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Zoning: Registered 'Marks' Override Zoning Ordinances, Court Rules

In a case involving municipal zoning, the U.S. Ninth Circuit Court of Appeals has ruled that a city cannot enforce zoning regulations for signs if they require the alteration of a registered service mark. The court did rule, however, that a city can prevent a company from erecting an awning containing a service mark. The case arose in Tempe, Arizona, where Blockbuster Video and Video Update, two national chains, rented space in two separate shopping centers. All exterior signs in Tempe's shopping centers must conform to the center's sign package, which specifies such things as the color, size and location of the signs. The package is created by the owner of the center, and is reviewed and approved by the Tempe Design Review Board, which can grant variances. Video Update was not allowed to use its signature color pattern on its sign, while Blockbuster was not allowed to construct its blue awning service mark. Both corporations sued the city, and the district court granted a preliminary injunction requiring Tempe to allow Blockbuster and Video Update to displace their registered service marks. The three-judge panel of the appellate court ruled in Video Update's favor and against Blockbuster. The case hinged on the interpretation of the federal Lanham Act 15 U.S.C. Section 1121 (b), which states "No state...or any political subdivision or agency thereof may require alteration of a registered mark ..." In an opinion by Circuit Judge David R. Thompson, the judge wrote, "The color red is a characteristic of Video Update's mark. By requiring Video Update to change the red color of the lettering on one of its signs to white letters on a turquoise background, Tempe required Video Update to 'alter' its service mark. This alteration violates Section 1121(b) of the Lanham Act." But the judge distinguished the Lanham Act in Blockbuster's case, noting that Section 1121(b) speaks only to the alteration of a mark, and does not require cities to allow businesses to display their registered mark. "A municipality retains the power to prohibit the use of a registered mark altogether," he wrote. "Thus, Tempe could prevent Blockbuster from installing its awning service mark on the outside of the building it leased in the shopping center." The court noted that Congress limited section 1121(b) to prohibiting any alteration of the mark itself. "[A] state, political subdivision or agency remains free to regulate where and whether signs may be placed and how large they may be," Thompson said. Looking at the legislative history of the Lanham Act's adoption, the court said it was unlikely that "Congress intended the broad zoning exception that Tempe seeks." The court noted that a trademark is recognized by having a uniform appearance in design and color, so that customers will recognize it. Two federal cases, the judge said, show that color is so important that "the color itself can be registered as a trademark because customers identify a particular brand by its color." Qualitex Co. v. Jacobson Prods. Co., 115 S. Ct. 1300, 1303 (1995), and In re Owens-Corning Fiberglas Corp., 774 F. 2d 1116, 1127 (Fed. Cir. 1985). Circuit Judge James R. Browning dissented in part and concurred in part of the opinion. "There is no reasoned basis for drawing a distinction for purposes of Section 1121 (b) preemption between local regulation of color and or architectural features. Color and architectural features are analogous aesthetic components of registered trademarks. If Congress intended to leave localities free to prohibit the use of architectural features, surely localities can also control the use of color." Browning contended that the majority adopted "an extreme interpretation of the Lanham Act that will give trademark holders the absolute right to display their marks, free or regulation, no matter how garish and inappropriate they may be..." The Case: Blockbuster Videos, Inc. v. City of Tempe, No. 97-15535, 98 Daily Journal D.A.R. 3811 (April 16, 1998). The Lawyers: For Tempe: Clifford Mattice, City Attorney, (602) 350-8227 For Blockbuster/Video Update: Marcia B. Paul, Kaye, Collyer & Boose, (212) 940-8200. For Video Update: David K. Jones, (602) 340-0900.