The Implications of Trademark Forefeiture in U.S. v. Mongol Nation

By Professors Jennifer E. Rothman and Rebecca Tushnet

This op-ed originally appeared in the Tuesday, Feb. 26, 2019 edition of the Los Angeles and San Francisco Daily Journal 

Last month, District Judge David O. Carter of the Central District of California invited the submission of amicus briefs to address a series of questions arising from litigation in United States v. Mongol Nation, CR13-0106-DOC, an ongoing case brought by the United States against a motorcycle gang, Mongol Nation. The government has sought through criminal forfeiture, pursuant to 18 U.S.C. Section 1963(a)(1) of the Racketeer Influenced and Corrupt Organizations Act to have the court transfer to it the defendant’s trademarks. Judge Carter specifically sought guidance from amici on a series of questions involving intellectual property, constitutional and criminal laws.

A group of law professors led by Rebecca Tushnet of Harvard Law School submitted a brief to the court in support of neither party. The brief addresses the first two questions posed by Judge Carter:

• Whether criminal forfeiture of any and all legal and equitable rights of any kind or nature associated with or appurtenant to a collective membership mark violates the First Amendment to the United States Constitution.

• Whether criminal forfeiture of a collective membership mark is feasible under intellectual property law.

In particular, the brief focuses on the limits of a transfer of the defendant’s marks under trademark and First Amendment law. The brief was signed on to by seven leading intellectual property scholars: Stacy L. Dogan (Boston University), Mark A. Lemley (Stanford), Jessica Litman (Michigan), Mark P. McKenna (Notre Dame), Jennifer E. Rothman (Loyola Law School, Los Angeles), Jessica Silbey (Northeastern University), and Rebecca Tushnet (Harvard Law School).
Here is an edited excerpt from the brief:

We write to offer some assistance to the court about what trademark law does — and does not — cover. A trademark is a symbol that consumers use to associate goods or services with their source or sponsorship. It is the combination of the symbol and its goodwill produced by the association with the source or sponsor, not the symbol in the abstract, that constitutes the trademark. Trademark rights arise out of use, not registration. This means that the Mongol Nation may hold more unregistered trademarks than the three identified by the government. At the same time, registration does not guarantee the validity of a mark. Trademarks can cease to exist when they are no longer used to identify particular goods or services.

Whatever trademarks the Mongol Nation owns are capable of being transferred in a forfeiture proceedings. But those marks would only survive such a transfer under specific circumstances. Nor is it clear that any new owner of the marks would be able to assert those rights against others ― including existing Mongol Nation members ― who continue to use the term Mongol or the existing logos to describe the current Mongols.

A trademark and its associated goodwill comprise an intangible asset, subject to forfeiture. There is no barrier to the criminal forfeiture of trademarks as assets as long as the marks are not targeted on expressive grounds. By analogy, trademarks have been involuntarily transferred in bankruptcy proceedings. However, in such instances, the trademark has been transferred along with the goodwill of the underlying business. Thus, the answers to the court’s first two questions are “no” and “yes, but with specific consequences” respectively: forfeiture of a trademark is “feasible” to the extent that its purpose is simply to divest defendants of accrued trademark rights, and, depending what the government plans to do with the seized mark, to prohibit others from using the mark commercially. It is not “feasible,” however, if its purpose is to allow the government to stop the club and its members from calling themselves Mongols and wearing Mongols gear.

If the government intends through forfeiture to stop the club or its members from calling themselves “Mongols,” or wearing the Mongols design mark, trademark law will not necessarily do that.

What Happens to the Forfeited Asset?

Several principles of trademark law govern whether trademark rights survive a transfer of ownership. A trademark, unlike a patent or copyright, is not “a right in gross or at large.” United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97 (1918). “Trademark ownership is always appurtenant to commercial activity. Thus, actual and continuous use is required to acquire and retain a protectable interest in a mark.” Tally-Ho, Inc. v. Coast Comm. College Dist., 889 F.2d 1018, 1022-23 (11th Cir. 1989).

If an unincorporated association has trademarks in a name and logo for identifying the services of a motorcycle club, it may prevent others from using the marks in confusing ways on related goods and services, but it does not have any title in the word or logo itself. Nor can the government by forfeiture come to own the word or logo apart from the underlying products or services for which those marks function as source-identifiers, any more than it could do so by purchasing the marks in a voluntary transaction.

For the registered marks, the covered services are those listed in the registrations, relating to membership in a motorcycle association. If the government does not intend to use the marks for this purpose, or to transfer them to an association dedicated to motorcycles, the marks would be abandoned. Nor could the government simply start using the word or design marks on new products to establish continued use. Trademark law requires that the uses be a continuation of the underlying uses that established the trademark rights in the first place.

Even Subsequently Created Items Bearing the Mark Would Not Necessarily Be Infringing.

Only uses of a mark in commerce that are likely to cause confusion infringe trademark rights. In addition, fair uses do not infringe: Uses that describe the user (“I am a Mongol”) may constitute descriptive or nominative fair use. Truthful references to historical affiliations are likely to be nominative fair use (a concept that helps implement First Amendment safeguards within trademark doctrine). Descriptive use — another type of noninfringing use — is usually distinguished from nominative fair use; nominative use involves a reference to the trademark owner, while descriptive fair use is centered on describing some characteristic of the challenged user. Where there is a historical symbol with a meaning that goes beyond simply linking goods and services to the seller of those goods or services, the two concepts may converge: the challenged user might have to use the trademark in order to successfully describe himself.

Although offering commercial services to the public in competition with the new owner could infringe the rights of that owner, individuals simply wearing Mongols gear or affiliating as a Mongol club would have a tenuous connection to any commercial harms. Even if consumers who viewed club members dressed as Mongols were confused about those members’ connection with the new owner, that wouldn’t be the same as confusion over the source or sponsorship of goods or services sold in the market, and members’ expressive and associational interests in identifying as Mongols are substantial. A person’s or group’s ability to choose the symbol that represents them is an important part of the freedom of speech. To prevent the suppression of constitutionally protected speech, any forfeiture order should clearly delineate the effect of forfeiture on the club and club members’ rights to continued expressive uses of the Mongols symbols. Even if the marks are validly transferred, the ownership of the marks by a new motorcycle club couldn’t prevent members of the current group from describing themselves without treading onto dangerous First Amendment ground.