By , January 20, 2016.

In recent years, there have been some attempts to characterize copyright as a government subsidy. Tom Bell, for example, argues that copyrights should not be considered “property” but should instead be considered to belong “to a bestiary of modern, artificial, statutory privileges, such as welfare benefits, farm subsidies… and taxi medallions.” 1Tom W. Bell, Copyright Porn Trolls, Wasting Taxi Medallions, and the Propriety of “Property”, 18 Chap. L. Rev. 799, 813 (2015). Similar charges can be found by other advocates, calling copyright a “subsidy“, a “government subsidy“, or a “government-created subsidy.”

The reason for doing so is primarily rhetorical: at the very least, “subsidy” suggests a higher level of scrutiny than “property” or “right.” At most, anything labelled a government subsidy is treated with the highest level of skepticism. Adopting the label of “subsidy” thus replaces a lot of persuasive work that would otherwise need to be done.

But a Federal Circuit decision last month undermines the characterization of copyright as a government subsidy. The decision, In re Tam, involves trademarks, but its reasoning is both implicitly and explicitly applicable to copyright.

In re Tam

In re Tam looks at the First Amendment implications of federal trademark registration. The Federal Circuit begins by noting that trademarks both “protect the public so it may be confident that, in purchasing a product bearing a particular trade-mark which it favorably knows, it will get the product which it asks for and wants to get” and ensure that trademark holders can protect their “investment from . . . misappropriation by pirates and cheats.” Trademarks may be protected through state and common law. The Lanham Act was passed by Congress to provide a federal system of registering and protecting trademarks.

Federal registration of a trademark by a markholder is optional but confers important substantive and procedural rights. These rights include:

  • Exclusive nationwide use of the mark (common law trademark is limited to the geographic area where the mark is actually used)
  • A presumption of validity, and incontestability after five years of consecutive post-registration use
  • Ability to sue in federal court for trademark infringement
  • Ability to recover treble damages for willful infringement
  • Ability to obtain assistance of US Customs and Border Protection to restrict importation of counterfeit goods
  • Qualification for a simplified process for obtaining protection of works in foreign countries that are members of the Paris Convention
  • A complete defense to state or common law claims of trademark dilution.

Section 2(a) of the Lanham Act, the section at issue here, bars registration of marks that, among other things, “disparage … persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.”

In 2011, Simon Shiao Tam filed an application to register a trademark in the name of his band, “The Slants”, an “Asian-American dance rock band.” A USPTO examiner denied the registration, finding it disparaging. The decision was affirmed by the Trademark Trial and Appeal Board and the Federal Circuit, but the Federal Circuit sua sponte ordered a rehearing en banc to consider whether refusal of disparaging trademarks implicated the First Amendment.

The en banc panel first held that Section 2(a) denies important legal rights to private speech based on its content. It is thus presumptively invalid and can only be justified if the government can prove that it is “narrowly tailored to serve compelling state interests.” The court states that “no argument has been made that the measure survives such scrutiny.”

The government also argued that Section 2(a) does not implicate the First Amendment at all, asserting that denial of trademark registration does not prohibit speech, that trademark registration is government speech, or that trademark registration is a government subsidy. The Federal Circuit rejected all of these arguments.

The third of these arguments is most relevant to the discussion above. As the Federal Circuit explains, the key distinction here is between Congress’s ability to direct government spending and a constitutional prohibition against denying a “benefit to a person on a basis that infringes his constitutionally protected interests—especially, his interest in freedom of speech.” The Constitution’s Spending Clause, after all, provides Congress discretion over the ability to tax and spend for the general welfare, which includes “‘the authority to impose limits on the use of such funds to ensure they are used in the manner Congress intends,’ even when  these limits exclude protected speech or other constitutionally protected conduct.” However, this authority does not permit Congress “to attach ‘conditions that seek to leverage funding to regulate speech outside the contours of the program itself.'” This is admittedly not a clear distinction, but in essence, “Congress cannot recast a condition on funding as a mere definition of its program in every case, lest the First Amendment be reduced to a simple semantic exercise.”

But the Federal Circuit doesn’t reach this distinction because it rejects the government’s threshold argument, saying, “Trademark registration does not implicate Congress’s power to spend or to control use of government property. Trademark registration is not a subsidy.” It rejects all of the government’s counterarguments, observing that “The restriction on the registration of disparaging marks bears no relation to the objectives, goals, or purpose of the federal trademark registration program.”

The court next underscores the importance of its holding.

Were we to accept the government’s argument that trademark registration is a government subsidy and that therefore the government is free to restrict speech within the confines of the trademark program, it would expand the “subsidy” exception to swallow nearly all government regulation.

Characterizing something as a subsidy invites all sorts of government interference, including that which might regulate speech.

Application to copyright law

The holding in In re Tam applies just as much to copyright as it does to trademark.

In the discussion that follows its rejection of the government’s subsidy argument, the court observes the resemblance between trademark registration and copyright registration. It says that under the logic of the government’s approach, Congress could similarly prohibit the registration of copyrighted works which contain racial slurs or religious insults. “This idea—that the government can control speech by denying the benefits of copyright registration to disfavored speech—is anathema to the First Amendment.” The court notes that the government agrees that copyright registration is protected by the First Amendment, “But the government has advanced no principled reason to treat trademark registration differently than copyright registration for present purposes.”

The Federal Circuit is explicit that there is no daylight between its trademark holding and one that would involve copyright. But the relationship between the two does not stop there. In fact, comparisons to copyright and copyright registration are pervasive throughout the court’s opinion. For example, the court responds to the government’s argument that “accoutrements of registration—such as the registrant’s right to attach the ® symbol to the registered mark, the mark’s placement on the Principal Register, and the issuance of a certificate of registration—amount to government speech.” It says if that was the case, then the same would be true for copyright registration, since that has identical accoutrements. The court observes that “the government would be free, under this logic, to prohibit the copyright registration of any work deemed immoral, scandalous, or disparaging to others.” It concludes that “This sort of censorship is not consistent with the First Amendment or government speech jurisprudence.”

It again draws parallels to copyright when it rejects the government’s argument that federal funding of the Patent and Trademark Office brings trademark registration within the ambit of the Spending Clause, noting that the Copyright Office likewise receives appropriations, but copyright registration is not a subsidy.

So while the Federal Circuit’s holding is about trademark, its reasoning clearly and directly extends to copyright. And its conclusion is clear: not only is copyright not a government subsidy, but to mischaracterize it as such would undermine free speech protections.