

Procedurally, trademark examiners were required to use a two part test to determine if a mark is disparaging. They considered the likely meaning of the mark, including dictionary definitions, relationship of the matter to other elements in the mark, nature of the goods and services and manner in which the mark is used in connection with the goods and services.

If the mark refers to specific persons, institutions, beliefs or national symbols, the examiner then was required to consider whether or not the mark is disparaging to a substantial composite of persons given contemporary attitudes. If that proves to be true, the trademark applicant must prove the mark is not disparaging to continue with registration, generally an uphill battle.

In defending the claim that the USPTO’s decision did not violate the Band’s First Amendment free speech rights, the Government contended that:  

  1. Trademarks are government speech, not private speech;

  2. Trademarks are a form of government subsidy; and

  3. The constitutionality of the disparagement clause should be tested under a new ‘government-program” doctrine. 

The Supreme Court rejected all three USPTO arguments.

Regarding the first argument, the Supreme Court explained that “[t]rademarks have not traditionally been used to convey a Government message” and that trademarks are private (coined by individuals to name their products and services) and not government speech. They explained:  

Holding that the registration of a trademark converts the mark into government speech would constitute a huge and dangerous extension of the government-speech doctrine. For if the registration of trademarks constituted govern­ment speech, other systems of government registration could easily be characterized in the same way. . .

As to the USPTO’s second argument, the Court found that trademarks are not a form of government subsidy, as the USPTO is not paying trademark applicants to register their marks, but rather it is the applicant who must pay a filing fee as well as renewal fees to keep the trademark on the Register.

As to the USPTO’s third argument, Justice Alito stated the U.S. Supreme Court has already ruled repeatedly that “the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers,” and that “government may not prohibit the expression of an idea simply because society find the idea itself offensive or disagreeable”.

Therefore, the disparagement clause in the Trademark Act could not be saved by viewing it as a type of government program in which some content and speaker-based restrictions are permitted.

Disparagement Clause Found Overbroad and Unenforceable

free-speech-trademark-lawThe next matter the court considered was under what standard the band’s free speech rights should be viewed – specifically, whether trademarks should be viewed under the more relaxed scrutiny of commercial speech (whereby speech may be more easily restricted) or expressive speech which warrants a higher level of scrutiny.  

The Court found that it did not need to resolve this debate because the “disparagement clause” could not withstand either level of scrutiny. For commercial speech to be curtailed, it must serve a “substantial interest” and must be “narrowly drawn”.

Here the Supreme Court found that the disparagement clause failed this requirement as the “clause reaches any trademark that disparages any person, group or institution.”  In other words, the Clause goes further than necessary to serve the interest asserted. If the government could curtail any speech by labeling it a commercial speech, free speech would be endangered.

Accordingly, the Court held that the disparagement clause violated the Free Speech clause of the First Amendment resulting in the band finally being able to register their mark.  

Practical Implications for Brands Like The Slants

This seminal Supreme Court decision changes trademark law in a significant way.

The Disparagement Clause was part of the original Trademark Act passed by Congress in 1870, nearly 150 years ago. It has been used by the USPTO to block what the agency deemed offensive marks for over a century.

The Supreme Court’s decision now will allow both individuals and companies to register expressive brands regardless of whether the message is offensive, hateful or inappropriate. But that is a little price to pay to protect our freedom of expression. As the Court indicated, “the proudest boast of our free speech jurisprudence is that we protect the freedom to express ‘the thought that we hate’”. 

 

Tal Grinblat is an Intellectual Property Attorney and a Certified Franchise & Distribution Law Specialist.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Monday
Jun052017

Franchisors, Got Claims? Don't Let Them Spoil Like Bad Cheese

Franchise LawyerChair, Franchise & Distribution Practice Group

by Barry Kurtz

818-907-3006

 

This is the tale of two restaurants, each facing trademark infringement claims under the Lanham Act brought by two, separate franchisors. The franchisees’ restaurants had three things in common: First, cheese is a key ingredient in their respective menus (which detail is only critical to cheese-lovers, but we like lists of three). Second and more importantly, time was a key ingredient in their respective defenses.

The third common element is that both defendants won. Here's why:

Both restaurateurs employed a laches defense. The Laches Doctrine is an old but often used defense employed when an unreasonable amount of time has passed between a supposed transgression by the defendant and a legal complaint is made by the plaintiff. Here are the details:

Delays May Cause Grouchy-ness

In Groucho's Franchise Systems, LLC v. Grouchy's Deli, Inc. (d/b/a  Grouchy's New York Deli and Bagels and referred to as "Deli" to avoid confusion), an 11th Circuit Court of Appeal upheld the trial court's ruling that the franchisor's (Groucho's) claim was barred by laches.

To sum up, Groucho's has been doing business in South Carolina since 1941, opened 20 additional locations over time, and finally registered its trade name in 1997. The Deli opened its restaurant in 2000 in Georgia.

In 2004, Groucho's sent the Deli a letter alleging the Deli was infringing on the franchisor’s registered mark. The letter further stated the franchisor planned to open a location in Atlanta sometime in the future, and that upon that occasion, would take legal action to stop the Deli's infringement. The Deli registered its own mark in 2005 and opened a second location. Thereafter, both concepts expanded their operations.

In 2013, Groucho's sent the Deli another letter, asking the Deli to change its name because of the risk of confusion between Groucho's and Grouchy's.  The Deli did not respond, and Groucho's franchisor followed up with a warning about a lawsuit. This time the Deli replied that there was no likelihood of confusion. Groucho's finally filed a lawsuit in 2014.

Among other allegations, Groucho's claimed trademark and service mark infringement in violation of the Lanham Act, unfair competition, unjust enrichment, and that the Deli's name would cause market confusion. The district court granted summary judgment for the Deli.

The 11th Circuit Court stated that a laches defense requires proof of three elements:

1. There must be a delay in asserting a claim;

2. The delay must not be excusable; and

3. The delay must cause the defendant undue prejudice.

The Court further opined that during the decade in which Groucho's waited to challenge the Deli's service mark; the Deli built business value around its own mark; registered its mark without opposition; and opened another restaurant which it later sold, licensing the buyer at the time to use the Deli's recipes and proprietary property. In short, the Deli "rel[ied] to its detriment" on Groucho's silence. The Court also characterized Groucho's behavior as "tortoise-like", and upheld the district court's decision.

If Groucho's wanted a successful shot at protecting its name, the franchisor should have taken legal action in 2004.

Franchisor Cheesed Off…Eventually

In Noble Roman's Inc. v. Hattenhauer Distributing Company, time plays a role again.

Noble Roman's of Indiana franchises pizza outlets and submarine sandwiches. Hattenhauer owns convenience stores and gas stations in Washington and Oregon. In 2006, the parties entered into franchise agreements to sell pizza and sandwiches at Hattenhauer locations – Hattenhauer agreed to only use ingredients that conform to the franchisor's specifications.

During an audit in 2014, Noble Roman's discovered Hattenhauer underreported sales. The franchisee disputed the claims and refused to pay royalty fees. Noble Roman's also claimed the franchisee was using inferior cheese rather than the franchisor's proprietary cheese, since 2011. In its 2014 lawsuit, Noble Roman's added unfair competition and breach of contract to its other claims.

Let's allow the cheese claim to stand alone:

Noble Roman's alleged the franchisee's use of subpar cheese violated the Lanham Act "because it deceived customers into paying full price" for a product that was not, in essence, a Noble Roman's product. The franchisor also claimed injury because it lost control of products sold under its trademark.

Hattenhauer on the other hand, claimed the franchisor knew about the cheese switch since 2010, because the franchisor received monthly reports from the approved supply distributor indicating that Hattenhauer was not buying its cheese.

In considering the facts, the court determined that the harm was not to customers who ate bad cheese, but to the franchisor, who may have been perceived by those customers to be serving bad cheese, which the court characterized as a claim for injury to personal property.

That being the case, the court then pointed out that the statute of limitations for personal property was two years in Indiana and found that Noble Roman's four year delay on its cheese claim was unreasonable, and that Hattenhauer was prejudiced by this delay. The court granted summary judgment for Hattenhauer regarding the trademark infringement claim.

Both cases reveal the harm caused to a plaintiff by sitting on its claims.

Barry Kurtz is a State Bar of California Certified Specialist in Franchise & Distribution Law.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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