December 11, 2018 Update:
The front page of the Los Angeles Times today features a new article on this long-lived lawsuit by the U.S. government against a motorcycle gang called the Mongols, which lawsuit has the stated goal of seizing for the U.S. government the Mongols’ storied trademark. The lawsuit has been up and down the appellate process, and is awaiting a jury verdict after trial. Some aspects of the case make it a real head-scratcher to trademark lawyers, but it has some lessons that can help more conventional business owners.
There is little doubt that the Mongols’ trademark is valuable, but the question that business owners should relate to is, of what value is the trademark if it is owned by someone other than its originator? In this particular instance, it seems that transferring this trademark to the U.S. government would be of little or no value even toward accomplishing the prosecutors’ laudable goal to preclude the use of the Mongols’ trademark to continue to operate their gang.
Assuming the government wins and is allowed to seize ownership of the Mongols’ design or word trademark, the first problem is that new ownership of the mark does not prevent people who have lawfully received items using the mark to continue to use genuine products that bear the mark. The “first sale doctrine” means that as long as the products bearing the Mongols’ trademark (such as patches, posters, shirts and vests) are genuine and unaltered U.S. goods, they can continue to be lawfully used and displayed by their owners. So the existing Mongols members can continue to wear their Mongols’ apparel, or transfer them lawfully, even if the Mongols’ association cannot issue new products with the trademarks that it no longer owns.
Next, trademarks only have substantial value if they are actually used to promote products or services. Since the government is not a rival motorcycle gang, what exactly is the government going to do with the Mongols’ trademarks other than retire them? When trademarks are not used for a legally sufficient amount of time, they are subject to a determination that they have been abandoned and they become available to anyone – including their former owner – to again start using them. So unless the government also manages to get a permanent injunction against the Mongols’ association ever again using their trademark (which seems unlikely, due to serious first amendment issues), once the trademarks are deemed abandoned the Mongols’ association may well be free to take back the trademarks as a full owner.
The ultimate lesson is that any prospective trademark owner must give thorough strategic consideration to who will own each trademark and what will be done with it, before expending substantial resources to create or acquire the trademark.
May 31, 2015 Blog Post:
The Mongols motorcycle gang has a distinctive registered trademark, which the U.S. government very badly wants to own. Claiming use that dates back to 1969, the Mongols’ design trademark is an image of a man with sunglasses, mustache, and queue, wearing a black vest, holding a sword, and riding a chopper motorcycle, and includes the words “MONGOLS M.C.” (USPTO Registration No. 4730806) The MONGOLS design mark is used extensively by the group, including on jackets and motorcycle accessories, to signify affiliation with the association. The MONGOLS design mark is owned by the corporation formed by the group, Mongols Nation Motorcycle Club, and it is classed as a Collective Membership Mark “indicating membership in an association dedicated to motorcycle riding appreciation.”
Since 2008, the U.S. has been prosecuting individual members of the Mongols for a wide variety of criminal acts, including extortion, drug dealing and assault. The government’s stated purpose is to “break the back” of the gang and put it out of business. What better way to achieve that goal than to seize ownership and control of the MONGOLS design trademark that signifies membership in the gang? The government’s view is that the trademark is an asset – arguably the single biggest asset – of the motorcycle gang and it can be seized when its members are found guilty of crimes requiring penalties and restitution to be paid to the government. In focusing on the trademark, the U.S. government recognizes that the organization would become essentially non-functional if its members were stripped of the ability to readily identify themselves as being members of the association.
The first attack by the government in 2008 was an attempt to seize the MONGOLS word mark (USPTO Registration No. 2916965). The government obtained a preliminary injunction restraining the transfer of the mark during the pendency of the action. But the action stalled when the U.S. District Court found that the government was trying to seize the trademark from the wrong person. In 2008, the government was prosecuting individual members of the gang for alleged criminal acts, but was trying to seize a trademark owned by the corporate entity that constitutes the Mongols association itself. This governmental drive skidded off the road because it violated one of the basic tenets of trademark law: The trademark is controlled by its owner, not by those who have non-exclusive licenses to use the mark such as members who are allowed to wear the mark on their jackets.
Not to be stymied, the U.S. Attorney returned to court beginning in 2013, this time with an indictment against the Mongols organization itself as an unincorporated association that is alleged to be racketeering enterprise. With this new approach, the registered owner of both the MONGOLS word and design marks is considered part of the indictment and the government seeks forfeiture of its assets, including its trademarks, which can be seized if the court allows that remedy.
One thing more conventional businesses can learn from the Mongols is to pay close attention to who owns the business’ marks, which are often its most valuable assets and usually vital to its survival and growth. Should the marks be owned by the business entity itself? By a sister entity that licenses it under strictures? Or perhaps by the individual founder, who can license the mark to the entity and create a revenue stream for herself?
Even for businesses that are not motorcycle gangs, all structures for trademark ownership options have advantages and disadvantages, and business owners would do well to consult counsel familiar with the issues involved. Conkle, Kremer & Engel attorneys advise clients about the most suitable trademark ownership and licensing structures for their circumstances and business plans.