A New York case decided this week by the U.S. Supreme Court involving a state prohibition on credit card surcharge fees would not, at first blush, seem to involve “speech,” let alone “speech” that needs to be protected by the First Amendment.  Indeed, a credit card surcharge fee – such as, for example, a nondescript warning stating “3% added for credit cards” – hardly seems to be in the same league as The Pentagon Papers, or Fanny Hill, or even the fundraising advertisement “Heed Their Rising Voices” by the Committee to Defend Martin Luther King, all of which were subjects of profound First Amendment cases.

ice cream sundae
Copyright: tul / 123RF Stock Photo

Nevertheless, the Supreme Court’s decision announced on Wednesday (Mar. 29, 2017) in Expressions Hair Design v. Schneiderman, 551 U.S. —, 2017 WL 1155913, involving something as innocuous as a thirty cents surcharge for using a credit card to pay for a ten dollar sundae at Brooklyn Farmacy & Soda Fountain marks a significant evolution in free speech law, one that has the prospect of affecting many areas of economic regulation.  The Court’s holding means that trade regulations that previously were perceived as solely government restrictions on economic activity having nothing to do with free speech rights are now potentially subject to First Amendment challenges if the government’s restrictions impose unwarranted burdens on a merchant’s ability to communicate information concerning the merchant’s products or services.  As a result, this “sleeper” decision from the Roberts Court marks yet another step in the continuing expansion of the Court’s use of the First Amendment to limit the ability of government to regulate economic activity.

The case itself is arcane in its details.  The matter involves a New York statute that was a duplicate of a federal measure that Congress enacted in 1981 but which Congress let expire in 1984.  The New York statute has the same effect as a contractual prohibition that previously had been incorporated into credit card companies’ contracts with merchants, but which the credit card companies dropped under pressure from antitrust lawsuits brought by merchants upset with the credit card companies’ efforts to prevent merchants from steering customers toward using cash instead of credit cards.

The New York statute establishes that “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”

On its face, this statutory language has nothing to do with speech.  The statute simply prohibits a merchant from imposing a “surcharge” on a customer who elects to use a credit card instead of cash.

However, both the five-justice majority for the Court led by Chief Justice Roberts as well as a concurring opinion by Justice Breyer held that this statutory provision regulates more than mere conduct – what price a merchant may impose – but it also regulates speech.  The Court held that the operation of the New York statute regulates “how sellers may communicate their prices”:

“A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say ‘$10, with a 3% credit card surcharge‘ or ‘$10, plus $0.30 for credit‘ because both of those displays identify a single sticker price–$10–that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price.”

The Court then concluded that “[i]n regulating the communication of prices rather than prices themselves, §518 regulates speech.”

This short assertion – that the statute regulates speech, rather than conduct – opens up the entire panoply of the First Amendment’s commercial speech doctrine.  As a result, and as the Supreme Court directed, the State of New York must now attempt to defend the statute, either on the grounds that it is a valid, non-discriminatory “disclosure” requirement, or on the grounds that it is “narrowly tailored” to serve a “substantial government interest.”  The trial court which heard the case initially concluded that the New York statute could not survive these First Amendment tests.  On remand from the Supreme Court, it will now be up to the Second Circuit to determine whether the trial court judge was correct.

In any event, the ruling now given by the Supreme Court to the first question – does the statute regulate speech – has the potential to open up constitutional challenges against various and sundry economic regulations that could be said to regulate the “communication” of a price as opposed to the “price” itself.  Hence, statutes or regulations that prohibit “Ladies Night” discounts at bars or clubs might now be said to regulate the “communication” of such discounted prices, rather than prohibiting the prices themselves, and as a result, the prohibitions against such prices might now be challenged on First Amendment grounds.  Similarly, local ordinances requiring the imposition of a 5 cents surcharge on customers who want their groceries in a plastic bag might well be challenged on First Amendment grounds, on the strength that such ordinances regulate how merchants “communicate” their prices, as opposed to the conduct of the price itself.  Additionally, regulations that prohibit merchants from imposing differential pricing based where a customer comes from – such as prohibitions against “residents” discounts – also now may be challenged on First Amendment grounds.

As Justice Breyer remarked in his concurrence in the Expressions Hair Design case, “virtually all government regulation affects speech.”  (Justice Breyer’s point was actually that it is less important whether a government provision regulates speech than it is to consider how much speech, and what kind, is affected by the regulation.)

In light of that observation – that government regulations fundamentally affect speech of all kinds – this latest case from the Supreme Court opens up a new tool for businesses to consider when challenging a regulation that affects their abilities to communicate with their customers.  This new decision means that businesses might now require the government to prove that an economic regulation that previously was subject only to highly deferential “rational basis” review is instead justifiable under more rigorous “substantial interest” scrutiny.

In this regard, the Court’s decision in Expressions Hair Design will come to be seen as a watershed moment for those wishing to challenge government regulation of economic activity.

Yesterday, on February 13, 2017, the Eighth Circuit issued a resounding affirmation of First Amendment principles in a case raising the question of just how far a public university can go in preventing the use of its marks by student organizations whose views the university may oppose or object to. We previously discussed the dispute in early December, before the court heard arguments in the case.

ISU NORML t-shirtIn the opinion, the unanimous appellate panel held that the First Amendment trumps normal trademark licensing principles for public universities, ruling that Iowa State University violated the First Amendment rights of students at the ISU chapter of NORML, the National Organization for the Reform of Marijuana Laws, when ISU barred the chapter from using ISU’s marks in conjunction with images or messages that advocated in favor of marijuana.

In this case, Gerlich v. Leath (8th Cir., No. 16-1518), the court ruled that the university’s trademark licensing program for student organizations – which otherwise allows student groups at the university to use certain of the university’s marks on a royalty-free basis, subject to standard trademark licensing arrangements – constituted a “limited-purpose public forum” in which student organizations could take advantage of the university’s marks to advance their own causes.

The court then ruled, applying standard and well-settled First Amendment principles, that because the trademark licensing program is a public forum, the First Amendment prohibits the university from discriminating against or between speakers in that forum on the basis of the speakers’ viewpoints.

That conclusion necessarily means, the court held, that ISU violated the First Amendment when it prevented the NORML chapter at ISU from taking advantage of the university’s trademark licensing program in the wake of public controversy surrounding the chapter’s advocacy in favor of reforming marijuana laws:  “The defendants’ rejection of NORML ISU’s designs discriminated against that group on the basis of the group’s viewpoint. The state engages in viewpoint discrimination when the rationale for its regulation of speech is ‘the specific motivating ideology or the opinion or perspective of the speaker.’ . . . The defendants’ discriminatory motive is evidenced by the unique scrutiny defendants imposed on NORML ISU.”

Although ultimately unsurprising in terms of its application of First Amendment law, the Eight Circuit’s decision is likely to have a significant impact on public universities and colleges in how they handle trademark licensing requests.  The holding in this case means that when a university establishes a typical trademark licensing program, especially one for student organizations, the university may not distinguish between licensees (and potential licensees) on the basis of those licensees’ public statements or viewpoints.  The bottom line is that public unviersities and colleges may not do what any other trademark owner could otherwise do in controlling who gets to use the trademark owner’s marks, at least when the public institution has established a trademark licensing program that is otherwise available to certain classes of licensees, such as student groups.

The case stands as an important reminder that trademark licensing principles are different for governmental organizations because of the overarching constraints of the First Amendment.

This morning, the United States Supreme Court heard the long-anticipated oral argument in the Lee v. Tam trademark dispute. The issue in the case, as reported on the SCOTUS blog, is as follows:

“Whether the disparagement provision of the Lanham Act, 15 U.S.C. 1052(a), which provides that no trademark shall be refused registration on account of its nature unless, inter alia, it ‘[c]onsists of . . . matter which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute’ is facially invalid under the Free Speech Clause of the First Amendment.”

Supreme Court
Copyright: mesutdogan / 123RF Stock Photo

Stated more simply, the issue facing the Supreme Court is whether section 2(a) of the Lanham Act, which bars the registration of disparaging trademarks, is constitutional. The Supreme Court is now primed to make that decision, which will not only have an impact on the Lee v. Tam dispute but also the Washington Redskins dispute and many others.

In making that decision, the justices will consider the parties’ oral argument and briefing as well as the numerous amicus briefs filed by numerous third party organizations and individuals interested in the outcome of the Lee v. Tam dispute. Demonstrating the significance of this dispute, numerous of the justices during oral argument today asked pointed questions to the attorneys representing the parties, particularly to the attorney arguing on behalf of the United States Patent and Trademark Office (in favor of the Lanham Act’s current prohibition). Today’s oral argument started and ended with questions related to differences in trademark law and copyright law and included questions on a whole range of topics relevant to section 2(a), its constitutionality, and its implications.

The Supreme Court will issue an order in the case later this year. Additional background regarding this dispute and the related Washington Redskins dispute can be found in prior blog posts as part of this blog’s ongoing coverage of developments in this landmark dispute.

Next week (12/14/2016), in a marble tiled courtroom in frosty St. Paul, Minnesota, a panel of judges of the Eighth Circuit Court of Appeals will wrestle with a question that is both as new as the campaign to legalize marijuana and as old as the First Amendment: When can a public university protect its brand, and its valuable trademarks, from being associated with viewpoints or messages that it rejects?

In the case of Gerlich v. Leath (8th Cir., No. 16-1518), a pair of students at Iowa State University are pursuing the provocative position that public universities have no power to discriminate in their trademark licensing practices so as to prevent their marks from being used by student groups that espouse positions the university regards as objectionable.  In that sense, the Gerlich case pits classic trademark rights – the power of a trademark owner to control how his mark is used – against the First Amendment’s prohibition of government discrimination based on a speaker’s viewpoint.

At Iowa State, as is the case at most public universities, student organizations are permitted to license various university trademarks to designate the organization’s involvement with ISU and the organization’s status as a registered student organization.  So long as these student groups comply with standard trademark usage guidelines, such as not altering or modifying the look of the university’s marks, the student groups are permitted to use the university’s marks under royalty-free licenses.  Iowa State has authorized trademark licenses to hundreds of student organizations, including those as varied as the Iowa State University Students for Life, an anti-abortion group, and the Iowa State Democrats, a group supporting abortion rights.  The university’s trademark licensing practices even extended to CUFFS, a sexual bondage student club that was a recognized student organization on campus and which used the university’s trademarks in conjunction with the club’s logo displaying a set of handcuffs.

In the context of these licensing practices, when the university came under fire for publicity garnered by the Iowa State chapter of NORML (the National Organization for the Reform of Marijuana Laws), which was using the university’s marks in combination with NORML’s logo displaying a distinctive cannabis leaf, the university put its foot down.  The university revoked any prior authorization for the ISU NORML chapter to use the university’s marks on the student group’s t-shirts – which bore the slogan “Freedom is NORML at ISU” along with a cannabis leaf.  And thereafter, the university prohibited the use of the university’s marks in connection with “illegal” products.

ISU NORML t-shirt

In the face of these actions, the student leaders of ISU NORML brought a First Amendment civil rights suit against Iowa State’s university president and other university administrators, contending that their First Amendment rights were violated by the university’s trademark licensing actions.  The students argued – and Senior District Judge James E. Gritzner, in the trial court in Des Moines, Iowa, agreed – that the university’s exercise of standard trademark licensing powers violated the First Amendment because it constituted “viewpoint discrimination” based on the university’s objections to the student organization’s political views.

Under a robust and well-developed line of judicial decisions, courts have routinely held that one of the most hallowed functions of the First Amendment is to prevent the government from discriminating between speakers on the basis of what they say.  Such “viewpoint discrimination” is per se prohibited by the First Amendment because the essence of this constitutional provision is to prevent the government from favoring one speaker over another on the basis of agreement or disagreement with the content of the speaker’s messages.

In contrast, however, standard and equally well-settled trademark law requires a trademark owner to control a licensee’s use of the owner’s marks, and allows the trademark owner to discriminate in his selection of licensees for his marks on the basis of the trademark owner’s assessment of whether the licensee will undermine the reputation or goodwill of the trademark owner’s brand.

Confronted by these two doctrines, the district court sided with the students in a decision in January this year, issuing an injunction prohibiting the university from refusing to license its marks to the ISU NORML chapter.  Now, on appeal, the university is attempting to escape the strong First Amendment prohibitions against viewpoint discrimination by focusing on how the use of its marks by various student groups can reflect negatively on the university, and as a result, the university’s trademark licensing practices should be regarded as a form of government speech.  (If so, then there is no First Amendment violation because the government is entitled under the First Amendment to say whatever it likes.)

With a bevy of First Amendment scholars and advocacy organizations lining up against the university through various amicus briefs, as well as a vigorous argument on behalf of the students from noted Washington, D.C., First Amendment litigator Robert Corn-Revere, it seems likely that the Eighth Circuit will affirm the injunction and endorse the students’ position that the First Amendment trumps trademark licensing norms when dealing with a public university.

Such a ruling would be another cautionary tale for public institutions with regard to their trademarks, perhaps demonstrating once again that they are “damned if they do, and damned if they don’t.”

It would also be another instance in the perennial tension between the First Amendment and trademark law demonstrating that in such battles, it is usually the First Amendment that wins.

Stay tuned.  Literally.  The Eighth Circuit posts same-day audio of its oral arguments online.

Although a rose “by any other name would smell as sweet,” (Romeo & Juliet, Act II, sc. 2, ln 48), there just aren’t any trademark registrations to be had in a person’s name, at least not without the person’s written consent.  So the U.S. Patent and Trademark Office recently reminded a trademark applicant who had applied for a trademark registration for the mark “LOVE TRUMPS HATE,” in connection with clothing.

Registered trademark in a red background
Copyright: silvia / 123RF Stock Photo

In an Office Action issued last week (Nov. 21, 2016), an examining attorney preliminarily rejected a trademark registration application filed for the mark “LOVE TRUMPS HATE” on the grounds that the mark identifies a particular living individual and the applicant had failed to make a part of his application a formal, written consent to the registration from that living person – in this case, president-elect Donald J. Trump.  (See Office Action, Nov. 21, 2016, Trademark Serial No. 87117865.)

The Trademark Office’s response to the application relies on Section 2(c) of the Lanham Act, 15 U.S.C. § 1052(c), which is among the many “statutory bars” that may trip up a business’ effort to secure trademark registrations.  In this case, the statutory bar for non-consensual registrations of marks that identify a living individual is one of the provisions of the Lanham Act intended to protect the personal rights of individuals whose names have become famous or otherwise may be the target of appropriation in the marketplace.  (The prohibition against false endorsements in Section 43(a)(1)(A) of the Lanham Act is another such area of protection for people with famous names.)  The statutory bar in Section 2(c) has been invoked in past cases as a barrier to registrations of marks such as “PRINCESS KATE,” and “BO JACKSON,” and “OBAMA PAJAMA.”

In this most recent case, an applicant from New York City sought to register the famous slogan from the Hillary Clinton presidential campaign, in connection with t-shirts, sweatshirts, and caps, on an intent-to-use basis, in an application that was filed with the Trademark Office on July 27, 2016.  At the time of the application, the Clinton campaign had begun using the slogan “Love Trumps Hate” in response to various statements made by the Republican nominee.  Indeed, the last words that Mrs. Clinton uttered in public on the last night of her campaign before Election Day were “Love trumps hate.”

Setting aside questions of whether the use of this slogan on t-shirts, sweatshirts, and caps would be a sufficient usage to designate the source or origin of the products – a question bearing on whether the phrase functions as an actual trademark, rather than merely an ornamental slogan – the Trademark Office issued its preliminary denial because, the examining attorney concluded, the phrase “LOVE TRUMPS HATE” “clearly references Donald Trump.”  The Trademark Office was not swayed by the fact that this phrase obviously conveys a meaning apart from a reference to Mr. Trump, in that it propounds a worldview in which the emotion of love overcomes those things we may despise.  The Trademark Office pointed out that the statutory bar precludes registration of any mark that identifies a living individual (where the person does not give formal, written consent) if the person identified in the mark “is so well known that the public would reasonably assume a connection between the person and the goods.”

Of course, this specific Office Action is only a preliminary refusal to register the mark, and the applicant may well attempt to bring to bear the gamut of First Amendment arguments that certainly protect the applicant’s right to criticize Mr. Trump.  Whether those First Amendment rights are sufficient to authorize a trademark registration in this context is a legal question that the Trademark Office likely would not find persuasive, especially in light of the Office’s positions in other cases involving the intersection of the Lanham Act’s statutory bars and the First Amendment.

Nevertheless, this little anecdote is a cautionary reminder to businesses that their trademarks may not be registrable if they identify a particular living individual, absent a formal written consent from that individual, where the mark’s use of a person’s name would cause the public to see a connection between the famous person and the goods for which the mark is used.  (Whether such protection of a celebrity’s right of publicity is a good or bad thing, or is overreaching, is a legislative question to be addressed to Congress, and in that regard, it is a question likely to go unresolved in this era celebrity-drenched politics.)  Thus, businesses seeking to appropriate the fame of a well-known person’s name in their trademarks – even in this context of a double entendre on Mr. Trump’s name – would be well advised to think twice, or certainly, to negotiate a consent agreement that avoids the difficulty of having an application for registration denied on the strength of this statutory bar.