Court Opinion

ID: 6967384
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:56:18.623579+00
Date Added: 2024-06-11T16:08:39.851705
License: Public Domain

BROWNING, Circuit Judge,
concurring in part and dissenting in part.
I concur in the majority’s opinion insofar as it affirms Tempe’s authority to condition the approval of a permit to display exterior signage in the Albertsons Plaza Shopping Center on conformance with that shopping center’s sign package, which stipulates that exterior signs in the shopping center will be flat. I dissent, however, from the majority’s holding that Tempe cannot condition the display of exterior signage at the Valley Fair Shopping Center on conformity with the requirement that such signage. employ white letters against a turquoise background and I disagree with the underlying interpretation of Section 1121(b) that led the majority to this result.
Section 1121(b) prohibits states and localities from applying regulations to federally registered trademarks that require changes in the marks themselves, alterations that will be reflected in every subsequent use of the affected marks. Section 1121(b) does not preempt local aesthetic zoning controls that affect the display of federal trademarks in exterior signage at particular locations. Tempe is not, for example, preempted under Section 1121(b) from enacting and enforcing zoning regulations restricting the use of color in exterior signage in a particular shopping center, even though businesses holding trademarks with incompatible colors will be precluded from displaying their marks in exterior signage at that shopping center. I dissent from the majority opinion’s rejection of this interpretation of Section 1121(b), and from the unsupportable distinction the majority draws between local aesthetic regulation of color, on the one hand, and architectural features on the other in the context of exterior signage.
I
“Alter” as used in Section 1121(b) does not encompass local ordinances limiting the permissible size, color, construction, or other physical characteristics of exterior signage, even if a trademark holder wishes to use its trademark in such signage. The term refers to state-mandated changes to federal marks themselves, changes that will, of necessity, be reflected in every subsequent use of the affected marks within that jurisdiction.
Congress enacted Section 1121(b) in response to the Century 21 experience, to make clear that some kinds of state regulation of trademarks are preempted by the Lanham Act. In Century 21, the Nevada Real Estate Advisory Commission required the alteration of real estate trademarks, as *1302such, by physically incorporating the broker’s name in such trademarks whenever displayed in Nevada, including on “signs, letterheads, business cards, brochures, uniforms, name tags, folders, cheeks, forms, memo pads, desk plates, display materials, marketing materials, advertisements, etc.” Payless Shoesource, Inc. v. Toivn of Penfield, New York, 934 F.Supp. 540, 543 (W.D.N.Y.1996).1 In the name of consumer protection, the Commission implemented its own regulatory scheme governing the content of real estate trademarks.
This is the sort of “alteration” Congress sought to prohibit with the enactment of Section 1121(b). In contrast, local aesthetic zoning regulations affect only specific, isolated applications of federally registered trademarks (e.g., use in exterior signs at a particular location) and do not alter the trademarks themselves in a manner that is reflected whenever they are used. Tempe’s sign ordinances, for example, limit the permissible aesthetic characteristics (color, size, materials, architectural features, etc.) of exterior signage in particular shopping centers, but do not affect the marks themselves or any other application of the marks within the city. The regulations are not directed at the marks at all, but at aesthetic considerations affecting the shopping centers and the public.
Tempe neither required the plaintiffs to incorporate their trademarks into their exterior signage nor mandated that they lease space in the particular shopping centers. It was the plaintiffs that elected to lease space in shopping centers where, from the terms of the particular shopping centers’ sign packages, they knew they would be prohibited from displaying their marks as registered. When, predictably, the City denied their applications to display the trademarks on exterior signs in those shopping centers, plaintiffs chose to sue the City rather than employ exterior signs consistent with the City’s sign ordinance or confine the display of their trademarks to interior signs. Under these circumstances, realistically, it cannot be said that Tempe’s sign ordinances required any alteration of the plaintiffs’ registered marks in violation of Section 1121(b). As Chief Judge Larimer noted in a similar case,
The fact that plaintiff would prefer to use its trademark as its sign should not preclude the Town from enforcing valid aesthetic zoning regulations. In essence, plaintiff has created the crisis by insisting that it has the absolute right to use its trademark as its outdoor sign regardless of the Town’s uniform sign regulations.
Payless, 934 F.Supp. at 546.
As the majority opinion correctly notes, Tempe’s sign packages were adopted pursuant to the City’s aesthetic zoning authority and specify the size, construction, color, architectural features, and other characteristics that may be employed in exterior signage by tenants in each of the City’s various shopping centers.2 Shopping center tenants are free to display any text—including registered marks—so long as the color, size, construction, character, and location of the signs comply with the sign package for that shopping center. In the ease of Blockbuster Videos, the sign package applicable in the Albertsons Plaza Shopping Center requires that all exterior signs be flat,3 effectively preventing Blockbuster Videos from displaying its awning mark in exterior signs. In the ease of *1303Video Update, the Valley Fair Shopping Center sign package requires that all exterior signs consist of white letters against a turquoise background, effectively precluding Video Update from displaying its registered red stylized lettering mark in exterior signs.
The majority opinion correctly holds that Tempe can, consistent with Section 1121(b), deny Blockbuster Videos permission to display its awning mark as an exterior sign. The appropriate principle underlying this holding is not, however, that the relevant aesthetic restriction survives only because it constitutes a “prohibition” on the display of Blockbuster Videos’ trademark rather than an “alteration” of it, but instead that Section 1121(b) does not bar states and their subdivisions from adopting aesthetic zoning regulations, even if those regulations indirectly affect the use of a federally registered trademark in exterior signs. Under this reasoning, both the color and the architectural feature regulations at issue in this ease should be upheld. Tempe sought to control the use of color for the same reason it barred the use of protruding architectural features such as awnings: to protect and enhance the appearance of its commercial areas by promoting a certain level of aesthetic consistency. The City denied Video Update’s application to display a red sign and Blockbuster Videos’ application to erect an awning because both were aesthetically inconsistent with the City’s sign controls. Both were elements of registered trademarks—both were barred— neither trademark was altered.
The majority attempts to distinguish Tempe’s color controls from its regulation of architectural features on the ground that the City prohibited, Blockbuster Videos from using an awning in its exterior signage and required Video Update to use white letters on a turquoise background in its signage. But this distinction is pure semantics. It could just as easily be said that Tempe required that Blockbuster display a flat sign and prohibited Video Update from using colors other than white. There is no reasoned basis for drawing a distinction for purposes of Section 1121(b) preemption between local regulation of color and of architectural features. Color and architectural features are analogous aesthetic components of registered trademarks. If Congress intended to leave localities free to prohibit the use of architectural features, surely localities can also control the use of color.
II
The majority seriously misconstrues the language and legislative history of Section 1121(b), as well as the relevance of the Copyright Act. The majority acknowledges that Section 1121(b) was enacted in response to Century 21, but inexplicably concludes that only the second clause of Section 1121(b) was intended to respond to the Century 21 problem. There is no support for this distinction in the language or legislative history. To the contrary, the House Report on the bill that became Section 1121(b) states that the bill arose out of the Century 21 experience and draws no distinction between its two provisions. H.R.Rep. No. 97-778 at 1-2 (1982). The more natural interpretation is that together, the two clauses were designed to prevent alterations to registered marks of the kind required by the Nevada Real Estate Advisory Commission.
The majority asserts the, legislative history of Section 1121(b) indicates Congress intended to permit localities only to either prohibit exterior signs containing registered trademarks or regulate their size and location. This is a serious miseharacterization of the legislative history, which leaves no doubt that Congress did not intend Section 1121(b) to limit the power of local governments to enact and enforce aesthetic zoning regulations at all, even if those regulations applied to federally registered trademarks.
Neither Congressman Frank nor anyone else testifying before the House Subcommittee adopted the interpretation of Section 1121(b) suggested by the majority. Mr. Frank was concerned that the amendment might be interpreted as limiting the power of localities to impose uniform aesthetic and historic zoning regulations like those adopted by Tempe. See Lanham Act Trademark Act Amendment, Hearing on H.R. 5154, before the Subcommm. on Courts, Civil Liberties, and the Administration of Justice, 97th Cong, at 9-11 (1982). Mr. Frank explicitly *1304raised the issue of local ordinances restricting the permissible color, lettering, construction, and content of exterior signage, and was repeatedly assured that such regulations would continue to be valid under Section 1121(b). Id. at 10-11. The House Report states:
To make the limited scope of the bill clear the Committee adopted an amendment, recommended by the Patent and Trademark Office, to make it clear that restriction on state’s power is limited to the display of other franchisee’s name “in the mark” itself and not to the uses of trademarks in advertizing. During the course of Committee debate Mr. Frank raised the issue of whether the bill would in any way restrict the zoning or historic site protection laws or regulations of states. On the advice of counsel, the Committee concludes that the bill in no way affects the powers of state and local governments in areas of concern raised by [Mr. Frank],
H.R.Rep. No. 97-778 at 2 (1982), U.S. Code Cong. & Admin. News at 2622 (emphasis added).
Those who testified before the House Subcommittee uniformly agreed that under Section 1121(b), state and local governments would continue to be free to enforce aesthetic zoning restrictions applicable to signage, even if that regulation affected the display of registered trademarks. In his prepared testimony, Hon. Jerry M. Patterson, author of the bill that would become Section 1121(b) stated, “[t]he legislation is not intended to limit the right of States to regulate signs or agreements merely because they may involve registered trademarks ... [o]n the contrary, the legislation will only prohibit State laws and regulations that attempt to alter a federally-registered trademarks [sic].” Lanham Act Trademark Act Amendment, Hearing on H.R. 515k before the Subcommm. on Courts, Civil Liberties, and the Administration of Justice, 97th Cong, at 13 (1982).
Thus, the author of the bill clearly distinguished regulation of signs that make use of a federally registered trademark from regulation that alters the mark itself. The term “alteration” was used by the bill’s author to describe state-mandated changes in the mark itself, which are, of necessity, reflected in every subsequent display of that mark within the relevant jurisdiction. Regulation that directly alters the mark itself is quite different from regulation that defines permissible aesthetic characteristics for signage in specific shopping centers and affects registered trademarks only indirectly.
Mr. Patterson also noted that the bill was “narrowly written so that it merely reaffirms the intent of the act in that it expressly prohibits only State regulations that directly interfere with the use of a trademark or service mark as registered. The language does not interfere with nor question the validity of other State regulations that only indirectly affect the use of a trademark—for example, municipal ordinances that ban neon signs, some of which may contain registered marks, from certain neighborhoods.” Id. at 13. Mr. Patterson anticipated sign controls like Tempe’s and acknowledged that local prohibition of signs with specific aesthetic characteristics (such as the use of neon lighting, or, in Tempe’s case, the use of other than specified colors) was consistent with Section 1121(b).
Hon. Gerald J. Mossinghoff, the Commissioner of Patents and Trademarks testified that he agreed with Mr. Frank that, “nothing in [the bill] would be meant to interfere with local aesthetic or hist[o]ric-type zoning, so that if there was a uniform requirement in a particular locality ... which required that any sign had to conform to a certain type, that nothing in [the bill] would be preemptive of that.” Id. at 10. Mr. Mossinghoff also acknowledged that Section 1121(b) would not impair a locality’s ability to announce to businesses, “[t]he only sign you may have must be in such and such lettering, and must be this color.” Id. at 10-11.
Iris D. Reeves, who testified as the representative of Century 21 franchisees, acknowledged that the bill was “not intended to limit the right of States to regulate signs or agreements merely because they may involve registered trademarks.” Id. at 14. John P. Moravek, who represented Century 21 in its roles as franchisor and sponsor of the bill, agreed that the bill was not intended to *1305interfere in any way with local zoning authority. See Id. at 41.
The comments during the Senate hearing on Section 1121(b) were consistent with those in the House. Senator Hatch noted:
Many states and local communities have laws or ordinances designed to promote scenic beauty, historical preservation and environmental protection. The legislation was carefully drafted so as to avoid any conflict with the traditional state right to regulate such matters.-
and
Nothing in this bill is intended to preclude the states from adopting legislation to promote the health, welfare and safety of citizens. For example, nothing in this bill prevents the states from enacting legislation to promote scenic beauty, historical preservation or environmental protection.
Cong. Rec. S-12636 (1982).
As the foregoing discussion! makes clear, the legislative history of Section 1121(b) provides unmistakable evidence that Congress intended that local governments would retain their traditional authority to regulate signage through zoning; trademark holders are not empowered by Section 1121(b) to ignore and frustrate local zoning controls.
The majority opinion argues that if Congress had intended to exempt local zoning power from federal preemption under Section 1121(b), it would have done so explicitly, as it did in the context of copyright law. Congress enacted Section 301(b)(4) of the Copyright Act to bring about “a fundamental and significant change” in existing copyright law by creating a new uniform federal copyright system and preempting and abolishing “rights under the common law or statutes of a State that are equivalent to copyright and that extend to works coming within the scope of the Federal copyright law.” Notes of Committee on the Judiciary, H.R.Rep. No. 94-1476 (1976). Congress carved out an exception to the general regime of uniform and exclusive federal copyright control by identifying “areas of protection that preemption would not prevent the States from protecting,” including rights or remedies relating to “zoning”. Id.
Section 301(b)(4) allows states and localities to afford additional protection to copyrights through zoning. An analogous exception to Section 1121(b) would provide that states could limit trademark rights through zoning. Because the inclusion of an exemption for local zoning authority in Section 1121(b) would serve a purpose entirely different from the zoning exemption included in Section 301(b)(4), the majority was wrong to draw an inference regarding the absence of an exemption in the Lanham Act from the presence of an exemption in the Copyright Act.
Ill
The majority’s misinterpretation of Section 1121(b) would seriously erode local power to enact and apply aesthetic zoning regulations when they indirectly affect federal trademarks. The majority opinion adopts an extreme interpretation of the Lanham Act that will give trademark holders the absolute right to display their marks, free of regulation, no matter how garish and inappropriate they may be in a particular public environment, and notwithstanding the carefully considered local aesthetic controls applicable to that environment.
The majority opinion transforms what Congress intended to be a narrow, technical clarification of the preemptive effect of the Lanham Act4 into a broad-ranging and unin*1306tended prohibition of local aesthetic controls. The adverse impact on state and local efforts to promote and protect aesthetic standards will be substantial. Contrary to the clear intent of Congress, the power to control the appearance of exterior signage will shift from local governments and local landlords to national franchisors with strikingly different interests. As Judge Larimer explained in Payless, “[i]f a proprietor’s preference could defeat regulations such as this, virtually all aesthetic zoning would be ineffectual. If each commercial proprietor could insist that it be allowed to utilize its trademark as a storefront sign regardless of its size, shape or color, any type of aesthetic zoning would be rendered nugatory.” Payless, 934 F.Supp. at 546.
Local aesthetic zoning ordinances strike a balance between the interest of local businesses in attracting the attention of consumers by standing out from other businesses and the background environment, and the desire of members of the local community to pursue and maintain aesthetic standards. In adopting Section 1121(b), Congress recognized the vital role played by local zoning controls and sought to balance the need for such regulations against the importance of protecting consumers and trademark holders. Both interests are reflected in the language and legislative history of Section 1121(b), and should be considered in interpreting and applying the statute. The ultimate balance struck by Congress was to prohibit state and local governments from actually requiring the alteration of registered marks themselves, while preserving local government power to restrict or prohibit particular applications of registered marks. The majority opinion would seriously disturb that balance.

. Section VII of the Rules and Regulations of the Nevada Real Estate Advisory Commission provides as follows:
"(4) Any broker who operates under or uses a franchise name shall:
(b) incorporate in the franchise name and logotype his own name; however, the broker's name may not be less than 50 percent of the surface area of the entire combined area of both the broker’s name and the trade name or logotype ...”

. Aesthetic regulations applicable to exterior signage, like other local ordinances affecting public health, safety, and morals, are a valid exercise of the police power. See City of Ladue v. Gilleo, 512 U.S. 43, 48-49, 114 S.Ct. 2038, 2041-42, 129 L.Ed.2d 36 (1994); City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 806-07, 104 S.Ct. 2118, 2129-30, 80 L.Ed.2d 772 (1984); Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 507-08 & 510-12, 101 S.Ct. 2882, 2892-93, 2893-95, 69 L.Ed.2d 800 (1981); Berman v. Parker, 348 U.S. 26, 33, 75 S.Ct. 98, 102-03, 99 L.Ed. 27 (1954).

.The sign package requires that all exterior wall signs consist of individual pan channel 22 gauge metal letters with acrylic sheet (or equal) that are internally illuminated with neon.

. In describing the impetus for the Lanham Act amendment, the House Report states:
The purpose of [the bill that would become Section 1121(b)] is to eliminate this confusion and to restore the preemptive nature of federal Trademark law. It in no way restricts the rights of states to otherwise regulate the activities of franchise realtors.
H.R.Rep. No. 97-778 at 2 (1982). The bill’s author, Mr. Patterson, testified at the hearing that the bill was "narrowly written so that it merely reaffirms the intent of the act in that it expressly prohibits only State regulations that directly interfere with the use of a trademark or service mark as registered. The language does not interfere with nor question the validity of other State regulations that only indirectly affect the use of a trademark—for example, municipal ordinances that ban neon signs, some of which may contain registered marks, from certain neighborhoods." Lanham Act Trademark Act Amendment, Hearing on H.R. 5154 before the Sub*1306commm. on Courts, Civil Liberties, and the Administration of Justice, 97th Cong, at 13 (1982).