This is Bloomberg Law with June Brusso from Bloomberg Radio.
He's always calling me little Marco an Alam the guy.
He's taller than me. He's like six to two, which is why I don't understand why his hands are the size of someone who's five to two.
Have you seen his hands?
They're like this, hit my hands.
I've never heard of this one.
Look at those hands?
Are they small hands?
You may remember seven years ago when Donald Trump and Senator Marco Rubio were engaged in locker room talk over the size of Trump's hands. Now it's part of the case before the Supreme Court. Attorney Steve Elster says he has a free speech right to trademark the phrase trump too small to use on T shirts. The US Patent and Trademark Office disagreed, and it appears that the Supreme
Court also disagrees. At oral arguments on Wednesday, Justice Is across the ideological divide suggested that nying Elster a trademark for the phrase does not violate his free speech rights for a host of reasons. Justice Katanji Brown Jackson discussed the point of trademark law.
And trademark is not about expression trademark is not about the First Amendment and people's ability to speak. Trademark is about source identifying and preventing consumer confusion.
Justice Sonya Sotomayor said that not getting a trademark does not infringe on his speech.
Because you're not talking about stopping the speech. You're talking about not receiving government protection for activity that you would like to heighten protection for. Doesn't stop you from selling. It doesn't stop you from selling anywhere as much as you want.
Justice Neil Gorzitch pointed to history.
But at the end of the day, it's pretty hard to argue that a tradition that's been around a long long time since the founding common law type stuff is inconsistent with the First Amendment.
And the Chief Justice said that giving him a trademark would have the effect of restricting the speech of other.
People, because the whole point of the trademark, of course, is to prevent other people from doing the same thing. So if you win, you know, the slogan trump too small or whatever, other people can't use it right.
Joining me is intellectual property litigator Terence Ross, a partner at Katon Euchen Rosenman, Terry tell Us about the procedural background of this case.
Mister Elser thought trademark registration from the United States Trademark Office, and the Trademark examiner handling the application denied it as a violation of sections ten fifty two A and C of the Landham Act, which is the trademark laws here in the United States. Mister Elster then appealed within the Trademark Office, which confirmed the finding of a denial by the Trademark Examiner, and mister Elster took it to the United States Court of Appeals for the Federal Circuit here
in DC. The Federal Circuit unanimously reversed the decision of the Trademark Office on constitutional grounds. It found that at least as applied in this case, section ten fifty two C was unconstitutional in light of the First Amendment, and the Trademark Office thereafter decided that this was important enough to appeal to the Supreme Court the United States, which granted SERTs theri on the case, recognizing it was a very significant issue.
So as just as Sonya Sotomayor pointed out, you don't need a trademark to sell T shirts with this phrase on it. In fact, they are selling t shirts with this phrase on it online, So what would registration of the trademark give Elster?
So this is an important issue that goes back to the passage of the Landam Act in nineteen fifty four and its predecessors.
Going back to the late nineteenth century. The argument is that there is a benefit to having a registered trademark in that your good or service and its identifier in the public mind is protected against copying by anyone else with respect to that same category of goods and services. So it's essentially a government benefit being conveyed upon the registrant.
That position is not without detractors within the trademark field, but that is the way we to this day teach law students about trademark law that if you jump through all the hoops to get a trademark, you receive this government blessing, this advantage in commerce, which is protection in a limited way for the trademark that you're using on your goods or services.
Elster's lawyer told the court that the government's sole interest in nine the trademark is protecting the feelings of famous people, but that's not a legitimate reason to burden protected speech. How did his argument strike you. It sort of struck me as being weak in many ways.
I thought it was extraordinarily weak. I mean, I was not there in person, and so there is a difference in listening to the recording of a Supreme Court argument to being there in person. But my reaction was that mister Alistair's counsel did not do a very good job. It was pointed out in the press that this was his very first argument to the Supreme Court, but quite frankly came across as a first a pallid argument at
a sword. And indeed his response to this question was really a hail Mary, because he was unable to answer a previous question from Justice Kagan. Justice Kagan had asked him for any case that he could think of in which the conveying of a government benefit in a position neutral viewpoint state had been held to be unconstitutional. You know, it was crickets in the room. He had nothing, and.
Nothing except maybe a sinking feeling.
Yeah, when just so my word asked this, he went for his press conference SoundBite, which was, Oh, we can't be protecting the feelings of famous people. Oh you know, that's actually not what this statute is about. There is actually a different provision on that, and it helps sometimes to read the actual wording of a statute here fifteen USC. Ten fifty two see essentially barge registration of a trademark.
That quote consists of, or comprises a name, portrait, or signature identifying a particular living individual except by his written consent. This applies to everybody, applies to you, applies to me, applies to the listeners. A living person's name and latest can't be used to promote another product, and this is fundamental to trademark. Look going back into the common law, it was known as passing off. You know, it's claiming that some famous person had blessed this product or was
associated with it. There's a separate provision regarding the name, signature, portrait of presidents of the United States, which was not an issue here. And so it was very much sort of an absurd response to Justice Sodoma Org and really reflected a core problem with their argument, which Justice Thomas identified quickly at or argument and he asked just straight out, what's the burden on free speech here? What is the
burden on free speech? And really didn't get an answer because simple fact that as you said, people are already using this slogan everywhere. The fact that you don't get registration does not mean you can't use the slogan, and mister Elster himself has already been using it. Means is that he's been denied the benefit of registration, which is the ability to exclude, in certain circumstances, third parties from using his slogan.
And the Chief Justice John Roberts pointed out that giving him a trademark would have the effect of restricting speech by other people who want to use that slogan.
And I think it's a fair point to make that in effect by granting the trademark registration here because of the unique category in which it thought, it really does limit other people's free speech, because this slogan Trump too Small is apparently commonly used by folks who are opposing former President Trump's candidates, So Terry.
We always say you can't tell from their oral arguments how the Court is going to rule. But it seemed to me that justices across the ideological spectrum we're against giving this phrase trademark protection.
I agree with that. My count was that there was a clear majority skeptical of granting registration, and I agree with your comment. It's hard to always read or arguments, but in this case, particularly, the tonalities of the justice's questions really reflect it pretty hardened positions antagonistic to any type of register. This my count had Justice Thomas, Justice Sodomi or Justice Kagan, and Chief Justice Roberts As all skeptical, if not outright saying they were opposed to registration here.
In addition, I had Justice Gorsi and Alito disagreeing with mister Elster's council on different grounds. They historically are opposed to this notion that trademark confers a government benefit, but they would say that they were opposed to this for other reasons. So by my count, that's six justices who seem pretty firmly opposed to registration of this trademark. And I really couldn't count maybe the other justices as being in favor. They just seem to not express an opinion
one way or the other. So sick zippy is a pretty good starting point for the government here.
So that leads me to the question, how did a unanimous panel of the Federal Circuit allow this trademark?
June.
We could spend a lot of time on decisions by the Federal Circuit, where I practice a lot, by the way, and the level of disrespect accorded to those decisions by the Supring Court in the United States, true, I mean, the mere fact that this decision came out of the Federal Circuit probably starts off with your points in the government's favor here, because the Supreme Court just doesn't respect decisions, most significant decisions coming out of the Federal Circuit. The
history of reversal is just phenomenal. And so I mean those of us who as a federal circuit regular basis say, okay, you get granted search the or out of the Federal Circuit, you got a good chance of winning. And this is another great example that the Federal Circuit was three zero in favor of mister Elster, and their views were in large part based on an attempt to accord their decision with what they perceived the Supreme Court wanted based on
prior cases involving the First Amendment trademark. And it looks like once again they just plain got it wrong.
Coming up a look at recent trademarked decisions by the Court. This is Bloomberg. I've been talking to intellectual property litigator Terrence Ross of Catain Euchen Rosenman about Supreme Court oral arguments this week over trademarking. The phrase trump too small, So that brings us to This case is the latest to come before the Court involving challenges to trademark denials.
In the previous cases the most recent so people seeking registration have won and the Court has struck down parts of the trademark law in favor of more free speech protections June.
It's impossible to understand the Selster case without recognizing that it's the third in a trilogy of Supreme Court cases of which challenged provisions of the Landom Act on First Amendment grounds. And this provision of the Landham Act actually contains three distinct prohibitions on registration. The first one is trademarks that consist of are comprised immoral or deceptive or scandalous matter. The second provision prohibits trademark registration for marks
that may disparage persons living or dead. And then the third one is the one actually in front of the court here. You know the use of name, portrait, or
signature identifying particular living individual. So a few years back in a case called Mattel versus ten there was an Asian American rock band that had sought trademark registration on the term slants slnts, which the Trademark Office I think rightly recognized as a slur on Asian Americans, very offensive for an Asian Americans, and denied registration on the grounds
that it was disparaging persons of Asian ethnicity. That case went all the way up to the Supreme Court, and the Supreme Court reversed the Trademark Office and held this particular provision of ten fifty two a unconstitutional in light of the First Amendment. The problem with that decision was that the Court was Justice cour Sais did not participate for some reason in that decision. So you only had
eight judges and they split evenly four to four. I mean, there were a number of concurring opinions, but the core decisions were split four to four, and that split was centered on whether or not this sort of government benefited speech should be subject to heightened scrutiny for First Amendment purposes. And whenever you have a type of speech that the government is trying to regulate and you apply heightened scrutiny. It's almost a certainty that's going to be held to
be unconstitutional. And Justice Kennedy, Ginsburg, Soda, Mayori, and Kagan all felt that you applied heightened scrutiny here, and therefore the provision was unconstitutional. Chief Justice Roberts, Justice Alito, Justice Pomis, and Justice Bryer fought that you did not apply heightened scrutiny, but it was still unconstitutional because there was no demonstrable benefit to the government to impose this sort of burden on free speech. So it was struck down eight to zero,
but with two really different basis for a decision. A couple of years later comes along in case Ionku versus Brunetti, looking at the second prohibition here in ten fifty two, which is immoral or scandalous trademarks. And in that case we had a registrant trying to get a trademark register in the term suc T and the trademark office refused to accept that as immoral or scandalous, and there is a long history of variations of that particular mark being rejected.
This one also went up to the Supreme Court, and again it was struck down, and the particular provision was held in constitutional in the first minute. But you had a combination of Justice Kagan, Justice Thomas, Justice Thelido importantly Justice Course Such and Justice Kinsburg. Just Kavanaugh also not participate because it wasn't on the court yet, and they made the argument that this was viewpoint based discrimination by
the government. The government was making a decision that the particular use of foul language or in moral words is the Statute says, was the government trying to dictate how people can speak, and therefore that was unconstitutional. So if you look at those two cases, even though there was sort of a scattered decision making, you would have come away, as the Federal Circuit did, thinking that the Supreme Court dislikes limits on trademarks relating to some form of speech,
even if that speech is really distasteful. And in both those cases it was very distasteful. And yet the Federal Circuit clearly misread what had happened before, in part because you have this floating cast of justices with different points of view, and they just plane got it wrong here.
How do you think the Court's going to rule?
I'm pretty confident June that the Federal Circuit decision is going to be reversed, and the Court will then send it back for a decision on the te tabs ruling of non registration, and at the end of the day may take a couple procedural hurdles, but this mark is not going to get registered. The real question is what's
the decision tree going to be like here? I think you will, once again, as in the Caam case and the Brunet Any case, have a fractured Supreme Court unless one of these justices, Justice Barrack, who really didn't give away where she was coming from, Let's say they join with several other justices to create a five judge majority. I think one of the core issues here is the
position that Justice Course suching Justice Alito have. They clearly expressed to the government lawyer that they don't believe in the government benefits argument. What they essentially said is they wanted the decision to be grounded in the history of trademark law in this country and pointed specifically to the historical protection that has been allowed for certain types of trademarks, such as geographic marks. The trademark law atlantamac accords special
protection to various things. For example, the Olympics the US Olympic Committe gets special protection, and unless you're running a business within a certain distance of Olympia, Washington, you don't get to use the word Olympic in any sense. But
those sorts of historically allowed prohibitions on trademarks. So I think that they're going to insist that the decision be grounded on the historical record of trademark law in this country, which by the way, is consistent with their views that you have to look at the historical development of the law and find something back in the historical records that
allows you to regulate. And here they would say that there's a historical recognition that the government has been allowed to regulate speech in the context of certain types of trademarks, and that's how they're going to ground their decision. And quite frankly, that might also pick up at least one other justice. So right there you have three justices with this splintered decision. I think Chief Justice Roberts might also be inclined to something like that, whereas you're going to
have this group justice sot of Major Justice Kagan. I think Justice Thomas at a minimum all arguing that this is not viewpoint discrimination and that the First Bendment only applies when it's in the context of viewpoint discrimination. I would like to see a clearer decision, and I may be proven wrong, but I think we're going to get one of these four three two or three three three
type decisions like we've had so often of late. The interesting part of it is you and I've discussed the past, June, so in the intellectual property field, you don't see the ideological split that you do. I mean, if you look at all three of these cases, the so called liberals and the so called conservatives are all together in different blocks. So it's sort of interesting that respect.
Thanks so much, Terry. That's Terrence Ross of Captain Eugen Rosenman. Coming up next on the Bloomberg Lawn Show. The government is trying to stop the merger of Jet Blue and Spirit Airlines. I'm June Grosso and you're listening to Bloomberg. The US crackdown on airline consolidation faces a new test this week, as the government tries to stop Jet blues three point eight billion dollar takeover of Spirit Airlines, arguing that the merger would reduce competition and boost fares for passengers.
Trials started Tuesday before a federal judge in Boston, and it comes at a critical time for the industry where domestic low cost carriers have cut service as fare slide and travel slows. Joining me from Boston is Bloomberg Intelligence senior litigation analyst Jenniferree, who's covering the trial. Jen, this isn't Jet blues first run in with antitrust regulators. Why is the government trying to stop this merger?
Well, you know, the government really sees this as reducing output and increasing prices, or at least a deal that would have the potential to do that in the industry. Because Spirit is what's considered an ultra low cost airline that offers a la carte options, and so if a consumer wants to fly and really get the very lowest price they can, they have the option of doing that on Spirit and not buying the extras the food or
the water or the inflight entertainment. Whereas Jet Blue has a different kind of a model, and so Jet Blue, if it takes over Spirit intends to change everything over to its own model. All the airplanes would be retrofitted, so there'd be fewer seats, so that means reduced output. And it would likely mean increase fares because Jet Blue's
average fares tend to be over spirits. So overall, putting aside sort of the city routes in which these two airlines compete, overall, the Department of Justice is concerned about the removal of this option of this a la carte ultra low cost option that's in the marketplace.
So Jet Blues lawyers said that it's the first time that the government has ever challenged a merger of two small airlines on antitrust grounds. The companies account for just eight percent of industry revenue, so even after the merger, Jet Blue's market share would rise to just seven percent from five percent. I mean, is the government going after them because they haven't gone after the airlines before. I mean, this seems like they're trying to compete with the big airlines.
Well, I have a couple things to say about that. I Mean, I first, I think, look that that's a good argument by Jet Blue, But I think it's sort of a red herring because at the end of the day, that national competition, that combined national share isn't really relevant to the anti trust inquiry. Because the anti trust inquiry looks at options for consumers, and consumers that are trying to fly from let's say Boston to Santa Fe, they don't care about the fact that, combine they're small nationally.
If they have a reduced option when they're shopping for their flights, and they have fewer options when they're shopping for that flight, and now the prices have gone up, those consumers care about that. So really, with airline deals, they have to be looked at from city to city and which airlines are competing on each of those routes. So it's kind of like a lot of mini mergers. And it's also not necessarily true that the Department of
Justice hasn't challenged small deals. You know, there have been deals where an airline was trying to just buy a few slots, let's say, at an airline, and the Department of Justice voiced some opposition and the airline abandoned that deal.
Well, what do you think Jet Blue's best argument was in the openings?
Well, I think that their best argument is and they've done a good job with it. That Look, at the end of the day, we are going to increase competition because we have a really tough time fighting against the big legacy carriers Delta, American and United, and you can throw Southwest in there too, that actually, combined account for about eighty percent of air travel and cost a lot
of money. We have lower farars than they do. And by increasing Jet Blue, by making Jet Blue a bigger, more viable competitor, we can exert more competitive pressure on those legacy airlines and it pulls down their prices. It's something that the Department of Justice has acknowledged called the Jet Blue effect, and I think that the lawyers have so far, we're just at the beginning, effectively laid that
out and made that argument. And I think it's a good argument because what it does is force us the judge to kind of say, which is the better side, you know, which is the bigger harm or the lesser harm? Is it better to remove this ultra low cost option for some real bargain conscious consumers, but end up, you know, exerting more of a competitive influence on the legacy carriers. Which side is stronger is part.
Of the equation for the judge. I mean, from what I've read, if Jet Blue loses in court, it's survival becomes an open question.
Yeah, you know, the interesting thing that again, we're just at the beginning, right so we have yet to get
into really the bulk of this trial. But so far, what we've heard more is that it's actually Spirit that's in a little bit of trouble, that they are not operating, they're operating at a loss right now, and that they have been for a couple of years since COVID, and that they didn't quite have the bounce back that some airlines did and that they expected in the post COVID travel boom, And so they're the ones that are struggling a little bit right now. You know, I haven't heard
an argument an anti trust. There's something called a failing firm or a flailing firm argument that you know, but for the deal, one off the companies will exit the market and that would be a worse outcome than allowing a deal to go forward. I haven't really heard that yet, and those are very tough standards to meet. But because you know, generally we do know that both Spirit and Jet Blue are struggling a little bit now. I certainly think it's something the judge is going to take it into account.
Spirit tried to merge before. Was it Spirit that tried to merge with Frontier.
Well, they were talking about so they were balancing a Frontier offer versus a Jet Blue offer. So originally they were in an offer with Frontier, but they were able to entertain a superior offer, and they judged Jet Blue's offer when it came in later to be a superior offer. So they were looking at both at one point and ended up going with Jet Blue.
And Jet Blue what happened with its alliance with American Airlines.
So the alliance they had in the Northeast with the American was challenged by the Department of Justice and they it went to trial and the company is lost and they were ordered to unwind that alliance. I went to that trial and I was a little surprised by that verdict. I did think that the alliance would be paired back a little bit by the judge, that some aspects of it might be paired back, but that they'd be able to keep at least the core sort of the code sharing.
But the judge actually said they have to unwind it completely. Now I think American has gone ahead and appealed that. But Jet Blue was able under their agreement to walk away because they had hit their end date. And so Jet Blue did walk away from that agreement.
It can't walk away from this agreement, can it. It has a breakup fee.
There's a breakup fee. So this agreement has an end date that I believe is in March. The way that works is neither company can walk away yet without being in breach of the agreement unless there's some legal impediment to them closing as of that their end date. Now, once an end date hits and they're not closed both and usually they aren't closed by an end date because there's still some legal impediment to closing at that point, either side has the option to walk away. There is
a breakup bee. If this deal fails because anti trust got in its way, then you hit that end date and you still haven't gotten cleared. There tend to be a couple different options. I mean, the companies can renegotiate that's out there. They can extend that endate, they can even renegotiate terms. But spirit also has the option as avet endate of choosing not to renegotiate or extending it, walking away and collecting.
Their breakup fee.
So if an airline could have a persecution complex, it seems like jet Blue would have one. It's the second time that antitrust enforcers have stepped into a Jet Blue deal. Why is the government going after Jet Blue when it's number six trying to compete with the four biggest airlines, you know, I.
Think that it's the types of deals essentially that Jet Blue has ended into. So you know, if you looked at the deal with American, the partnership deal, it could have been a different kind of partnership. Jet Blue does have a partnership with Alaska Airlines out in the West that had different sorts of terms, and I think that the partnership in the Northeast went a little bit too far.
They were also collaborating on capacity, and they were collaborating on revenue rather than just code sharing, and I think that that was kind of what doomed that. I think that if it had been a more limited partnership, it may have had less opposition from the Department of Justice and maybe you know, no lawsuit at all. So I think that was one problem. And I also think it's possible that there are other airlines that Jet Blue might be able to acquire and with some divestitors clear through
the DOJ. But I think this one is particularly sensitive for the agency because it does hit low consumer passengers.
So let's talk about the first witnesses who've testified.
Yeah, the Spirit CEO was the very first witness and that's been most of trial so far, and another employee
of Spirit testified today. Primarily so far, we've heard from the CEO, and it was a lot about Spirit and Spirit's profitability, the negotiations with Frontier and the negotiations with Jet Blue, and why they decided to go with Jet Blue, and what was Spirit talking about when they themselves publicly said that they thought there could be antitrust problems with a Jet Blue Spirit combination and they were concerned about that.
Why did they say that in public.
Because at the time they were preferred the Frontier offer.
Because it's like I'm going to permit a crime.
Perhaps, Well, you know, according to them, they weren't really saying, hey, this is an illegal deal. They were saying, we just have some concerns about regulatory pushback, and we would need Jet Blue. I mean, this is what they're saying now, we would need Jet Blue to come up with a better commitment to us about what they'd be willing to do to resolve concerns of the DOJ a larger commitment in term of what they'd be willing to divest. We need a bigger breakup fee to protect us from risk,
et cetera. So they're kind of saying, well, look, it was a bargaining chip in order to get some better terms out of Jet Blue.
And they did propose divestitures, didn't they. But the federal government didn't think they went far enough right.
They proposed our vestitures I think in Newark, LA, Guardia, Boston, and Fort Lauderdale, and these are some really big airports for Jet Blue and for Spirit, the Spirits focus airports and Jet Blue's focus airports. The agency doesn't think it goes far enough. They think that there are other problematic
airports and other problematic routes. And I think the agency is also concerned about routes where the companies don't overlap at all, routes that Spirit flies that Jet Blue doesn't fly, because in those cases that's where Jet Blue would retrofit those Spirit planes, turn them into the Jet Blue type plane and the Jet Blue model, and theoretically, for those routes, consumers would lose that ultra low priced option.
So jen is the only resolution of this, either to stop the merger or allow it to go forward. Is there any middle ground that the judge could order?
You know, I don't think so. I think at this point more divestitures doesn't do the trick. I think that this is basically either the judge is going to rule against the airlines or it's going to rule for the airlines. And if it rules for the airlines, they'll be able to go ahead and close the deal.
If it rules.
Against the airlines, I think they'll probably appeal. But I don't really think there's some other remedy or concessions they could throw out there that would lead to some resolution or a settlement.
And how long is the trial expected to last.
It's expected to be finished on December fifth. It's kind of long actually for a Department of Justice or permanent injunction merger trial. But it's not going consecutive days. There are a couple days in there the judge has to skip. He's only going up till one o'clock every day, and then Thanksgivings in the middle there. So I think probably
going to get a ruling in January. Originally that I've said, he's really going to try hard to rule in December, but that was when the trial was supposed to start much earlier in October. It got pushed back a few times, so at this point I think probably January's likely.
Thanks so much, Jen, Enjoy Boston. That's Bloomberg Intelligence Senior Litigation analyst Jenniferree. For more of Jen's analysis, you can go to Bigo on the Bloomberg terminal. And that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast Slash Law, and remember to tune into The Bloomberg Law Show every
weeknight at ten pm Wall Street Time. I'm June Grosso, and you're listening to Bloomberg