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Symposium: Market failure

Robert S. Chang is professor of law and executive director of the Fred T. Korematsu Center for Law and Equality at Seattle University School of Law

I grew up in Ohio and I have vivid memories of being called the S-word. The slur was often accompanied by gestures whereby children would pull up the outside corners of their eyes. While I am sympathetic to Simon Tam’s project to reappropriate the S-word, to fill it with positive content in order to take away its sting, the starting point for me is that the S-word, like R-skins, is a racial slur. I would hate for one of my children to be called the S-word.

As the executive director of the Korematsu Center, charged with advancing the legacy of Fred Korematsu, who challenged the government’s wartime orders that led to the incarceration of Japanese Americans during World War II, I am well aware of the dangers of government overreach. I am also well aware of the important role the government can play in safeguarding the rights of minorities and ensuring their full participation in our nation’s economic life. Section 2(a) of the Lanham Act helps fulfill this role by authorizing the government to withhold certain commercial benefits in its federal trademark-registration program by denying or canceling federal registration of trademarks that are racially disparaging. A key point here is the limited nature of this regulatory authority, which addresses only federal registration of a trademark and which does not prevent the creation or use of racially disparaging trademarks.

A common misperception in many news stories about this case and the one involving the Washington football team is that if the government wins, the band and team will lose their trademarks or will no longer be able to use their names. Nothing could be further from the truth. The federal government does not create, grant or confer trademarks. A trademark is, according to the U.S. Patent and Trademark Office, a word, phrase, symbol and/or design that identifies and distinguishes the source of one party’s goods from that of others. A service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than goods; the term “trademark” is often used to encompass both trademarks and service marks. Trademarks and the rights that flow from them are established by their use. Thus, the denial or cancellation of the federal registration of a trademark is not the same as denying or canceling a trademark, and certainly does not prevent or forbid the use of a name.

Simon Tam has been using the S-word as his band’s name since 2006. He continued using it even after federal registration was denied. Through his usage, he has successfully established trademark rights and could sue to protect against infringement. The denial of federal registration has not impinged upon his political project of reappropriation.

Judge Kimberly Moore, writing for the majority of the en banc U.S. Court of Appeals for the Federal Circuit, made much of the expressive dimension that trademarks can involve. However, her focus on expression misses the mark. The expression that occurs through the trademark takes place in the commercial realm, and the federal government has, at least since 1964, taken strong and intrusive measures to limit the conduct and speech of those choosing to engage in interstate commerce.

Title II of the Civil Rights Act of 1964 authorizes the federal government to interfere with private individuals and businesses who engage in conduct and speech that prevent a person from full enjoyment of certain places of public accommodation on the basis of race, despite the expressive ideas and viewpoints contained in those acts of racial discrimination. Providing separate drinking fountains for blacks and whites and relegating black restaurant patrons to take-out windows, with sit-down service reserved for whites, convey clear messages of racial degradation. Yet we do not allow the fact that this kind of conduct and signage includes a strong expressive dimension to insulate such discriminatory behavior from government interference. The federal government’s power under Section 2(a) of the Lanham Act to deny or cancel federal registration of racially disparaging trademarks is consistent with, though far weaker than, its power under the Civil Rights Act.

It could be argued, as it often is, that the answer to bad speech is more speech. And, the argument goes, this is especially the case in the marketplace, where antidiscrimination laws are unnecessary because discrimination is inefficient and will naturally dissipate through the sheer will and power of rational wealth-maximizers. However, this rationale misapprehends the existence and strength of people’s taste for discrimination, whereby employers, employees, business owners and customers prefer certain individuals and groups over others based on race (and/or other characteristics) and, if given the chance, act on these preferences. It also ignores the possibility of market failure. The Civil Rights Act illustrates the importance of harnessing government power to address market failure. The cases upholding the act are clear recognitions of the constitutionality of governmental market intervention, notwithstanding the First Amendment.

The use of racist trademarks by the Washington football team is a prime example of market failure. For decades, this team has called itself by a racial slur. Until recently, it has done so with the imprimatur of the federal government, which recognized the team’s name as a federally registered trademark. The team’s use of its trademark is so pervasive that the slur gets bandied about on primetime television, even on the same networks that would not tolerate the use of other racial slurs. Interestingly, the NFL itself penalizes as unsportsmanlike conduct the use of certain racially derogatory language on the field. Yet it tolerates the R-skins slur. Some pressure has been brought to bear on the team’s owner to change the name, but he has so far resisted. Market failure.

Though Tam seeks to distinguish his case from the one involving the Washington football team, the common question presented in both cases is whether Section 2(a) of the Lanham Act’s disparagement provision is facially invalid under the First Amendment. Despite protestations that Tam’s case and cause are different, a victory for Tam on this question would be a victory for the football team.

The Korematsu Center, joined by the Hispanic National Bar Association, the National Asian Pacific American Bar Association, the National Bar Association, the National LGBT Bar Association and the National Native American Bar Association, submitted a “friend of the court” brief in Lee v. Tam, drafted by attorneys at Perkins Coie LLP, supporting the government’s position.

We argue in the brief that the federal government is properly exercising its power to regulate commerce and that its ability to do so is especially important because racially disparaging trademarks can lead to a return to a segregated marketplace. In his dissent in the Federal Circuit, Judge Jimmie Reyna imagined a hypothetical restaurant called “Spics Not Welcome,” which, if it did not deny service to Latinos, might not run afoul of Title II of the Civil Rights Act of 1964. The brief connects this hypothetical to the gun shops in several states that have posted signs declaring themselves to be “Muslim Free Zone[s]” and Indiana’s Religious Freedom Restoration Act, which would appear to permit businesses to post “Gays Not Allowed” signs. Though nothing prevents these signs, through their usage, from becoming trademarks, the federal government should not support such discriminatory behavior by conferring benefits to the mark-holders through federal registration. Private acts and expressions of racism can be terrible and damaging, but they take on a wholly different meaning, and are particularly corrosive to our ideal of an integrated society, when they occur with the sanction of the government.

Cases: Matal v. Tam

Recommended Citation: Robert Chang, Symposium: Market failure, SCOTUSblog (Dec. 20, 2016, 1:52 PM),