A new twist on asset forfeiture

A part of its ongoing legal battle with the Mongols Nation motorcycle club of California, the federal government several years ago attempted, after obtaining criminal convictions against a number of club members, to "seize" the group's distinctive logo (see it here) over which the group held federal trademark rights. The attempt (which Eugene flagged in a 2008 posting) ultimately failed when the court held that while individual club members may have behaved criminally, the trademark rights were held by the club itself (which was not a defendant in the criminal action) and not the individual members, and was therefore not forfeitable:

Criminal forfeiture is by nature in personam. Only property belonging to a defendant may be confiscated. … There is no evidence that [any] individual member of the organization holds or ever held an ownership interest in the Marks in question. The club maintains exclusive ownership of the Marks [but] it was not indicted in [the earlier criminal action] nor was it named as a RICO defendant under section 1962(a) as receiving income and benefitting from racketeering activity. … Property belonging only to the unindicted enterprise is not forfeitable.

The government (according to reports in McClatchy DC and Fox News) is, apparently, trying again. It has now brought a RICO indictment against the club itself, declaring, among other allegations, that "the Mongols Gang actively engaged in drug trafficking, especially the distribution of methamphetamine and cocaine," as well as "acts of violence, ranging from battery to murder." And it has renewed its request to seize the trademarked logo. A spokesman for the US Attorney's Office for the Central District of California was quoted as saying that

"The property we seek to forfeit is intellectual property, the trademarks, but that property was used in direct relation to a wide range of illegal activity … If we prevail in the current case, no member of the gang would be allowed to wear the trademark that we believe is synonymous with the group."

Putting aside some (very serious) First Amendment questions, the notion of seizing a trademark strikes me as at best peculiar and at worst borderline incoherent. Notice: we're not talking about whether the government can seize the tangible goods (t-shirts, flags, etc.) on which the trademarked logo appears—that's a common occurrence in the law, and those goods are clearly forfeitable property. But here, the government is attempting to seize the intangible trademark rights—the "intellectual property." And that's where they lose me.

Trademark rights (like copyright and patent rights) are "negative rights"; the owner of a trademark doesn't get the "right" to do anything, it gets the right to stop others from doing certain things. In trademark, that amounts to a right to stop others from infringing the mark—i.e., using the trademark in a manner that is "likely to confuse consumers" about the "source or origin" of the goods on which the trademark appears. [The other IP rights operate similarly, although they each have a different set of exclusions: copyright allows the owner of the copyright to stop others from "reproducing or distributing" the copyrighted work, while the owner of a patent has the right to stop others from "making or using" the patented invention]

So let's say the government "seizes" this trademark. Does that mean (as the government seems to think it means) that "no member of the gang would be allowed to wear the trademark"? As it turns out, pretty basic principles of trademark law show that it does not.

To begin with, after it "seizes" the trademark, is the government the owner of the trademark? I don't think it is, or can be. Trademark ownership is always tied to trademark use. It is a fundamental principle of trademark law that you can't own a trademark without using it in commerce to identify your goods or services—it's why, for instance, you can't sell trademark rights disassociated from the distribution of goods on which the mark appears. But the government, presumably, will not be using the logo on goods that it distributes, and under very basic trademark principles, whatever trademark rights now exist in the logo will disappear under those circumstances.

So perhaps the seizure can instead be seen as just cancelling the club's trademark rights without any transfer of ownership to the government. But in that case, there's nothing to stop club members from continuing to use the logo any way they please. The trademark rights are negative rights. The cancellation would just mean that the club could no longer stop anyone else from using the logo—but it definitely does not mean that club members (or anyone else) has to stop using it. [Same for the Redskins—trademark law doesn't give you the "right to use" a logo, it gives you the right to stop others from using the logo. If the Redskins mark is cancelled, the team can continue to use it for as long as it would like—it just can't control the use of the mark in the way it does now.]

And even if the government is somehow, absurdly, deemed to be the trademark owner, can it stop members of the Mongols Nation club from putting the logo on a t-shirt, or from selling coffee mugs or beer steins with the logo on them? On what grounds? As I said, the owner of trademark has only the right to stop others from using the mark in a way that confuses consumers about the source or origin of the goods—what would be "confusing" to cnosumers about this continued use of the logo? Just because the government is deemed to own the trademark, are consumers supposed to now believe that goods bearing the Mongols logo come from the government, and they're confused when it turns out they come from the motorcyle club??

FILE UNDER: Silly mistakes people fall into when they try to treat IP rights as just "property."

[Thanks to Ki Tu for the pointer]