A business’ signage can be one of the most distinctive characteristics of its brand and one of its most important assets. This is especially true when the sign display’s the business’ federally registered trademark and color is a feature of the mark. But what happens when that brand runs afoul of state and local laws?
It is common place for commercial real estate development plans to impose requirements on the characteristics of the signs that tenants may display in the development. Sometimes, those requirements impose restrictions on the colors that such signs may display. For owners of federally registered trademarks where color is claimed as a feature of the mark, the last thing they want is to have to change the color of their sign.
For example, imagine telling McDonalds that its famous golden and red sign must be displayed in other colors, say, like this:
For most consumers, I suspect this sounds ridiculous. But that is exactly the obstacle that federal brand owners must overcome when faced with local zoning restrictions on color.
Fortunately, the federal trademark law provides some relief. Or does it? The Lanham Act expressly provides that federal law preempts state law by providing (in part):
No State or other jurisdiction of the United States or any political subdivision or any agency thereof may require alteration of a registered mark …. (15 USCA §1121(B))
While this may seem pretty clear on its face, courts are split as to whether towns can lawfully impose color restrictions on signs displaying a federally registered trademark.
Two courts in the 9th Circuit (including the 9th Circuit Court of Appeals) have shot down Tempe, Arizona’s attempts to impose such color restrictions under this section of the Lanham Act. Blockbuster Videos, Inc. v. City of Tempe, 141 F.3d 1295 (1998); Desert Subway, Inc. v. City of Tempe, 322 F. Supp.2d 1036 (2003). Conversely, two courts in the 2d Circuit (including the 2d Circuit Court of Appeals) have upheld town zoning boards’ imposition of signage color restrictions as superior to the rights of federally registered trademark holders. Payless Shoesource, Inc. v. Town of Penfield, NY, 934 F. Supp. 540 (1996); Lisa’s Party City, Inc. v. Town of Henrietta, 185 F.3d 12 (1999).
According to the 9th Circuit courts, from looking at the legislative history, it is clear that while local governments can prohibit the display of outdoor signs altogether, there is nothing to suggest that local zoning ordinances may require alteration of trademarks. Looking at the identical legislative history and, in some cases, quoting from the same testimony, the 2d Circuit courts agreed that the law would allow local zoning ordinances to prohibit outdoor signs altogether or even materially restrict their size. However, the 2d Circuit found that the statute was intended to prohibit state-mandated changes in the trademark itself since the brand owner would be free to use the unaltered mark in every other aspect of its business.
So who is right?
Like any other situation where courts are split geographically, they both are. Until the Supreme Court takes up the issue, local ordinances in the 2d Circuit are free to place restrictions on colors used in trademarks displayed on signs, whereas in the 9th Circuit (especially, Tempe, Arizona), local ordinances may not. For those of us in other circuits, the moral of the story for brand owners is to be mindful of local zoning restrictions before committing to a store location. Real estate developers should also be mindful of signage restrictions included in their plans when seeking local approvals.
