Property, intangible

The government has been trying to seize the MONGOLS trademark for over ten years. You can read my previous posts about it here, here, here and here. 

The Mongol Nation, an unincorporated association, owned or owns several registrations for a trademark, service marks and collective membership marks for the word mark MONGOLS, the riding figure, and the Mongol patch:

In current events, the Mongol Nation was convicted by a jury of racketeering and conspiracy to racketeer. The jury returned a special verdict form finding that the rights appurtenant to the trademarks and some items of personal property bearing the marks should be forfeited.

The government moved for a preliminary order of forfeiture. According to the court, the government had a clear agenda:

[W]hat does the United States accomplish by seizing control of the intellectual property rights associated with a motorcycle club’s associative symbols? The Government’s own prior admissions shed light on the objectives underlying more than ten years of their efforts: The collective membership marks are “potent emblem[s]” used to “generate fear among the general public,” and the Government has sought orders to prevent use of “the trademark to create an atmosphere of fear through public display.” The Government has stated publicly that it has sought to “stop [a] gang member and literally take [a] jacket right off his back.”

In an effort to avoid implicating the First Amendment, the government argued that issuing the order didn’t mean that it would take members’ jackets right off their backs, but rather that its goal was merely to prevent the Mongol Nation from suing other entities. The court wasn’t buying it; possible outcomes from issuing a forfeiture order included the transfer of the marks to a third party, legal retaliation against members for their use of the marks and (hilarious, in my view) the Mongol Nation paying royalties to the government.

The court concluded that “the forced transfer of the collective membership marks to the United States violates the First Amendment.” I’ll leave it to others to give you the tl;dr on the First Amendment analysis, but I have a couple of thoughts on the opinion.

First, some of the registrations were for goods and services, which the court also characterized as “collective membership marks”:

The Government sought forfeiture of any and all legal and equitable rights of any kind or nature associated with or appurtenant to three collective membership marks:
1. The Collective Membership Mark consisting of the word “Mongols” (the “Word Mark”) [citing registrations for two service marks and a collective membership mark]:
2. The Collective Membership Mark consisting of the drawn image of a Genghis Khan-type character with sunglasses and a ponytail, riding a motorcycle, with the letters “M.C.” appearing below the motorcycle (the “Center Patch Image”) [citing registrations for a goods mark and a collective membership mark]:
3. The Collective Membership Mark consisting of both the Word Mark and the Center Patch Image (the “Combined Mark”) [citing a registration for a collective membership mark]: …

Nevertheless, the court’s opinion appears to be premised on the fact that collective membership marks implicate the First Amendment in a way that ordinary trademarks do not:

Before addressing the First Amendment challenges, it is important to understand the nature of the intangible property the Government seeks to forfeit. A collective membership mark is unique in that it is a type of trademark merely used to identify membership in a particular collective group or organization, cooperative, or association. Collective membership marks are unique in that they are used solely for the purpose of identifying the person displaying the mark as a member of a collective, not to distinguish the source or origin of particular goods or services. Neither the collective nor its members use the collective membership mark to identify and distinguish goods or services; rather, the sole function of such a mark is to indicate that the person displaying the mark is a member of the organized collective group.

…

Here, the collective membership marks at issue indicate “membership in an association dedicated to motorcycle riding appreciation,” see U.S. Reg. No. 4,730,806, and the Government admits they are used “to indicate that the user of the mark is a member of a particular organization.” Motorcycle riding is, of course, an activity enjoyed by a large number of law-abiding citizens and does not indicate support of the commission of crimes. The collective membership marks do not have the same underlying purpose of a traditional trademark, which is used to distinguish goods or services in commerce.

The requested preliminary order of forfeiture of the Mongol Nation’s collective membership marks violates the First Amendment.

The court’s focus on the fact that these were collective membership marks would, in theory, make room for the government to distinguish collective membership marks from other kinds of marks, say a service mark for a brothel. However, I don’t think the court was wrong to lump the goods and service marks in with the collective membership marks—the service mark registrations, for “association services, namely, promoting the interests of persons interested in the recreation of riding motorcycles goods,” are virtually indistinguishable from the collective membership registrations, and the registration for the goods, jackets and T-shirts, is for goods commonly used to display one’s affiliation with the organization. Any mark, no matter how it is formally categorized, may implicate First Amendment concerns. So while the decision could perhaps suggest that collective membership marks get different treatment from other kinds of marks, I don’t believe that the distinction is all that important.

Second, the opinion offers some “observations” that the forfeiture would be a “forced transfer of this property in gross.” The court notes that a trademark cannot be transferred without its goodwill and concluded this means the marks cannot be forfeited. The court cited Marshak v. Green, 746 F.2d 927, 929 (2d Cir. 1984) which held that a trademark for the name of a band was not subject to attachment and sale. The Mongol Nation court noted that in Marshak the mark was used for “entertainment services [] unique to the performers and … if another group advertised themselves as Vito and the Salutations, the public could be confused into thinking that they were about to watch the group identified by the registered trade name.” The Mongol Nation court held the same applied here too:

[T]he collective membership marks would be forcibly transferred to the United States in gross because the goodwill associated with the marks cannot be transferred. What the Mongol Nation collective membership marks represent is membership in the Mongol Nation motorcycle club, which will continue to exist after this case…. [T]he Mongol Nation marks’ goodwill is inextricably intertwined with identification with and membership in the Mongol Nation motorcycle club. It may not be legally possible to maintain continuity or prevent confusion in the public when the Mongol Nation will continue to exist after forfeiture.

I’m not convinced. Trademarks are involuntarily transferred all the time. It is the subsequent owner of the mark who typically suffers the risk of loss, that is, if the acquiror fails to use the newly acquired mark in the same way that it was previously used, then it it can’t claim the benefit of the prior use and instead will be starting to build goodwill in the new use. A smart shopper for the MONGOLS trademark might realize that it couldn’t carry on the use of the mark in continuity with the prior use, but that should only affect the sales price, not prohibit transferability altogether. Holding that some marks can’t be transferred, particularly when the court blurred the line between collective membership registrations and trademark and service mark registrations, seems to me like a bad idea, creating uncertainty in the efficient operation of the marketplace.

United States v. Mongol Nation, No. CR 13-0106 (C.D. Cal. Feb. 28, 2019).

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