You'll Probably Never Litigate 15 U.S.C. § 1121(b) But There's Only Been a Handful of Cases That Have
Like many trademark practitioners, I cite Section 39(a) of the Lanham Act, aka 15 U.S.C. § 1121(a), routinely in jurisdictional statements. And every time I take a refresher and peek at the statutory section, Section (b) piques my interest. So what’s the story on § 1121(b)? Turns out, it’s a short story with little case law interpreting it.
15 U.S.C. § 1121(b) — The Century 21 Amendment
In case you’re not familiar with § 1121(b), here it is
(b) No State or other jurisdiction of the United States or any political subdivision or any agency thereof may require alteration of a registered mark, or require that additional trademarks, service marks, trade names, or corporate names that may be associated with or incorporated into the registered mark be displayed in the mark in a manner differing from the display of such additional trademarks, service marks, trade names, or corporate names contemplated by the registered mark as exhibited in the certificate of registration issued by the United States Patent and Trademark Office.
15 U.S.C. § 1121(b).
If you’re wondering why § 1121(b) exists, I’m going to let the Ninth Circuit explain it:
The protagonist in the story of the enactment of section 1121(b) is Century 21, a national franchisor of real estate brokerage firms. Century 21 had a registered service mark which consisted of Century 21’s logo, covering 80% of the mark, and the name of the local franchisee, covering the remaining 20% of the mark. To protect the public from being misled about the nature of the franchisor-franchisee relationship, the Nevada Real Estate Advisory Commission issued a regulation which required any Century 21 franchisee’s name to be as large as the Century 21 logo. Century 21 Real Estate Corp. v. Nevada Real Estate Advisory Comm’n, 448 F. Supp. 1237, 1239 (D. Nev. 1978), aff’d, 440 U.S. 941, 59 L. Ed. 2d 630, 99 S. Ct. 1415 (1979). Century 21 objected to the regulation and filed suit in the Nevada District Court, claiming Nevada’s regulation violated Century 21’s service mark rights under the Lanham Act. The district court ruled in favor of the Nevada Commission and held that the regulation did not violate the Lanham Act. 448 F. Supp. at 1241.
After the Century 21 decision, other states adopted rules requiring different percentages of a mark to be devoted to the franchisee’s name. H.R. Rep No. 97-778, at 1. In response, a district court in New York held that such regulation “inhibited nationwide advertising campaigns, increased costs, and made the franchisor-franchisee relationship less appealing.” Payless Shoesource, Inc. v. Town of Penfield, New York, 934 F. Supp. 540, 543 (W.D.N.Y. 1996). Against this backdrop, Congress enacted section 1121(b).
The second clause of section 1121(b) directly responds to the Century 21 problem. This clause prohibits any state from requiring the owner of a registered mark to display additional trademarks in the registered mark “in a manner differing from the display of such additional trademarks . . . contemplated by the registered mark.”
Section 1121(b), however, also has a first clause. The first clause, which prohibits altering a mark, was not necessary to address the Century 21 problem because that problem was addressed by the second clause. It seems apparent, therefore, that Congress added the first clause to cover situations in which a state, local political subdivision, or agency might require other types of changes in a registered mark, changes such as those we see here.
Blockbuster Videos, Inc. v. City of Tempe, 141 F.3d 1295, 1298-99 (9th Cir. 1998).
Only a Handful of Cases Have Interpreted § 1121(b) and the Ninth and Second Circuits Are Not Simpatico
I only found five cases interpreting 15 U.S.C. § 1121(b): (1) Blockbuster Videos, Inc. v. City of Tempe, 141 F.3d 1295 (9th Cir. 1998); (2) Lisa’s Party City, Inc. v. Town of Henrietta, 185 F.3d 12 (2d Cir. 1999); (3) Beatrice Foods Co. v. Wisconsin, 1983 U.S. Dist. LEXIS 11771 (W.D. Wis. 1983); (4) Payless Shoesource v. Town of Penfield, 934 F. Supp. 540 (W.D.N.Y. 1996); and (5) Desert Subway, Inc. v. City of Tempe, 322 F. Supp. 2d 1036 (D. Ariz. 2003).
Ninth Circuit: Don’t Ya Know Plain Language When Ya Read It
In Blockbuster Videos, the Ninth Circuit held that a municipality may not enforce zoning regulations that require the alteration of a registered mark. Video Update owned a registered trademark for VIDEO UPDATE in stylized red lettering. Video Update leased a space in a shopping center that required white letters on a turquoise background. The Ninth Circuit held that the zoning ordinance violated § 1121(b) because it required Video Update to alter its registered trademark:
The color red is a characteristic of Video Update’s mark. By requiring Video Update to change the red color of the lettering on one of its signs to white letters on a turquoise background, Tempe required Video Update to “alter” its service mark. This alteration violates section 1121(b) of the Lanham Act.
Section 1121(b), however, does not require municipalities to allow businesses to display their registered marks. A municipality retains the power to prohibit the use of a registered mark altogether. This is so because section 1121(b) speaks only to the alteration of a mark. Thus, Tempe could prevent Blockbuster from installing its awning service mark on the outside of the building it leased in the shopping center.
Tempe contends that in the exercise of its police power to ensure compliance with aesthetic zoning, it should be able to require the alteration of registered marks. Because requiring all signs in a given shopping center to have, for example, white letters on a turquoise background would give a uniform, aesthetically pleasing look to the shopping center, Tempe contends section 1121(b) should not prevent it from promulgating zoning regulations to achieve this aesthetic goal, even if its regulations alter a mark.
Although this argument has some appeal, we must reject it. The language of section 1121(b) is clear. “No state . . . or any political subdivision or agency thereof may require alteration of a registered mark . . . .” 15 U.S.C. § 1121(b).
Blockbuster Videos, 141 F.3d at 1298. Five years later, the District of Arizona—bound by the Blockbuster Videos decision—came to the same conclusion in a case based on similar facts against the same defendant. Desert Subway, Inc. v. City of Tempe, 322 F. Supp. 2d 1036 (D. Ariz. 2003).
Second Circuit: Alteration Is Unclear, Let’s Look at the Legislative History
By contrast, in Lisa’s Party, the Second Circuit determined that local regulations that require signs to display uniform coloring do not require alteration of registered marks in violation of § 1121(b). In Lisa’s Party, Party City leased a space in a plaza requiring lettering in all signs to be in red. But Party City wanted its sign to be in its five alternating colors as in its federally registered mark and argued that § 1121(b) was being violated. The Second Circuit disagreed
Appellants first argue that the term “alteration” is so unambiguous as to admit of no other construction than one which prohibits application of city zoning regulations in a manner that inhibits the use of a federally-registered trademark. We disagree. . . .
It is at least as consistent with the language of the statute to understand it as allowing a local government to restrict businesses in a narrowly circumscribed location from using exterior signs in any color other than red. Such regulation does not compel a businesses to alter their trademark, since they remain free to use their trademarks without alteration in every manifestation other than the exterior sign at the covered location – on letterhead, leaflets, billboards, magazines, newspapers, television and Internet advertising, point-of-sale displays inside the store, and external signs at other locations. Under this narrower construction of § 1121(b), a restriction on external signs in a narrowly circumscribed locality would not come within the statute’s prohibition on requiring businesses to alter their trademarks.
We think the more plausible interpretation of § 1121(b) reads its use of the term “alteration” “to describe state-mandated changes in the mark itself, which are, of necessity, reflected in every subsequent display of that mark within the relevant jurisdiction.” . . . By contrast, local uniform aesthetic and historic regulations simply limit color typefaces and decorative elements to certain prescribed styles. These regulations have no effect on the businesses’ trademark. They limit only the choice of exterior sign at a particular location. As such, though entirely disallowing the use of a registered trademark in carefully delimited instances, these regulations do not require “alteration” at all.
Lisa’s Party City, Inc., 185 F.3d at 14-15.
§ 1121(b): An Additional Reason to Federally Register?
Maybe § 1121(b) provides another compelling reason to federally register your trademark—especially if you have multiple retail locations with signage. And especially if you do business within the Ninth Circuit. Just make sure you register the version of your trademark you want to display (this means having a color application if that’s what’s important on signage). So this might also be a compelling reason for certain businesses to register color versions of their marks—not just the black and white versions.