Thursday, October 23, 2008

Court Orders Mongols To Give Up Clothing Bearing Government Seized Trademark

The trademark story du-jour was the decision by a California district court judge to issue an broad injunction order which essentially prevents members of the Mongols Motorcycle Club ("Mongols") from wearing any clothing bearing the Mongols’ trademarked logo. See Associated Press, ZDNet, and

The injunction came after the U.S. government indicted 79 members of the Latino motorcycle gang for racketeering. The government’s 177 page indictment describes the group as engaging in a criminal enterprise involving murder, torture, drug trafficking and other criminal offenses.

The government apparently was able to seize two registered trademarks that were owned by the Mongols. Up until March 26, 2008, Mongol Nation, an unincorporated association based in California, owned the word mark MONGOLS for “association services, namely promoting the interests of persons interested in the recreation of riding motorcycles” and the logo M.C. (and Design) for jackets and t-shirts (pictured above). While these marks were purportedly assigned to a California limited liability company named Shotgun Productions, LLC on March 26, 2008 (click here), a corrective assignment filed on October 13, 2008 raises some questions about the current ownership of the marks because it’s not exactly clear about the nature of the “corrective assignment.” Given the recent timing of the corrective assignment, it’s possible that title to the marks reverted back to the Mongols, which would explain the basis for the Feds’ seizure of the marks (as property of the Mongols). There is also the possibility that the Feds were able to tie in Shotgun Productions, LLC with the Mongols and seize the marks on that basis.

What has raised eyebrows with this court order is that when the court initially issued a temporary restraining order on Tuesday, the order apparently only barred the “sale and distribution” of goods bearing the Mongols trademark. However, language subsequently added stated that gang members and their affiliates “shall surrender for seizure all products, clothing, vehicles, motorcycles ... or other materials bearing the Mongols trademark, upon presentation of a copy of this order.”

The case is being described as the first ever where a government, through a court order, has taken over a gang’s identity through the seizure of the group’s trademarks. It remains to be seen how the government will actually proceed with any such seizures. The U.S. Attorney General’s Office is supposedly drafting up protocols for law enforcement agencies to follow in executing the seizures, which could begin as early as today or tomorrow.

Vegas™Esq. Comments:
Anyone who might have a problem with the government’s seizure of the Mongols’ trademarks should recognize that trademarks are intellectual “property” and thus can be seized like any other property owned by the Mongols such as the 60 motorcycles, mostly Harley-Davidsons, seized by the U.S. Marshal’s Services on Tuesday (each with an estimate value of $22,000). In addition, if the U.S. government is indeed the legal owner of the M.C. logo for jackets and t-shirts, then they can stop the sale and distribution of such goods bearing such mark (and can also prevent any other motorcycle group from naming itself Mongols).

What is more questionable is the use of such marks to stop people from wearing clothing that they already purchased. The media has described this as a first amendment issue, but in terms of whether wearing such clothing would constitute trademark infringement (and thus be rightfully subject to the typical seizure order – although apparently we are dealing with an atypical seizure order), the issue is more about the first-sale doctrine, which protects buyers of trademarked goods. Under the first-sale doctrine, after the trademark owner has sold its trademarked goods to a buyer, the owner cannot later use its trademark rights to control how the buyer uses those goods (the owner is said to have exhausted its trademark rights with respect to those goods, which is why the doctrine is sometimes referred to as the exhaustion doctrine).

So if you buy genuine Nike shoes, and then the government suddenly seizes all of Nike’s intellectual property assets, including Nike trademarks, the government cannot stop people from wearing their previously purchased genuine Nike shoes. In the case of those Mongols members who purchased clothing bearing the Mongols logo, such clothing goods were authorized goods at the time they were purchased by the members, so how can the government now dictate how the members can wear such clothing?

Perhaps an even more interesting question is if and how the government will exploit its newly acquired intellectual property. What steps is the U.S. government going to take in order to ensure that the “goodwill” that has been built up in the Mongols’ registered marks is continued? If the Mongols name is really connected to the alleged criminal activity, how is the government going to continue the tradition? But seriously, does the government really want to be involved in an association of members interested in motorcycles or get into the clothing business? [Those in Nevada may remember that the U.S. government, through the BLM, was in the brothel business (sort of) for a period of time when it owned the trademark Mustang Ranch acquired through a criminal forfeiture proceeding against the prior owners – the government never actually used the name in operating a brothel and eventually sold the trademark on eBay in 2003].

Finally, if the government does not do anything with the marks, then that could be construed as abandonment unless the government can show evidence that such nonuse is due to special circumstances which excuse such nonuse. Perhaps the government needs some time to look for the right motorcycle gang worthy enough to carry on the Mongols name.

[HT to Las Vegas Sun reporter Abby Goldman for bringing this story to my attention.]

1 comment:

Anonymous said...

Besides the stated obvious I think that this action on behalf of the Government is dangerous to ALL patch members of any club. Is it going to be legal now for the Government to seize "intellectual property" I.E..patches or whatever, for the obvious purpose of stopping crime? Are ALL members who wear a patch in a club now criminals? Are Copyrights covered when the forfeiture claims only to seize the Trademark?