Intellectual Property

Why Criminal Forfeiture Of The Mongols Nation's Trademark Is An Outlaw Idea

Criminal forfeiture is a dangerous tool when it comes to intellectual property.

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(Photo via Mongols M.C.)

It’s one thing to push the envelope of the law, but it’s another thing altogether to obliterate it.  On December 14, 2018, a federal jury found the Mongols Nation (a motorcycle club based out of Wes Covina, California) guilty of conspiracy and racketeering charges.  As part of the prosecution of this case, federal prosecutors are seeking the forfeiture of the motorcycle club’s trademark logo — a design worn on the jackets of its initiated members and unquestionably a valuable symbol of the club.  The theory is that taking the logo away from this motorcycle “gang” will help dismantle the club and potentially disband it by destroying its identity.  In essence, they seek to obtain the club’s intellectual property in an effort to destroy it.  This tactic is not only a stretch of criminal forfeiture, but if allowed, will tear the very fabric of trademark law in the process.

First, a little background may be helpful.  The federal government has long targeted what they consider “outlaw motorcycle gangs” — motorcycle social clubs whose members engage in a range of criminal activities, such as gun running and illegal drug distribution.  In investigating and prosecuting such organizations, however, the federal government has gone to great lengths to bring such organizations to justice.  From undercover agents to sting operations (such as Operation Black Rain which culminated in 2008 when approximately 80 members of the Mongol Nation were prosecuted on various racketeering charges), these prosecutions have involved significant resources and litigation but resulted in varied degrees of success. This culminated in the genesis of a novel use of criminal forfeiture arising out Operation Black Rain — taking the intellectual property of an “outlaw motorcycle gang” in the form of the club’s trademarks so as to cripple the organization.

Criminal forfeiture (not to be confused with civil forfeiture) is an interesting tool of the prosecutor, but is a dangerous tool when it comes to intellectual property.  By the Department of Justice’s own definition, “[c]riminal forfeiture is an action brought as a part of the criminal prosecution of a defendant. It is an in personam (against the person) action and requires that the government indict (charge) the property used or derived from the crime along with the defendant. If the jury finds the property forfeitable, the court issues an order of forfeiture.”

The Federal Bureau of Investigation supports criminal forfeiture, citing its historical use stating that “[a]sset forfeiture has its roots in the ancient practice by governments to defend against piracy through the seizure of vessels and contraband[, and] it is used [today] to disrupt, dismantle, and deter those who prey on the vulnerable for financial gain, including criminal organizations, drug dealers, terrorists, and white-collar criminals.”  On its face, this seems entirely reasonable for tangible property.  For example, if drugs are seized in conjunction with the prosecution of a defendant under the Controlled Substances Act,  it seems entirely reasonable to seeks forfeiture of the drugs themselves (because, among other things, they are illegal) as well as the funds received from the sale of such contraband. When it comes to intellectual property, however, the line is not so simply drawn.

Unlike tangible assets, intellectual property involves inchoate rights that are simply not conducive to such forfeiture.  Here are are a few reasons why criminal forfeiture of the Mongol Nation’s trademarks is problematic:

Taking the Trademark Will Not Take Out the Club.  The underlying rationale proffered by the federal government here is that the forfeiture of this trademark will ultimately give the federal government the ability to dismantle the club by forcing removal of the logo from the club member’s jackets and other property and destroying their “identity.”  If the organization (as opposed to individual rogue members) is involved in such criminal endeavors, what is to prevent them from rebranding? Unlike companies in the marketplace that rebrand while straining to ensure they don’t lose consumers, an “outlaw motorcycle gang” does not have such concerns.  From what I can gather, their identity stems from their membership and the perception of that membership by rivals and the general public. I know — years of continuous trademark use and the club’s attachment to the trademark clearly makes such a change difficult, but to think that the core “identity” of the organization will disappear is a bit much.

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Taking the Trademark Will Destroy The Trademark Rights.  Trademarks gain such status by their use in commerce by the owner of the trademark (or its licensees where authorized use inures to the benefit of the trademark holder).  If the federal government controls the trademark, it seems clear that they will not be licensing the trademark back to the Mongol Nation (or another motorcycle club or anyone else) anytime soon.  Without use in commerce, the trademark will go abandoned and trademark rights will cease.  Unlike real property or monies seized that can be sold or otherwise allocated to different uses, respectively, trademarks cannot be so easily converted in the present case because it requires the transfer of the goodwill behind the business as well.  No matter the reasons proffered for the forfeiture, the net effect of the criminal forfeiture would be to seize a legal asset and destroy it in the process.

Taking the Trademark Creates an Enforcement Nightmare.  If the federal government succeeds in obtaining the trademark, how will they enforce the “non-use”?  This is not simply a matter seizing inventory (such as counterfeit goods bearing an infringing mark).  In this case, enforcement is anything but clear — do members who were granted the right to use the trademark as an insignia on their jackets or on patches before the forfeiture now lose their right to do so by virtue of the forfeiture?  Does the federal government (as the trademark holder post-forfeiture) now take action to enforce non-use that would destroy the very rights they obtained in the first place?   It’s one thing to seize an inventory of jackets and patches, but another thing altogether to take the jackets off of club members with a prior right of use that kills the rights the federal government has obtained in the first place.

There are just some of the glaring problems. I haven’t even touched on First Amendment issues. There is a tension between individual rights to free expression under the First Amendment and the exclusive rights to use words and other symbols as trademarks.  Should the federal government succeed in obtaining criminal forfeiture of the club’s trademark, there is a colorable argument that the federal government would be restricting the club’s right to engage in its chosen expression in violation of the First Amendment.

I understand the arguments, but the ends do not even remotely justify the means (nor should they).  The challenges faced by the government in prosecuting crime simply cannot justify the forfeiture of trademarks that will ultimately result in their abandonment.  Bottom line: Such forfeiture runs counter to the nature of the trademark rights being taken.  I understand and appreciate the difficulty of the job in prosecuting such cases, but let’s face it — this is a tactic as ostensibly outlaw as the defendants they successfully prosecute.

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Tom Kulik is an Intellectual Property & Information Technology Partner at the Dallas-based law firm of Scheef & Stone, LLP. In private practice for over 20 years, Tom is a sought-after technology lawyer who uses his industry experience as a former computer systems engineer to creatively counsel and help his clients navigate the complexities of law and technology in their business. News outlets reach out to Tom for his insight, and he has been quoted by national media organizations. Get in touch with Tom on Twitter (@LegalIntangibls) or Facebook (www.facebook.com/technologylawyer), or contact him directly at tom.kulik@solidcounsel.com.

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