In re Simon Shiao Tam

In case with potentially far-reaching effects, including on Washington Redskins’ ongoing legal battle to maintain federal trademark registration, Federal Circuit sitting en banc strikes down federal statute that permits denial of trademark registration for “disparaging” marks as unconstitutional burden on free speech, reversing Trademark Office’s refusal to register The Slants as name for Asian-American rock band.

Simon Shiao Tam is the frontman in an Asian-American rock band called The Slants. Tam named his band The Slants in order to “reclaim” and “take ownership” of Asian stereotypes. In 2011, Tam filed an application with the U.S. Patent and Trademark Office to register the service mark “THE SLANTS” for “Entertainment in the nature of live performances by a musical band.” The examiner refused to register Tam’s mark under Section 2(a) of the Lanham Act, which permits the rejection of marks that “may disparage” an identifiable group of Americans, finding that “even though Tam may have chosen the mark to ‘reappropriate the disparaging term,’ a substantial composite of persons of Asian descent would find the term offensive.” The Trademark Trial and Appeal Board affirmed, and Tam appealed to the U.S. Court of Appeals for the Federal Circuit. A three-judge panel affirmed the TTAB’s ruling in April 2015, finding that it was bound by a 1981 precedent of the Federal Circuit upholding the constitutionality of Section 2(a). One week later, the Federal Circuit sua sponte vacated the decision and announced that it would reconsider the case en banc. On rehearing, the en banc Federal Circuit concluded that the disparagement provision of Section 2(a) was unconstitutional.

Section 2(a) contains various grounds on which an application to register a trademark may be denied, or an existing registration may be canceled. At issue was the bar on registration of a mark that may disparage persons or is scandalous or immoral. The Federal Circuit first decided that Section 2(a) is subject to strict scrutiny, finding that the provision burdens private speech based on disapproval of the message conveyed, and therefore is neither content- nor viewpoint-neutral. The court rejected the government’s argument that Section 2(a) is viewpoint-neutral, pointing out that marks are rejected when used in a negative way and are permitted when referring to a group in a positive manner. It pointed to instances where the PTO treated identical marks in different ways (e.g., “SQUAW VALLEY” was allowed in connection with one of the applied-for classes of goods, but not in connection with a different class of goods). 

The court also rejected the federal government’s argument that a lower standard of scrutiny should be applied because Section 2(a) regulates “commercial speech,” which is entitled to less protection than purely expressive speech, finding that the provision regulates the expressive aspects of the mark, not its function as commercial speech. The government also contended that Section 2(a) does not implicate the First Amendment at all, because it does not prohibit speech. Tam was free to name his band as he wished and to use the name in commerce without registering a trademark in the name. The Federal Circuit cited numerous cases standing for the proposition that a denial of benefits is in effect a penalty or censorship of speech. “Federal trademark registration brings with it valuable substantive and procedural rights unavailable in the absence of registration[,]” denial of which “has a chilling effect on speech,” the court noted.

Next, the federal government argued that trademark registration — such as the registrant’s right to attach the registered trademark symbol (®) to the mark, the mark’s placement on the Principal Register and the issuance of a registration certificate — constituted government speech not protected by the First Amendment. The Federal Circuit disagreed. The court distinguished Walker v. Texas Sons of Confederate Veterans, in which the U.S. Supreme Court concluded that specialty license plates were government speech, on the grounds that license plates are owned by the government and legally required to be displayed, whereas the government does not “own” a trademark and the registrant is free to decide whether or not to use the registration symbol. As with copyright registration, the Federal Circuit noted, registration of a trademark does not convert the underlying speech to government speech, and the PTO “does not endorse any particular product, service, mark, or registrant” when it registers a mark. 

The en banc panel also rejected the government’s argument that 2(a) was merely the equivalent of a government subsidy program, which permits more restrictive regulations on speech. Under the unconstitutional conditions doctrine, “even though a person has no ‘right’ to a valuable governmental benefit … there are some reasons upon which the government may not rely” to deny that benefit, it noted. Whereas the subsidy cases all involved government funding or government property, trademark registration, in contrast, “does not implicate Congress’s power to spend or to control use of government property.” Trademark registration is not a subsidy — unlike a subsidy, the benefits of registration, while valuable, are not monetary. Moreover, although the PTO is funded by government appropriations, these appropriations have been funded entirely by registration fees, not the U.S. treasury, added the Federal Circuit.

Finally the Federal Circuit reasoned that, even under the intermediate scrutiny standard applied to commercial speech, Section 2(a) would be unconstitutional because it fails under the test for commercial speech set forth in the Supreme Court’s decision in Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y. Under that two-pronged test, commercial speech first must concern lawful activity and not be misleading. The Federal Circuit deemed this prong was met, as there was no claim that disparaging trademarks are unlawful or mislead the public as to the source or sponsorship of the associated goods or services. Second, a substantial government interest must justify the regulation. The Federal Circuit concluded Section 2(a) fails under this prong. Although the federal government argued that it had a legitimate interest in disassociating itself from speech it found odious, the Federal Circuit explained “disapproval is not a legitimate government interest where there is no plausible basis for treating the speech as government speech or reasonably attributed to the government by the public.” Similarly, the court rejected the government’s claim that it had a compelling interest in fostering racial tolerance, citing Bob Jones University v. United States, in which Supreme Court held that the government had an interest in combating racially discriminatory conduct, but not a more general interest in fostering racial tolerance that would justify preventing disparaging speech.