The United States Court of Appeals for the Federal Circuit ruled on Tuesday that the Lanham Act’s prohibition on the registration of disparaging marks – which was central in the controversy over the name of the professional football team the Washington Redskins – is unconstitutional.  This drastic change to U.S. trademark law will pave the way for owners of marks that may be viewed as disparaging to a certain group to reap the benefits of federal registration.

Before this ruling, Section 2(a) of the Lanham Act would have prohibited registration of trademarks that consist of “matter which may disparage … persons, … institutions, beliefs, or national symbols.”  To determine if a mark was disparaging under this Section, a U.S. Patent and Trademark Office (“PTO”) Examiner would have first considered the likely meaning of the mark, then whether that meaning referred to identifiable persons, beliefs or national symbols, and finally whether that meaning may be disparaging to a substantial composite of the referenced group.  If the PTO Examiner found that a substantial composite of the group would find the mark to be disparaging, registration could be refused.

Although this provision first appeared in the Lanham Act in 1946, it was not until the last several decades that it has become a more frequent basis for rejection or cancellation of trademark registration.  This provision was central in the long-standing battle over the mark used by the professional football team the Washington “Redskins,” which some critics label as a racial epithet.

Relevant to Tuesday’s ruling, this provision was also used to deny registration of the mark THE SLANTS to a band owner who chose the mark to “make a statement about racial and cultural issues in this country.”  Specifically, the PTO Examiner found the mark to be likely disparaging to “persons of Asian descent” under Section 2(a).  The Trademark Trial and Appeal Board affirmed the PTO Examiner’s decision to refuse registration.  The case then went to the United States Court of Appeals for the Federal Circuit, who considered whether Section 2(a) violated the First Amendment right to free speech.

When determining whether Section 2(a) was unconstitutional on these grounds, the Court first analyzed whether the provision was “content-based” (targeting speech based on its communicative content), or even more suspect “viewpoint-based” (targeting the substance of the viewpoint expressed).  Here, the Court found that when the government refuses to register a mark under Section 2(a), it does so because it disapproves of “the message a speaker conveys,” and thus the provision is viewpoint-discriminatory on its face.  Indeed, the Court noted that the PTO rejects marks when it finds the marks refer to a group in a negative way, but permits the registration of marks that refer to the same group in a positive way.  For example, while the PTO refused registration of THE SLANTS in this case, it previously registered marks such as CELEBRASIANS and ASIAN EFFICIENCY.

Such regulations are presumptively unconstitutional and are only justified if the government proves that they are narrowly tailored to serve compelling state interests.  Thus, “strict scrutiny” is the proper standard of review for Section 2(a), and no argument was made that this Section survived such scrutiny.  Indeed, Section 2(a) cannot be justified on the basis that it furthers the Lanham Act’s purpose to prevent consumers from being deceived.

As in the Washington Redskins case, the government contended that First Amendment scrutiny was not applicable, as nothing in Section 2(a) prohibits speech since applicants are free to use their mark without federal registration.  The Court was not persuaded.

First, the Court noted that:

While it is true that a trademark owner may use its mark in commerce even without federal registration, it has been widely recognized that federal trademark registration bestows truly significant and financially valuable benefits upon markholders.

For example, the holder of a federally registered mark has a right to exclusive nationwide use of the mark anywhere there is not already a prior use that proceeds registration.  Also, a registrant enjoys prima facie evidence of a mark’s validity and of its ownership and exclusive use of the mark.  A registrant can also stop the importation of goods bearing the mark, and recover treble damages for willful infringement.   “Common law” use of a trademark without registration does not provide these rights.

Further, even if an applicant is able to obtain a registration initially, its mark may be challenged under this provision years later, as in the Washington Redskins case, after significant investments have been made in promoting the registered mark and developing its goodwill.

Because of the denial of these benefits, and because of the ongoing uncertainties, the Court held that “the Section 2(a) bar on registration creates a strong disincentive to choose a ‘disparaging’ mark” and puts “a chilling effect on speech.”

The Court also struck down the government’s other theory that the federal registration program is government speech, stating that the act of registration did not transform private speech into government speech.  Rather, when the government registers a trademark, it regulates private speech.

Thus, the Court ultimately held that

The government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others. The government regulation at issue amounts to viewpoint discrimination, and under the strict scrutiny review appropriate for government regulation of message or viewpoint, we conclude that the disparagement proscription of § 2(a) is unconstitutional.

The Court noted that although many of the marks that have been rejected under this provision conveyed hurtful speech that “harms members of oft-stigmatized communities,” “the First Amendment protects even hurtful speech.”

While this holding may not be applicable to a majority of trademark owners, those affected will have one less hurdle to overcome when seeking federal registration.