Opinion ID: 2795022
Heading Depth: 3
Heading Rank: 3

Heading: Applying the “Unconstitutional Conditions”

Text: Doctrine to Trademark Registration McGinley is the only case of ours to consider, if only briefly, the First Amendment implications of § 2(a). Since McGinley, a number of cases raised a First Amendment challenge to § 2(a), but in each case, the panel held itself bound by McGinley. See In re Boulevard Entm’t, Inc., 334 F.3d 1336, 1343 (Fed. Cir. 2003); In re Mavety Media Grp., 33 F.3d 1367, 1374 (Fed. Cir. 1994); In re Fox, 702 F.3d 633, 635 (Fed. Cir. 2012). Neither the court in McGinley nor any other court has analyzed § 2(a) under the “unconstitutional conditions” doctrine. This is error. Federal trademark registration confers valuable benefits, and under § 2(a), the government conditions those benefits on the applicants’ choice of a mark. Because the government denies benefits to applicants on the basis of their constitutionally protected speech, the “unconstitutional conditions” doctrine applies. However, we are faced with a fundamental predicate question: does the “unconstitutional conditions” doctrine apply with full force in the context of trademark registration, or is it tempered by virtue of Congress’ spending power? The benefits of trademark registration, while valuable, are not monetary. Unlike tangible property, a subsidy, or a tax exemption, bestowal of a trademark registration does not result in a direct loss of any property or money from the public fisc. Rather, a trademark redefines the nature of the markholder’s rights as against the rights of other citizens, depriving others of their rights to use the mark. Like the programs in Bullfrog and Texas Lottery Commission, the system of trademark registration is a regulatory regime, not a government subsidy program. IN RE TAM 15 Furthermore, the act of registering a trademark does not involve the federal treasury. In 1981, as noted by the McGinley court, trademark registration was “underwritten by public funds.” 660 F.2d at 486. That is no longer true today. Since 1991, PTO operations have been funded entirely by registration fees, not the taxpayer. Figueroa v. United States, 466 F.3d 1023, 1028 (Fed. Cir. 2006); see also 56 Fed. Reg. 65147 (1991); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, S. 10101, 1990 U.S.C.C.A.N. (104 Stat.) 1388. While PTO operations are fully funded by registration fees, some federal funds are nonetheless spent to facilitate the registration and enforcement of trademarks. For example, PTO employee benefits, which include pensions, health insurance, and life insurance, are administered by the Office of Personnel Management and funded from the general treasury. Figueroa, 466 F.3d at 1028. And registering a trademark may lead to additional government spending, such as when the trademark owner seeks to enforce the trademark through the federal courts and U.S. Customs and Border Patrol. This spending, however, is attenuated from the benefits bestowed by trademark registration. Trademark registration does not implicate the Spending Clause merely because of this attenuated spending, else every benefit or program provided by the government would implicate the Spending Clause. The programs in Bullfrog and Texas Lottery Commission were likely funded in some part by the government—perhaps also by government benefits paid to employees administering the programs—but the Ninth Circuit and the Fifth Circuit considered only whether the conditioned benefits were paid for by government spending, and not whether the government subsidized the program in more indirect manners. And while the government argued in Autor that the government had appropriated public funds to establish the international trade advisory committees, 740 F.3d at 182, the D.C. Circuit nonetheless found that member16 IN RE TAM ship on these advisory committees was not a financial benefit, id. at 183. The purpose and nature of trademark registration support the conclusion that trademark registration is not a government-funded benefit. The Lanham Act derives from the Commerce Clause, not the Spending Clause, and its purpose is to regulate marks used in interstate commerce—not to subsidize the markholders. 15 U.S.C. § 1127. Furthermore, it is the markholder, and not the government, that must spend money (on advertising using its mark) to obtain the benefits of trademark registration. Registration of a trademark is not a federally funded financial benefit to the applicant. McGinley was written only one year after Central Hudson and was decided against a background of law where the First Amendment had only recently begun to apply to commercial speech. Given the drastic changes since McGinley in constitutional jurisprudence and the PTO’s shift from a taxpayer-funded organization to a user-funded program, the McGinley court’s analysis of the constitutionality of § 2(a) of the Lanham Act no longer suffices. This analysis did not discuss the “unconstitutional conditions” doctrine, despite the doctrine’s clear relevance. And because trademark registration is no longer funded by the federal treasury, there is no longer any argument that trademark registration implicates Congress’ power to spend. To the contrary, the trademark registration scheme is a prototypical example of a regulatory regime. As a result, the “unconstitutional conditions” doctrine applies. The government cannot hinge the benefits of federal trademark registration on constitutionally protected speech—here, the applicant’s selection of a suitable mark—unless the government’s actions pass constitutional scrutiny. IN RE TAM 17