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Sept. 27 — The Washington Redskins are on the brink of knowing if the U.S. Supreme Court will hear their trademark dispute, a quarter-century-old controversy that could ultimately cost the team a brand valued at over $200 million.
The court has been asked by an Asian-American rock band to decide if a federal law barring the registration of disparaging trademarks violates free speech, and the Redskins want to tag along. A decision on whether the court will hear the case of the rock group known as The Slants—with or without the Redskins—is expected as early as this week.
The constitutional question is whether Section 2(a) of the Lanham Trademark Act of 1946, which, among other things, states that the Patent and Trademark Office will not register a trademark that “may disparage ... persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute,” breaches the First Amendment's free-speech guarantee.
But whether the team gets to keep its registrations is just part of the issue. The essential question at the heart of the long-running fight between the Redskins and American Indian activists who say the name perpetuates damaging stereotypes is what the Redskins brand is worth to the team and its diehard fans. If its registrations are permanently canceled, would the team change its name, and at what price?
“The issue is much bigger than the registration itself,” David S. Graff of branding and licensing agency SunGate Partners, New York, told Bloomberg BNA. “The biggest impact, frankly, is the gut-brand loyalty to the team.”
From a purely financial perspective, an NFL team that decides to change its name could potentially face several millions of dollars in costs.
The Redskins are ranked as the fifth most valuable of the NFL's 32 franchises, with an overall value of $2.95 billion and annual revenues of $447 million in 2016, according to Forbes. In a petition to the Supreme Court, the Redskins said that $214 million of that value comes from its brand. The team dropped two places from last year, when it was ranked third.
Allen Adamson, founder of New York-based BrandSimple Consulting, told Bloomberg BNA that a top brand development company could charge $250,000 to $500,000 to come up with a new brand. And that task involves much more than settling on something that sounds catchy.
“The biggest challenge in name generation is not on the creative side,” said Adamson, who has been in the brand creation business for more than 20 years. “It's finding something you can pronounce. It's finding white space, finding a needle in a haystack, a name that they can either buy or claim that's going to work for them.”
After that, there are fixed costs related to infrastructure, like changing signs. In one stadium renaming project Adamson worked on, that cost alone came to about $4 million. There are communications costs involved in publicizing and advertising a new name, and making sure it sticks. Those can reach 10 to 20 times the amount spent to develop the new brand—up to as much as $10 million or $15 million, depending on the campaign's extent, Adamson said.
All those expenses, meanwhile, would only accrue after the team's lawyers clear the chosen name for use as a protectable trademark—either because no one else is using it or because it's being used in such a way that the team's use wouldn't interfere. That, in and of itself, can be a prolonged task.
“Getting a name cleared is a complicated process that often takes time, because it's likely that the first name won't make it through, so you need 10 or more names to get one cleared,” Adamson said.
Name-change costs accrued by the Redskins, though, would be partially offset, at least, by revenues from sales of shirts, water bottles and other goods to fans eager to show their support, Stu Seltzer of the Seltzer Licensing Group, New York, told Bloomberg BNA.
“There's a spike in business when there's a new team jersey,” Seltzer said. “This is true if there's a new franchise, new name or just a new slight design on the standard logo. The passionate fans always want the latest and greatest.”
Graff agreed. “On the plus side,” he said, “people are going to start buying your new shirts.”
However all that balances out, revenues from licensing trademarks make up a relatively small part of an NFL team's overall revenues, Scott Sillcox of LicensedSports.net, Toronto, who as an owner of a poster company was himself a trademark licensee of the NFL, told Bloomberg BNA.
The NFL teams all hold their own trademark rights but all, except one, license them back to NFL Properties LLC, which then licenses them as a group to manufacturers. Sillcox, who now consults for companies that want to make or sell NFL-branded goods, estimated that the league distributes about $10 million annually to each team from sales of licensed goods bearing team trademarks.
“That doesn't even give you a backup quarterback,” he said, adding that the biggest revenue sources for an NFL franchise are TV revenues and ticket sales.
Trademark rights are earned through use, so the Redskins wouldn't lose their rights even if they lose their federal registrations, according to legal scholars and trademark practitioners. Those rights can also be enforced without registrations, though it's harder.
Having a federal trademark registration means that in court, a party is presumed to have a valid trademark to enforce, so that point doesn't need to be proven from scratch. A registration also provides other benefits, such as getting help from customs in stopping knockoffs at the border.
Although enforcing common law trademark rights requires more effort, a large organization like the Redskins with a long history of enforcing its trademarks shouldn't have much of a problem, Alan S. Cooper, a trademark lawyer with Westerman Hattori Daniels & Adrian LLP, Washington, said. That's especially relevant because most businesses that will try and sell knockoff Redskins goods are not likely to put up a strong defense to claims of trademark infringement or counterfeiting, Cooper told Bloomberg BNA.
Losing a federal trademark registration may not translate into a loss of trademark rights, but it could complicate the licensing scenario for the Redskins.
If all NFL teams have the same federal registration status, it's easier for the NFL to write uniform contracts for licensing goods. So if the Redskins lost their registrations, but retained their name based on common law trademark rights, the team's trademarks are “going to be a square peg in a round hole,” Sillcox said. Although it's unclear how the NFL would handle that, it does have experience in making exceptions for outliers, he said.
After Jerry Jones bought the Dallas Cowboys, he fought the league for the right to control the Cowboys' trademark licenses for clothing and won. After a 1995 court battle, the NFL settled with Jones, allowing the Cowboys to opt out of the league's group licensing system.
In trying to hang onto their registrations, the Redskins have formed unlikely alliances with free-speech activists, including the American Civil Liberties Union, and a self-described “Chinatown dance rock” band founded a decade ago in Portland, Ore., by Simon Tam. The group wants to register its own disparaging trademark in an effort to reclaim the word “slants,” a pejorative term for Asians.
But the outcome is far from clear, given the involvement of an administrative agency, two appellate courts and the Supreme Court, at various stages, in the Redskins' and Slants' cases.
Last year, Tam won a ruling from the U.S. Court of Appeals for the Federal Circuit that the ban is unconstitutional. In re Tam, No. 14-01203 (Fed. Cir. Dec. 22, 2015) (246 PTD, 12/23/15). The PTO asked the Supreme Court to hear—and overturn—that ruling.
If the Supreme Court takes the case and decides the ban is not unconstitutional, the PTO's Trademark Trial and Appeal Board's 2015 cancellation of the Redskins' registrations stands.
The Redskins argue that their case is actually the better one for deciding the constitutional question. But they still want the court to add their case to the Slants', if the latter is heard. Meanwhile, the team is hoping the U.S. Court of Appeals for the Fourth Circuit will overturn the TTAB, which applied Section 2(a) and determined that several registrations issued to the Redskins between 1967 and 1990 should be canceled. Blackhorse v. Pro-Football, Inc., No. 92046185 (T.T.A.B. June 18, 2014) (118 Patent, Trademark & Copyright Law Daily, 6/19/14); affirmed, Pro-Football, Inc. v. Blackhorse, No. 14-01043 (E.D. Va. July 8, 2015) (131 PTD, 7/9/15).
The Fourth Circuit, where the Redskins' appealed a U.S. District Court for the Eastern District of Virginia decision that upheld the TTAB cancellations, would have to follow any Supreme Court decision. But if the high court doesn't take the Slants' case, leaving the Federal Circuit ruling intact, the Fourth Circuit isn't obligated to follow its fellow appeals court. Still, it would almost certainly take that court's reasoning into account in deciding the fate of the Redskins.
This is actually the second battle the Redskins are fighting to preserve their registrations. Suzan Harjo and a group of American Indians first petitioned the PTO to cancel the Redskins' registrations in 1992, as a step to persuading the team to change its name. Harjo's lawsuit eventually failed, because a court decided she and her co-plaintiffs had waited too many years to file objections to the registrations, but she was succeeded by new litigants. The name-change movement picked up allies and the controversy grew, with public protests, news publications refusing to use the name and members of Congress unsuccessfully sponsoring bills to revoke existing and future “redskin” registrations in 2013 and 2015, when the TTAB canceled them.
In the end, legal and financial consequences will only be part of the Redskins' calculus, if the registrations are buried and they must decide whether to stick with a name that's been in use since the Great Depression or take a new path, trademark and branding practitioners said.
“The decision to retain the name Washington Redskins is not motivated by financial considerations,” Sillcox said.
The inclinations of team owner Dan Snyder, who has publicly said he has no intention of changing the name, will likely play an important role, as will fans' emotional connection to the name.
“It's a very evocative name,” Adamson said. “They could come up with another one, but they can't replicate the power of ‘the Redskins' name, even though it might be polarizing to some target groups.”
To contact the reporter on this story: Anandashankar Mazumdar in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Mike Wilczek at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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