Category: Supreme Court

Adding “.com” to Generic Term May Open Route to Trademark Protection According to Supreme Court

Generic terms—those words that actually name a product or service—are ineligible for trademark protection under current United States trademark law. The United States Patent and Trademark Office (USPTO) decided that adding “.com” to an otherwise generic term was not sufficient to allow trademark registration of the “generic.com” composition. In the matter at hand, the internet website Booking.com was refused trademark registration of its name based on this decision by the USPTO.

On June 30, 2020, however, the United States Supreme Court reversed this decision, holding that adding “.com” to an otherwise generic—and thus ineligible for registration—term may be registered. The Court said, a generic.com term is only generic if consumers and customers take the term, as a whole, as generic. The Court noted that, in the lower court proceedings, evidence had been presented that consumers do not view Booking.com as a generic website to book hotels and such, but rather associated it with a particular company.

The USPTO raised the concern that allowing such trademarks to be registered would be akin to allowing a business to add the word “Company” to a generic term and noted that this is not permitted. The Court, however, noted that, unlike business names, domain names are single use—only one “generic.com” domain name exists for each possible generic term. In addition, the Court said, the USPTO has other tools in its arsenal, such as insistence of a disclaimer of the generic term, to guard against a particular generic.com trademark holder from exerting undue control over other trademarks that include the generic term. This, the Court said, further shows that there is no basis to deny Booking.com the protection of a federally registered trademark.

This decision opens the door to a new category of potentially protectable trademarks: generic terms with “.com” added to the end. However, it is important to note that whether a generic.com trademark could be registered depends in large part on how that trademark is viewed by consumers. Booking.com is registerable because consumers attribute that trademark to a specific company; however, this may not be true in every case. Much of whether a generic.com brand name is going to be able to be trademarked is likely to depend on evidence showing how consumers view the name; such evidence could include consumer surveys, evidence of marketing efforts, and evidence of long-term use. Nevertheless, companies who wish to use their most basic and generic description of the goods and services they offer as a part of a trademark now have another avenue by which to seek protection. However, it will be important to consider and prepare for questions that will likely be raised by the USPTO, including why the particular generic.com trademark is not viewed by consumers as generic, in order to raise the likelihood of obtaining trademark protection.

© 2020 Davis|Kuelthau, s.c. All Rights Reserved

For more on the recent Booking.com decision, see the National Law Review Intellectual Property Law section.

Consumer Perception is Key to Registration of Generic “.com” Marks

In an 8-1 decision, the Supreme Court held in U.S. Patent and Trademark Office v. Booking.com that “generic.com” marks may be registered trademarks or service marks when consumers do not perceive them as generic.

Booking.com is a travel company that provides hotel reservations and other services under the brand “Booking.com,” which is also the domain name of its website. Booking.com filed applications to register four marks in connection with travel-related services, each containing the term “Booking.com.”

A United States Patent and Trademark Office (USPTO) examining attorney and the USPTO’s Trademark Trial and Appeal Board (TTAB) both concluded that the term “Booking.com” is generic for the services at issue and is therefore unregistrable. According to the TTAB, “Booking” means making travel reservations and “.com” signifies a commercial website. The TTAB ruled that customers would understand the term “Booking.com” primarily to refer to an online reservation service for travel, tours, and lodging. Alternatively, the TTAB held that even if “Booking.com” is descriptive, it is unregistrable because it lacks secondary meaning.

Booking.com sought review in the US District Court for the Eastern District of Virginia. Relying in significant part on new evidence of consumer perception, the district court concluded that “Booking.com”—unlike “booking”—is not generic. The “consuming public,” the court found, “primarily understands that BOOKING.COM does not refer to a genus, rather it is descriptive of services involving ‘booking’ available at that domain name.” The Court of Appeals for the Fourth Circuit affirmed the district court’s judgment.

During oral argument at the Supreme Court, the USPTO argued that the combination of a generic word and a “.com” must also be generic. The Court rejected this per se theory, ruling that whether “Booking.com” is generic turns on whether that term, taken as a whole, signifies to consumers the class of online hotel reservation services. According to the Court, if “Booking.com” were generic, one might expect consumers to understand Travelocity—another such service—to be a “Booking.com.” Additionally, one might similarly expect that a consumer, searching for a trusted source of online hotel reservation services, could ask a frequent traveler to name her favorite “Booking.com” provider. However, as noted even by the USPTO and the dissent, only one entity can occupy a particular Internet domain name at a time, so a “consumer who is familiar with that aspect of the domain-name system can infer that BOOKING.COM refers to some specific entity.”

The Court further opined that the USPTO’s fears that trademark protection for “Booking.com” could exclude or inhibit competitors from using the term “booking” or adopting domain names like “ebooking.com” or “hotel-booking.com” are unfounded. According to the Court, this is an issue for any descriptive mark and comes down to a likelihood of confusion analysis.

Justice Sotomayor’s Concurrence

In a concurring opinion, Justice Sotomayor agreed that there is no per se rule against trademark protection for a “generic.com” mark. However, she cautioned the use of surveys as they can have limited probative value depending on the survey design.

Justice Breyer’s Sole Dissent

Justice Stephen Breyer, the sole dissenting justice, argued that the majority disregarded important trademark principles and sound trademark policy. According to Justice Breyer, “[t]erms that merely convey the nature of the producer’s business should remain free for all to use.” Thus, under the majority’s approach, many businesses could obtain a trademark by adding “.com” to the generic names of their products, which Justice Breyer claimed could have widespread anticompetitive effects, and the majority’s reliance on the need to prove confusion and the statutory descriptive use privilege to protect competitors, underestimates the threat of costly litigation.

Implications

The decision in Booking.com expands trademark protection for seemingly generic marks simply by adding “.com” to the mark. A registrant need only rely on the consumer’s perception of the mark, which can be shown by the use of surveys. Thus, even with Justice Sotomayor’s caution against the use of surveys, surveys are likely to become more important during the registration process and in any subsequent litigation.

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.

For more on the Booking.com case, see the National Law Review Intellectual Property Law section.

SCOTUS Favors Employers’ Religious Liberties Over Employee Rights

The Supreme Court of the United States (SCOTUS) issued two important decisions this week in cases reflecting the ongoing legal tensions between employers’ religious liberties and the right of employees to be free from discrimination; and in both cases, SCOTUS tipped the scales decidedly in favor of employers’ religious liberties.

First Amendment Supersedes Employment Discrimination Claims

The Supreme Court issued a decision in two similar cases – essentially dismissing the discrimination claims brought by two Catholic school teachers who were discharged from their instructional positions at two different Catholic schools in southern California. In Our Lady of Guadalupe School v. Morrissey-Berru (19-267), and St. James School v. Biel (19-348), the Supreme Court held by a 7-2 majority that the U.S. Constitution’s First Amendment Religion Clauses foreclose the teachers’ employment discrimination claims. In the OLG case, the former teacher sued for age discrimination; in the St. James case, the teacher was dismissed after she sought a leave of absence for cancer treatment. The teacher later passed away.

Relying on the “ministerial exception” outlined in the 2012 SCOTUS decision in Hosanna-Tabor Evangelical Lutheran Church v. EEOC, 565 U.S. 171 (2012), the majority opinion, authored by Justice Samuel Alito, noted that “religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.”

Justice Sonia Sotomayor, joined by Justice Ruth Bader Ginsburg in dissent, criticizes the majority for its distillation of the Hosanna-Tabor standard into “a single consideration: whether a church thinks its employees play an important religious role,” and observes that it “strips thousands of schoolteachers of their legal protections.”

Religious Exemptions From Birth Control Mandate Under the Affordable Care Act

In a similar but procedurally more complicated ruling, the Supreme Court upheld the federal government’s expansion of a federal rule that exempts employers with religious or moral objections from being required to provide employees with health insurance coverage for birth control under the Affordable Care Act (ACA).

In a 7-2 decision in Little Sisters of the Poor v. Pennsylvania (19-431), SCOTUS tackled the latest skirmish of the ACA’s birth-control mandate. The ACA mandate generally requires employers to provide female employees health insurance with access to contraception. Religious entities have repeatedly challenged the rules, as well as the opt-out accommodation process developed under the Obama administration for employers with religious or moral exemptions.  (The Trump administration had expanded those exemptions.)

With the majority opinion authored by Justice Clarence Thomas, SCOTUS held that the departments of Health and Human Services, Labor, and the Treasury had authority to issue rules for employers. In a concurring opinion, Justice Elena Kagan (joined by Justice Stephen Breyer) acknowledges the statutory authority of the federal agencies, but cautions, “that does not mean the Departments should prevail when these cases return to the lower courts. The States challenged the exemptions not only as outside the HRSA’s [Health Resources and Services Administration’s] statutory authority, but also as ‘arbitrary [and] capricious.’”

In her dissenting opinion, Justice Ginsburg (joined by Justice Sotomayor) notes, “Today, for the first time, the Court casts totally aside countervailing rights and interests in its zeal to secure religious rights to the nth degree.”

Takeaways for Discerning Employers

While these Supreme Court decisions, in tandem, may bolster employers’ confidence in their sincerely held beliefs and moral objections about certain employment-related decisions, it is also important to recognize its limitations.  Employers should strategize with their leadership and legal counsel to carefully weigh whether and to what extent these decisions should (or will) inform their own policies and practices, as well as any resulting reputational impact and workplace morale considerations.

© 2020 BARNES & THORNBURG LLP

For more recent SCOTUS employment decisions, see the National Law Review Labor & Employment law section.

U.S. Supreme Court Issues Landmark Ruling in Favor of LGBTQ Employees in the Workplace

Yesterday, in a much-anticipated opinion, the United States Supreme Court held that federal anti-discrimination laws protect LGBTQ employees in the workplace. This ruling provides much needed clarity for employers and resolves a court split in which some federal courts recognized that federal law prohibited LGBTQ discrimination, while others (including those covering Florida, Georgia, and Alabama) stated that LGBTQ discrimination was not unlawful.

This landmark ruling, in Bostock v. Clayton County, Georgia, arises out of three different appeals. In two of the cases, the employees were fired despite having long and successful careers after their employers learned that they were homosexual. In the third case, an employee who initially presented herself as a male announced several years later that she planned to transition to “living and working full-time as a woman.” The employer terminated her immediately.

The law at issue – Title VII of the Civil Rights Act of 1964 (“Title VII”) – prohibits discrimination in employment on the basis of race, color, religion, sex and national origin. However, the law makes no mention of sexual orientation.

Nevertheless, in a 6-3 decision, the Supreme Court held that all three terminations were illegal. In doing so, the Court noted that “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

Although several states and municipalities have passed laws and rules prohibiting all or at least some forms of LGBTQ discrimination, this ruling clarifies that both sexual orientation discrimination and gender identity/transgender discrimination are prohibited by federal law throughout the United States.

The federal agency responsible for enforcing Title VII provides the following examples of LGBTQ-related conduct that it considers to be unlawful:

  • Refusing to hire an applicant because she is a transgender woman.
  • Firing an employee because he is planning or has made a gender transition.
  • Denying an employee equal access to a common restroom corresponding to the employee’s gender identity.
  • Harassing a woman because she does not dress or talk in a feminine manner.
  • Harassing a man because he dresses in an effeminate manner or enjoys hobbies that are traditionally associated with women.
  • Harassing an employee because of a gender transition, such as by intentionally and persistently failing to use the name and gender pronoun that correspond to the gender identity with which the employee identifies, and which the employee has communicated to management and employees.
  • Denying an employee a promotion because he is gay or straight.
  • Paying a lower salary to an employee because of sexual orientation.
  • Denying spousal health insurance benefits to a female employee because her legal spouse is a woman, while providing spousal health insurance to a male employee whose legal spouse is a woman.
  • Harassing an employee because of his/her sexual orientation (e.g., derogatory terms, sexually oriented comments, or disparaging remarks for associating with a person of the same or opposite sex).
  • Discriminating against or harassing an employee because of his/her sexual orientation or gender identity, in combination with another unlawful reason, for example, on the basis of transgender status and race, or sexual orientation and disability.

The penalties for non-compliance can be significant, including potential for significant emotional distress and other compensatory damages, punitive damages, and attorney’s fees.

This ruling is particularly significant to employers in jurisdictions like Florida that did not recognize that LGBTQ discrimination was unlawful under federal law. In light of this decision, employers should immediately take the following proactive steps to prevent and prohibit LGBTQ discrimination in the workplace:

  • Review your handbooks and anti-discrimination policies to ensure that sexual orientation and other LGBTQ-related status are included in your list of legally protected categories.
  • Consider adopting policies and procedures protecting the rights of transgender employees. For example, a transgender woman must be allowed to use a common female restroom or locker room facility, and dress code policies should permit employees to follow the dress code matching their gender identity.
  • Update your discrimination and harassment training modules to ensure that LGBTQ-related discrimination and harassment is addressed. Such training should include specific examples of what types of conduct could constitute unlawful discrimination. Managers and human resources personnel in particular need to be made aware that LGBTQ discrimination is unlawful and will not be tolerated.

In addition, employers will need to closely follow EEOC guidance and case law that follows this ruling. For example, as Justice Alito mentioned in his dissenting opinion, it is unclear what impact this ruling will have on employees who want their employers to pay for sex reassignment surgery and treatment.

© 2007-2020 Hill Ward Henderson, All Rights Reserved

For more on SCOTUS’s recent decision, see the National Law Review Civil Rights law section.

Supreme Court Rules Title VII Bars Discrimination on the Basis of Sexual Orientation and Gender Identity

Today, June 15, 2020, the Supreme Court of the United States issued a landmark decision in Bostock v. Clayton County, Georgia, holding that Title VII of the Civil Rights Act of 1964 (“Title VII”) protects lesbian, gay, bisexual, and transgender workers.  The Court held that employers who discriminate against employees based on sexual orientation or gender identity unlawfully intend to rely on sex in their decision-making. Justice Gorsuch, along with Chief Justice Roberts and the four liberal justices of the Court, wrote, in deciding the question of whether an employer can fire an individual for being homosexual or transgender: “the answer is clear.”  Specifically, “an employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex.  Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”  Ultimately, “an employer who fires an individual merely for being gay or transgender defies the law.”

Bostock v. Clayton County, Georgia consisted of three individual employment cases, all of which involved an employer terminating the employment of a long-time employee shortly after the employee revealed the he or she was homosexual or transgender.  Gerald Bostock worked as a child welfare advocate for Clayton County, Georgia for over ten years and was fired shortly after participating in a gay recreational softball league.  The reason given for his termination was an allegation of misspent funds and “conduct unbecoming of a county employee;” however, Bostock argued that was pretense and the real motivation for his termination was his sexual orientation.  Both the District Court and the Eleventh Circuit held that Title VII did not include protection against discrimination towards sexual orientation.

In Altitude Express Inc. v. Zarda, Donald Zara worked as a skydiving instructor for Altitude Express in New York.  Zarda worked for the company for several years and his employment was terminated shortly after mentioning to his employer that he was gay.  While the District Court ruled in favor of the employer, the Second Circuit ruled that Title VII protects employees from discrimination based on sexual orientation.

Lastly, in R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission, Aimee Stephens, a funeral home employee in Garden City, Michigan, who originally presented herself as a male upon hiring, revealed to her employer during her sixth year of employment that she would be transitioning and working and living full-time as a woman.  Shortly thereafter, she was dismissed from her job due to her transition.  Initially, the District Court found for the funeral home on two bases: (1) Title VII did not protect transgender persons nor gender identity, and (2) the Religious Freedom Restoration Act permitted the funeral home to make employment decisions based on faith.  The Sixth Circuit reversed this decision, ruling that Title VII’s “discrimination by sex” does include transgender persons and also that the funeral home had failed to show how Title VII interfered with its owner’s religious expression.

Given the split among the circuit courts, the Supreme Court took up this trio of cases to render a clear determination as to whether sexual orientation and gender identity are protected categories under Title VII.  This case of first impression signifies a key development in the interpretation and meaning of discrimination on the basis of “sex” under Title VII.  The opinion resolved the issue of whether those who drafted Title VII could have intended protection of these classes, with Justice Gorsuch explaining: “Those who adopted the Civil Rights Act might not have anticipated their work would lead to this particular result. Likely, they weren’t thinking about many of the Act’s con­sequences that have become apparent over the years, in­cluding its prohibition against discrimination on the basis of motherhood or its ban on the sexual harassment of male employees. But the limits of the drafters’ imagination sup­ply no reason to ignore the law’s demands. When the ex­press terms of a statute give us one answer and extratextual considerations suggest another, it’s no contest. Only the written word is the law, and all persons are entitled to its benefit.”

Employers must ensure that their policies, including their equal employment opportunity, harassment, and discrimination policies, reflect this opinion and prohibit discrimination on the basis of sexual orientation and gender identity.  In addition to these policy matters, employers should take actions to prevent discrimination on the basis of sexual orientation or gender identity and communicate the development in the law to employees and key decision makers in the company.

The full opinion can be found here.

© 2020 Bracewell LLP

For more on the SCOTUS Title VII decision, see the National Law Review Civil Rights law section.

Supreme Court Preserves Availability of Profits Award for Both “Willful” and “Innocent” Trademark Infringement

On April 23, 2020, the U.S. Supreme Court unanimously held in Romag Fasteners, Inc. v. Fossil Group, Inc., 590 U.S. ___ (2020), that the Lanham Act does not impose a “willfulness” prerequisite for awarding profits in trademark infringement actions.

Disgorgement of a defendant’s profits has long been a critical remedy available to brand owners seeking remediation for the infringement of its trademarks.  A profits award can be a proxy for the actual damages suffered by the trademark owner, as actual damages are often very difficult to prove in trademark cases.  Profits awards also serve to deprive infringers of their unjust gains, and can be an important deterrent against infringing activities.  Some federal courts have considered an infringer’s intent as a factor, but not a prerequisite, to awarding a defendant’s profits to the prevailing plaintiff.  Other courts have required proof that the defendant’s infringement was willful before awarding damages measured by its profits, complicating the availability of this important trademark infringement remedy in certain jurisdictions.

The U.S. Supreme Court has resolved this split, finding that a categorical rule requiring a showing of willfulness cannot be reconciled with the statute’s plain language.  Accordingly, prevailing trademark owners do not have to prove willfulness to be awarded the infringer’s profits.

Background

The parties had an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners. Unable to resolve its concerns amicably, Romag sued, alleging that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag.

The U.S. District Court for the District of Connecticut found Fossil liable, and the jury awarded Romag $6.7 million of Fossil’s profits to “deter future trademark infringement.”  The trial court overturned the jury’s damages award because the jury found Fossil acted “callously,” rather than “willfully,” as required by the controlling Second Circuit precedent for a profits award. The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decision, and the U.S. Supreme Court vacated that judgment and remanded for further proceedings consistent with its opinion.

Overview of Court’s Opinion

Section 15 U.S.C. §1117(a) of the Lanham Act, which governs remedies for trademark violations, states:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. (Underlined emphases added).

Although acknowledging that a defendant’s mental state is a highly important consideration in determining whether a profits award is appropriate, the Court rejected the categorical rule applied in certain lower courts (including controlling Second Circuit precedent) that a plaintiff can win a profits award only after proving that the defendant willfully infringed its trademark.  The Court relied on the plain language in 15 U.S.C. §1117(a) to find that Congress intended to limit such willfulness precondition to a profits award in a suit under Section 1125(c) for trademark dilution. It rejected Fossil’s position that the phrase “subject to the principles of equity” in Section 1117(a) should be read as imposing a willfulness requirement, especially given that Congress prescribed a “willfulness” requirement elsewhere in the very same statutory provision. In no uncertain terms, the Court noted that “the statutory language has never required a showing of willfulness to win a defendant’s profits” in claims under Section 1125(a) for false or misleading use of trademarks (i.e., trademark infringement).

Conclusion

The Court’s decision resolves a split amongst the lower courts and preserves a critical deterrent against trademark infringement by clarifying that Congress intended to allow a trademark owner to recover a defendant’s ill-gotten profits, regardless of whether such infringement was willful.

©2020 Pierce Atwood LLP. All rights reserved.

ARTICLE BY Jonathan M. Gelchinsky and Michael C. Hernandez of Pierce Atwood LLP.

 

For more Trademark Cases, see the National Law Review Intellectual Property Law section.

The Future of the CFPB: the Executive Branch and Separation of Powers

On October 18, 2019 the Supreme Court granted certiorari in Seila Law v. Consumer Financial Protection Bureau (CFPB). SCOTUS  will answer the question of “whether the substantial executive authority yielded by the CFPB, an independent agency led by a single director, violates the separation of powers,” and the Justices requested that the parties brief and argue an additional issue: “If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. § 5491(c)(3) [the for-cause removal provision] be severed from the Dodd-Frank Act?”

Origins of the Consumer Financial Bureau and Previous Constitutional Challenges

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) established the CFPB as an independent bureau within the Federal Reserve System designed to protect consumers from abusive financial services practices.  The structure and constitutionality of the CFPB has been addressed before. In 2018, the D.C. Circuit held in PHH Corp. v. CFPB, No. 15-1177 (D.C. Cir. 2018) (PHH) that the current structure of the CFPB, which features a single director that cannot be removed by the president except for cause, “is consistent with Article II” of the Constitution.

The PHH opinion stated that Congress’ response to the consumer finance abuse that led up to the 2008 financial crisis purposely created the CFPB to be “a regulator attentive to individuals and families”  because the existing regulatory agencies were too concerned about the financial industry they were supposed to supervise. It was determined that the CFPB needed independence to do its job, and the CPFB structure was designed to confer that independence.   Neither PHH Corporation nor the CFPB filed a petition for certiorari to ask the Supreme Court to review the D.C. Circuit’s decision.

Background of the Seila Law Case

In Seila Law v. Consumer Financial Protection Bureau (CFPB) the Petitioner is a law firm that provides a variety of legal services to consumers, and as part of a CFPB investigation into whether Seila Law violated certain federal laws, the CFPB issued a civil investigative demand seeking information and documents. Seila Law objected to the demand on the ground that the CFPB was unconstitutionally structured and filed a petition to a federal district court for enforcement. The district court held that the structure of the CFPB did not violate the separation of powers and was constitutional, after which that district court decision was appealed. The Ninth Circuit affirmed, noting that the issues had been “thoroughly canvassed” in the DC Circuit it in PHH, and adopting the position of the PHH majority that the CFPB’s structure is constitutional. Seila Law filed a petition for a writ of certiorari with the U.S. Supreme Court seeking review of the Ninth Circuit’s ruling, and here we are.

An Experienced Federal Agency Litigator’s Perspective

Mr. Anthony E. DiResta, is co-chair of Holland & Knight’s Consumer Protection Defense and Compliance Team, and a former Director of the Federal Trade Commission’s (FTC) Southeast Regional office.  Mr. DiResta was kind enough to take some time with the National Law Review to discuss the upcoming Seila Law decision and its impact on the future of the CFPB.

_______________

NLR: Can you sum up the CFPB and separation of powers story to this point from your own viewpoint?

DiResta: The Supreme Court has decided to review this case because of the constitutionality of the CFPB’s structure, based on separation of powers. Any single leader in government who doesn’t serve at the pleasure of the President may simply have too much power, and people with certain jurisprudential philosophies about how government should be run find that an offensive situation. That’s the theory behind the certiorari decision and why SCOTUS is addressing the case – it’s really a question of constitutionality and the power of administrative agencies. Additionally, the Court will look at the severability of the CFPB in Dodd-Frank, whether it’s possible to just restructure the single leader structure, and then leave the Bureau intact to continue business as usual.

NLR: It seems many of these issues could’ve been avoided had the CFPB been structured more as a multi-member commission initially or if Congress had simply expanded FTC powers.  Why do you think it was structured differently?

DiResta: That’s a matter of speculation – but I think it might have gone something like this: After the Recession in the early 2000s, many people felt that government was asleep at the wheel, letting  devastating things in banking and finance and servicing to consumers run out of control, which led to serious blunders and mishaps. So it was decided that a new office was needed – and this was led by representatives in Congress like Elizabeth Warren.

Why they didn’t simply expand the power and resources of the FTC is also pure speculation – they could have merely expanded FTC’s jurisdiction and reach to achieve similar outcomes and intentions.

The Constitutionality of the CFPB

NLR: Do you think SCOTUS will rule in favor of the petitioner in Seila Law, and find the structure of the CFPB unconstitutional?

DiResta: I do. I suspect that SCOTUS will, in fact, find the structure unconstitutional on the basis of the separation of powers. But I also believe that an even more interesting part of that will be the discussion of the severability of the organization’s leadership, leaving the CFPB itself intact. If the structure is unconstitutional, how the Court recommends a remedy to correct that unconstitutionality could have far-reaching effects. This is so important – and we should all be excited that we get to watch this corrective process in action.

NLR: Is there a chance this would result in a complete restructure of CFPB, or even its possible dissolution?

DiResta: I really don’t think so – and the Court couldn’t do that anyway. The Court could recommend to Congress that a certain path for correction be followed, but it will be up to Congress to rearrange the CFPB (if that’s the result) in the best way. The legislative branch will just have to make sure it’s done, in a way that the Court recommends.

Some More Background on CFPB Constitutionality Litigation

Then-Judge, now Justice Kavanaugh was on the U.S Court of Appeals Court for the D.C. Circuit for the 2018 en banc ruling in the PHH Corp. v. CFPB case and on the 2016 three-judge decision. Judge Kavanaugh authored two opinions regarding PHH:  declaring a certain aspect of the CFPB to be unconstitutional and in 2018, the dissenting opinion from the en banc U.S. Court of Appeals for the D.C Circuit’s decision overruling the 2016 panel opinion.

The 2016 panel opinion determined that the structure of the CFPB is unconstitutional stating:  “The concentration of massive, unchecked power in a single Director marks a dramatic departure from settled historical practice and makes the CFPB unique among independent agencies.” And the 2016 panel also presented a view of the Constitution that vests with the president an extensive degree of unilateral authority over the executive branch’s enforcement of federal laws.

NLR:  Since Justice Kavanaugh was a judge involved in a similar case – PHH Corp. v. CFPB – why is he allowed to rule on this matter again?

DiResta: I’m not an expert on judicial ethics but there does not appear to be improper bias in Kavanaugh reviewing this decision. Rather, his views in PHH reflect a philosophical perspective on separation of powers and the role of administrative agencies.  In fact, I expect they’ll use his past ruling on PHH as part of their internal discussion.

Seila Law v CFPB and Election Politics

NLR: It’s difficult to ignore the political undertones of this case:  a watchdog organization created, in part, with input from some high-profile democrats (most notably Elizabeth Warren, who is currently running as a candidate for president) is being challenged and that challenge is being echoed in support by largely conservative elements.  In your view, is this case a litmus test for the Supreme Court delving into political issues, something it has largely tried not to do?

DiResta: No – I really don’t see this as political. Again, this is a purely constitutional question, a legal question, and it’s exactly the kind of case the SCOTUS should be deciding. If we’re honest, this is a perfect example of why we have SCOTUS in the first place: To examine how effective our public servants are behaving and performing their responsibilities under the constitutional structure revealed in the separation of powers doctrine.

Besides that, politically speaking, this could boomerang. Consider: if the Democrats win the White House in 2020, and the Court were to change the structure, that would offer any Democratic President the opportunity to appoint a new Director in 2021, and Kathleen Kraninger’s term isn’t up until 2023.

Informed Democracy at Work

While the situation with CFPB and its constitutionality is demonstrably important, DiResta touched on a few more salient – though no less important – points.

DiResta: Democracy isn’t supposed to be easy. Democracy is hard – it’s messy and complicated. It’s in its nature, and in the nature of different ideas.

In a free marketplace of ideas, people will clash when citizens are free to express themselves, and there will always be conflict – but it’s out of resolving those conflicts that democracy claims – and grows – its power and attraction. It’s so important that we – the people – see this and get to comment on it – to watch this happening.

NLR: Absolutely. In a world where the news cycle has compressed from days, to hours, to minutes – while attention spans have diminished in similar fashion – it’s increasingly important that these monumental workings in government are transparent, and that people see them.

DiResta: I couldn’t agree more. And – as a young lawyer, I  had the privilege to work with some very dedicated and highly professional journalists who understood journalism as a public service, not as entertainment.  These journalists saw themselves as educators, bringing light to the processes and prospects of government to citizens. And that’s how the media serves effectively as the Fourth Branch of government. A branch that presents a constant check to the power of government and its branches, and that gives the people the knowledge to make better decisions, and to vote for the best people and the best situations.

We sincerely appreciate Mr. DiResta for his thoughtful insights and for taking time out of his busy schedule to share them with the National Law Review.

Copyright ©2019 National Law Forum, LLC

Can an Employee be Fired for Being Gay or Transgender?

HR Professionals will soon know the answer to this question.

The United States Supreme Court is preparing to settle a contentious debate on employee protections under federal employment discrimination laws.  On October 7th, the Court returned from its summer break to start the new term.  The Court did not have to wait long before it tackled a complex case because on October 8th, the Court heard two major oral arguments with potentially far-reaching implications for both employers and employees.  Both cases focus on the prohibitions in employment discrimination under Title VII of the 1964 Civil Rights Act (“Title VII”).  Under Title VII, Congress made it illegal for employers to discriminate against employees on the basis of “race, color, religion, sex, and national origin.”  The question that the Court will address is whether employment discrimination based on sexual orientation or gender identity is prohibited employment discrimination “because of sex.”

The first case the Court heard was a consolidated matter involving cases from the Second Circuit Court of Appeals (Altitude Express Inc. v. Zarda) and the Eleventh Circuit Court of Appeals (Bostock v. Clayton County, Georgia), both of which involve men who claim they were fired from their jobs because of their sexual orientation.

Second Circuit: “Sex” is Necessarily a Factor in Sexual Orientation

The plaintiff in Zarda, Donald Zarda, was a skydiving instructor, who died in 2014.  Prior to his death, a female client complained that Zarda inappropriately touched her during a jump.  At some point, Zarda communicated to the client that he was a homosexual and “had an ex-husband,” a practice that Zarda stated he often did with female clients to put them at ease.  Altitude Express terminated Zarda in connection with the complaint; however, Zarda insisted he was fired solely because of his reference to his sexual orientation.

A federal district court granted summary judgment against Zarda, reasoning that his claim was not cognizable under Title VII.  However, the Second Circuit reversed, with a majority of the court believing that sexual orientation discrimination is motivated by sex and, therefore, a “subset of sex discrimination.”  Thus, the Second Circuit concluded that federal law prohibits the firing of an employee on the basis of sexual orientation.  Notably, the court reached this conclusion by taking a broad interpretation of the meaning of the text “because of sex.”  Specifically, the court reasoned that Title VII must protect sexual orientation “because sex is necessarily a factor in sexual orientation.”

Eleventh Circuit: Discharge for Homosexuality Not Prohibited by Title VII

The Eleventh Circuit reached the opposite conclusion in Bostock v. Clayton County, Georgia.  The plaintiff in Bostock, Gerald Bostock, was a Child Welfare Services Coordinator in Clayton County for over ten years.  Although Bostock had received good performance reviews for his work, an internal audit was conducted on his program’s funds.  Bostock, who is gay, claimed the audit was a “pretext for discrimination against him because of his sexual orientation.”  During an advisory meeting, where Bostock’s supervisor was present, at least one person criticized Bostock’s sexual orientation and his participation in a gay softball league.

After his complaint was dismissed at the district court level, Bostock appealed to the Eleventh Circuit.  Referring back to a 1979 decision, the Eleventh Circuit reasoned that it had already held that “[d]ischarge for homosexuality is not prohibited by Title VII.”  While hinting that this earlier ruling may have been wrong, the court held that it had no choice but to follow precedent and affirm the dismissal of Bostock’s claim.

Sixth Circuit: Discrimination on the Basis of Transgender and Transitioning Status is Necessarily Discrimination on the Basis of Sex

The second case, Harris Funeral Homes v. EEOC, presents a similar question to Zarda and Bostock.  That is, whether employees can be fired based on their status as transgender.

The case involves Aimee Stephens, who was a funeral director and embalmer for R.G. & G.R. Harris Funeral Homes.  While working in this position for six years, Stephens dressed and presented herself as a man without issue.  However, once Stephens communicated that she wanted to live and work as a woman before having sex-reassignment surgery, she was terminated.  The owner of the funeral home, a devout Christian, admitted that Stephens was fired because she “was no longer going to represent himself as a man.  He wanted to dress as a woman.”  The owner believed this change would violate “God’s commands.”

After Stephens filed a discrimination charge, the Equal Employment Opportunity Commission (“EEOC”) pursued a complaint on her behalf against the funeral home.  In ruling in favor of the employer, the district court reasoned that transgender status is not a protected trait under Title VII and that the Religious Freedom Restoration Act (“RFRA”) precludes the EEOC from enforcing Title VII in this instance as doing so would substantially burden the employer’s religious exercise.  The Sixth Circuit reversed, holding that “discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex.”  The court further ruled that the RFRA did not apply to protect the funeral home’s actions because the funeral home was not a “religious institution,” and Stephens was not a “ministerial employee” excluded from Title VII’s protections.

Stakeholders: States, Federal Government, Employers, and Employees

The Supreme Court’s ruling in these cases, which is expected in the spring or summer of 2020, has the potential to be monumental because of the many stakeholders involved.  Currently, 21 states and the District of Columbia have barred sexual orientation and gender identity discrimination by statute or regulation, as have a number of counties and municipalities.  While a few other states provide protection from this type of discrimination either by agency interpretation or court ruling, the remaining states in the country offer no protection under their state laws.  This means that LGBTQ individuals who live in states such as Alabama, Florida, Georgia, Indiana, and even North Carolina (at least with respect to private employers) may have no remedy to this type of employment discrimination outside of Title VII.

Additionally, states who have passed laws in this area may face challenges in enforcing those laws if the Supreme Court decides that Title VII does not protect gay and transgender status.  Many of these states lean on the EEOC’s authority to investigate claims of discrimination against companies that operate in multiple jurisdictions, and the EEOC has been successful in partnering with states to investigate discrimination claims and enforce such actions.  However, states would lose EEOC assistance should the Court decide that Title VII’s scope does not extend to sexual orientation or gender identification.

Although the EEOC traditionally has been on the side of expanding Title VII protections, the federal government in the most recent litigation has aligned itself with the employers.  In particular, United States Solicitor General Noel Francisco argued that Title VII’s prohibition on discrimination “because of sex” does not apply to sexual orientation or gender identity.  Accepting this interpretation, Title VII is limited to barring employers from treating women different from men in the same or similar position, and vice-versa.

Equally important to the states’ and federal government’s interest is the interest of employers.  Companies have lined up on both sides of the debate with over 36 briefs filed in support of Bostock and Zarda, and over 24 briefs filed in support of Clayton County and Altitude Express.  For example, one brief filed in support of Bostock and Zarda includes 206 companies representing businesses such as Apple, Google, Facebook, Walt Disney, Coca-Cola, and Uber.  These businesses argued that interpreting Title VII to “exclude sexual orientation or gender identity from protections against sex discrimination would have wide-ranging, negative consequences for businesses, their employees, and the U.S. economy.”  In contrast, the C12 group that represents “the largest network of Christian CEOs, business owners, and executives in the United States” filed a separate brief in support of the employers arguing that interpreting “because of sex” in Title VII to include sexual orientation and gender identity ignores the natural meaning of the law, “thereby bypassing the political process, shutting down debate, preventing any accommodation of divergent views, and precluding any compromise.”

Makeup of the Court: The Deciding Vote

Prior to his retirement, Justice Anthony Kennedy was the deciding vote in several gay rights cases.  However, Justice Kennedy is no longer on the bench, and these cases present the first opportunity for the public to see how his successor, Justice Brett Kavanaugh, will vote on these issues.  Also, Justice Neil Gorsuch, successor to Justice Antonin Scalia, may play a key role in deciding these issues.  Similar to Scalia, it is believed that Justice Gorsuch is more inclined to rule that courts should naturally interpret statutes as they were meant when enacted.  Should Justice Gorsuch hold firm to this view, then there is some thought that he may conclude sexual orientation and gender identity were not meant to be included as discrimination “because of sex” under Title VII.  The perspectives of these new Justices are likely to dictate the Court’s ultimate decision – a decision which may directly impact the employment landscape for years to come.

© 2019 Ward and Smith, P.A. All Rights Reserved.

For more on Employment Protections, see the National Law Review Labor & Employment and Civil Rights law pages.

Second Circuit Deepens Split with Third Circuit Over Aviation Safety Field Preemption, Awaiting Possible Supreme Court Resolution

There is no greater issue currently facing the aviation bar than whether the Federal Aviation Act (“FAAct”) preempts state law by occupying the entire field of air safety. In other words, do federal standards of care exclusively govern liability in the aviation industry, or are states allowed to govern aspects of aviation safety through a patchwork of unique tort or regulatory liability regimes? This question is the subject of a petition for writ of certiorari pending before the U.S. Supreme Court, seeking review of the Third Circuit’s decision in Sikkelee v. Precision Airmotive (2016). In Sikkelee, the Third Circuit concluded that Abdullah v. American Airlines – in which it previously held in the context of in-air operations that “federal law establishes the applicable standards of care in the field of air safety, generally, thus preempting the entire field from state and territorial regulation” – did not apply to state product liability claims concerning the design of aircraft engines.[1] The Supreme Court has asked the U.S. Solicitor General to weigh in on this important question.

Most recently, while the Sikkelee cert petition is pending, the Second Circuit decided Tweed-New Haven Airport Authority v. Tong (2019). In Tweed, the Court of Appeals doubled down on its prior holding in Goodspeed Airport v. East Haddam Inland Wetlands & Watercourses Commission (2011) that the FAAct occupies the “entire field of aviation safety” to the “exclusion of state law” and consequently preempts state laws that sufficiently interfere with federal regulation of air safety. Though the Third Circuit in Sikkelee tried to distinguish and reconcile such other broad field preemption decisions, the analytical split between them – made even more visible in Tweed – is unmistakable. The resultant uncertainty is antithetical to the very purposes of the FAAact – to create a uniform system of federal regulation for aviation industry participants. Tweed thus underscores the need for the Supreme Court to grant certiorari and resolve the split.

The Second Circuit’s Approach to Field Preemption

In Goodspeed, a small privately owned airport sought a declaratory judgment that local environmental and wetlands laws were preempted by the FAAct. The Second Circuit affirmed a “thorough and well-reasoned” district court decision using a two-step analysis for field preemption. The first step asks whether Congress intended the entire field to be occupied by federal law to the exclusion of state law. If so, the second step considers whether the state law in question sufficiently intrudes upon that field.

Applying the two steps, the Second Circuit had little difficulty concluding first that “the overall statutory and regulatory scheme” under the FAAct is “evidence of ‘a clear congressional intent to occupy the entire field of aviation safety to the exclusion of state law,’” because it “has established a comprehensive regulatory scheme ‘addressing virtually all areas of air safety,’ including the certification of aircraft, most airports, pilots and mechanics, air traffic control systems, air navigation and communication, and airspace classifications.” In so holding, the Court noted that it was joining the First, Third, Sixth, Ninth, and Tenth Circuits.

Turning to the second question, the Goodspeed Court considered whether the state environmental and wetland law at issue, which simply required a permit before cutting down trees in protected wetlands, “sufficiently interferes with federal regulation that it should be deemed preempted.” Examining the purpose and effect of the state law, the Court found that the law did not sufficiently enter into the scope of the preempted field: “Goodspeed Airport is not licensed by the FAA; it is not federally funded, and no federal agency has approved or mandated the removal of the trees from its property. Indeed, in its response to a formal inquiry from the district court, in this case, the federal government disclaimed any authority to order the trees’ removal.” In other words, as the district court had explained below, “Courts have long distinguished between state laws that directly affect aeronautical safety, on the one hand, and facially neutral laws of general application that have merely an incidental impact on aviation safety.”

In Tweed, the Second Circuit applied the same, two-step analysis in considering whether a state law preventing the expansion of an airport runway was impliedly field preempted. Tweed is a small commercial Airport. Its largest runway is currently 5,600 feet long making it one of the shortest commercial airport runways in the country, substantially limiting commercial flights. In 2002, Tweed had prepared a Master Plan with Federal Aviation Administration (“FAA”) involvement for upgrading its airport, including extending the runway. In 2009, however, the Connecticut legislature enacted a statute expressly blocking the expansion of the runway. In response, Tweed filed a declaratory judgment action seeking a determination that the statute was preempted by the FAAct. The district court rejected Tweed’s arguments, finding that Tweed lacked standing to sue, and that, even if it had standing, the FAAct did not preempt the statute. The Second Circuit reversed, finding both standing and preemption.

With regard to preemption, the Court of Appeals first reiterated the Goodspeed holding that the FAAct “was enacted to create a uniform and exclusive system of federal regulation in the field of air safety. . . . It was passed by Congress for the purpose of centralizing in a single authority . . . the power to frame rules for the safe and efficient use of the nation’s airspace.” Consequently, it reasoned, state laws that conflict with the FAAct “or sufficiently interfere with federal regulation of air safety are preempted.”

Thus turning to the second step in the analysis, the Court considered whether the statute fell within the scope of the preempted field. It found that the statute directly impacted air safety by limiting the length of the runway, which in turn limited the number of passengers, amount of baggage, and even the type of planes that could use the airport. The Court also considered the extent of FAA involvement with Tweed overall and with the length of the runway specifically, concluding that the “FAA’s involvement with Tweed and its runway project has been direct and significant.” As the Court explained, Tweed is federally regulated as part of the Tweed-New Haven Airport Layout Plan, which requires approval by the FAA. Additionally, as a primary commercial service airport, Tweed needs to hold an operating certificate pursuant to federal regulations. It is required to submit its Master Plan to the FAA, which, as early as 2002, included a plan for extending the length of the runway. The FAA directly approved the Master Plan, including the extension of the runway. For all these reasons, the Court held that the state law was preempted.

The Third Circuit’s Conflicting Approach

In Abdullah v. American Airlines (1999), the Third Circuit similarly considered whether the FAAct preempted the field of air safety thus barring a tort claim premised on an alleged failure by aircraft crew to warn passengers of expected turbulence. The Plaintiffs alleged negligence by the pilot and flight crew for failing to either avoid the turbulent conditions or warn the passengers so they could protect themselves. The Court of Appeals found implied field preemption based on its conclusion that the FAAct and relevant federal regulations “establish complete and thorough safety standards for interstate and international air transportation that are not subject to supplementation by or variation among, jurisdictions.” Indeed, the Third Circuit expressly distinguished its holding from those in which courts had only found preemption of “discrete aspects of air safety,” explaining that “federal law establishes the applicable standards of care in the field of air safety, generally, thus preempting the entire field from state and territorial regulation.”

Despite the breadth of this express holding in Abdullah, the Third Circuit subsequently held in Sikkelee that the FAAct does not preempt state law aviation product liability claims. The plaintiff had alleged that a design defect in the carburetor of an airplane engine resulted in the aircraft crashing shortly after takeoff. Examining whether that claim was subject to implied field preemption, the Third Circuit did not use the Second Circuit’s two-step analysis, but instead essentially conflated the inquiries, focusing entirely on whether there was pervasive enough federal regulation addressing the particular aviation safety aspect at issue to rebut the general presumption against preemption.

In that regard, the defendants pointed to the extensive certification process required by the FAA in order to receive a type certificate for the engine: “This certification process can be intensive and painstaking, for example, a commercial aircraft manufacturer seeking a new type certificate for wide-body aircraft might submit 300,000 drawings, 2,000 engineering reports, and 200 other reports in addition to completing approximately 80 ground tests and 1,600 hours of flight tests.” As the defendants explained, the type certificate “certifies that a new design for an aircraft or aircraft part performs properly and meets the safety standards defined in the aviation regulations,” and any changes to the design thereafter must be approved by the FAA. A “major” change to the type certificate requires the issuance of an amended or supplemental type certificate. The defendants argued that, because a type certificate applicant goes through such a rigorous regulatory process culminating in the certification of a part as meeting safety standards defined in the aviation regulations, the question of whether a part design was reasonably safe under state law was preempted by the FAAct.

The Third Circuit disagreed. Focused on the general presumption against preemption, the Court of Appeals considered the fact that “aviation torts have been consistently governed by state law” as far back as 1914. It also read the text of the FAAct as “not signal[ing] an intent to preempt state law products liability claims.” The Third Circuit dismissed the extensive regulations addressing the engine design and certification process as merely establishing “a baseline requirement” for “minimum standards.”

In thus holding that the FAAct did not impliedly preempt the field of aviation safety pertaining to engine certification, the Third Circuit tried to distinguish and reconcile its approach to field preemption with that of other Courts of Appeals, including the Second Circuit: “Appellees observe that various Courts of Appeals have described the entire field of aviation safety as preempted, but, on inspection, even those courts have carefully circumscribed the scope of those rulings. The Second, Ninth, and Tenth Circuits all assess the scope of the field of aviation safety by examining the pervasiveness of the regulations in a particular area rather than simply determining whether the area implicated by the lawsuit concerns an aspect of air safety.”

Not so. Again, for example, the Second Circuit has not started its analysis by “examining the pervasiveness of the regulations in a particular area” of aviation. In direct conflict with Sikkelee, the Second Circuit through Tweed has now twice readily found at the outset of its analyses that the FAAct impliedly preempted the “entire” field of aviation safety. Only thereafter has the Second Circuit examined the state law at issue to determine if it sufficiently intruded into the preempted field (Tweed), or, rather, was merely incidental to it (Goodspeed).

This fundamental difference in analyzing field preemption belies the Third Circuit’s attempt to distinguish product liability cases (Sikkelee) from in-air operations (Abdullah). Indeed, the Second Circuit acknowledged no such distinction in Tweed, and in its predecessor, Goodspeed, the Court affirmed the district court’s “thorough and well-reasoned” explanation that, in response to the FAAct’s “congressional mandate, the FAA has established a comprehensive regulatory scheme addressing virtually all areas of air safety, including the certification of aircraft.” Thus, unlike the Third Circuit, the Second Circuit would not start its analysis of a case involving engine product liability by examining whether the pervasiveness of aircraft design and certification regulations sufficiently evinces an intent to overcome a general presumption against preemption, but, rather, by yet again recognizing field preemption over all aspects of aviation safety – including engine design – and would then ask whether the state tort standards of care at issue sufficiently intrude upon the scope of that field. In that regard, we think the Second Circuit would have little difficulty concluding that they do. Like the extent of federal involvement with the physical layout of the airport in Tweed, the level of federal involvement in engine design and certification is indisputably “direct and significant,” such that state tort law standards of care that purport to govern the safety of engine design clearly intrude upon it.

Conclusion

The fundamental and critical circuit split on the proper analysis of implied field preemption in aviation cases, illustrated and emphasized most recently by Tweed, undermines the very purpose of the FAAct of creating uniform and consistent standards of care for safety in the aviation industry. We hope the Supreme Court will grant certiorari and resolve it.

[1] The Third Circuit remanded the case for consideration of conflicts preemption and on subsequent review of the district court’s determination that the product liability claims were conflict preempted, it reversed and remanded for further proceedings. The pending cert petition seeks review of both preemption rulings. This article, however, is focused solely on field preemption.

© 1998-2019 Wiggin and Dana LLP

For more aviation cases, see the National Law Review Utilities & Transport type of law page.

Immoral and Scandalous Trademarks Are Now Allowed According to Today’s U.S. Supreme Court Decision

On June 24, 2019, the Supreme Court handed down its decision in Iancu v. Brunetti, addressing whether, in light of its previous holding in Matal v. Tam, the Lanham (Trademark) Act’s prohibition on registration of “immoral” and “scandalous” trademarks represents a violation of the First Amendment.  Six justices joined the majority opinion, which held that both the immoral and the scandalous provisions of the Lanham Act do not square with the First Amendment and, thus, must be invalidated.

Respondent Erik Brunetti founded a clothing line that uses the trademark and brand name ‘FUCT’.  When Brunetti attempted to register his trademark with the United States Patent and Trademark Office (USPTO), the registration was denied on the grounds that the mark was “a total vulgar” and therefore could not be registered.  Brunetti appealed, arguing that, particularly in light of Tam (which held that the disparagement clause of the Lanham Act represented a First Amendment Violation), the Lanham Act’s exclusion of immoral and scandalous marks as eligible for federal registration by the USPTO also represented unconstitutional viewpoint discrimination.

The government argued that the ban on such marks was viewpoint-neutral, and, in any case, could be constructed in a limiting way such that the only prohibition would be to marks that are offensive or shocking due to their mode of expression, regardless of the views presented by the marks.  Doing this, according to the government, would result in only vulgar—lewd, sexually explicit, and profane—marks being refused registration, which would make the prohibition constitutional.

The Supreme Court disagreed, explaining that “the statute says something markedly different”.  The Lanham Act, as written “does not draw the line at lewd, sexually explicit, or profane marks…[or] refer only to marks whose “mode of expression,” independent of viewpoint, is particularly offensive.”  Moreover, the Supreme Court explained, while the Lanham Act clearly has a legitimate purpose, it is still not permitted to engage in viewpoint-based discrimination.  As an illustration, the Supreme Court pointed to several contradictions by the USPTO when it came to attempts to register a trademark (‘KO KANE’ rejected as a trademark for beverages while ‘SAY NO TO DRUGS—REALITY IS THE BEST TRIP IN LIFE’ registered; ‘BONG HITS 4 JESUS’ refused registration due to the belief that “Christians would be morally outraged” but ‘JESUS DIED FOR YOU’ allowed registration on clothing).

Between Tam and Brunetti, the Lanham Act has now lost its ability to exclude a wide swath of potential trademarks.  Previously, Examining Attorneys with the USPTO were permitted to refuse registration of a trademark, even if it was not phonetically equivalent to a curse word (as in the present case), if the Examining Attorney felt that the trademark was, or could potentially be, offensive or outside the “accepted” viewpoint.  This is why ‘BONG HITS 4 JESUS’ was refused registration but ‘JESUS DIED FOR YOU’ was allowed; as the Supreme Court opinion notes, one mark suggests irreverence while the other suggests religious faith and, while some may find the first mark offensive, it is not the place of the USPTO to police what is and is not objectionable.  Marks that are disparaging, explicit, immoral, and/or scandalous are now eligible for registration with the USPTO.  Brunetti should now be granted federal registration for his clothing brand and enjoy the additional protections that come from having the USPTO backing a trademark.

 

© 2019 Davis|Kuelthau, s.c. All Rights Reserved
This article was written by Erin E. Kaprelian of Davis Kuelthau.
Learn more about SCOTUS IP decisions on the National Law Review Intellectual Property page.