Law, Business and Society 11th Edition by Tony McAdams

Exercise 38

Judge Newman
BACKGROUND
Bad Frog is a Michigan corporation that manufactures and markets several different types of alcoholic beverages under its "Bad Frog" trademark. This action concerns labels used by the company in the marketing of Bad Frog Beer, Bad Frog Lemon Lager, and Bad Frog Malt Liquor. Each label prominently features an artist's rendering of a frog holding up its four-"fingered" right "hand," with the back of the "hand" shown, the second "finger" extended, and the other three "fingers" slightly curled.
Bad Frog does not dispute that the frog depicted in the label artwork is making the gesture generally known as "giving the finger" and that the gesture is widely regarded as an offensive insult, conveying a message that the company has characterized as "traditionally … negative and nasty." Versions of the label feature slogans such as "He just don't care," "An amphibian with an attitude," "Turning bad into good," and "The beer so good … it's bad." Another slogan, originally used but now abandoned, was "He's mean, green and obscene."
Bad Frog's labels have been approved for use by the Federal Bureau of Alcohol, Tobacco, and Firearms, and by authorities in at least 15 states and the District of Columbia, but have been rejected by authorities in New Jersey, Ohio, and Pennsylvania.
In May 1996, Bad Frog's authorized New York distributor, Renaissance Beer Co., made an application to the New York State Liquor Authority (NYSLA) for brand label approval and registration.…
In September 1996, NYSLA denied Bad Frog's application…. Explaining its rationale for the rejection, the Authority found that the label "encourages combative behavior" and that the gesture and the slogan, "He just don't care," placed close to and in larger type than a warning concerning potential health problems,
foster a defiance to the health warning on the label, entice underage drinkers, and invite the public not to heed conventional wisdom and to disobey standards of decorum.
In addition, the Authority said that it
considered that approval of this label means that the label could appear in grocery and convenience stores, with obvious exposure on the shelf to children of tender age
and that it
is sensitive to and has concern as to [the label's] adverse effects on such a youthful audience.
Finally, the Authority said that it
has considered that within the state of New York, the gesture of "giving the finger" to someone has the insulting meaning of "**k You," or "Up Yours," … a confrontational, obscene gesture, known to lead to fights, shootings, and homicides … concludes that the encouraged use of this gesture in licensed premises is akin to yelling "fire" in a crowded theater,… [and] finds that to approve this admittedly obscene, provocative confrontational gesture would not be conducive to proper regulation and control and would tend to adversely affect the health, safety, and welfare of the People of the State of New York.
Bad Frog filed the present action in October 1996 and sought a preliminary injunction barring NYSLA from taking any steps to prohibit the sale of beer by Bad Frog under the controversial labels. The District Court denied the motion [and Bad Frog now appeals the District Court decision].
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COMMERCIAL OR NONCOMMERCIAL SPEECH
In Bad Frog's view, the commercial speech that receives reduced First Amendment protection is expression that conveys commercial information. The frog labels, it contends, do not purport to convey such information, but instead communicate only a "joke." As such, the argument continues, the labels enjoy full First Amendment protection, rather than the somewhat reduced protection accorded commercial speech.
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NYSLA agrees with the District Court that the labels enjoy some First Amendment protection, but are to be assessed by the somewhat reduced standards applicable to commercial speech.
Bad Frog's label attempts to function, like a trademark, to identify the source of the product The picture on a beer bottle of a frog behaving badly is reasonably to be understood as attempting to identify to consumers a product of the Bad Frog Brewery. In addition, the label serves to propose a commercial transaction. Though the label communicates no information beyond the source of the product, we think that minimal information, conveyed in the context of a proposal of a commercial transaction, suffices to invoke the protections for commercial speech….
Bad Frog contends that its labels deserve full First Amendment protection because their proposal of a commercial transaction is combined with what is claimed to be political, or at least societal, commentary.
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We are unpersuaded by Bad Frog's attempt to separate the purported social commentary in the labels from the hawking of beer. Bad Frog's labels meet the three criteria identified in Bolger [463 U.S. 60 (1983)]: the labels are a form of advertising, identify a specific product, and serve the economic interest of the speaker. Moreover, the purported noncommercial message is not so "inextricably intertwined" with the commercial speech as to require a finding thatthe entire label must be treated as "pure" speech.
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We thus assess the prohibition of Bad Frog's labels under the commercial speech standards outlined in Central Hudson [447 U.S. 557 (1980)].
THE CENTRAL HUDSONTEST
Central Hudson sets forth the analytical framework for assessing governmental restrictions on commercial speech:
At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted government interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the government interest asserted, and whether it is not more extensive than is necessary to serve that interest.
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A. Lawful Activity and Not Deceptive
We agree with the District Court that Bad Frog's labels pass Central Hudson's threshold requirement that the speech "must concern lawful activity and not be misleading." The consumption of beer (at least by adults) is legal in New York, and the labels cannot be said to be deceptive, even if they are offensive.
B. Substantial State Interests
NYSLA advances two interests to support its asserted power to ban Bad Frog's labels: (i) the State's interest in "protecting children from vulgar and profane advertising," and (ii) the State's interest "in acting consistently to promote temperance, i.e., the moderate and responsible use of alcohol among those above the legal drinking age and abstention among those below the legal drinking age."
Both of the asserted interests are "substantial" within the meaning of Central Hudson. States have "a compelling interest in protecting the physical and psychological well-being of minors," and "[t]his interest extends to shielding minors from the influence of literature that is not obscene by adult standards."
The Supreme Court also has recognized that states have a substantial interest in regulating alcohol consumption. We agree with the District Court that New York's asserted concern for "temperance" is also a substantial state interest.
C. Direct Advancement of the State Interest
To meet the "direct advancement" requirement, a state must demonstrate that "the harms it recites are real and that its restriction will in fact alleviate them to a material degree" [Edenfield v. Fane, 507 U.S. 761,771 (1993)].
(1) Advancing the interest in protecting children from vulgarity.
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NYSLA endeavors to advance the state interest in preventing exposure of children to vulgar displays by taking only the limited step of barring such displays from the labels of alcoholic beverages. In view of the wide currency of vulgar displays throughout contemporary society, including comic books targeted directly at children, barring such displays from labels for alcoholic beverages cannot realistically be expected to reduce children's exposure to such displays to any significant degree.
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(2) Advancing the state interest in temperance. We agree with the District Court that NYSLA has not established that its rejection of Bad Frog's application directly advances the state's interest in "temperance."
NYSLA maintains that the raised finger gesture and the slogan "He just don't care" urge consumers generally to defy authority and particularly to disregard the Surgeon General's warning, which appears on the label next to the gesturing frog. NYSLA also contends that the frog appeals to youngsters and promotes underage drinking.
The truth of these propositions is not so self-evident as to relieve the state of the burden of marshalling some empirical evidence to support its assumptions. All that is clear is thatthe gesture of "giving the finger" is offensive. Whether viewing that gesture on a beer label will encourage disregard of health warnings or encourage underage drinking remain matters of speculation.
NYSLA has not shown that its denial of Bad Frog's application directly and materially advances either of its asserted state interests.
A. Narrow Tailoring
Central Hudson's fourth criterion, sometimes referred to as "narrowtailoring," requires consideration of whether the prohibition is more extensive than necessary to serve the asserted state interest. Since NYSLA's prohibition of Bad Frog's labels has not been shown to make even an arguable advancement of the state interest in temperance, we consider here only whether the prohibition is more extensive than necessary to serve the asserted interest in insulating children from vulgarity.
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In this case, Bad Frog has suggested numerous less intrusive alternatives to advance the asserted state interest in protecting children from vulgarity, short of a complete statewide ban on its labels. Appellant suggests "the restriction of advertising to point-of-sale locations; limitations on billboard advertising; restrictions on over-the-air advertising; and segregation of the product in the store." Even if we were to assume that the state materially advances its asserted interest by shielding children from viewing the Bad Frog labels, it is plainly excessive to prohibit the labels from all use, including placement on bottles displayed in bars and taverns where parental supervision of children is to be expected. Moreover, to whatever extent NYSLA is concerned that children will be harmfully exposed to the Bad Frog labels when wandering without parental supervision around grocery and convenience stores where beer is sold, that concern could be less intrusively dealt with by placing restrictions on the permissible locations where the appellant's products may be displayed within such stores. Or, with the labels permitted, restrictions might be imposed on placement of the frog illustration on the outside of six-packs or cases sold in such stores.
NYSLA's complete statewide ban on the use of Bad Frog's labels lacks a "reasonable fit" with the state's asserted interest in shielding minors from vulgarity, and NYSLA gave inadequate consideration to alternatives to this blanket suppression of commercial speech.
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[W]e conclude that NYSLA has unlawfully rejected Bad Frog's application for approval of its labels.
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[Reversed and remanded.] [For an update on Bad Frog, see
http://badfrog.com]
In online fantasy sports leagues, fans "draft" current professional players in baseball, football, etc. to create their own teams that then compete based on the actual performance of those players. A Missouri company,
B.C. Distribution and Marketing, Inc., operated a for- profit online league. In 2005, Major League Baseball changed its licensing policies and declined to allow B.C. a license to continue using the names and statistics of major league baseball players. C.B.C. then sued claiming it had a First Amendment right to use the information while M.L.B. argued that the information was protected by the intellectual property/publicity rights of the players. Decide the case. Explain. See C.B.C. Distribution and Marketing, Inc. v. Major League Baseball Advanced Media, 505 F.3d 818 (8th Cir. 2007); cert. den. Major League Baseball v. C.B.C. Distrib. Mktg, 2008 U.S. LEXIS 4574.