Turning Bad Into Good?

Intellectual Property Practice Group Newsletter - Volume 2, Issue 1, Spring 1998

May 1, 1998

Jendi B. Reiter

In The Wife of Bath's Tale, Chaucer observes, "Forbede us thyng, and that desiren we." On this point Chaucer is in agreement with modern advertisers, who constantly try to surround their products with the perversely appealing aura of transgression. Trademarks like "Pete's Wicked Ale" and "Black Death Cigarettes" make badness seem exciting, rebellious, hip -- something so gratifying that there must be prudes who disapprove of it. The Bad Frog Brewery company recently tried to hop on this bandwagon, but the New York State Liquor Authority ("NYSLA") prohibited the sale or marketing of the beer because of its "profane" label, which bore the slogan "Turning Bad Into Good" and a trademark caricature of a frog "giving the finger." NYSLA acted pursuant to regulations which authorize it to deny approval to liquor labels containing "any statement, design, device, matter or representation which is obscene or indecent or which is obnoxious or offensive to the commonly and generally-accepted standard of fitness and good taste." 9 N.Y.C.R.R. § 83.3 (1995).

Last July, the Northern District of New York upheld NYSLA's ban, finding that NYSLA's asserted goal of protecting minors from exposure to profane advertising was sufficient justification for this restriction of free expression. Bad Frog Brewery, Inc. v. New York State Liquor Auth., 973 F. Supp. 280 (N.D.N.Y. 1997) [hereinafter Bad Frog I].

This decision was replete with unintended ironies. First, banning a product whose very appeal depends on the appearance of transgression probably only increase its appeal in those areas where it is available. (Amstel Beer's recent advertising campaign, which featured the fictional morality watchdog group "Americans for Disciplined Behavior" calling for a boycott of the beer, illustrates this truth of human nature.) Second, though our culture is harmed by the prevalent sentiment that badness is cooler than goodness, and by the proliferation of vulgar advertisements, the regulation at issue would address these problems by sacrificing important First Amendment principles.

This past January, the Second Circuit partly reversed the District Court's decision and granted Bad Frog Brewery's request for injunctive relief with respect to the disapproval of its labels. (Its damages claims were dismissed.) See Bad Frog Brewery, Inc. v. New York State Liquor Auth., No. 97-7949, 1998 U.S. App. LEXIS 525 (2d Cir. Jan. 15, 1998) hereinafter Bad Frog II. The Second Circuit recognized that the regulation in question discriminated on the basis of content, and thus, to the extent that it was applied to non-obscene expression, it potentially infringed on First Amendment rights. The "Bad Frog" trademark was clearly not obscene. The key inquiry was first, whether the message conveyed by the frog trademark should be considered commercial or noncommercial speech, and second, whether the appropriate test for regulation of such speech had been satisfied. Id. at *16.

Content-based regulation of noncommercial, fully protected speech is subject to strict scrutiny. Such regulation must advance a compelling government interest in the least restrictive way possible. See Perry Education Ass'n v. Perry Local Educators' Ass'n, 460 U.S. 37, 45 (1983). However, content-based regulation of commercial speech, such as trademarks, is subject to a more lenient test. If the speech is not misleading and promotes a lawful product, the regulation must directly advance a substantial government interest by means which are no more restrictive than necessary. See Central Hudson Gas & Electric Corp. v. Public Service Comm'n, 447 U.S. 557, 564 (1980).

On appeal, both parties contended that the trademark conveyed no useful consumer information, but drew opposite conclusions from this fact. The brewery claimed that the trademark was in the nature of a satiric commentary on modern culture, and was thus entitled to full First Amendment protection. NYSLA, however, argued that the trademark was less useful to consumers than traditional informative commercial speech, and that therefore the policy reasons for protecting commercial speech were less applicable here. See Bad Frog II, 1998 U.S. App. LEXIS 525, at *17.

The Second Circuit found the brewery's characterization of its label to be nebulous and strained. Clearly, the frog image functioned as a trademark on a product label, not as a free-standing piece of social commentary. Id. at *26-*27. Nonetheless, the degree of protection was unclear. As the court noted, Supreme Court decisions on commercial speech have all dealt with restrictions on dissemination of information, giving little guidance as to whether "a logo or a slogan that conveys no information, other than identifying the source of the product, but that serves, to some degree, to 'propose a commercial transaction,' enjoys any First Amendment protection." Id. at *23.

In particular, the court was troubled by the Supreme Court's opinion in Friedman v. Rogers, 440 U.S. 1, 12 (1979) which indicated that an optometrist's trade name conveyed no information until it had acquired secondary meaning. However, this opinion seemed limited to cases where the trademark or trade name had a potential to mislead, which was less likely here. The Second Circuit concluded that the frog trademark's role as source identifier, placed in a context (a product label) that implicitly proposed a commercial transaction, gave the trademark enough informational content to warrant protection as commercial speech. Bad Frog II, 1998 U.S. App. LEXIS 525, at *24. The court declined to resolve the broader question whether a completely uninformative label would be protected. Id. at *24 n.4. The court's conclusion on this point seems to rest on a sense that an inherently distinctive mark like the frog label can be presumed to convey information for First Amendment purposes, while a descriptive mark cannot. Since the Second Circuit did not use these terms of art, however, this intriguing hypothesis awaits further clarification.

Having concluded that the beer label was commercial speech, the Second Circuit applied the Central Hudson standard. However, because the regulation was not directed at the commercial or transactional characteristics of the label, but rather at the aesthetic and moral content of the frog trademark -- qualities it has in common with noncommercial speech -- Supreme Court precedent suggests that strict scrutiny should have been applied. In Carey v. Population Services International, 431 U.S. 678 (1977), the Supreme Court held that New York could not prohibit the advertising of contraceptives even if the advertisements might offend and embarrass people. The fact that the speech in question was commercial speech did not justify a less strict standard of review, because the ban was "clearly not directed at any commercial aspect of the prohibited advertising but at the ideas conveyed and form of expression -- the core of First Amendment values." Id. at 701 n.28.

More recently, in R.A.V. v. City of St. Paul, 505 U.S. 377 (1992), the Court held that the fact that speech belongs to a less-protected category does not justify content-based discrimination that is unrelated to the traits which made this category of speech less protected. Thus, a state may regulate advertising in order to prevent fraud, because this is one of the concerns that justifies the lesser protection of commercial speech. "But a State may not prohibit only that commercial advertising that depicts men in a demeaning fashion." Id. at 389.

Though it declined to apply strict scrutiny and the "least restrictive means" test, the Second Circuit still found in favor of Bad Frog Brewery under the Central Hudson test. It agreed with the District Court that the first two elements of the test had been shown: the label concerned lawful activity and was not misleading, and the state's asserted interest in protecting minors from vulgar and profane images was substantial. Bad Frog II, 1998 U.S. App. LEXIS 525, at *29-*30. On the other hand, the proposed regulatory solution did not directly advance that interest, nor was it narrowly tailored. Id. at *35, *41.

Underinclusiveness will not necessarily defeat a regulation, as the state has some discretion to regulate only the most egregious aspects of a widespread social problem, but "a prohibition that makes only a minute contribution to the advancement of a state interest can hardly be considered to have advanced the interest 'to a material degree.'" Id. at *33 (quoting Edenfield v. Fane, 507 U.S. 761, 771 (1993)). NYSLA's ban on a single offensive label would have little or no impact on minors' exposure to profanity, given "the wide currency of vulgar displays throughout contemporary society." Id. at *35. Since NYSLA's authority to address the issue is necessarily limited to the area of alcoholic beverage marketing, such a regulation could be deemed a substantial contribution if it were part of a broader coordinated effort among state regulatory agencies to protect minors from vulgar displays. However, as an isolated measure, it would have no significant effect. Id. at *36.

Moreover, the label ban was not narrowly tailored, because many less intrusive options were feasible. Id. at *40. Bad Frog Brewery had proposed several reasonable alternative time/place/manner regulations which the District Court summarily dismissed --point of sale location limitations; restrictions on billboard, display, and broadcast advertising; or segregation of the product in areas of the store where access could be controlled. See Bad Frog I, 973 F. Supp. at 286-97.

Having based its reversal on the third and fourth prongs of the Central Hudson test, the Second Circuit perhaps too readily accepted the District Court's conclusion that protecting minors from profane advertising was a substantial government interest. The Supreme Court has repeatedly said that speech which is not obscene cannot be suppressed solely because it may offend. In Cohen v. California, 403 U.S. 15 (1971), a man was arrested for disturbing the peace because he entered the Los Angeles County Courthouse wearing a jacket with "F--- the Draft" on the back, thereby exposing unwilling spectators (including children) to this offensive message. The Court reversed his conviction: "[T]he mere presence of unwitting listeners or viewers does not serve automatically to justify curtailing all speech capable of giving offense." Id. at 21. Since the profane word was being displayed in public, rather than being forced on unwilling viewers in their homes, the Court concluded that people who were offended should avert their eyes. Id.

Similarly, the Court held in Carey v. Population Services International that "where obscenity is not involved, we have consistently held that the fact that protected expression may be offensive to some does not justify its suppression." 431 U.S. at 701.

This is no less true when the speech is of a commercial nature. As the Court said in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 648 (1985), when striking down Ohio's restrictions on lawyer advertising, "the mere possibility that some members of the public might find advertising embarrassing or offensive cannot justify suppressing it."

Lower court decisions also cast doubt on the assumption that the state has a substantial interest in regulating offensive commercial speech. In Hornell Brewing Co. v. Brady, 819 F. Supp. 1227 (E.D.N.Y. 1993), plaintiffs had received a certificate of label approval from the Bureau of Alcohol, Tobacco and Firearms ("BATF") for their "Crazy Horse" Malt Liquor label. However, some senators became concerned that the label disparaged and offended American Indians. Congress then passed a law outlawing the use of the "Crazy Horse" brand name on liquor. As a result, the BATF had to withdraw the certificate. Id. at 1229-31.

The Eastern District of New York heard plaintiff's First Amendment challenge and ruled that the law failed the Central Hudson test for commercial speech. "It bears repeating that the desire to protect society or certain members of society from the purported offensiveness of particular speech is not a substantial interest which justifies its prohibition." Id. at 1234. Moreover, to the extent that the law was based on a legitimate desire to discourage alcohol abuse among American Indian, the total ban was more restrictive than necessary: restrictions on the marketing of the liquor in American Indian communities would have sufficed. Id. at 1239.

In Sambo's Restaurants, Inc. v. City of Ann Arbor, 663 F.2d 686 (6th Cir. 1981), the Sixth Circuit held that the City Council could not deny approval of the site plan of a "Sambo's" restaurant on the grounds that the trade name was considered a racial slur by some black people. "We must . . . reject the proposition that otherwise protected commercial speech is stripped of that protection because of its ancillary offensiveness." Id. at 694. Relying on Cohen, the court held that if no privacy interests are being invaded by the intrusion of offensive materials into the home, the government has no power to shut off discourse solely to prevent others from exposure to offensive expression. Id. at 695.

The Supreme Court has said on occasion that somewhat greater speech restrictions may be justified to protect minors (e.g. bans on non-obscene child pornography). See, e.g., New York v. Ferber, 458 U.S. 747 (1982). When the Supreme Court has found protection of minors from non-obscene indecent material to be a substantial government interest, however, it has imposed time/place/manner restrictions so that adults still have access. Moreover, these decisions have been limited to the unique context of indecent broadcasting, which implicates the privacy interests mentioned in Cohen because it invades the home without prior warning as to its unsuitable content. See F.C.C. v. Pacifica Found., 438 U.S. 726, 731 (1978); see also Denver Area Educ. Telecomm. Consortium v. F.C.C., 116 S. Ct. 2374, 2386 (1996).

Even in the broadcasting context, the government interest asserted was protecting children from "exposure to patently offensive sex-related material." Denver Area, 116 S. Ct. at 2386. Rather being than a blanket license to protect children from rude gestures, this statement more likely reflects the Court's consensus that some sex-related material which is not quite obscene may still be harmful to minors. The Court has explicitly stated that by upholding restrictions on broadcasts of profanity in the daytime, it is not declaring that profanity always justifies regulation. See Pacifica, 438 U.S. at 750. Additionally, the broadcasting regulations which the Court found acceptable merely required that the potentially inappropriate programs be aired at a time when children were less likely to tune in. Restrictions that made adult access too difficult were struck down. See Denver Area, 116 S. Ct. at 2386-91.

Similarly, in Anheuser-Busch, Inc. v. Schmoke, 101 F.3d 325 (4th Cir. 1996), the Fourth Circuit did find that Baltimore had a substantial interest in protecting minors from liquor advertising, but the regulation which was upheld in that case was a mere time/place/manner restriction on the marketing of the product so that the ads would not appear in places frequented by children. Id. at 329. The government in this case was concerned about encouraging teenage alcohol abuse, not solely about offensive speech. On the rare occasion when total bans on indecent material involving children have been upheld, more than mere offensiveness was at stake: the Court also wanted to protect children from sexual exploitation. See Ferber, 458 U.S. at 757.

The Court's tentative extension of the state's power to regulate non-obscene content does not authorize courts to conclude that any regulation aimed at suppressing offensive speech, which would be unconstitutional if intended to protect adults, will become constitutional if the state simply argues that it was trying to protect children. Yet this is what happened in the Bad Frog litigation. The regulation in question did not refer specifically to protecting minors from indecent labels, nor was the remedy -- a total ban on the sale of beer with such labels -- tailored in any way so as to preserve adults' free expression rights. The Second Circuit's decision addressed the "narrow tailoring" problem in the context of this specific label, but left open the possibility that a more carefully drafted content-based or viewpoint-based restriction would wrongly be deemed constitutional merely because minors might see the trademark in question.

Compared to the public's interest in obtaining accurate information about legal services, contraception, or consumer goods prices, the right to be insulted by a cartoon frog may seem trivial. The District Court in Bad Frog I clearly thought so: "Here, New York State is regulating a strictly superficial aspect of commercial advertising of no value to the consumer in making an informed purchase." 973 F. Supp. at 287.

But this goes back to our original observation about the selling power of transgression. If the perceived brand image of Bad Frog Beer were of no importance to the consumer, Bad Frog Brewery would not have wasted time and money bringing this lawsuit. For better or worse, whether the beer they drink makes them look like rebels is just as important to many consumers as whether it is a good buy or good for them. This may be further proof, if any was needed, that our consumer culture is often disturbingly superficial and vulgar. Even worse, the trendy glorification of badness makes people vulnerable to manipulation because they perceive moral standards as transient or insignificant. "Turning Bad Into Good" sounds a lot like "War is Peace" and those other paradoxes of the totalitarian state in Orwell's 1984.

However, if people regard goodness and good taste with indifference or contempt, this weakness of character cannot be remedied by benevolent censors, who merely ban the manifestations of our distorted values. Though it reached the right result, the Second Circuit missed an opportunity to articulate a principle that could prevent future abuses of regulatory power over commercial speech: namely, that the value system of American culture cannot effectively or fairly be changed from above by courts' and regulators' prior restraints on expression. Overcoming the age-old appeal of transgression for its own sake is a key aspect of the character-formation of responsible citizens. Meanwhile, to paraphrase Justice Holmes, if the American people want to turn bad into good, it is the courts' job to let them do it.

*Jendi B. Reiter is a senior law clerk at the New York Supreme Court, Appellate Division, First Department.