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The Constitutionality of the Trump Organization’s Illegal (?) Chinese Trademark

by Andy Grewal — Tuesday, Feb. 21, 2017

Over the past week, several sources reported that the Trump Organization finally won its long-running battle to obtain a Chinese trademark. See, e.g., CNN (Feb. 17, 2017). A “squatter” had previously registered the trademark, which related to the use of the Trump name in construction-related businesses. But after years of litigation and administrative petitions, the Chinese government, on Sept. 6, 2016, voided the squatter’s trademark and on Nov. 13, 2016, the Trump Organization’s trademark became effective. The Chinese government’s trademark decision could have been disputed until Feb. 14, 2017, but that date passed without any further controversies.

Senator Feinstein and others have argued that the grant of the trademark to the Trump Organization may violate the Foreign Emoluments Clause. For all the reasons I’ve discussed at length elsewhere,* the grant of the trademark would not qualify as an “emolument” within the meaning of that clause, unless the grant of the trademark to a Trump Organization entity were treated as compensation to President Trump in exchange for services personally provided by him to the Chinese government.

There are no facts suggesting that the Chinese government has hired President Trump as an officer, employee, or consultant. Thus, no prohibited emolument arises through the grant of the trademark.** Under similar reasoning, former President Obama’s receipt and enjoyment of book copyrights from 20+ foreign countries did not create impeachable offenses, even though he profited from those foreign copyrights through worldwide book sales during his time in office.

But the discussion of the Trump Organization’s trademark in China has raised another potential constitutional issue, aside from the definition of emoluments. The Foreign Emoluments Clause prohibits not only the acceptance of emoluments from foreign governments, but also the acceptance of “presents” (gifts). Was the awarding of the trademarks to the Trump Organization a gift to President Trump?

Usually, we don’t think of intangible government benefits as gifts. Rather, they are potentially revocable privileges. For example, one does not receive a “gift” when she gets a driver’s license from the DMV. But if an intangible government benefit were provided on special terms to a person, it seems fair to dig further into the facts, to see whether the granting of the benefit was a gift. That is, though it may be awkward to treat an intangible government benefit as a gift, that treatment does not seem legally foreclosed. (Comments on this difficult issue would be most welcome.)

A ThinkProgress article argues that China violated its own law in granting Trump’s trademark, and that this illegal behavior establishes “gift” treatment. But I’m hesitant to accept the illegality claim for several reasons. First and foremost, I know absolutely nothing about Chinese law and have no idea whether the grant of the trademark was legal or illegal. 

Second, if we think about this issue from a U.S. perspective, we often say that a judicial decision or an agency’s action is “wrong” when we believe, for example, that a statute was misconstrued of overlooked. But claims that a case should have come out the other way have no legal effect. Government actors declare whether something is illegal, not commentators or (sadly) law professors. See also CNN (Feb. 17, 2017) (noting the Chinese government’s position that the Trump case “was handled in compliance with China’s trademark law”).

Third, and along similar lines, even if a commentator offered a better legal analysis of Chinese law than the one employed by the Chinese government in granting the trademark, I’m highly skeptical that a U.S. court would credit that analysis or engage in a de novo examination of Chinese law. Rather, whether because of comity principles, the Act of State doctrine, or analogous concepts, a U.S. court would likely treat the Chinese government’s award of a trademark as made in accordance with Chinese law. 

But for sake of analysis, let’s assume that Chinese law was broken in granting the Trump Organization a trademark. How would that affect the analysis? Perhaps counterintuitively, the illegality of a gift could make the Foreign Emoluments Clause less likely to apply.

Suppose, for example, that under the laws of China, a government official could properly transfer an item of jewelry to a U.S. Officer on behalf of the Chinese government, and that a government official does so. In these circumstances, we would likely find that a gift had been made under the Foreign Emoluments Clause. Under these posited facts, the U.S. Officer would have received a valuable piece of property, which was his to keep, without providing any consideration. That fits neatly into the common-law definition of a gift, which probably governs analysis under the Foreign Emoluments Clause.

But suppose that the Chinese government official acted illegally. Perhaps the official stole the jewelry from the government and presented the item to the U.S. Officer. Or perhaps Chinese law prohibited the making of gifts, but the official herself purchased and made a gift to the U.S. Officer.

In these circumstances, the Foreign Emoluments Clause probably wouldn’t apply. That clause applies to receipts from a “King, Prince, or foreign State” (i.e., a foreign government). It does not apply to receipts from a rogue official, who does not act on behalf of the government. For U.S. Constitutional purposes, we should probably turn away from the Foreign Emoluments Clause and instead determine whether a bribe had been made, as would be the case if the jewelry were transferred in exchange for the U.S. Officer agreeing to perform some corrupt act.***  

Though this approach makes sense for a transfer of a physical object from a foreign government official to U.S. Officer, things become trickier when it comes to trademarks or other intangible government benefits. Unlike an item of jewelry, the benefits of a trademark, including the right to sue others for infringement, are something that only a government can provide. To assert one’s rights under a trademark, one must necessarily invoke the legal infrastructure of a government — a single rogue government official cannot guarantee that no one will infringe trademark rights. (Let’s ignore Tony Soprano-style behavior.)

With that in mind, we seem stuck back at square one. We can’t call the award of a trademark an emolument, unless President Trump acts as an officer, employee, or consultant for China. We can try to call it a gift, but then we run into awkward issues relating to whether an intangible government benefit can qualify as a gift. We might then focus on bribery questions between President Trump and a single Chinese official, but these questions are most naturally examined when dealing with transfers of physical objects, not transfers of intangible government benefits, which an individual rogue official has no authority to bestow.

Where does that leave us? The above analysis tells us that the focus should be on whether Trump performs some corrupt act for the Chinese government in recognition of the trademark. In other words, if Constitutional problems arise from the trademark granted to the Trump Organization, the key issue relates to impeachable bribes, not to the Foreign Emoluments Clause. The alleged illegality of the trademark may be a red herring, given that U.S. courts would likely treat the grant of the trademark as legal. Consequently, we should focus on Trump’s actual course of conduct. Congress can and should investigate if it believes that President Trump has offered special favors in recognition of a granted trademark, just as it should have investigated President Obama had he (contrary to available facts) provided special treatment to the foreign countries that bought substantial quantities of his books.

Footnotes:

*For full legal analysis, see The Foreign Emoluments Clause and the Chief Executive. For shorter discussions, see this post (relating to some general principles on “emoluments”), this post (relating to some absurd consequences of an excessively broad interpretation of emoluments), and this post (relating to the presence of business entities in constitutional analysis).

**Without digging into Chinese and U.S. law, I’m unsure whether the trademark should be considered to have been granted in 2016, prior to Trump becoming the President, or after Inauguration Day, in February 2017, when Trump would arguably become subject to the Foreign Emoluments Clause. But regardless, the date of the grant is somewhat of a red herring. Under the view advanced, without analysis of relevant authorities, by some commentators, the Foreign Emoluments Clause reaches all benefits provided by foreign governments to a U.S. Officer. And intellectual property rights (most commonly, the rights to sue others for infringement) reflect benefits provided for the period over which the intellectual property right is granted, and are not rights existing solely on the date of the grant of a trademark, copyright, or patent. So, whether or not a trademark was granted to President Trump before or after he took office, the relevant focus, under a broad reading of “emolument,” is on any benefit, including his right to bring infringement suits during the term of his Presidency, even if that benefit began to accrue prior to Inauguration Day.

***If the foreign government official were, say, the U.S. Officer’s sibling, then the transfer of the jewelry would likely be a constitutionally harmless gift, though there are no direct authorities on transfers between foreign officials and U.S. Officers in their personal capacities.

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About Andy Grewal

Law Professor, University of Iowa

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