Banning 'scandalous' trademarks violates First Amendment

CNN reported on June 24, 2019, The Supreme Court struck down a provision of federal law that prohibits the registration of "immoral" or "scandalous" trademarks as a violation of the First Amendment.

The justices' ruling clears the way for a clothing designer to apply for a federal trademark for his clothing line called FUCT.

The ruling, which was unanimous in part and 6-3 in part, could open the doors to more requests to register words or phrases that have been considered vulgar, a concern that the court's minority feared.

"We hold that this provision infringes the First Amendment," Justice Elena Kagan wrote in the majority opinion, because it "disfavors certain ideas."

Vulgar or protected speech? Supreme Court examines 'FUCT' trademark claim

Entrepreneur Erik Brunetti said he founded a clothing brand in 1990 to question authority and the assumptions of society. He said his company's name stands for "FRIENDS U CAN'T TRUST."

In 2011, Brunetti sought to register the mark with the United States Patent and Trademark Office in order to obtain benefits such as expanding rights against others attempting to use the same mark.

READ: Supreme Court ruling on First Amendment and FUCT trademark

The office refused Brunetti's request because it said FUCT was the "phonetic equivalent" of the past tense of a vulgar word, and determined that federal law prohibits the registration of trademarks that consist of "scandalous" subject matter.

"According to Brunetti, the mark (which functions as the clothing's brand name) is pronounced as four letters, one after the other: F-U-C-T. But you might read it differently and, if so, you would hardly be alone," Kagan wrote.

Kagan wrote the statute "does not draw the line at lewd, sexually explicit, or profane marks" instead it covers "the universe of immoral or scandalous" material.

"A law disfavoring 'ideas that offend' discriminates based on viewpoint, in violation of the First Amendment," she wrote.

Kagan was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, Brett Kavanaugh, and Neil Gorsuch in full. Chief Justice John Roberts and Justices Stephen Breyer and Sonia Sotomayor concurred in part and dissented in part.

Alito suggested that Congress could step in and act.

"Our decision does not prevent Congress from adopting a more carefully focused statute that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas," Alito wrote in a concurring opinion

He conceded the registration of such marks "serves only to further coarsen our popular culture," but the justices are "not legislators and cannot substitute a new statute for the one now in force."

'Unfortunate results?'

Roberts, Breyer and Sotomayor would have saved part of the statute that prohibits "scandalous" trademarks. Breyer said he would do so because "these attention-grabbing words" may lead "to the creation of public spaces that many will find repellant, perhaps on occasion creating the risk of verbal altercations or even physical confrontations."

"Just think," he wrote, "about how you might react if you saw someone wearing a t-shirt or using a product emblazoned with an odious racial epithet."

Sotomayor added that the court's decision "will beget unfortunate results."

"Much of the debate between the Justices in this case is over just how far they can go to rewrite a poorly worded statute in order to save it from constitutional challenge," said Steve Vladeck, CNN Supreme Court analyst and professor at the University of Texas School of Law.

"That fight shows up in three of the Court's four decisions from Monday -- and is, in many ways, a sign of the times, as the Court confronts an increasingly polarized Congress that, for various reasons, may be more likely to write vague statutes than clear ones," Vladeck said.

The justices will deliver additional opinions on Wednesday.

Cannabis, CBD & Hemp Trademarks Get Some Guidance from USPTO

The USPTO issued a Guideline on May 2, 2019 regarding its review of trademark applications for cannabis, CBD and hemp-derived goods following the 2018 Farm Bill passed last year.

For background, the USPTO will not grant a federal registration for the production or sale of goods that violates federal law (even if lawful within a particular state) because use of a trademark must be “lawful” under federal law to qualify for federal registration. However, marks generally can be registered if the services are educational and/or comply with the Controlled Substances Act (CSA).

Following the 2018 Farm Bill, hemp and hemp-derived goods (e.g., CBD) — as now defined — are no longer considered controlled substances. Specifically, the 2018 Farm Bill removes “hemp” from the definition of “marijuana” under the CSA and defines hemp as the cannabis plant (and any part thereof) containing no more than 0.3% THC on a dry-weight basis.

This means that the USPTO will allow registration for cannabis or CBD goods if the goods are derived from “hemp” (i.e., containing no more than 0.3% THC). This will apply to applications filed after December 20, 2018 (effective date of Farm Bill). If the application was filed earlier, the applicant can amend the filing date. An Examiner will also likely require a declaration that the goods are made with hemp licensed or authorized under USDA regulations and the 2018 Farm Bill for the commercial production of hemp.  

Still, not all hemp-derived goods that are lawful under the CSA are currently lawful under FDA regulations (i.e., food, beverages, dietary supplements). Accordingly, registration of marks for food, beverages or dietary supplements containing cannabis or CBD (even if hemp-derived) will still be refused as unlawful.

The TTB also recently issued a guideline (TTB Industry Circular 2019-1) on alcohol beverages containing hemp ingredients.

Girl Scouts Sue Boy Scouts for Trademark Infringement

Yes, its true. The Girl Scouts have sued the Boy Scouts of America (“BSA) for trademark infringement for using the word “scout” not preceded by “boy”.   You might ask, how is this possible when both organizations have used “scout” in their trademarks for decades?  Is there not a statue of limitations or defense based on the longtime concurrent use?  It appears the lawsuit was sparked following the recent decision by the Boy Scouts to allow girls into its scouting program and it repeated use of just the term “scouts" in its marketing. While the outcome of the case may be many months away, it demonstrates that marketplace changes can result in trademark infringement even though two competitors have coexisted in the marketplace for decades.  We occasionally see this where a company adds a new product category under a house brand mark (e.g., a spirits company adding a wine), but it is much less frequent where the same goods or services are  at issue.  Stay tuned!  

Trademark Infringement Survey from the CEO Perspective

Trademark research company CompuMark and Clarivate Analytics released a 2017 report “The Trademark Ecosystem Through the Lens of the C-Suite,” which surveyed 440 C-level executives in the US and EU. The report notes that the number of trademark applications has more than doubled between 2008 and 2015.  The report found that while more companies are filing for new trademarks (61% of the respondents launched new trademarks in the last 12 months), few were actively enforcing their marks against third party infringement (20% actively watch more than three quarters of their trademarks, while half only watch 26-75% of their marks).  The report also found that 34% of the respondents had to change one of their brand names as a result of infringement. The respondents cited that the biggest costs of trademark infringement was loss in revenue, followed by damage to brand reputation, customer confusion and reduced customer loyalty and trust.

Disparaging Trademarks May Be On The Rise

On June 19, 2017, the U.S. Supreme Court ruled in Matal v. Tam (Case No. 15-1293) that the Trademark Act’s prohibition on registration of “disparaging” marks was unconstitutional.  The USPTO had refused to register an application for THE SLANTS filed by the Portland-based band on grounds that it was disparaging to Asians under the “Disparagement Clause” of the Trademark Act (Section 2(a)).  The Disparagement Clause bars registration of trademarks which may disparage persons, institutions, beliefs or national symbols or “bring them into contempt or disrepute.” The Asian-American band members argued that they intended the mark “reclaim” the offensive phrase and “drain” it of derogatory meaning. The band appealed the refusal to the Federal Circuit, which held that the Disparagement Clause unconstitutionally restricts free speech and this decision was affirmed.  The Supreme Court reasoned that the Disparagement Clause amounted to impermissible viewpoint discrimination – where the government restricts speech solely because it was disagreeable.  This decision does not address the Trademark Act’s ban on registering “immoral, deceptive or scandalous matter,” although this matter is being addressed in an appeal before the Federal Circuit (In Re Brunetti), which addresses the USPTO’s refusal to register FUCT for apparel, including children’s apparel. This case will also be informative for the REDSKINS’ owners whose trademarks were cancelled in 2014 under the Disparagement Clause as disparaging to Native Americans.  There are numerous alcoholic beverage brand names that were refused based on the Disparagement Clause, including BULLSHIT and KHORAN and would now be considered registrable.

Such A Lovely Place

On May 1, 2017, the Eagles filed a lawsuit (Eagles Ltd v Hotel California Baja LLC et al, filed in the Central District of California, Case No. 17-03276) against a hotel in Todos Santos, Mexico for trademark infringement based on its use of HOTEL CALIFORNIA.  The Eagles claim that the owners of the 11-room Hotel California infringe their trademark through selling HOTEL CALIFORNIA-branded merchandise and encouraging customers to believe the hotel is falsely associated with the band to further its sales.  Interestingly, the song was released in 1976 and Hotel California opened in 1950, although the hotel underwent several name changes since then. The Eagles also opposed the hotel’s application to register the trademark HOTEL CALIFORNIA for a host of goods, including eyewear, jewelry, bags, and clothing, based on the Eagles’ “common law” (unregistered) rights to the HOTEL CALIFORNIA trademark.

Patron Tequila cancels Porton Pisco trademark

In a non-precedential opinion issued on January 4, 2017, the Trademark Trial and Appeal Board (TTAB) cancelled two US trademark registrations for PORTON for “distilled spirits; brandy; pisco” on grounds that they were confusingly similar to PATRON for “tequila.” PORTON is the brand name for a Peruvian brandy, pisco, sold by Pisco Porton and PATRON is the brand for a Mexican tequila sold by Patron Spirits Int’l.  The TTAB concluded that there was a likelihood of confusion between the marks based on the similarity of marks, the relatedness of goods, the channels of trade, the classes of customers and the conditions under which the products are sold. The TTAB held that since the products were deemed “legally identical,” the degree of similarity between the marks necessary to find confusion was reduced. While any Spanish speaker would distinguish these marks based on meaning alone (“porton” means door or gate and “patron” means guest or customer), it is clear that the TTAB will not put as much weight on differences in connotation when the marks are non-English words.

Another Year of Growth Reports for the Wine Industry

Wines & Vines reports on January 25, 2017 in its "Good Times Roll for U.S. Wine Industry" article that U.S. wine consumption and production are on the rise.  Specifically, the article notes that "Table wine consumption in the United States grew by 1.8% in volume and 4.4% in dollars at the stores" and that "553,000 U.S. on- and off-premise locations now sell wine, which is 120,000 more locations than 10 years ago."  The article also notes the rise of higher-priced wine, since "the average price of a 750ml bottle of wine is passing the $10 mark for the first time."

The Beer and Wine Battles Persist

On November 28, 2016, Sutter Home sued Shmaltz Brewing for infringing its Menage a Trois trademark for selling 12-packs of beer under the MANNAge a Trois trade name.  Here is the complaint and Shmaltz' website showing its use for a "3-way variety 12-pack" of its Hop Momma, Hop Manna and Hop Mania IPAs.  The lawsuit was dismissed on January 11, 2017 and the 12-pack remains sold, for now.

Wine Buyers Based on Label Design

Andres O'Hara-Plotnik's "Wine Label Design is More Important than You Think" article in Eater on  October 12, 2016 is a great overview of studies and buyer perspectives (both consumer and retailer) of selecting bottles based on their label design.  While some believe labels are just "gimmicks," reports and this author's interviews do show that wine buyers and consumers, especially millenials, are apt to buy (or not) a wine based on its label.  

2016 Direct-to-Consumer Wine Shipping Report

This 2016 Direct-to-Consumer Wine Shipping Report by ShipCompliant and Wines & Vines offers some interesting facts on the state of the wine industry as it relates to shipping and DTC sales.  Of note is the break-down of large, medium and small wineries: 61 large wineries (500k+ case production), 256 medium wineries (50k-499k cases), 1538 small wineries (5k-49k cases) and over 6,000 wineries producing less than 5k cases.  That's a lot of brand names ... see page 4. 

Coppola Files Lawsuit for Infringement of Trademark and Trade dress

On August 31, 2016, Lauren Eads of the Drinks Business covers the recent lawsuit filed by Coppola against Copa di Vino for trademark infringement and unfair competition based on its use of COPA on the Winemaker's Cut wine, which it alleges infringes its Director's Cut trademark for wine (among others) and distinctive trade dress.  Coppola seeks damages and injunctive relief.  You can read the complaint and check out the labels side-by-side here.  We will monitor this for updates so stay tuned...

Let's Talk Cider

Eric Mortenson of the Capital Press reports on September 1, 2016 that the number of association cider makers in the Northwest has increased ten-fold in the last 6 years.  Other noteworthy trends include the fact that cider represents 1.7% of alcohol sales in the US and Portlanders drink the most cider per capita

California Wine A Vital Contributor to Local and US Economy

The Wine Institute and California Association of Winegrape Growers commissioned a report on the economic impact of California wine (summarized here on August 4, 2016), noting that the California wine industry contributes over $57 billion to the California economy and $114 billion to the US economy.  A few other fascinating stats: the California wine industry employs over 786,000 Americans (325,000 in California), pays $15 billion in taxes ($7 billion in California) and has grown 19% in the past seven years. 

Strength of US Wine Market in 2015

The Wine Institute reports on July 8, 2016 here that California sold a record high of 276 million cases of wine in 2015 and reminds us that the US has been the world's largest wine market since 2010. Some other interesting facts: DTC shipping will now be legal in 44 states and the number of U.S. supermarkets now selling wine is about 30,000 (1,700 more stores than the year prior).  As for the State of California, California wine makes up 60% of the US wine market, and 90% of wine exports.  Here is a list of the top 5 consumers of US wine exports: EU ($622 million ), Canada ($461 million), Hong Kong ($97 million), Japan ($96 million) and China ($56 million).

Direct-To-Consumer Wine Sales Tops $2 Billion in a Decade

Wines & Vines and ShipCompliant released the 2016 Direct-to-Consumer Wine Shipping Report, available on ShipCompliant's website and well-summarized here by Jim Gordon for Wines & Vines on January 25, 2016.  Notably, Direct to Consumer sales in the US reached $2 billion in just ten years after the Supreme Court paved the way for direct-to-consumer wine shipments -- that is 8% higher in value and volume (which exceeds the 2.2% growth in the wine retail marketplace) and the average price per bottle of wine shipped is $38.