Articles Posted in New Decisions

New Albany, Indiana – Patent attorneys for Ligchine International Corporation of Floyds Knob, Indiana initiated a patent lawsuit in the Southern District of Indiana seeking declaratory judgment of non-infringement. Defendant is Somero Enterprises, Inc. of Houghton, Michigan.

This federal lawsuit is in response to a June 2016 letter sent to Ligchine by patent lawyers for Somero. In this letter, Somero asserted that Ligchine was engaged in the manufacture, use, offer for sale, sale and/or distribution of concrete screeding machines containing a “Paver/Superflat Combo Screed Head that includes a powered roller option.” Somero contended that such conduct infringed Somero’s patent rights in U.S. Patent Nos. 9,234,318 and 9,353,490, which have been registered with the U.S. Patent and Trademark Office. Somero threatened litigation if the alleged infringement did not cease.

Ligchine asserts that it has not infringed either patent and asks the court for a declaration of non-infringement for each of the two patents-in-suit. It also asks the court to order reimbursement of its costs of the lawsuit, including attorneys’ fees.

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Washington, D.C. – A unanimous decision by the U.S. Supreme Court this week gave district courts more flexibility to award enhanced damage in cases of willful patent infringement.

This decision consolidated two patent infringement lawsuits, Halo Electronics, Inc. v. Pulse Electronics, Inc., et al. and Stryker Corp. et al. v. Zimmer, Inc., et al, in which Indiana-based Zimmer, Inc. was sued. In each lawsuit, the proper interpretation of the statutory language of 35 U.S.C. §284, which permits district courts the discretion to award enhanced damages in cases of patent infringement, was at issue.

The exercise of that discretion is guided by the principle that enhanced damages are to be limited to cases of egregious misconduct. Prior to this week’s decision, it was also guided by a test elucidated by the Federal Circuit, as set forth in In re Seagate Technology, LLC. This test requires a patent owner to show two things by clear and convincing evidence: first, “that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent” and, second, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”

In a unanimous opinion written by Chief Justice John Roberts, the Court held that while the Seagate standard reflected an appropriate recognition that enhanced damages were to be awarded only in egregious cases, the test set forth by the Federal Circuit “is unduly rigid” and “impermissibly encumbers the statutory grant of discretion to district courts.”

The Court primarily took issue with the requirement that objective recklessness be found, holding that such a threshold “excludes from discretionary punishment many of the most culpable offenders, such as the ‘wanton and malicious pirate’ who intentionally infringes another’s patent–with no doubts about its validity or any notion of a defense–for no purpose other than to steal the patentee’s business.”

The Court also noted that the Seagate test improperly allowed ex post facto defenses in considering culpability. Specifically, under the Seagate test, an infringer could rely on a defense at trial, even if he had been unaware of that defense at the time he had acted. This, the Court held, ignored the general rule that culpability is to be determined by an actor’s knowledge at the time of the conduct in question.

Finally, the Court rejected the requirement that recklessness be proved by clear and convincing evidence, finding it to be inconsistent with §284. Instead, it stated that enhanced damages are no different from patent infringement litigation in general, which “has always been governed by a preponderance of the evidence standard.”

The Court vacated the judgments of the Federal Circuit in both cases and remanded them for further proceedings consistent with the Court’s opinion.

Although this was a unanimous opinion, Justice Breyer authored a concurring opinion, in which Justices Alito and Kennedy joined.

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Indianapolis, Indiana – Judge Jane Magnus-Stinson dismissed a lawsuit by Indiana copyright attorney and professional photographer Richard Bell against Defendant Find Tickets, LLC of Alpharetta, Georgia for lack of personal jurisdiction.

In June 2015, Bell sued Find Tickets in the Southern District of Indiana asserting copyright infringement. He stated that the Georgia-based company had published a copyrighted photo on its website, www.findticketsfast.com, without his permission. The photo in question was one that Bell had taken of the downtown Indianapolis skyline. It had been registered by the U.S. Copyright Office under Registration No. VA0001785115.

On behalf of Find Tickets, a copyright lawyer asked the court to dismiss the complaint for lack of jurisdiction, averring that Find Tickets “does not maintain any offices in Indiana, has no employees in Indiana, holds no assets in Indiana, pays no taxes to the state of Indiana, and has no bank or other financial institution accounts in Indiana.” It was further stated that the business was owned by two Georgia residents, neither of whom had ever set foot in Indiana.

The court turned to a constitutional analysis of the due process requirements for personal jurisdiction, as elucidated by the Seventh Circuit in Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 800-01 (7th Cir. 2014). Citing that appellate case, the district court stated:

Due process is satisfied so long as the defendant had “certain minimum contacts” with the forum state such that the “maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” The relevant contacts are those that center on the relations among the defendant, the forum, and the litigation. However, “[f]or a State to exercise jurisdiction consistent with due process, the defendant’s suit-related conduct must create a substantial connection with the forum State.” Thus, the relation between the defendant and the forum “must arise out of contacts that the ‘defendant himself‘ creates with the forum . . . .” Moreover, although no special test exists for internet-based cases, the Court focuses on whether the defendant has purposely exploited the Indiana market beyond the availability of the website in the forum state. (Citations omitted).

The district court was unpersuaded by Bell’s arguments, opining that the Seventh Circuit precedent set forth in Advanced Tactical “established that a defendant who ‘maintains a website that is accessible to Indiana residents should not be haled into court simply because the defendant owns or operates a website that is accessible in the forum state, even if it is ‘interactive.'”

The court similarly held that, as with Advanced Tactical, Defendant’s sales to residents of the forum state were insufficient to establish personal jurisdiction as it had not been demonstrated that such sales were related to the lawsuit.

Finding no personal jurisdiction over Defendant, the court dismissed the lawsuit without prejudice.

Practice Tip: Overhauser Law Offices, publisher of this blog, represented Defendants Real Action Paintball, Inc. and its president in the appeal to the Seventh Circuit.

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Chicago, IllinoisMagistrate Judge Geraldine Soat Brown of the Northern District of Illinois granted the motion for summary judgment of John Doe, the anonymous Defendant sued by pornographer Malibu Media LLC (“Malibu”) on allegations of copyright infringement.

Plaintiff alleged that, between May 2013 and July 2013, Defendant infringed Malibu’s copyright in 24 movies by downloading them from the internet using file-sharing software known as BitTorrent. Copyright attorneys for Malibu filed a copyright infringement lawsuit against Defendant, stating that Defendant had been identified by the internet protocol (“IP”) address that had been used to infringe. Defendant was permitted to litigate anonymously as “John Doe” (“Doe”).

Malibu submitted various pieces of evidence to support its contentions that Doe had infringed the copyrights on Malibu’s works, including a declaration by the founder of Malibu and declarations of various experts, such as forensic investigators. Doe denied Plaintiff’s claims and contested its method of proof.

The court evaluated Malibu’s evidence, noting that some of it was simply pro forma and included no relevant and particularized statements about the copyright infringement that Malibu alleged had been committed by Doe. The court stated that at least one pleading was described by Malibu as containing attached materials that had not, in fact, been attached. Other material was described by Malibu as having been sent to the court, while the court indicated that it had never been received.

The court also reproached Malibu’s attorneys for misrepresenting to the court the court’s earlier statements regarding the relevant evidentiary requirements to prove Doe’s liability. It further noted that Malibu had failed to adhere to required procedures, such as the serving of several disclosures under Rule 26(a)(2). Because those disclosures had not been made, and because the court held that the failure to disclose was evidence of at least willfulness, if not bad faith, two of Malibu’s declarations were stricken in their entirety as were portions of a third declaration. All of Malibu’s statements of fact that relied upon the stricken material were also excluded from evidence.

The court subsequently concluded that “Malibu has no evidence that any of its works were ever on Doe’s computer or storage device,” stating that Malibu’s contention that Doe had used visualization software to infringe Malibu’s works was merely speculation:

Malibu admits that there is no evidence of visualization software on Doe’s computer, and not even any evidence of the deletion of visualization software. Malibu says that is “beyond fishy,” and speculates that Doe must have deleted visualization software from his computer in some way that hides the fact that it was deleted, and then extends the speculation to suggest that Doe must have done that deletion to hide his infringement of Malibu’s works. That is not evidence that Doe copied or distributed Malibu’s works.

The court granted Defendant’s motion for summary judgment. Plaintiff’s motion for summary judgment, which asked the court to conclude that Doe had infringed its copyrighted works, was denied.

Practice Tip #1: Malibu has filed a multitude of virtually identical lawsuits around the country. According to a recent case in New York, “Malibu is a prolific litigant: between January and May 2014, for example, Malibu was responsible for 38% of copyright lawsuits filed in the United States.” Malibu Media, LLC v. Doe, No 15 Civ. 4369 (AKH), 2015 WL 4092417, at *3 (S.D.N.Y. July 6, 2015).

Practice Tip #2: We have blogged about Malibu Media’s litigation exploits before. Some recent posts include:

Magistrate Rejects Malibu Media’s Request for Fees and Sanctions
Malibu Media Sues Nine Additional “John Does” Asserting Copyright Infringement
Fourteen New Lawsuits Asserting Copyright Infringement Filed by Malibu Media
Malibu Media Alleges Infringement of Thirty Copyrighted Works

Another John Doe Sued by Malibu Media on Allegations of Copyright Infringement

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Washington, D.C. – The Federal Circuit, sitting en banc, reaffirmed its rules of patent exhaustion in a 10-2 decision. It concluded that the Supreme Court decisions in Quanta Computer, Inc. v. LG Electronics, Inc., and Kirtsaeng v. John Wiley & Sons, Inc., did not require any change in the law of patent exhaustion. The 99-page decision was consistent with the position argued in the amicus brief filed by the American Intellectual Property Law Association.

Specifically, the Federal Circuit held that a patentee, when selling a patented article subject to a single-use/no-resale restriction that is lawful and clearly communicated to the purchaser, does not give the buyer, or downstream buyers, the resale/reuse authority that has been expressly denied. Explaining that the ruling in Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992) remains unchanged, Judge Taranto wrote the following:

Such resale or reuse, when contrary to the known, lawful limits on the authority conferred at the time of the original sale, remains unauthorized and therefore remains infringing conduct under the terms of § 271. Under Supreme Court precedent, a patentee may preserve its § 271 rights through such restrictions when licensing others to make and sell patented articles; Mallinckrodt held that there is no sound legal basis for denying the same ability to the patentee that makes and sells the articles itself. We find Mallinckrodt’s principle to remain sound after the Supreme Court’s decision in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), in which the Court did not have before it or address a patentee sale at all, let alone one made subject to a restriction, but a sale made by a separate manufacturer under a patentee-granted license conferring unrestricted authority to sell.

The Federal Circuit also held that a U.S. patentee, by merely selling or authorizing the sale of a U.S.-patented article abroad, does not authorize the buyer to import the article and sell and use it in the United States, which are infringing acts absent authority from the patentee. Explaining that the ruling in Jazz Photo Corp. v. International Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001), remains unchanged, Judge Taranto wrote the following:

Jazz Photo’s no exhaustion ruling recognizes that foreign markets under foreign sovereign control are not equivalent to the U.S. markets under U.S. control in which a U.S. patentee’s sale presumptively exhausts its rights in the article sold. A buyer may still rely on a foreign sale as a defense to infringement, but only by establishing an express or implied license–a defense separate from exhaustion, as Quanta holds–based on patentee communications or other circumstances of the sale. We conclude that Jazz Photo’s no-exhaustion principle remains sound after the Supreme Court’s decision in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013), in which the Court did not address patent law or whether a foreign sale should be viewed as conferring authority to engage in otherwise infringing domestic acts. Kirtsaeng is a copyright case holding that 17 U.S.C. §109(a) entitles owners of copyrighted articles to take certain acts “without the authority” of the copyright holder. There is no counterpart to that provision in the Patent Act, under which a foreign sale is properly treated as neither conclusively nor even presumptively exhausting the U.S. patentee’s rights in the United States.

Judge Dyk filed a dissenting opinion, which was joined by Judge Hughes, that generally agreed with the position argued in the government’s amicus brief.

With respect to Mallinckrodt, Judge Dyk maintained that the decision was wrong from the outset and cannot now be reconciled with the Supreme Court’s Quanta decision. “We exceed our role as a subordinate court by declining to follow the explicit domestic exhaustion rule announced by the Supreme Court,” he added. With respect to Jazz Photo, he wrote that he would retain the ruling if read to say that a foreign sale does not always exhaust U.S. patent rights, but it may if the authorized seller failed to explicitly reserve those rights.

Background

Lexmark makes and sells patented ink cartridges for its printers. It sells cartridges under one plan that permits buyers to use them as they wish, and at a discounted price under a “Return Program” plan that limits buyers to a single use of the cartridge and requires the cartridges to be returned to Lexmark for recycling.

Lexmark brought infringement actions in the district court and the International Trade Commission against Impression Products and other makers of after-market ink cartridges for Lexmark printers. Most of the district court defendants settled the litigation with Lexmark.

As to Lexmark’s action against Impression Products, the district court entered a stipulated judgment on Impression Products motion to dismiss. It held that Lexmark’s patent rights in cartridges first sold in the United States were exhausted under Quanta, but that the rights were retained for cartridges first sold abroad under Jazz Photo.

On appeal, the Federal Circuit sua sponte granted en banc review of whether the appellate court’s ruling on conditional sales in the U.S. must be overruled in light of Supreme Court’s Quanta decision, and whether the appellate court’s Jazz Photo ruling on international exhaustion must be overruled in light of the Supreme Court’s ruling on copyright exhaustion in Kirtsaeng.

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Indianapolis Indiana – Following a Markman hearing, Judge Sarah Evans Barker considered 18 disputed terms in five patents owned by Plaintiff Bonutti Research, Inc. of Effingham, Illinois and licensed exclusively to Plaintiff Joint Active Systems, Inc., also of Effingham, Illinois. Fourteen of the terms were construed. The court held that the remaining four needed no further construction.

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The patents-in-suit are: U.S. Patent No. 5,848,979, U.S. Patent No. 7,955,286, U.S. Patent No. 7,404,804, U.S. Patent No. 7,112,179 and U.S. Patent No. 8,784,343, which had been issued by the U.S. Patent and Trademark Office. It is alleged that Defendant Lantz Medical, Inc. of Indianapolis, Indiana infringed those patents.

The following terms were construed by the court:

• “drive means” (construed in two different contexts)
• “a main gear which is connected with said first cuff means and is rotatable with said first cuff means relative to said base”
• “first extension member”
• “second extension member having an arcuate shape extending therefrom”
• “arcuate shape”
• “arcuate path”
• “travels along an arcuate path through the first extension member”
• “removably attachable to the finger”
• “curved path”
• “a first arm member for coupling to the first body portion and defining a curved path”
• “movable along the curved path”
• “operatively coupled”
• “drive assembly”

• “lockout element”

The court determined that no further construction was necessary for the following terms:

• “base”
• “gear means”
• “second gear is at least partially disposed in a recess in said base”

• “bending mechanism”

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Hammond, Indiana – Trademark litigation commenced in the Western District of Michigan in 2013 was transferred to the Northern District of Indiana yesterday.

This federal lawsuit, filed by trademark attorneys for Plaintiffs Texas Roadhouse, Inc. and Texas Roadhouse Delaware LLC, both of Louisville, Kentucky, alleges infringement of U.S. Service Mark Reg. No. 1,833,533, U.S. Service Mark Reg. No. 2,231,309, and U.S. Service Mark Reg. No. 2,250,966. These marks have been filed with the U.S. Patent and Trademark Office.

The Defendants listed in the Michigan complaint were Texas Corral Restaurants, Inc.; Switzer Properties, LLC; Texcor, Inc.; Texas Corral Restaurant II, Inc.; T.C. of Michigan City, Inc.; T.C. of Kalamazoo, Inc.; Chicago Roadhouse Concepts, LLC; Paul Switzer; Victor Spina; and John Doe Corp. Defendants filed a motion to dismiss or, in the alternative, transfer venue, with the Michigan court, which was granted. The lawsuit will continue in the Northern District of Indiana.

Plaintiffs, via their trademark lawyers, asserted the following claims:

• Count I: Trade Dress Infringement
• Count II: Federal Trademark Infringement
• Count III: Trademark Infringement Under Michigan Statutory Law
• Count IV: Trademark Infringement Under Indiana Statutory Law
• Count V: Trademark Infringement Under Common Law
• Count VI: Copyright Infringement

• Count VII: Unfair Competition Under Michigan and Indiana Common Law

Texas Roadhouse seeks equitable relief; damages, including punitive damages; costs and attorney fees.

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Chicago, Illinois – The Seventh Circuit Court of Appeals held that an injunction against Defendants effecting a prior restraint on defamatory speech regarding the Plaintiffs was improper.

This lawsuit springs from an Indiana event occurring in 1956 wherein Mary Ephrem, a Catholic Sister, claimed to have encountered a series of apparitions of the Virgin Mary. Those apparitions told her: “I am Our Lady of America.” A program of devotions to Our Lady began, which Patricia Fuller joined in 1965. When Sister Ephrem passed away, she willed her property to Fuller. Between Sister Ephrem’s efforts to register intellectual property pertaining to Our Lady and Fuller’s efforts, the program’s assets included both copyrights and trademarks.

In 2005, Kevin McCarthy and Albert Langsenkamp volunteered to assist Fuller in promoting devotions to Our Lady. By 2007, however, the relationship had soured. Langsenkamp established the Langsenkamp Family Apostolate and McCarthy and Langsenkamp (and the latter’s apostolate) claimed to be the authentic promoters of devotions to Our Lady. They also claimed ownership to all documents and artifacts accumulated by Fuller and Sister Ephrem.

Paul Hartman intervened on Fuller’s behalf, “launching a campaign to smear McCarthy’s and Langsenkamp’s reputations.” McCarthy and Langsenkamp, as well as the Langsenkamp Family Apostolate, sued Fuller and Hartman asserting tortious conduct, including conversion, fraud and defamation. Plaintiffs also sought a declaratory judgment that they had not infringed any of Fuller’s intellectual property. Fuller and Hartman counterclaimed, accusing Plaintiffs of theft, infringement and defamation.

The district court conducted a jury trial that resulted in a verdict in favor of Plaintiffs, who were awarded compensatory and punitive damages, as well as attorney’s fees, sanctions and costs. The district court also issued an injunction prohibiting Defendants from making certain statements “as well as any similar statements that contain the same sorts of allegations or inferences, in any manner or forum” and ordered that Fuller take down his website.

Judge Posner, writing for the Seventh Circuit, upheld the damages, fees and costs but vacated the injunction. He noted that, while the jury had held that Plaintiffs had been defamed, there was no specific indication regarding which of the many of Defendants’ statements had been deemed by the jury to be defamatory. Thus, by prohibiting all of the statements, the injunction was overbroad.

Moreover, the injunction’s preamble greatly expanded the scope of the prohibited conduct by enjoining “any similar statements [that is, similar to the injunction’s specific prohibitions] that contain the same sorts of allegations or inferences, in any manner or forum,” as those listed in the body of the injunction. This was also held to be improper as overly expansive, as an injunction must be specific about the acts that it prohibits.

The mandate within injunction that Hartman take down his website, made without a finding that everything published on the website defamed any of the Plaintiffs, was also held to be overly broad.

Finally, the Seventh Circuit opined on the injunction as it related to the First Amendment, which forbids, with some exceptions, “prior restraints” on speech by the government. One permissible exception outlined by the other jurisdictions, including the Sixth Circuit, is for defamatory statements, which may be enjoined but only where the injunction is “no broader than necessary to provide relief to plaintiff while minimizing the restriction of expression.”

The appellate court thus concluded that the trial court’s injunction could not be sustained. Without ruling that the law of the Seventh Circuit allowed the enjoining of defamatory speech, it held that, even were such an injunction permissible in the Seventh Circuit, the injunction issued by the trial court was vague, open-ended and overbroad; that it was thus a patent violation of the First Amendment; and that as a consequence the injunction must be vacated.

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Fort Wayne, Indiana – District Judge Jon DeGuilo held that prior rights to the Stratotone trademark were abandoned and that the subsequent user held the superior right to the trademark.

This litigation arose as a result of a federal trademark complaint, filed in the Northern District of Indiana by Plaintiff Darryl Agler, doing business as The Stratotone Guitar Company of Fort Wayne, Indiana. The Defendant is Westheimer Corporation of Northbrook, Illinois. In the complaint, Agler asserted that Westheimer had infringed the trademark “STRATOTONE” (the “Stratotone trademark”), Trademark Registration No. 3,986,754, which has been issued by the U.S. Patent and Trademark Office.

The claims listed in Agler’s complaint were:

• Count I: Federal Unfair Competition and False Designation of Origin
• Count II: Federal Trademark Infringement
• Count III: Federal Trademark Counterfeiting
• Count IV: Common Law Unfair Competition and Trademark Infringement
• Count V: Unjust Enrichment
• Count VI: Conversion
• Count VII: Deception

• Count VIII: Indiana Crime Victim’s Relief Act

Westheimer counterclaimed, asserting that Agler was infringing on its rights in the Stratotone trademark as well as an additional trademark for “Atom.”

In this opinion, Judge DeGuilo ruled on Agler’s motion for summary judgment on counts I through IV as well as Agler’s motion for summary judgment on all of Westheimer’s counterclaims.

The court first addressed the Stratatone trademark. Agler asserted, and Westheimer conceded, that the Stratatone mark was protected and that Westheimer’s use of the mark was likely to cause confusion. The question for the court was which party had superior rights to the mark, as determined by whether Agler or Westheimer had priority to the trademark. That priority, in turn, was determined by who had established and maintained the earliest claim to the trademark.

It was undisputed that Agler had filed an “intent-to-use” application to register the Stratotone mark on March 7, 2006. Westheimer claimed that it had acquired rights that predated Agler’s 2006 application through its 2009 purchase of trademark rights from Harmony Industries, a third party that had used the Stratotone trademark at least as early as 2001.

The court, however, reviewed the testimony of those involved with Harmony Industries and found that Harmony Industries had both ceased to use the trademark and had demonstrated no intent to use it for more than four years starting at least January 1, 2003. The holder of a trademark has only three years to formulate its intent to resume use before that trademark is presumed abandoned. Thus, Harmony Industries was held to have abandoned the trademark. In turn, because Harmony Industries had no trademark rights to convey in the Stratotone mark, Westheimer acquired none. Consequently, Agler was held to have an earlier priority date and, thus, superior rights to the trademark. The court granted Agler’s motion with respect to his claims, and Westheimer’s counterclaims, regarding the Stratotone trademark.

Regarding the Atom trademark, the court concluded that it did not have sufficient evidence to determine that Agler had acquired priority. It thus denied Agler’s motion for summary judgment with respect to the claims involving the Atom trademark.

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The Lanham Act’s ban on registering disparaging marks violates the First Amendment of the Constitution held the Federal Circuit, sitting en banc, on December 22, 2015. In re Tam, en banc Fed. Cir., No. 2014-1203, oral argument 12/22/2015.

In a case involving the refusal to register the term “The Slants” for a group of Asian musicians, the court concluded that the disparagement provision of the Lanham Act is used to reject trademarks based on their content and viewpoint, and that denying the benefit of registration on this basis is an unlawful burden on free speech.

Background

After the U.S. Patent and Trademark Office refused to register the “The Slants” mark as disparaging under Section 2(a) of the Lanham Act, 15 U.S.C. § 1052(a), the applicants appealed to the Federal Circuit. The Federal Circuit panel affirmed based on In re McGinley, 660 F.2d 481 (CCPA 1981), which found no First Amendment violation since the applicant was free to use the mark without the registration.

However, Judge Moore, in her “additional views,” said that McGinley should be reconsidered by the en banc in light of current First Amendment jurisprudence stating that the government may not deny a benefit based solely on a moral judgment about the viewpoint expressed by a mark. The Federal Circuit granted en banc review on whether Section 2(a) violates the First Amendment.

Disparagement Provision Is Neither Content Nor Viewpoint Neutral

It is beyond dispute that Section 2(a) discriminates on the basis of content and viewpoint to the extent that it denies registration on the basis of the idea or message expressed, the court held. It rejected the government’s argument that the provision calls for rejection of marks based on particular words rather than viewpoints. Judge Moore pointed out that an applicant can register a mark if he shows it is perceived by the referenced group in a positive way, even if the mark contains language that would be offensive in another context.

Nor can the government avoid strict scrutiny of the provision by contending that it simply regulates commercial speech, Judge Moore continued. While trademarks have a commercial function as source identifiers, she explained, it is always a mark’s expressive character that is the basis for the disparagement exclusion from registration, not its ability to serve as a source identifier.

The en banc court expressly overruled In re McGinley, rejecting the argument that denial of a trademark registration does not prohibit use of the trademark. Citing Perry v. Sindermann, 408 U.S. 593(1972), Judge Moore pointed out that, by denying the government benefit based on constitutionally protected speech, a government could penalize and inhibit that freedom. She wrote the following:

Federal trademark registration brings with it valuable substantive and procedural rights unavailable in the absence of registration. These benefits are denied to anyone whose trademark expresses a message that the government finds disparages any group, Mr. Tam included. The loss of these rights, standing alone, is enough for us to conclude that § 2(a) has a chilling effect on speech. Denial of federal trademark registration on the basis of the government’s disapproval of the message conveyed by certain trademarks violates the guarantees of the First Amendment.

Government Speech and Government Subsidy

The court also rejected the contention that trademark registration is government speech and therefore beyond the terms of the First Amendment. While registered trademarks are recorded on a government database, that doesn’t convert the underlying speech to government speech any more that copyright registration converts copyrighted works into government speech, Judge Moore noted. “If being listed in a government database or published in a list of registrations were enough to convert private speech to government speech, nearly every action the government takes–every parade permit granted, every property title recorded, every hunting or fishing license issued–would amount to government speech,” she wrote.

Nor was the Federal Circuit persuaded that the provisions of Section 2(a) set out a variety of legitimate conditions for providing the government subsidy of trademark registration, pointing out that the availability of government subsidies may not be limited by unconstitutional conditions. While Congress is entitled to define the conditions under which it extends government benefits, the court noted that the denial of registration has a major chilling effect on private speech because the benefits of registration are so substantial.

Judge Moore added the following:

Were we to accept the government’s argument that trademark registration is a government subsidy and that therefore the government is free to restrict speech within the confines of the trademark program, it would expand the “subsidy” exception to swallow nearly all government regulation. In many ways, trademark registration resembles copyright registration. Under the logic of the government’s approach, it follows that the government could refuse to register copyrights without the oversight of the First Amendment. Congress could pass a law prohibiting the copyrighting of works containing “racial slurs,” “religious insults,” “ethnic caricatures,” and “misogynistic images.”

Judge O’Malley filed a concurring opinion, writing separately to argue that Section 2(a) is unconstitutionally vague under the Fifth Amendment.

Judge Dyk filed a concurring and dissenting opinion, arguing that the majority goes too far in concluding that the statute is facially unconstitutional as applied to purely commercial speech.

Judge Lourie filed a dissenting opinion, explaining that he would apply stare decisis to sustain Section 2(a).

Judge Reyna filed a dissenting opinion, arguing that Section 2(a) is an appropriate regulation of commercial speech.

Practice Tip: The availability of trademark protection for the Washington Redskins trademark, which was also denied federal trademark protection on the grounds that it was disparaging, is currently under review by the Fourth Circuit Court of Appeals.

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