For the last decade the federal government has been attempting to use criminal asset forfeiture laws to seize the trademarked logo of the notorious biker club the Mongols (the “MONGOLS trademark”) in a campaign to shut down the biker club once and for all.  The logo plays the important role of signifying the club’s identity and is worn on club member jackets and other property and paraphernalia owned by the club and its members. The government’s position is that forfeiture of the logo will in effect destroy the club’s very identity and ultimately dissolve the club itself. The government had previously been unsuccessful in this endeavor because prior criminal actions were brought against individual club members who did not themselves own the trademarked logo.  However, the Mongols Nation organization was recently convicted of racketeering and on January 11, 2018 a jury decided that the Mongols Nation should forfeit the MONGOLS trademark to the government. There is a hearing set for February 28, 2019 for the Court to further consider the trademark forfeiture and seizure implementation. Since this verdict could have significant implications regarding trademark law, as well as the First Amendment, any decision made by the Court will surely be appealed to the U.S. Court of Appeals for the Ninth Circuit and possibly to the U.S. Supreme Court.

The jury’s decision raises some serious issues regarding the government’s ability to utilize trademark law to accomplish the goal of shutting down the motorcycle club, but before exploring these issues further it is necessary to review some basic principles of trademark law relevant to this matter. A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods or services of one party from those of others. Trademark rights arise from and are maintained by the continual provision of specific goods and/or services in connection with a given mark and there are no rights in a given mark separate and apart from this commercial activity.  Trademark rights can also be extinguished or “abandoned” should the trademark owner cease use of the mark in connection with the provision of goods / services without an intent to resume use.  There is a rebuttable presumption of abandonment after a period of three consecutive years of non-use.  Once a trademark is abandoned, another party is free to adopt the trademark or the original owner may even seek to reestablish rights in the mark.  Furthermore, a trademark cannot be transferred or assigned to another party without the “goodwill” of the business symbolized by the trademark. The goodwill is the association in the consumer’s mind of the trademark with a particular party. An assignment of a trademark without the goodwill is called an “assignment in gross” and is invalid with no rights passing to the assignee.  In addition, a trademark owner can enjoin use of an identical or confusingly similar mark in connection with the same or similar goods / services by another party in a trademark infringement lawsuit in which it must be proven that (1) the plaintiff has a protectable right in a trademark and (2) there would be a “likelihood of confusion” between the respective marks.  Trademark abandonment is an absolute defense to a trademark infringement suit.

Keeping these principles in mind, it is easy to see the potential difficulties associated with a seizure of the MONGOLS trademark by the federal government and the government’s ability to suppress use of the trademark by the motorcycle club organization and its members. Specifically, would a court-ordered forfeiture and seizure of the trademark by the federal government validly convey trademark rights in the Mongols’ trademark to the government? If so, would the government be able to maintain a legitimate ongoing right in the trademark and  avoid the mark being deemed legally abandoned?  If the answer is again in the affirmative, would the government be able to suppress use of the mark by the Mongols organization and its members or a new club?

In regard to the first question, federal criminal asset forfeiture law does provide for the seizure of both tangible and intangible property and trademark forfeiture under criminal asset forfeiture laws is not unprecedented and has been upheld in the courts. For example, in 1999 the trademark MUSTANG RANCH for a Nevada brothel was seized by the federal government following a jury finding that the brothel owner A.G.E. Corp. was guilty of racketeering and bankruptcy fraud. https://www.researchgate.net/publication/279538923_Probate_trademarks_Death_reincarnation_and_survival_of_intellectual_property_rights.  Accordingly, it appears unlikely that the validity of the forfeiture of the MONGOLS trademark to the government will be the critical issue in the case.

In regard to the second question, the government would surely be able to maintain a legitimate ongoing right in the trademark and avoid the MONGOLS trademark being deemed legally abandoned if it stepped into the shoes of the Mongols organization and provided the same or substantially similar association services in connection with the trademark either directly or through a licensee like most other trademark assignees.  However, this scenario seems highly unlikely in this particular case, since the government is clearly not the standard assignee business entity that wishes to continue the business of its predecessor in interest.  In fact, the government’s admitted strategy in this case is to acquire the MONGOLS trademark for the sole purpose of suppressing its use and there is no indication that the government is going to be responsible for running the motorcycle club directly or through a licensee.  This could spell doom for the government being able to succeed in a trademark infringement action against the Mongols organization and its members, since the obvious defense to such an action is that the government abandoned its rights in the trademark by not using the mark and has no intention to resume use.

On the other hand, under the right set of facts the government does not necessarily need to be using the trademark to maintain rights in the trademark, at least in the short term.  In a later case seeking to establish that the federal government’s seizure of the MUSTANG RANCH trademark had resulted in abandonment of the mark, the Court of Appeals for the Ninth Circuit held that the federal government did not abandon the trademark even though it did not use the trademark from 1999 until 2003 when it finally divested the business and trademark to brothel kingpin Lance Gilman.  Burgess v. Gilman, 316 Fed. App’x 542, 544 (9th Cir. 2008).  Specifically, the Court held as follows:

[T]he district court applied the correct legal standard for abandonment and its findings of fact were not clearly erroneous. See Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407, 410-11 (9th Cir. 1996). The government came forward with evidence sufficient to rebut the presumption of abandonment that arose from the approximately four-year period of nonuse, and the Burgesses were unable to carry their burden of strict proof that the government intended not to resume use of the trademark. See id. at 411; Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 935 n. 2 (9th Cir. 2006). Portions of the evidence presented at trial…led the district court to conclude that the government was actively considering the various interests and repeatedly reassessing its position going forward. The government’s conduct, characterized as indecisiveness by the district court, was held insufficient to strictly prove that the government intended not to resume use of the trademark and, in our view, this conclusion was not clearly erroneous.

Accordingly, the government’s actions with respect to the trademark post-seizure were critical in establishing if abandonment of the mark had occurred.

As in Burgess, the federal government’s actions following seizure of the MONGOLS trademark may be a critical deciding factor  in a later legal defense seeking to establish that the mark is abandoned and therefore not enforceable against the Mongols organization and its members.  It is possible that at least in the short term of three years following seizure of the MONGOLS trademark the government does not have to actually use the mark in any capacity and may still avoid a finding of abandonment.  Specifically, it may only need to avoid making statements or taking actions indicating that it intends not to resume use of the trademark, since the presumption of abandonment is not in effect until three consecutive years of non-use.  Then, Burgess shows that when the presumption of abandonment does go into effect,  even evidence amounting only to “indecisiveness” by the government concerning what is to be done with the trademark is adequate to rebut the presumption of abandonment. Of course, this scenario only works for the government if it is genuinely at least considering plans for the trademark other than just using it as a de facto tool of criminal law enforcement and it is unclear if the government’s position, statements, and actions to date singularly focusing on using the trademark to shut down the Mongols have already seriously jeopardized its ability to withstand an abandonment defense at any point following seizure of the trademark.

Regarding the third question of whether the government would be able to suppress use of the trademark by the Mongols organization and its members in the event that it can demonstrate a protectable trademark right, the government would need to further demonstrate that there is a likelihood of confusion between the trademark and use of the identical trademark by the Mongols organization and/or its members in connection with the same association services.  Since any continued use of the MONGOLS trademark by the Mongols organization and/or members would be identical to the goodwill conveyed to the government, the government may bizarrely have a strong case that there is a likelihood of confusion, keeping in mind that the lynchpin holding the governments entire case together would be the high wire act of avoiding a finding that the trademark has been abandoned discussed above.

The complexities and difficulties associated with the government’s ability to suppress use of the MONGOLS trademark by the Mongols organization and members demonstrates how trademark law was really designed for the commercial arena to prevent consumer confusion, protect brand integrity, and to prevent unfair competition, and not as a tool of criminal law. It should also be noted that the potential First Amendment implications of this utilization of trademark law by the federal government, while beyond the scope of this article, may be significant and will surely be litigated further.  It will indeed be interesting to see how this case plays out in the months and years to come.

 

 

KEYWORDS: Mongols, trademark, infringement, seizure, forfeiture, forfeit, abandonment, abandoned