WSJ Law Blog: “Don’t Impersonate a Soldier or Sha Na Na This Weekend” (discussing NJ Truth in Music Bill, tenth such state law “making it illegal to use the name of a famous band unless it includes at least one original member or unless management holds a trademark.”)
Utah invents the electronic registration mark.
Utah General Counsel is reminded of the dormant commerce clause:
As required by legislative rule and practice, the Office of Legislative Research and General Counsel provides the following legislative review note to assist the Legislature in making its own determination as to the constitutionality of the bill. The note is based on an analysis of relevant state and federal constitutional law as applied to the bill. The note is not written for the purpose of influencing whether the bill should become law, but is written to provide information relevant to legislators’ consideration of this bill. The note is not a substitute for the judgment of the judiciary, which has authority to determine the constitutionality of a law in the context of a specific case.
This legislation allows the registration of an electronic mark that would prohibit the triggering of an advertisement for a competitor. The most prominent application for this type of mark is the use of user-entered search terms in an Internet search engine to trigger advertisements. These triggered advertisements are often advertisements for a competitor of an entity whose name is entered in the search engine by a potential customer. Because of the potential impact on interstate commerce from the state’s regulation of electronic registration mark use on Internet search engines, this legislation has a high probability of being held to be unconstitutional.
The Commerce Clause to the United States Constitution provides that Congress has the power to regulate interstate commerce. (U.S. Const. art. I, sec. 8). This provision also has a “dormant” aspect that “prohibits state . . . regulation that discriminates against or unduly burdens interstate commerce.” General Motors Corp. v. Tracy, 519 U.S. 278, 287 (1997) (Citations omitted). Although the dormant aspect of the Commerce Clause is not implicated when Congress has delegated its power to regulate in an area to the states, that delegation “must be either ‘expressly stated’ or ‘made unmistakably clear.’” New York State Dairy Foods, Inc. v. Northeast Dairy Compact Comm’n, 198 F.3d 1, 20 (citations omitted). Further, this delegation must be specific to that state action challenged. See Ind. Community Bankers Ass’n v. Bd. of Comm’rs of the Fed. Reserve Sys., 838 F.2d 969, 973-77 (8th Cir. 1988) (holding that although Congress authorized states to allow a bank’s acquisition by out-of-state entity, Congress did not authorize restrictions on acquired banks).
In the context of this legislation, there has been no specific delegation by Congress of the authority to regulate the type of Internet advertising that this legislation targets, whether triggered by an electronic registration mark or any other method. Thus, the dormant Commerce Clause is implicated and the legislation will be analyzed to determine whether it places a burden on interstate commerce that outweighs the state’s benefit. ACLU v. Johnson, 194 F.3d 1149, 1161 (10th Cir. 1999).
This legislation applies to an electronic mark registered in Utah that is used to trigger an advertisement if the advertisement is delivered in Utah or if the advertiser or person selling the advertisement is located in Utah. A large Internet search engine must first determine whether a user is located within Utah. If the user is in Utah, the Internet search engine must check search terms against Utah’s registry of trademarks to prevent the unlawful triggering of advertising. Literally millions of search requests from locations worldwide each day would be subject to verification of location. Once verified, the search engine would then use a separate process for delivering advertising to Utah. This results in multiple systems of advertisement for a search engine to manage.
It is plausible that a search engine might merely decide to check all searches against the state’s registry to avoid the need to ascertain the location of each user. This would be strong evidence of the magnitude of the burden of verifying the location of each user and of the interstate impact of this legislation. See, e.g., Id. (stating “the nature of the Internet forecloses the argument that [the statute] applies only to intrastate communications.”). Whether deciding to verify a user’s location or to merely check the registry with each search, any benefit to the state from this legislation is likely substantially outweighed by the burden on every Internet search engine or similar system to re- engineer its systems and constantly check the search terms or the location of a user. This is likely the case even with advances in technology that make it easier to determine a user’s location.
In ACLU v. Johnson, the Tenth Circuit U.S. Court of Appeals held that a New Mexico statute that prohibited the dissemination of material harmful to minors by computer violated the Commerce Clause because it applied to material that was being disseminated over the Internet. Id. at 1152, 1161-63. This legislation is not dissimilar from the laws struck down in ACLU v. Johnson, in that it has the effect of requiring entities outside of Utah to verify the location of a user or ensure that all content complies with Utah law. Additionally, the benefit to the state from this legislation is likely less than in ACLU v. Johnson, which dealt with the protection of minors from pornography. Thus, in addition to regulating conduct outside of Utah, this legislation also likely provides a benefit that is substantially outweighed by the burdens on interstate commerce. For these reasons, this legislation has a high probability of being held to be unconstitutional.
Office of Legislative Research and General Counsel