1
00:00:03,200 --> 00:00:08,000
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

2
00:00:10,119 --> 00:00:13,000
Speaker 2: He's always calling me little Marco an Alam the guy.

3
00:00:13,039 --> 00:00:14,960
Speaker 1: He's taller than me. He's like six to two, which

4
00:00:14,960 --> 00:00:17,200
Speaker 1: is why I don't understand why his hands are the

5
00:00:17,239 --> 00:00:18,680
Speaker 1: size of someone who's five to two.

6
00:00:18,920 --> 00:00:19,920
Speaker 3: Have you seen his hands?

7
00:00:20,600 --> 00:00:22,480
Speaker 4: They're like this, hit my hands.

8
00:00:22,480 --> 00:00:23,400
Speaker 5: I've never heard of this one.

9
00:00:23,680 --> 00:00:24,640
Speaker 2: Look at those hands?

10
00:00:24,680 --> 00:00:25,799
Speaker 6: Are they small hands?

11
00:00:26,320 --> 00:00:29,560
Speaker 1: You may remember seven years ago when Donald Trump and

12
00:00:29,600 --> 00:00:33,840
Speaker 1: Senator Marco Rubio were engaged in locker room talk over

13
00:00:33,880 --> 00:00:36,960
Speaker 1: the size of Trump's hands. Now it's part of the

14
00:00:37,000 --> 00:00:40,800
Speaker 1: case before the Supreme Court. Attorney Steve Elster says he

15
00:00:40,840 --> 00:00:44,080
Speaker 1: has a free speech right to trademark the phrase trump

16
00:00:44,159 --> 00:00:48,120
Speaker 1: too small to use on T shirts. The US Patent

17
00:00:48,159 --> 00:00:52,000
Speaker 1: and Trademark Office disagreed, and it appears that the Supreme

18
00:00:52,040 --> 00:00:56,520
Speaker 1: Court also disagrees. At oral arguments on Wednesday, Justice Is

19
00:00:56,560 --> 00:01:01,480
Speaker 1: across the ideological divide suggested that nying Elster a trademark

20
00:01:01,520 --> 00:01:04,559
Speaker 1: for the phrase does not violate his free speech rights

21
00:01:04,800 --> 00:01:08,960
Speaker 1: for a host of reasons. Justice Katanji Brown Jackson discussed

22
00:01:09,000 --> 00:01:10,760
Speaker 1: the point of trademark law.

23
00:01:10,920 --> 00:01:14,920
Speaker 5: And trademark is not about expression trademark is not about

24
00:01:14,959 --> 00:01:19,240
Speaker 5: the First Amendment and people's ability to speak. Trademark is

25
00:01:19,280 --> 00:01:23,520
Speaker 5: about source identifying and preventing consumer confusion.

26
00:01:24,080 --> 00:01:27,679
Speaker 1: Justice Sonya Sotomayor said that not getting a trademark does

27
00:01:27,760 --> 00:01:29,520
Speaker 1: not infringe on his speech.

28
00:01:29,600 --> 00:01:33,600
Speaker 7: Because you're not talking about stopping the speech. You're talking

29
00:01:33,760 --> 00:01:38,920
Speaker 7: about not receiving government protection for activity that you would

30
00:01:39,000 --> 00:01:42,720
Speaker 7: like to heighten protection for. Doesn't stop you from selling.

31
00:01:42,720 --> 00:01:45,399
Speaker 7: It doesn't stop you from selling anywhere as much as

32
00:01:45,440 --> 00:01:45,880
Speaker 7: you want.

33
00:01:46,840 --> 00:01:49,440
Speaker 1: Justice Neil Gorzitch pointed to history.

34
00:01:49,520 --> 00:01:53,000
Speaker 8: But at the end of the day, it's pretty hard

35
00:01:53,040 --> 00:01:56,800
Speaker 8: to argue that a tradition that's been around a long

36
00:01:56,920 --> 00:02:01,840
Speaker 8: long time since the founding common law type stuff is

37
00:02:02,360 --> 00:02:04,040
Speaker 8: inconsistent with the First Amendment.

38
00:02:04,400 --> 00:02:07,360
Speaker 1: And the Chief Justice said that giving him a trademark

39
00:02:07,520 --> 00:02:10,560
Speaker 1: would have the effect of restricting the speech of other.

40
00:02:10,400 --> 00:02:13,040
Speaker 4: People, because the whole point of the trademark, of course,

41
00:02:13,120 --> 00:02:16,000
Speaker 4: is to prevent other people from doing the same thing.

42
00:02:16,080 --> 00:02:18,560
Speaker 4: So if you win, you know, the slogan trump too

43
00:02:18,560 --> 00:02:21,320
Speaker 4: small or whatever, other people can't use it right.

44
00:02:22,000 --> 00:02:25,639
Speaker 1: Joining me is intellectual property litigator Terence Ross, a partner

45
00:02:25,680 --> 00:02:29,800
Speaker 1: at Katon Euchen Rosenman, Terry tell Us about the procedural

46
00:02:29,960 --> 00:02:31,720
Speaker 1: background of this case.

47
00:02:32,600 --> 00:02:38,320
Speaker 6: Mister Elser thought trademark registration from the United States Trademark Office,

48
00:02:38,680 --> 00:02:44,040
Speaker 6: and the Trademark examiner handling the application denied it as

49
00:02:44,080 --> 00:02:48,560
Speaker 6: a violation of sections ten fifty two A and C

50
00:02:49,240 --> 00:02:51,960
Speaker 6: of the Landham Act, which is the trademark laws here

51
00:02:51,960 --> 00:02:55,280
Speaker 6: in the United States. Mister Elster then appealed within the

52
00:02:55,360 --> 00:03:00,320
Speaker 6: Trademark Office, which confirmed the finding of a denial by

53
00:03:00,320 --> 00:03:03,120
Speaker 6: the Trademark Examiner, and mister Elster took it to the

54
00:03:03,200 --> 00:03:05,359
Speaker 6: United States Court of Appeals for the Federal Circuit here

55
00:03:05,360 --> 00:03:10,760
Speaker 6: in DC. The Federal Circuit unanimously reversed the decision of

56
00:03:10,800 --> 00:03:14,560
Speaker 6: the Trademark Office on constitutional grounds. It found that at

57
00:03:14,639 --> 00:03:18,959
Speaker 6: least as applied in this case, section ten fifty two

58
00:03:19,320 --> 00:03:23,280
Speaker 6: C was unconstitutional in light of the First Amendment, and

59
00:03:23,720 --> 00:03:28,480
Speaker 6: the Trademark Office thereafter decided that this was important enough

60
00:03:28,520 --> 00:03:32,000
Speaker 6: to appeal to the Supreme Court the United States, which

61
00:03:32,120 --> 00:03:35,240
Speaker 6: granted SERTs theri on the case, recognizing it was a

62
00:03:35,320 --> 00:03:36,440
Speaker 6: very significant issue.

63
00:03:36,560 --> 00:03:39,480
Speaker 1: So as just as Sonya Sotomayor pointed out, you don't

64
00:03:39,520 --> 00:03:42,640
Speaker 1: need a trademark to sell T shirts with this phrase

65
00:03:42,720 --> 00:03:44,760
Speaker 1: on it. In fact, they are selling t shirts with

66
00:03:44,840 --> 00:03:48,839
Speaker 1: this phrase on it online, So what would registration of

67
00:03:49,080 --> 00:03:50,840
Speaker 1: the trademark give Elster?

68
00:03:51,560 --> 00:03:56,200
Speaker 2: So this is an important issue that goes back to

69
00:03:56,760 --> 00:04:00,000
Speaker 2: the passage of the Landam Act in nineteen fifty four

70
00:04:00,680 --> 00:04:03,040
Speaker 2: and its predecessors.

71
00:04:02,240 --> 00:04:06,720
Speaker 6: Going back to the late nineteenth century. The argument is

72
00:04:06,840 --> 00:04:12,720
Speaker 6: that there is a benefit to having a registered trademark

73
00:04:13,160 --> 00:04:17,839
Speaker 6: in that your good or service and its identifier in

74
00:04:17,880 --> 00:04:23,520
Speaker 6: the public mind is protected against copying by anyone else

75
00:04:23,800 --> 00:04:27,120
Speaker 6: with respect to that same category of goods and services.

76
00:04:27,360 --> 00:04:32,440
Speaker 6: So it's essentially a government benefit being conveyed upon the registrant.

77
00:04:33,000 --> 00:04:37,919
Speaker 6: That position is not without detractors within the trademark field,

78
00:04:38,320 --> 00:04:41,400
Speaker 6: but that is the way we to this day teach

79
00:04:41,560 --> 00:04:45,200
Speaker 6: law students about trademark law that if you jump through

80
00:04:45,240 --> 00:04:47,680
Speaker 6: all the hoops to get a trademark, you receive this

81
00:04:47,839 --> 00:04:52,520
Speaker 6: government blessing, this advantage in commerce, which is protection in

82
00:04:52,560 --> 00:04:55,200
Speaker 6: a limited way for the trademark that you're using on

83
00:04:55,240 --> 00:04:56,280
Speaker 6: your goods or services.

84
00:04:56,440 --> 00:04:59,719
Speaker 1: Elster's lawyer told the court that the government's sole interest

85
00:04:59,720 --> 00:05:03,880
Speaker 1: in nine the trademark is protecting the feelings of famous people,

86
00:05:04,240 --> 00:05:08,040
Speaker 1: but that's not a legitimate reason to burden protected speech.

87
00:05:08,400 --> 00:05:10,839
Speaker 1: How did his argument strike you. It sort of struck

88
00:05:10,880 --> 00:05:12,560
Speaker 1: me as being weak in many ways.

89
00:05:13,200 --> 00:05:16,200
Speaker 6: I thought it was extraordinarily weak. I mean, I was

90
00:05:16,240 --> 00:05:19,159
Speaker 6: not there in person, and so there is a difference

91
00:05:19,320 --> 00:05:23,200
Speaker 6: in listening to the recording of a Supreme Court argument

92
00:05:23,200 --> 00:05:27,600
Speaker 6: to being there in person. But my reaction was that

93
00:05:28,279 --> 00:05:31,159
Speaker 6: mister Alistair's counsel did not do a very good job.

94
00:05:31,440 --> 00:05:33,680
Speaker 6: It was pointed out in the press that this was

95
00:05:33,720 --> 00:05:36,800
Speaker 6: his very first argument to the Supreme Court, but quite

96
00:05:36,800 --> 00:05:39,240
Speaker 6: frankly came across as a first a pallid argument at

97
00:05:39,240 --> 00:05:43,040
Speaker 6: a sword. And indeed his response to this question was

98
00:05:43,200 --> 00:05:47,719
Speaker 6: really a hail Mary, because he was unable to answer

99
00:05:48,040 --> 00:05:52,800
Speaker 6: a previous question from Justice Kagan. Justice Kagan had asked

100
00:05:52,880 --> 00:05:56,120
Speaker 6: him for any case that he could think of in

101
00:05:56,640 --> 00:06:00,719
Speaker 6: which the conveying of a government benefit in a position

102
00:06:00,880 --> 00:06:05,680
Speaker 6: neutral viewpoint state had been held to be unconstitutional. You know,

103
00:06:05,680 --> 00:06:08,520
Speaker 6: it was crickets in the room. He had nothing, and.

104
00:06:08,880 --> 00:06:11,080
Speaker 1: Nothing except maybe a sinking feeling.

105
00:06:11,400 --> 00:06:14,080
Speaker 6: Yeah, when just so my word asked this, he went

106
00:06:14,240 --> 00:06:18,640
Speaker 6: for his press conference SoundBite, which was, Oh, we can't

107
00:06:18,640 --> 00:06:21,320
Speaker 6: be protecting the feelings of famous people. Oh you know,

108
00:06:21,480 --> 00:06:25,159
Speaker 6: that's actually not what this statute is about. There is

109
00:06:25,279 --> 00:06:29,200
Speaker 6: actually a different provision on that, and it helps sometimes

110
00:06:29,480 --> 00:06:34,599
Speaker 6: to read the actual wording of a statute here fifteen USC.

111
00:06:34,680 --> 00:06:38,839
Speaker 6: Ten fifty two see essentially barge registration of a trademark.

112
00:06:38,920 --> 00:06:43,480
Speaker 6: That quote consists of, or comprises a name, portrait, or

113
00:06:43,600 --> 00:06:48,640
Speaker 6: signature identifying a particular living individual except by his written consent.

114
00:06:48,920 --> 00:06:50,880
Speaker 6: This applies to everybody, applies to you, applies to me,

115
00:06:51,160 --> 00:06:55,120
Speaker 6: applies to the listeners. A living person's name and latest

116
00:06:55,200 --> 00:06:58,839
Speaker 6: can't be used to promote another product, and this is

117
00:06:59,040 --> 00:07:03,360
Speaker 6: fundamental to trademark. Look going back into the common law,

118
00:07:03,520 --> 00:07:05,880
Speaker 6: it was known as passing off. You know, it's claiming

119
00:07:05,880 --> 00:07:08,760
Speaker 6: that some famous person had blessed this product or was

120
00:07:08,800 --> 00:07:13,720
Speaker 6: associated with it. There's a separate provision regarding the name, signature,

121
00:07:13,800 --> 00:07:17,680
Speaker 6: portrait of presidents of the United States, which was not

122
00:07:17,800 --> 00:07:21,480
Speaker 6: an issue here. And so it was very much sort

123
00:07:21,520 --> 00:07:26,880
Speaker 6: of an absurd response to Justice Sodoma Org and really

124
00:07:26,960 --> 00:07:32,480
Speaker 6: reflected a core problem with their argument, which Justice Thomas

125
00:07:32,600 --> 00:07:37,000
Speaker 6: identified quickly at or argument and he asked just straight out,

126
00:07:37,040 --> 00:07:40,840
Speaker 6: what's the burden on free speech here? What is the

127
00:07:40,880 --> 00:07:45,240
Speaker 6: burden on free speech? And really didn't get an answer

128
00:07:45,520 --> 00:07:49,920
Speaker 6: because simple fact that as you said, people are already

129
00:07:49,960 --> 00:07:52,880
Speaker 6: using this slogan everywhere. The fact that you don't get

130
00:07:52,920 --> 00:07:57,080
Speaker 6: registration does not mean you can't use the slogan, and

131
00:07:57,160 --> 00:08:00,400
Speaker 6: mister Elster himself has already been using it. Means is

132
00:08:00,360 --> 00:08:03,920
Speaker 6: that he's been denied the benefit of registration, which is

133
00:08:03,960 --> 00:08:07,920
Speaker 6: the ability to exclude, in certain circumstances, third parties from

134
00:08:08,000 --> 00:08:08,800
Speaker 6: using his slogan.

135
00:08:09,120 --> 00:08:12,920
Speaker 1: And the Chief Justice John Roberts pointed out that giving

136
00:08:13,000 --> 00:08:17,239
Speaker 1: him a trademark would have the effect of restricting speech

137
00:08:17,640 --> 00:08:20,200
Speaker 1: by other people who want to use that slogan.

138
00:08:21,000 --> 00:08:23,720
Speaker 6: And I think it's a fair point to make that

139
00:08:23,840 --> 00:08:29,280
Speaker 6: in effect by granting the trademark registration here because of

140
00:08:29,320 --> 00:08:34,079
Speaker 6: the unique category in which it thought, it really does

141
00:08:34,480 --> 00:08:39,800
Speaker 6: limit other people's free speech, because this slogan Trump too

142
00:08:39,800 --> 00:08:44,640
Speaker 6: Small is apparently commonly used by folks who are opposing

143
00:08:44,679 --> 00:08:47,240
Speaker 6: former President Trump's candidates, So Terry.

144
00:08:47,240 --> 00:08:49,960
Speaker 1: We always say you can't tell from their oral arguments

145
00:08:50,000 --> 00:08:52,760
Speaker 1: how the Court is going to rule. But it seemed

146
00:08:52,800 --> 00:08:58,480
Speaker 1: to me that justices across the ideological spectrum we're against

147
00:08:58,600 --> 00:09:00,960
Speaker 1: giving this phrase trademark protection.

148
00:09:01,360 --> 00:09:04,760
Speaker 6: I agree with that. My count was that there was

149
00:09:04,800 --> 00:09:10,360
Speaker 6: a clear majority skeptical of granting registration, and I agree

150
00:09:10,360 --> 00:09:13,800
Speaker 6: with your comment. It's hard to always read or arguments,

151
00:09:14,000 --> 00:09:19,920
Speaker 6: but in this case, particularly, the tonalities of the justice's

152
00:09:20,040 --> 00:09:27,560
Speaker 6: questions really reflect it pretty hardened positions antagonistic to any

153
00:09:27,600 --> 00:09:31,800
Speaker 6: type of register. This my count had Justice Thomas, Justice

154
00:09:31,840 --> 00:09:38,840
Speaker 6: Sodomi or Justice Kagan, and Chief Justice Roberts As all skeptical,

155
00:09:39,040 --> 00:09:42,160
Speaker 6: if not outright saying they were opposed to registration here.

156
00:09:42,360 --> 00:09:46,920
Speaker 6: In addition, I had Justice Gorsi and Alito disagreeing with

157
00:09:47,160 --> 00:09:51,920
Speaker 6: mister Elster's council on different grounds. They historically are opposed

158
00:09:51,960 --> 00:09:56,040
Speaker 6: to this notion that trademark confers a government benefit, but

159
00:09:56,400 --> 00:09:59,680
Speaker 6: they would say that they were opposed to this for

160
00:09:59,760 --> 00:10:03,560
Speaker 6: other reasons. So by my count, that's six justices who

161
00:10:03,600 --> 00:10:08,280
Speaker 6: seem pretty firmly opposed to registration of this trademark. And

162
00:10:08,440 --> 00:10:11,400
Speaker 6: I really couldn't count maybe the other justices as being

163
00:10:11,400 --> 00:10:14,319
Speaker 6: in favor. They just seem to not express an opinion

164
00:10:14,360 --> 00:10:17,160
Speaker 6: one way or the other. So sick zippy is a

165
00:10:17,280 --> 00:10:19,199
Speaker 6: pretty good starting point for the government here.

166
00:10:19,520 --> 00:10:22,520
Speaker 1: So that leads me to the question, how did a

167
00:10:22,720 --> 00:10:27,319
Speaker 1: unanimous panel of the Federal Circuit allow this trademark?

168
00:10:28,400 --> 00:10:28,720
Speaker 2: June.

169
00:10:28,760 --> 00:10:32,400
Speaker 6: We could spend a lot of time on decisions by

170
00:10:32,440 --> 00:10:34,760
Speaker 6: the Federal Circuit, where I practice a lot, by the way,

171
00:10:34,960 --> 00:10:38,640
Speaker 6: and the level of disrespect accorded to those decisions by

172
00:10:38,640 --> 00:10:40,400
Speaker 6: the Supring Court in the United States, true, I mean,

173
00:10:40,559 --> 00:10:43,320
Speaker 6: the mere fact that this decision came out of the

174
00:10:43,360 --> 00:10:47,440
Speaker 6: Federal Circuit probably starts off with your points in the

175
00:10:47,440 --> 00:10:52,440
Speaker 6: government's favor here, because the Supreme Court just doesn't respect decisions,

176
00:10:52,760 --> 00:10:55,520
Speaker 6: most significant decisions coming out of the Federal Circuit. The

177
00:10:55,720 --> 00:10:59,360
Speaker 6: history of reversal is just phenomenal. And so I mean

178
00:10:59,400 --> 00:11:02,360
Speaker 6: those of us who as a federal circuit regular basis say, okay,

179
00:11:02,400 --> 00:11:05,640
Speaker 6: you get granted search the or out of the Federal Circuit,

180
00:11:05,840 --> 00:11:07,800
Speaker 6: you got a good chance of winning. And this is

181
00:11:07,800 --> 00:11:11,800
Speaker 6: another great example that the Federal Circuit was three zero

182
00:11:12,000 --> 00:11:17,040
Speaker 6: in favor of mister Elster, and their views were in

183
00:11:17,200 --> 00:11:22,400
Speaker 6: large part based on an attempt to accord their decision

184
00:11:22,520 --> 00:11:25,720
Speaker 6: with what they perceived the Supreme Court wanted based on

185
00:11:25,800 --> 00:11:30,040
Speaker 6: prior cases involving the First Amendment trademark. And it looks

186
00:11:30,080 --> 00:11:31,720
Speaker 6: like once again they just plain got it wrong.

187
00:11:32,200 --> 00:11:35,400
Speaker 1: Coming up a look at recent trademarked decisions by the Court.

188
00:11:35,640 --> 00:11:39,240
Speaker 1: This is Bloomberg. I've been talking to intellectual property litigator

189
00:11:39,360 --> 00:11:43,480
Speaker 1: Terrence Ross of Catain Euchen Rosenman about Supreme Court oral

190
00:11:43,600 --> 00:11:48,760
Speaker 1: arguments this week over trademarking. The phrase trump too small,

191
00:11:48,840 --> 00:11:52,120
Speaker 1: So that brings us to This case is the latest

192
00:11:52,160 --> 00:11:56,079
Speaker 1: to come before the Court involving challenges to trademark denials.

193
00:11:56,559 --> 00:12:00,959
Speaker 1: In the previous cases the most recent so people seeking

194
00:12:01,040 --> 00:12:04,800
Speaker 1: registration have won and the Court has struck down parts

195
00:12:05,320 --> 00:12:08,960
Speaker 1: of the trademark law in favor of more free speech

196
00:12:09,040 --> 00:12:10,400
Speaker 1: protections June.

197
00:12:10,400 --> 00:12:14,200
Speaker 6: It's impossible to understand the Selster case without recognizing that

198
00:12:14,240 --> 00:12:17,680
Speaker 6: it's the third in a trilogy of Supreme Court cases

199
00:12:18,200 --> 00:12:21,680
Speaker 6: of which challenged provisions of the Landom Act on First

200
00:12:21,679 --> 00:12:25,680
Speaker 6: Amendment grounds. And this provision of the Landham Act actually

201
00:12:25,720 --> 00:12:31,760
Speaker 6: contains three distinct prohibitions on registration. The first one is

202
00:12:32,160 --> 00:12:37,240
Speaker 6: trademarks that consist of are comprised immoral or deceptive or

203
00:12:37,280 --> 00:12:42,079
Speaker 6: scandalous matter. The second provision prohibits trademark registration for marks

204
00:12:42,080 --> 00:12:45,840
Speaker 6: that may disparage persons living or dead. And then the

205
00:12:45,880 --> 00:12:47,840
Speaker 6: third one is the one actually in front of the

206
00:12:47,840 --> 00:12:51,120
Speaker 6: court here. You know the use of name, portrait, or

207
00:12:51,120 --> 00:12:55,120
Speaker 6: signature identifying particular living individual. So a few years back

208
00:12:55,240 --> 00:12:59,560
Speaker 6: in a case called Mattel versus ten there was an

209
00:12:59,640 --> 00:13:05,760
Speaker 6: Asian American rock band that had sought trademark registration on

210
00:13:05,840 --> 00:13:10,800
Speaker 6: the term slants slnts, which the Trademark Office I think

211
00:13:10,880 --> 00:13:16,000
Speaker 6: rightly recognized as a slur on Asian Americans, very offensive

212
00:13:16,080 --> 00:13:19,520
Speaker 6: for an Asian Americans, and denied registration on the grounds

213
00:13:19,520 --> 00:13:23,120
Speaker 6: that it was disparaging persons of Asian ethnicity. That case

214
00:13:23,160 --> 00:13:24,439
Speaker 6: went all the way up to the Supreme Court, and

215
00:13:24,440 --> 00:13:28,320
Speaker 6: the Supreme Court reversed the Trademark Office and held this

216
00:13:28,400 --> 00:13:32,360
Speaker 6: particular provision of ten fifty two a unconstitutional in light

217
00:13:32,400 --> 00:13:34,920
Speaker 6: of the First Amendment. The problem with that decision was

218
00:13:34,960 --> 00:13:38,120
Speaker 6: that the Court was Justice cour Sais did not participate

219
00:13:38,160 --> 00:13:40,400
Speaker 6: for some reason in that decision. So you only had

220
00:13:40,440 --> 00:13:43,280
Speaker 6: eight judges and they split evenly four to four. I mean,

221
00:13:43,280 --> 00:13:45,800
Speaker 6: there were a number of concurring opinions, but the core

222
00:13:45,920 --> 00:13:50,360
Speaker 6: decisions were split four to four, and that split was

223
00:13:50,679 --> 00:13:56,080
Speaker 6: centered on whether or not this sort of government benefited

224
00:13:56,280 --> 00:14:02,040
Speaker 6: speech should be subject to heightened scrutiny for First Amendment purposes.

225
00:14:02,520 --> 00:14:05,600
Speaker 6: And whenever you have a type of speech that the

226
00:14:05,600 --> 00:14:08,680
Speaker 6: government is trying to regulate and you apply heightened scrutiny.

227
00:14:08,840 --> 00:14:11,400
Speaker 6: It's almost a certainty that's going to be held to

228
00:14:11,400 --> 00:14:15,720
Speaker 6: be unconstitutional. And Justice Kennedy, Ginsburg, Soda, Mayori, and Kagan

229
00:14:16,200 --> 00:14:19,120
Speaker 6: all felt that you applied heightened scrutiny here, and therefore

230
00:14:19,520 --> 00:14:24,480
Speaker 6: the provision was unconstitutional. Chief Justice Roberts, Justice Alito, Justice Pomis,

231
00:14:24,480 --> 00:14:28,080
Speaker 6: and Justice Bryer fought that you did not apply heightened scrutiny,

232
00:14:28,480 --> 00:14:32,880
Speaker 6: but it was still unconstitutional because there was no demonstrable

233
00:14:33,280 --> 00:14:36,880
Speaker 6: benefit to the government to impose this sort of burden

234
00:14:36,880 --> 00:14:40,480
Speaker 6: on free speech. So it was struck down eight to zero,

235
00:14:40,520 --> 00:14:43,840
Speaker 6: but with two really different basis for a decision. A

236
00:14:43,840 --> 00:14:47,320
Speaker 6: couple of years later comes along in case Ionku versus Brunetti,

237
00:14:47,880 --> 00:14:51,280
Speaker 6: looking at the second prohibition here in ten fifty two,

238
00:14:51,480 --> 00:14:55,960
Speaker 6: which is immoral or scandalous trademarks. And in that case

239
00:14:56,040 --> 00:14:59,960
Speaker 6: we had a registrant trying to get a trademark register

240
00:15:00,280 --> 00:15:06,200
Speaker 6: in the term suc T and the trademark office refused

241
00:15:06,200 --> 00:15:09,440
Speaker 6: to accept that as immoral or scandalous, and there is

242
00:15:09,480 --> 00:15:13,440
Speaker 6: a long history of variations of that particular mark being rejected.

243
00:15:13,560 --> 00:15:16,760
Speaker 6: This one also went up to the Supreme Court, and

244
00:15:16,800 --> 00:15:19,840
Speaker 6: again it was struck down, and the particular provision was

245
00:15:19,840 --> 00:15:22,000
Speaker 6: held in constitutional in the first minute. But you had

246
00:15:22,040 --> 00:15:27,160
Speaker 6: a combination of Justice Kagan, Justice Thomas, Justice Thelido importantly

247
00:15:27,280 --> 00:15:31,160
Speaker 6: Justice Course Such and Justice Kinsburg. Just Kavanaugh also not

248
00:15:31,200 --> 00:15:33,840
Speaker 6: participate because it wasn't on the court yet, and they

249
00:15:34,480 --> 00:15:38,960
Speaker 6: made the argument that this was viewpoint based discrimination by

250
00:15:39,000 --> 00:15:42,960
Speaker 6: the government. The government was making a decision that the

251
00:15:43,160 --> 00:15:48,080
Speaker 6: particular use of foul language or in moral words is

252
00:15:48,200 --> 00:15:51,120
Speaker 6: the Statute says, was the government trying to dictate how

253
00:15:51,120 --> 00:15:54,720
Speaker 6: people can speak, and therefore that was unconstitutional. So if

254
00:15:54,720 --> 00:15:56,840
Speaker 6: you look at those two cases, even though there was

255
00:15:56,880 --> 00:16:00,160
Speaker 6: sort of a scattered decision making, you would have come away,

256
00:16:00,200 --> 00:16:03,160
Speaker 6: as the Federal Circuit did, thinking that the Supreme Court

257
00:16:03,320 --> 00:16:08,480
Speaker 6: dislikes limits on trademarks relating to some form of speech,

258
00:16:08,760 --> 00:16:12,000
Speaker 6: even if that speech is really distasteful. And in both

259
00:16:12,000 --> 00:16:15,440
Speaker 6: those cases it was very distasteful. And yet the Federal

260
00:16:15,560 --> 00:16:21,120
Speaker 6: Circuit clearly misread what had happened before, in part because

261
00:16:21,120 --> 00:16:24,400
Speaker 6: you have this floating cast of justices with different points

262
00:16:24,440 --> 00:16:26,680
Speaker 6: of view, and they just plane got it wrong here.

263
00:16:27,200 --> 00:16:29,520
Speaker 1: How do you think the Court's going to rule?

264
00:16:29,960 --> 00:16:34,360
Speaker 6: I'm pretty confident June that the Federal Circuit decision is

265
00:16:34,400 --> 00:16:37,080
Speaker 6: going to be reversed, and the Court will then send

266
00:16:37,160 --> 00:16:40,760
Speaker 6: it back for a decision on the te tabs ruling

267
00:16:41,000 --> 00:16:43,480
Speaker 6: of non registration, and at the end of the day

268
00:16:43,600 --> 00:16:47,040
Speaker 6: may take a couple procedural hurdles, but this mark is

269
00:16:47,080 --> 00:16:51,480
Speaker 6: not going to get registered. The real question is what's

270
00:16:51,520 --> 00:16:55,440
Speaker 6: the decision tree going to be like here? I think

271
00:16:55,480 --> 00:16:59,520
Speaker 6: you will, once again, as in the Caam case and

272
00:16:59,560 --> 00:17:04,840
Speaker 6: the Brunet Any case, have a fractured Supreme Court unless

273
00:17:05,800 --> 00:17:10,040
Speaker 6: one of these justices, Justice Barrack, who really didn't give

274
00:17:10,080 --> 00:17:13,200
Speaker 6: away where she was coming from, Let's say they join

275
00:17:13,320 --> 00:17:17,320
Speaker 6: with several other justices to create a five judge majority.

276
00:17:17,640 --> 00:17:21,520
Speaker 6: I think one of the core issues here is the

277
00:17:21,560 --> 00:17:26,400
Speaker 6: position that Justice Course suching Justice Alito have. They clearly

278
00:17:26,560 --> 00:17:31,919
Speaker 6: expressed to the government lawyer that they don't believe in

279
00:17:31,960 --> 00:17:35,720
Speaker 6: the government benefits argument. What they essentially said is they

280
00:17:35,840 --> 00:17:39,600
Speaker 6: wanted the decision to be grounded in the history of

281
00:17:39,680 --> 00:17:43,800
Speaker 6: trademark law in this country and pointed specifically to the

282
00:17:43,960 --> 00:17:49,560
Speaker 6: historical protection that has been allowed for certain types of trademarks,

283
00:17:49,600 --> 00:17:54,960
Speaker 6: such as geographic marks. The trademark law atlantamac accords special

284
00:17:55,080 --> 00:17:59,240
Speaker 6: protection to various things. For example, the Olympics the US

285
00:17:59,280 --> 00:18:03,480
Speaker 6: Olympic Committe gets special protection, and unless you're running a

286
00:18:03,480 --> 00:18:07,200
Speaker 6: business within a certain distance of Olympia, Washington, you don't

287
00:18:07,240 --> 00:18:10,199
Speaker 6: get to use the word Olympic in any sense. But

288
00:18:10,280 --> 00:18:16,119
Speaker 6: those sorts of historically allowed prohibitions on trademarks. So I

289
00:18:16,200 --> 00:18:20,119
Speaker 6: think that they're going to insist that the decision be

290
00:18:20,240 --> 00:18:25,080
Speaker 6: grounded on the historical record of trademark law in this country,

291
00:18:25,280 --> 00:18:27,800
Speaker 6: which by the way, is consistent with their views that

292
00:18:27,840 --> 00:18:30,280
Speaker 6: you have to look at the historical development of the

293
00:18:30,359 --> 00:18:33,800
Speaker 6: law and find something back in the historical records that

294
00:18:33,960 --> 00:18:37,160
Speaker 6: allows you to regulate. And here they would say that

295
00:18:37,200 --> 00:18:40,560
Speaker 6: there's a historical recognition that the government has been allowed

296
00:18:40,840 --> 00:18:44,960
Speaker 6: to regulate speech in the context of certain types of trademarks,

297
00:18:44,960 --> 00:18:46,919
Speaker 6: and that's how they're going to ground their decision. And

298
00:18:46,960 --> 00:18:49,640
Speaker 6: quite frankly, that might also pick up at least one

299
00:18:49,640 --> 00:18:52,280
Speaker 6: other justice. So right there you have three justices with

300
00:18:52,400 --> 00:18:56,719
Speaker 6: this splintered decision. I think Chief Justice Roberts might also

301
00:18:56,840 --> 00:18:59,520
Speaker 6: be inclined to something like that, whereas you're going to

302
00:18:59,520 --> 00:19:02,320
Speaker 6: have this group justice sot of Major Justice Kagan. I

303
00:19:02,359 --> 00:19:06,919
Speaker 6: think Justice Thomas at a minimum all arguing that this

304
00:19:07,080 --> 00:19:10,560
Speaker 6: is not viewpoint discrimination and that the First Bendment only

305
00:19:10,560 --> 00:19:13,480
Speaker 6: applies when it's in the context of viewpoint discrimination. I

306
00:19:13,520 --> 00:19:16,440
Speaker 6: would like to see a clearer decision, and I may

307
00:19:16,440 --> 00:19:18,359
Speaker 6: be proven wrong, but I think we're going to get

308
00:19:18,400 --> 00:19:21,920
Speaker 6: one of these four three two or three three three

309
00:19:21,920 --> 00:19:24,639
Speaker 6: type decisions like we've had so often of late. The

310
00:19:24,720 --> 00:19:27,000
Speaker 6: interesting part of it is you and I've discussed the past, June,

311
00:19:27,080 --> 00:19:29,159
Speaker 6: so in the intellectual property field, you don't see the

312
00:19:29,200 --> 00:19:32,000
Speaker 6: ideological split that you do. I mean, if you look

313
00:19:32,040 --> 00:19:34,280
Speaker 6: at all three of these cases, the so called liberals

314
00:19:34,320 --> 00:19:37,760
Speaker 6: and the so called conservatives are all together in different blocks.

315
00:19:37,920 --> 00:19:39,840
Speaker 6: So it's sort of interesting that respect.

316
00:19:40,359 --> 00:19:44,240
Speaker 1: Thanks so much, Terry. That's Terrence Ross of Captain Eugen Rosenman.

317
00:19:44,760 --> 00:19:47,520
Speaker 1: Coming up next on the Bloomberg Lawn Show. The government

318
00:19:47,600 --> 00:19:50,040
Speaker 1: is trying to stop the merger of Jet Blue and

319
00:19:50,119 --> 00:19:53,639
Speaker 1: Spirit Airlines. I'm June Grosso and you're listening to Bloomberg.

320
00:19:54,480 --> 00:19:58,879
Speaker 1: The US crackdown on airline consolidation faces a new test

321
00:19:58,920 --> 00:20:02,280
Speaker 1: this week, as the government tries to stop Jet blues

322
00:20:02,400 --> 00:20:06,600
Speaker 1: three point eight billion dollar takeover of Spirit Airlines, arguing

323
00:20:06,600 --> 00:20:10,600
Speaker 1: that the merger would reduce competition and boost fares for passengers.

324
00:20:11,000 --> 00:20:14,679
Speaker 1: Trials started Tuesday before a federal judge in Boston, and

325
00:20:14,760 --> 00:20:17,560
Speaker 1: it comes at a critical time for the industry where

326
00:20:17,600 --> 00:20:22,000
Speaker 1: domestic low cost carriers have cut service as fare slide

327
00:20:22,080 --> 00:20:26,240
Speaker 1: and travel slows. Joining me from Boston is Bloomberg Intelligence

328
00:20:26,320 --> 00:20:31,320
Speaker 1: senior litigation analyst Jenniferree, who's covering the trial. Jen, this

329
00:20:31,400 --> 00:20:35,720
Speaker 1: isn't Jet blues first run in with antitrust regulators. Why

330
00:20:35,800 --> 00:20:37,840
Speaker 1: is the government trying to stop this merger?

331
00:20:38,760 --> 00:20:42,040
Speaker 3: Well, you know, the government really sees this as reducing

332
00:20:42,200 --> 00:20:45,080
Speaker 3: output and increasing prices, or at least a deal that

333
00:20:45,119 --> 00:20:47,400
Speaker 3: would have the potential to do that in the industry.

334
00:20:47,800 --> 00:20:51,760
Speaker 3: Because Spirit is what's considered an ultra low cost airline

335
00:20:52,040 --> 00:20:54,560
Speaker 3: that offers a la carte options, and so if a

336
00:20:54,600 --> 00:20:57,280
Speaker 3: consumer wants to fly and really get the very lowest

337
00:20:57,280 --> 00:20:59,760
Speaker 3: price they can, they have the option of doing that

338
00:20:59,840 --> 00:21:02,399
Speaker 3: on Spirit and not buying the extras the food or

339
00:21:02,440 --> 00:21:06,239
Speaker 3: the water or the inflight entertainment. Whereas Jet Blue has

340
00:21:06,280 --> 00:21:09,399
Speaker 3: a different kind of a model, and so Jet Blue,

341
00:21:09,480 --> 00:21:13,400
Speaker 3: if it takes over Spirit intends to change everything over

342
00:21:13,440 --> 00:21:16,600
Speaker 3: to its own model. All the airplanes would be retrofitted,

343
00:21:16,640 --> 00:21:19,760
Speaker 3: so there'd be fewer seats, so that means reduced output.

344
00:21:19,800 --> 00:21:22,959
Speaker 3: And it would likely mean increase fares because Jet Blue's

345
00:21:23,000 --> 00:21:26,720
Speaker 3: average fares tend to be over spirits. So overall, putting

346
00:21:26,760 --> 00:21:29,680
Speaker 3: aside sort of the city routes in which these two

347
00:21:29,720 --> 00:21:33,879
Speaker 3: airlines compete, overall, the Department of Justice is concerned about

348
00:21:33,920 --> 00:21:37,040
Speaker 3: the removal of this option of this a la carte

349
00:21:37,119 --> 00:21:39,760
Speaker 3: ultra low cost option that's in the marketplace.

350
00:21:40,480 --> 00:21:44,439
Speaker 1: So Jet Blues lawyers said that it's the first time

351
00:21:44,560 --> 00:21:46,960
Speaker 1: that the government has ever challenged a merger of two

352
00:21:47,080 --> 00:21:50,879
Speaker 1: small airlines on antitrust grounds. The companies account for just

353
00:21:51,000 --> 00:21:55,120
Speaker 1: eight percent of industry revenue, so even after the merger,

354
00:21:55,240 --> 00:21:58,400
Speaker 1: Jet Blue's market share would rise to just seven percent

355
00:21:58,800 --> 00:22:02,040
Speaker 1: from five percent. I mean, is the government going after

356
00:22:02,080 --> 00:22:05,240
Speaker 1: them because they haven't gone after the airlines before. I mean,

357
00:22:05,240 --> 00:22:08,879
Speaker 1: this seems like they're trying to compete with the big airlines.

358
00:22:09,200 --> 00:22:11,040
Speaker 3: Well, I have a couple things to say about that.

359
00:22:11,119 --> 00:22:12,720
Speaker 3: I Mean, I first, I think, look that that's a

360
00:22:12,720 --> 00:22:15,200
Speaker 3: good argument by Jet Blue, But I think it's sort

361
00:22:15,200 --> 00:22:17,800
Speaker 3: of a red herring because at the end of the day,

362
00:22:17,840 --> 00:22:23,000
Speaker 3: that national competition, that combined national share isn't really relevant

363
00:22:23,080 --> 00:22:26,360
Speaker 3: to the anti trust inquiry. Because the anti trust inquiry

364
00:22:26,400 --> 00:22:30,160
Speaker 3: looks at options for consumers, and consumers that are trying

365
00:22:30,160 --> 00:22:33,880
Speaker 3: to fly from let's say Boston to Santa Fe, they

366
00:22:33,920 --> 00:22:36,960
Speaker 3: don't care about the fact that, combine they're small nationally.

367
00:22:37,440 --> 00:22:40,399
Speaker 3: If they have a reduced option when they're shopping for

368
00:22:40,440 --> 00:22:43,600
Speaker 3: their flights, and they have fewer options when they're shopping

369
00:22:43,600 --> 00:22:45,720
Speaker 3: for that flight, and now the prices have gone up,

370
00:22:46,000 --> 00:22:50,080
Speaker 3: those consumers care about that. So really, with airline deals,

371
00:22:50,480 --> 00:22:52,560
Speaker 3: they have to be looked at from city to city

372
00:22:52,640 --> 00:22:55,600
Speaker 3: and which airlines are competing on each of those routes.

373
00:22:55,760 --> 00:22:57,920
Speaker 3: So it's kind of like a lot of mini mergers.

374
00:22:58,000 --> 00:23:00,760
Speaker 3: And it's also not necessarily true that the Department of

375
00:23:00,880 --> 00:23:03,640
Speaker 3: Justice hasn't challenged small deals. You know, there have been

376
00:23:03,680 --> 00:23:05,919
Speaker 3: deals where an airline was trying to just buy a

377
00:23:05,960 --> 00:23:09,520
Speaker 3: few slots, let's say, at an airline, and the Department

378
00:23:09,560 --> 00:23:13,240
Speaker 3: of Justice voiced some opposition and the airline abandoned that deal.

379
00:23:13,640 --> 00:23:16,719
Speaker 1: Well, what do you think Jet Blue's best argument was

380
00:23:17,160 --> 00:23:18,000
Speaker 1: in the openings?

381
00:23:18,560 --> 00:23:20,680
Speaker 3: Well, I think that their best argument is and they've

382
00:23:20,720 --> 00:23:23,119
Speaker 3: done a good job with it. That Look, at the

383
00:23:23,200 --> 00:23:26,000
Speaker 3: end of the day, we are going to increase competition

384
00:23:26,400 --> 00:23:29,480
Speaker 3: because we have a really tough time fighting against the

385
00:23:29,480 --> 00:23:33,560
Speaker 3: big legacy carriers Delta, American and United, and you can

386
00:23:33,600 --> 00:23:36,800
Speaker 3: throw Southwest in there too, that actually, combined account for

387
00:23:36,840 --> 00:23:39,160
Speaker 3: about eighty percent of air travel and cost a lot

388
00:23:39,200 --> 00:23:41,719
Speaker 3: of money. We have lower farars than they do. And

389
00:23:41,760 --> 00:23:44,399
Speaker 3: by increasing Jet Blue, by making Jet Blue a bigger,

390
00:23:44,480 --> 00:23:47,800
Speaker 3: more viable competitor, we can exert more competitive pressure on

391
00:23:47,840 --> 00:23:51,120
Speaker 3: those legacy airlines and it pulls down their prices. It's

392
00:23:51,119 --> 00:23:53,760
Speaker 3: something that the Department of Justice has acknowledged called the

393
00:23:53,800 --> 00:23:56,760
Speaker 3: Jet Blue effect, and I think that the lawyers have

394
00:23:56,880 --> 00:24:00,399
Speaker 3: so far, we're just at the beginning, effectively laid that

395
00:24:00,480 --> 00:24:02,159
Speaker 3: out and made that argument. And I think it's a

396
00:24:02,160 --> 00:24:04,919
Speaker 3: good argument because what it does is force us the

397
00:24:05,000 --> 00:24:07,520
Speaker 3: judge to kind of say, which is the better side,

398
00:24:07,720 --> 00:24:09,879
Speaker 3: you know, which is the bigger harm or the lesser harm?

399
00:24:10,160 --> 00:24:13,200
Speaker 3: Is it better to remove this ultra low cost option

400
00:24:13,400 --> 00:24:17,520
Speaker 3: for some real bargain conscious consumers, but end up, you know,

401
00:24:17,640 --> 00:24:20,880
Speaker 3: exerting more of a competitive influence on the legacy carriers.

402
00:24:20,920 --> 00:24:23,080
Speaker 3: Which side is stronger is part.

403
00:24:22,840 --> 00:24:26,040
Speaker 1: Of the equation for the judge. I mean, from what

404
00:24:26,119 --> 00:24:29,880
Speaker 1: I've read, if Jet Blue loses in court, it's survival

405
00:24:30,200 --> 00:24:31,439
Speaker 1: becomes an open question.

406
00:24:31,960 --> 00:24:34,159
Speaker 3: Yeah, you know, the interesting thing that again, we're just

407
00:24:34,200 --> 00:24:36,320
Speaker 3: at the beginning, right so we have yet to get

408
00:24:36,320 --> 00:24:38,720
Speaker 3: into really the bulk of this trial. But so far,

409
00:24:39,240 --> 00:24:42,440
Speaker 3: what we've heard more is that it's actually Spirit that's

410
00:24:42,480 --> 00:24:45,480
Speaker 3: in a little bit of trouble, that they are not operating,

411
00:24:45,600 --> 00:24:47,720
Speaker 3: they're operating at a loss right now, and that they

412
00:24:47,760 --> 00:24:50,080
Speaker 3: have been for a couple of years since COVID, and

413
00:24:50,160 --> 00:24:52,639
Speaker 3: that they didn't quite have the bounce back that some

414
00:24:52,760 --> 00:24:55,960
Speaker 3: airlines did and that they expected in the post COVID

415
00:24:56,080 --> 00:24:59,040
Speaker 3: travel boom, And so they're the ones that are struggling

416
00:24:59,080 --> 00:25:01,320
Speaker 3: a little bit right now. You know, I haven't heard

417
00:25:01,359 --> 00:25:04,280
Speaker 3: an argument an anti trust. There's something called a failing

418
00:25:04,359 --> 00:25:07,240
Speaker 3: firm or a flailing firm argument that you know, but

419
00:25:07,400 --> 00:25:09,760
Speaker 3: for the deal, one off the companies will exit the

420
00:25:09,800 --> 00:25:12,560
Speaker 3: market and that would be a worse outcome than allowing

421
00:25:12,560 --> 00:25:15,080
Speaker 3: a deal to go forward. I haven't really heard that yet,

422
00:25:15,520 --> 00:25:18,800
Speaker 3: and those are very tough standards to meet. But because

423
00:25:18,960 --> 00:25:21,199
Speaker 3: you know, generally we do know that both Spirit and

424
00:25:21,280 --> 00:25:23,359
Speaker 3: Jet Blue are struggling a little bit now. I certainly

425
00:25:23,440 --> 00:25:25,639
Speaker 3: think it's something the judge is going to take it

426
00:25:25,680 --> 00:25:26,400
Speaker 3: into account.

427
00:25:26,800 --> 00:25:30,800
Speaker 1: Spirit tried to merge before. Was it Spirit that tried

428
00:25:30,800 --> 00:25:32,240
Speaker 1: to merge with Frontier.

429
00:25:32,960 --> 00:25:35,639
Speaker 3: Well, they were talking about so they were balancing a

430
00:25:35,640 --> 00:25:38,679
Speaker 3: Frontier offer versus a Jet Blue offer. So originally they

431
00:25:38,720 --> 00:25:41,119
Speaker 3: were in an offer with Frontier, but they were able

432
00:25:41,200 --> 00:25:45,960
Speaker 3: to entertain a superior offer, and they judged Jet Blue's

433
00:25:45,960 --> 00:25:48,639
Speaker 3: offer when it came in later to be a superior offer.

434
00:25:49,119 --> 00:25:51,320
Speaker 3: So they were looking at both at one point and

435
00:25:51,480 --> 00:25:52,840
Speaker 3: ended up going with Jet Blue.

436
00:25:53,440 --> 00:25:57,560
Speaker 1: And Jet Blue what happened with its alliance with American Airlines.

437
00:25:58,040 --> 00:26:00,200
Speaker 3: So the alliance they had in the Northeast with the

438
00:26:00,200 --> 00:26:03,000
Speaker 3: American was challenged by the Department of Justice and they

439
00:26:03,520 --> 00:26:06,320
Speaker 3: it went to trial and the company is lost and

440
00:26:06,359 --> 00:26:08,840
Speaker 3: they were ordered to unwind that alliance. I went to

441
00:26:08,880 --> 00:26:11,360
Speaker 3: that trial and I was a little surprised by that verdict.

442
00:26:11,720 --> 00:26:13,920
Speaker 3: I did think that the alliance would be paired back

443
00:26:13,960 --> 00:26:16,159
Speaker 3: a little bit by the judge, that some aspects of

444
00:26:16,200 --> 00:26:18,920
Speaker 3: it might be paired back, but that they'd be able

445
00:26:18,920 --> 00:26:21,679
Speaker 3: to keep at least the core sort of the code sharing.

446
00:26:21,720 --> 00:26:25,440
Speaker 3: But the judge actually said they have to unwind it completely.

447
00:26:25,800 --> 00:26:28,760
Speaker 3: Now I think American has gone ahead and appealed that.

448
00:26:28,800 --> 00:26:32,200
Speaker 3: But Jet Blue was able under their agreement to walk

449
00:26:32,240 --> 00:26:34,240
Speaker 3: away because they had hit their end date. And so

450
00:26:34,320 --> 00:26:36,280
Speaker 3: Jet Blue did walk away from that agreement.

451
00:26:36,760 --> 00:26:39,239
Speaker 1: It can't walk away from this agreement, can it. It

452
00:26:39,240 --> 00:26:40,360
Speaker 1: has a breakup fee.

453
00:26:40,600 --> 00:26:43,399
Speaker 3: There's a breakup fee. So this agreement has an end

454
00:26:43,480 --> 00:26:47,000
Speaker 3: date that I believe is in March. The way that

455
00:26:47,080 --> 00:26:51,000
Speaker 3: works is neither company can walk away yet without being

456
00:26:51,000 --> 00:26:55,159
Speaker 3: in breach of the agreement unless there's some legal impediment

457
00:26:55,240 --> 00:26:58,000
Speaker 3: to them closing as of that their end date. Now,

458
00:26:58,080 --> 00:27:00,160
Speaker 3: once an end date hits and they're not closed both

459
00:27:00,800 --> 00:27:02,880
Speaker 3: and usually they aren't closed by an end date because

460
00:27:02,920 --> 00:27:06,240
Speaker 3: there's still some legal impediment to closing at that point,

461
00:27:06,280 --> 00:27:08,960
Speaker 3: either side has the option to walk away. There is

462
00:27:08,960 --> 00:27:12,560
Speaker 3: a breakup bee. If this deal fails because anti trust

463
00:27:12,560 --> 00:27:15,440
Speaker 3: got in its way, then you hit that end date

464
00:27:15,480 --> 00:27:18,119
Speaker 3: and you still haven't gotten cleared. There tend to be

465
00:27:18,160 --> 00:27:20,879
Speaker 3: a couple different options. I mean, the companies can renegotiate

466
00:27:21,359 --> 00:27:24,600
Speaker 3: that's out there. They can extend that endate, they can

467
00:27:24,640 --> 00:27:29,160
Speaker 3: even renegotiate terms. But spirit also has the option as

468
00:27:29,200 --> 00:27:32,320
Speaker 3: avet endate of choosing not to renegotiate or extending it,

469
00:27:32,640 --> 00:27:34,320
Speaker 3: walking away and collecting.

470
00:27:33,880 --> 00:27:34,600
Speaker 6: Their breakup fee.

471
00:27:35,000 --> 00:27:38,080
Speaker 1: So if an airline could have a persecution complex, it

472
00:27:38,160 --> 00:27:41,840
Speaker 1: seems like jet Blue would have one. It's the second

473
00:27:41,840 --> 00:27:46,000
Speaker 1: time that antitrust enforcers have stepped into a Jet Blue deal.

474
00:27:46,480 --> 00:27:49,760
Speaker 1: Why is the government going after Jet Blue when it's

475
00:27:50,280 --> 00:27:53,320
Speaker 1: number six trying to compete with the four biggest airlines,

476
00:27:54,480 --> 00:27:55,040
Speaker 1: you know, I.

477
00:27:54,960 --> 00:27:58,440
Speaker 3: Think that it's the types of deals essentially that Jet

478
00:27:58,480 --> 00:28:02,440
Speaker 3: Blue has ended into. So you know, if you looked

479
00:28:02,440 --> 00:28:06,200
Speaker 3: at the deal with American, the partnership deal, it could

480
00:28:06,240 --> 00:28:09,200
Speaker 3: have been a different kind of partnership. Jet Blue does

481
00:28:09,240 --> 00:28:12,200
Speaker 3: have a partnership with Alaska Airlines out in the West

482
00:28:12,240 --> 00:28:15,480
Speaker 3: that had different sorts of terms, and I think that

483
00:28:15,520 --> 00:28:18,120
Speaker 3: the partnership in the Northeast went a little bit too far.

484
00:28:18,480 --> 00:28:22,240
Speaker 3: They were also collaborating on capacity, and they were collaborating

485
00:28:22,240 --> 00:28:26,040
Speaker 3: on revenue rather than just code sharing, and I think

486
00:28:26,080 --> 00:28:28,600
Speaker 3: that that was kind of what doomed that. I think

487
00:28:28,640 --> 00:28:30,879
Speaker 3: that if it had been a more limited partnership, it

488
00:28:30,920 --> 00:28:34,080
Speaker 3: may have had less opposition from the Department of Justice

489
00:28:34,200 --> 00:28:36,480
Speaker 3: and maybe you know, no lawsuit at all. So I

490
00:28:36,480 --> 00:28:39,200
Speaker 3: think that was one problem. And I also think it's

491
00:28:39,240 --> 00:28:42,720
Speaker 3: possible that there are other airlines that Jet Blue might

492
00:28:42,880 --> 00:28:46,440
Speaker 3: be able to acquire and with some divestitors clear through

493
00:28:46,440 --> 00:28:49,800
Speaker 3: the DOJ. But I think this one is particularly sensitive

494
00:28:50,200 --> 00:28:53,880
Speaker 3: for the agency because it does hit low consumer passengers.

495
00:28:54,240 --> 00:28:57,400
Speaker 1: So let's talk about the first witnesses who've testified.

496
00:28:57,560 --> 00:29:00,880
Speaker 3: Yeah, the Spirit CEO was the very first witness and

497
00:29:00,880 --> 00:29:04,760
Speaker 3: that's been most of trial so far, and another employee

498
00:29:04,760 --> 00:29:08,560
Speaker 3: of Spirit testified today. Primarily so far, we've heard from

499
00:29:08,560 --> 00:29:11,000
Speaker 3: the CEO, and it was a lot about Spirit and

500
00:29:11,040 --> 00:29:15,560
Speaker 3: Spirit's profitability, the negotiations with Frontier and the negotiations with

501
00:29:15,640 --> 00:29:18,160
Speaker 3: Jet Blue, and why they decided to go with Jet Blue,

502
00:29:18,440 --> 00:29:22,560
Speaker 3: and what was Spirit talking about when they themselves publicly

503
00:29:22,600 --> 00:29:25,520
Speaker 3: said that they thought there could be antitrust problems with

504
00:29:25,840 --> 00:29:28,560
Speaker 3: a Jet Blue Spirit combination and they were concerned about that.

505
00:29:28,880 --> 00:29:31,080
Speaker 1: Why did they say that in public.

506
00:29:32,360 --> 00:29:35,760
Speaker 3: Because at the time they were preferred the Frontier offer.

507
00:29:35,840 --> 00:29:37,880
Speaker 1: Because it's like I'm going to permit a crime.

508
00:29:37,960 --> 00:29:42,080
Speaker 3: Perhaps, Well, you know, according to them, they weren't really saying, hey,

509
00:29:42,120 --> 00:29:44,440
Speaker 3: this is an illegal deal. They were saying, we just

510
00:29:44,520 --> 00:29:48,520
Speaker 3: have some concerns about regulatory pushback, and we would need

511
00:29:48,600 --> 00:29:50,800
Speaker 3: Jet Blue. I mean, this is what they're saying now,

512
00:29:51,200 --> 00:29:53,360
Speaker 3: we would need Jet Blue to come up with a

513
00:29:53,400 --> 00:29:56,320
Speaker 3: better commitment to us about what they'd be willing to

514
00:29:56,360 --> 00:29:59,640
Speaker 3: do to resolve concerns of the DOJ a larger commitment

515
00:29:59,680 --> 00:30:02,120
Speaker 3: in term of what they'd be willing to divest. We

516
00:30:02,200 --> 00:30:04,680
Speaker 3: need a bigger breakup fee to protect us from risk,

517
00:30:04,720 --> 00:30:06,840
Speaker 3: et cetera. So they're kind of saying, well, look, it

518
00:30:06,880 --> 00:30:08,880
Speaker 3: was a bargaining chip in order to get some better

519
00:30:08,960 --> 00:30:10,240
Speaker 3: terms out of Jet Blue.

520
00:30:10,400 --> 00:30:14,200
Speaker 1: And they did propose divestitures, didn't they. But the federal

521
00:30:14,200 --> 00:30:17,040
Speaker 1: government didn't think they went far enough right.

522
00:30:17,080 --> 00:30:21,040
Speaker 3: They proposed our vestitures I think in Newark, LA, Guardia, Boston,

523
00:30:21,160 --> 00:30:24,960
Speaker 3: and Fort Lauderdale, and these are some really big airports

524
00:30:24,960 --> 00:30:28,320
Speaker 3: for Jet Blue and for Spirit, the Spirits focus airports

525
00:30:28,320 --> 00:30:32,920
Speaker 3: and Jet Blue's focus airports. The agency doesn't think it

526
00:30:32,960 --> 00:30:35,760
Speaker 3: goes far enough. They think that there are other problematic

527
00:30:36,320 --> 00:30:39,480
Speaker 3: airports and other problematic routes. And I think the agency

528
00:30:39,560 --> 00:30:43,280
Speaker 3: is also concerned about routes where the companies don't overlap

529
00:30:43,320 --> 00:30:46,520
Speaker 3: at all, routes that Spirit flies that Jet Blue doesn't fly,

530
00:30:46,880 --> 00:30:50,000
Speaker 3: because in those cases that's where Jet Blue would retrofit

531
00:30:50,040 --> 00:30:52,760
Speaker 3: those Spirit planes, turn them into the Jet Blue type

532
00:30:52,800 --> 00:30:56,720
Speaker 3: plane and the Jet Blue model, and theoretically, for those routes,

533
00:30:57,040 --> 00:30:59,480
Speaker 3: consumers would lose that ultra low priced option.

534
00:31:00,120 --> 00:31:04,160
Speaker 1: So jen is the only resolution of this, either to

535
00:31:04,200 --> 00:31:06,680
Speaker 1: stop the merger or allow it to go forward. Is

536
00:31:06,720 --> 00:31:09,760
Speaker 1: there any middle ground that the judge could order?

537
00:31:10,320 --> 00:31:12,280
Speaker 3: You know, I don't think so. I think at this

538
00:31:12,400 --> 00:31:16,560
Speaker 3: point more divestitures doesn't do the trick. I think that

539
00:31:16,640 --> 00:31:19,360
Speaker 3: this is basically either the judge is going to rule

540
00:31:19,880 --> 00:31:22,720
Speaker 3: against the airlines or it's going to rule for the airlines.

541
00:31:23,040 --> 00:31:25,040
Speaker 3: And if it rules for the airlines, they'll be able

542
00:31:25,080 --> 00:31:26,360
Speaker 3: to go ahead and close the deal.

543
00:31:27,160 --> 00:31:28,160
Speaker 6: If it rules.

544
00:31:27,880 --> 00:31:30,920
Speaker 3: Against the airlines, I think they'll probably appeal. But I

545
00:31:30,960 --> 00:31:34,959
Speaker 3: don't really think there's some other remedy or concessions they

546
00:31:34,960 --> 00:31:37,160
Speaker 3: could throw out there that would lead to some resolution

547
00:31:37,280 --> 00:31:37,920
Speaker 3: or a settlement.

548
00:31:38,680 --> 00:31:40,800
Speaker 1: And how long is the trial expected to last.

549
00:31:41,840 --> 00:31:44,520
Speaker 3: It's expected to be finished on December fifth. It's kind

550
00:31:44,520 --> 00:31:47,920
Speaker 3: of long actually for a Department of Justice or permanent

551
00:31:47,960 --> 00:31:51,440
Speaker 3: injunction merger trial. But it's not going consecutive days. There

552
00:31:51,440 --> 00:31:53,360
Speaker 3: are a couple days in there the judge has to skip.

553
00:31:53,560 --> 00:31:55,840
Speaker 3: He's only going up till one o'clock every day, and

554
00:31:55,840 --> 00:31:59,760
Speaker 3: then Thanksgivings in the middle there. So I think probably

555
00:32:00,160 --> 00:32:04,080
Speaker 3: going to get a ruling in January. Originally that I've said,

556
00:32:04,080 --> 00:32:06,440
Speaker 3: he's really going to try hard to rule in December,

557
00:32:06,480 --> 00:32:09,480
Speaker 3: but that was when the trial was supposed to start

558
00:32:09,560 --> 00:32:12,640
Speaker 3: much earlier in October. It got pushed back a few times,

559
00:32:12,720 --> 00:32:15,240
Speaker 3: so at this point I think probably January's likely.

560
00:32:15,840 --> 00:32:19,800
Speaker 1: Thanks so much, Jen, Enjoy Boston. That's Bloomberg Intelligence Senior

561
00:32:19,800 --> 00:32:23,600
Speaker 1: Litigation analyst Jenniferree. For more of Jen's analysis, you can

562
00:32:23,640 --> 00:32:26,920
Speaker 1: go to Bigo on the Bloomberg terminal. And that's it

563
00:32:27,000 --> 00:32:29,560
Speaker 1: for this edition of The Bloomberg Law Show. Remember you

564
00:32:29,600 --> 00:32:32,040
Speaker 1: can always get the latest legal news on our Bloomberg

565
00:32:32,160 --> 00:32:35,760
Speaker 1: Law Podcast. You can find them on Apple Podcasts, Spotify,

566
00:32:35,960 --> 00:32:41,000
Speaker 1: and at www dot Bloomberg dot com, slash podcast Slash Law,

567
00:32:41,400 --> 00:32:44,000
Speaker 1: and remember to tune into The Bloomberg Law Show every

568
00:32:44,040 --> 00:32:47,920
Speaker 1: weeknight at ten pm Wall Street Time. I'm June Grosso,

569
00:32:48,080 --> 00:32:49,680
Speaker 1: and you're listening to Bloomberg