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WHAT'S HAPPENING AT THE SUPREME COURT THIS TERM? - SPRING 2019

 

Iancu v. Brunetti - Docket No. 18-302 – Argument: April 15, 2019 – Op. Below Federal Circuit

            On April 15, 2019 the U.S. Supreme Court heard arguments in what could be a precedent-setting case over vulgar trademarks and free speech. In a facial challenge to Section 2 of the Lanham Act the Supreme Court is considering whether the prohibition on registration of scandalous and immoral trademarks is unconstitutional because it constitutes viewpoint discrimination in violation of the First Amendment.

            In 1990 Erik Brunetti started a counterculture streetwear company with professional skateboarder Natas Kaupas. This case arose when Brunetti repeatedly tried to protect his clothing brand by applying to register his trademark “FUCT” with the US Patent and Trademark Office (“PTO”). The PTO consistently rejected Brunetti’s trademark application on the basis that the mark is a phonetic equivalent of a vulgar word – finding that a substantial composite of the general public would consider the mark vulgar. Now, Brunetti’s trademark fight has finally ended up before the Supreme Court.

            Section 2 of the Lanham Act prohibits certain trademarks from being registered, including trademarks that are deemed offensive in certain ways — specifically those that may be “disparaging” to individuals or groups, and those deemed “scandalous” or “immoral.” To determine whether a mark is immoral or scandalous, a trademark examiner considers whether a substantial composite of the general public would find the mark “shocking to the sense of truth, decency, or propriety; disgraceful; offensive; disreputable; giving offense to the conscience or moral feelings … or calling out for condemnation.” The trademark office has historically treated the two terms “immoral” and “scandalous” as a single category.

            On appeal, the U.S. Court of Appeals for the Federal Circuit agreed that substantial evidence supported the findings that the FUCT mark is vulgar and was therefore unregistrable under Section 2(a). However, it ultimately reversed the PTO’s decision and found that the bar on registering scandalous and immoral trademarks is a content-based restriction on free speech in violation of the First Amendment. The Federal Circuit found the provision to be an impermissible content-based discrimination that failed the rigorous strict scrutiny standard, which required the government to show that the restriction furthered a compelling state interest and was narrowly tailored to that interest.

            This case follows Matal v. Tam, which struck down the disparagement provision in Section 2(a) which denied registration to any trademark that was deemed disparaging. In Tam, the Supreme Court held that trademarks are private, not government, speech, and an examiner may not refuse to register trademarks based on the particular viewpoint the trademarks express; holding that the ban constituted viewpoint discrimination in violation of the First Amendment.

            Deputy Solicitor General Malcolm Stewart argued on behalf of the government in support of the bar on registration of immoral/scandalous marks. According to the government, the scandalous marks provision does not restrict speech, but instead imposes a condition on the availability of a government benefit. Stewart argued that the statute is reasonably related to several relevant legitimate government interests, including in protecting the sensibilities of the public, ensuring the orderly flow of commerce, and avoiding any appearance that the government approves of offensive trademarks. Justice Samuel Alito and Justice Sonia Sotomayor both asked whether the government’s interest is focused on preventing an association with particular words, or is based on a sense of the public’s morality. Justice Alito: “But what is the standard that you're looking to, at bottom, and this is framed by Justice Ginsburg's question, is -- what is Congress's interest? Is it -- does it have an independent interest in not having the federal government associated with certain words? Or is it just an interest in following whatever the population thinks is offensive or scandalous or immoral at a particular point in time?” Mr. Stewart: “It is some of both,… we would emphasize the interest is in protecting unwilling viewers from material that they find offensive.”

            It appeared that both Justices Alito and Sotamayor rejected this rationale argued by Mr. Stewart, pointing out that rejecting a trademark registration does not remove the offensive trademark from the stream of commerce.

            Justices Ruth Bader Ginsburg, Justice Brett Kavanaugh and Justice Neil Gorsuch joined in a common concern about the judgment call needed to make the determination that the general public would consider a mark “scandalous”. These Justices were further concerned about the evidence in the parties’ briefs that there has been an inconsistent application of the immoral/scandalous-marks provision. For example, “FCUK”, “THE F WORD”, “FVCK STREET WEAR”, and “F’D” were registered by the PTO, but not “F U”, “EFFU”, or “FVCKED”. If it is inconsistently applied, the restriction may not directly advance the governmental interest in a way that is not overbroad. Justice Ginsburg: “How is -- how is that determined, that a substantial composite of the general public would find the – the mark shocking or offensive? I mean, if -- considering what's involved in this case, if you were to take a -- a composite of, say, 20-year-olds, do you think that that answer would be they would find it shocking?” Justice Kavanaugh: “…how do you deal with the problem of erratic or inconsistent enforcement, which seems inevitable with a test of the kind you're articulating?” Justice Gorsuch: “Justice Ginsburg's point takes us back to Justice Kavanaugh's, I think, which is you look at the -- the seven words at the end of the red brief and there are shocking numbers of ones granted and ones refused that -- that do look remarkably similar. How is a reasonable citizen supposed to know? What notice do they have about how the government's going to treat their mark?”

            Despite these concerns with the application of the statutory language, several justices expressed apprehension about opening the floodgates to profane and offensive trademarks. Chief Justice John Roberts asked Mr. Stewart whether the PTO could deny registration to marks on the grounds that they're obscene if the statute were struck down, and Stewart responded that he did not think they could. Justice Alito, who authored the plurality opinion in Tam, was concerned about an increased flow of trademark applications. Justice Alito: “What's going to – if this is held to be unconstitutional, what is going to happen with whatever list of really dirty words still exist and all of their variations? There's going to be a mad scramble by people to register these marks.”

            John Sommer appeared as counsel for Erik Brunetti. Chief Justice Roberts asked him about the effect on the public if his trademark were registered. Chief Justice Roberts: “-- you say that, you know, this product's not going to be in Wal-Mart, right?” Mr. Sommer: “Correct.” Chief Justice Roberts: “But it is going to be on people walking down through the mall. And, you know, for parents who are trying to teach their children not to use those kinds of words, they're going to look at that and say, well, look at that, and then, you know, they're going to see the little trademark thing and say, well, it's registered trademark. Well, they won't say that, but --(the audience laughed.)”

            Justice Gorsuch asked Mr. Sommer to explain whether he had met the burden of a facial challenge to the statute. Sommer asserted that he had: Mr. Sommer: “I believe so, because I have shown that there's a substantial amount of speech that is improperly refused under this provision. And the provision is so incredibly overbroad, because if it's taken at its word -- at its -- on its face, Steak 'n Shake can't be registered because some people believe you – a substantial portion of Americans believe that eating beef is immoral. And so now that's unconstitutional -- that's invalid, that registration.”

            Mr. Sommer was asked by Justice Breyer to define the harm to Brunetti. Justice Breyer: “So what exactly is the harm to the First Amendment speech interest here? I mean, this is, after all, simply not forbidding use of any word in any place, but you can't put a little R next to it.” Mr. Sommer: “I would say Brunetti cannot express his viewpoint -- without an unconstitutional burden.”

            A decision in this case has not yet been published by the U.S. Supreme Court.

Audrey Powers Thornton is an appellate and civil litigation attorney at Thornton Koller.

 

                 

NEW LEGISLATION IN 2019 PROTECTS THE VICTIM'S RIGHT TO SPEAK PUBLICLY IN SEXUAL HARASSMENT, SEXUAL ASSAULT AND SEXUAL DISCRIMINATION SETTLEMENTS

If you are drafting a settlement agreement in a sexual harassment, assault or discrimination case there is new legislation favoring the rights of the victim that I became acquainted with as I rewrote a boilerplate mutual release that was presented by the defendant and perpetrator of the sexual assault and harassment. Most releases have previously included blanket non-disclosure provisions which told a claimant to keep her or his mouth shut after signing the settlement agreement. For many reasons, including the victim’s need to address a traumatic incident as part of her or his recovery, the legislature now allows victims to talk about it, and prohibits efforts to silence them. As a result of this legislation, however, the parties have also lost what was used as a bargaining chip in settlement - the claimant's agreement to confidentiality.

Previously, California Code Civil Procedure §1002 prohibited the inclusion of a non-disclosure provision in a settlement agreement of a civil action for only certain sexual offenses, (an act that could be prosecuted as a felony sex offense; childhood sexual abuse; sexual exploitation of a minor; and sexual assault against an elder or dependent adult), with two exceptions allowing a non-disclosure provision relating to the privacy of medical information and personal identifying information.

In September 2018 several pieces of legislation were enacted in California that related to the rights of victims of sexual harassment. One of them was SB 820 that enacted Section 1001 of the Code of Civil Procedure, effective January 1, 2019. This statute prohibits the inclusion of a provision in a settlement agreement that prevents the disclosure of “factual information related to a claim filed in a civil or administrative action regarding: (1) An act of sexual assault that is not governed by subdivision (a) of Section 1002, (2) An act of sexual harassment, as defined in Section 51.9 of the Civil Code, (3) An act of workplace harassment or discrimination based on sex, or failure to prevent an act of workplace harassment or discrimination based on sex or an act of retaliation against a person for reporting harassment or discrimination based on sex, as described in subdivisions (h), (i), (j), and (k) of Section 12940 of the Government Code, (4) An act of harassment or discrimination based on sex, or an act of retaliation against a person for reporting harassment or discrimination based on sex, by the owner of a housing accommodation, as described in Section 12955 of the Government Code."

It is still permissible to demand that the parties agree to the confidentiality of the amount being paid in settlement in such an action, (C.C.P. section 1001 (e)), and in addition, section 1001 allows “a provision that shields the identity of the claimant and all facts that could lead to the discovery of his or her identity, including pleadings filed in court…." so long as the claimant has requested anonymity. (C.C.P. section 1001 (c).)

The information that a victim cannot be prevented from disclosing is categorized very broadly - “factual information related to a claim” - thus, the statute attempts to help the court determine if section 1001 has been violated by referring to this information in subsection (f) of 1001 as the “factual foundation of a cause of action” and instructing the court to refer to the pleadings and other papers in the record.

Counsel will now have to negotiate the language of standard non-disparagement clauses that have previously been included in a mutual release for sexual harassment and sexual discrimination cases, which seek to generally prohibit the victim from saying or doing anything that will injure or hurt the reputation of the defendant. A typically broad non-disparagement obligation will now be inconsistent with section 1001 which allows the claimant to disclose what happened, including the egregious acts of the defendant. One could anticipate that any disclosure by the victim of the perpetrator's conduct could fall within the scope of the common use of "disparage" defined by the Merriam Webster dictionary as: "Regard or represent as being of little worth", including synonyms: derogatory, deprecating, deprecatory, denigratory, belittling, slighting, insulting. A method of writing an acceptable-to-both-sides non-disparagement provision would be to narrowly tailor the non-disparagement language to conform to the actual legal definition of disparagement which refers to the elements of defamation and requires the element of falsity. Merriam Webster dictionary's legal definition of disparagement is: 1) the publication of false and injurious statements that are derogatory of another's property, business, or product. — called also business disparagement, commercial disparagement, disparagement of property, slander of goods, trade libel; 2) slander of title. Black’s Law Dictionary (7th ed. 1999) provides: "Disparagement” is “a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.” It would appear that using language that binds the parties to refrain from intentionally publishing false and injurious statements that are derogatory, should not infringe on the rights of the victim under section 1001.

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