By a vote of 2-1, the agency's Trademark Trial and Appeal Board sided with five Native Americans in a dispute that has been working its way through legal channels for more than two decades.
The ruling doesn't directly force the team to abandon the name, but it adds momentum to the campaign at a time of increasing criticism of Redskins owner Dan Snyder from political, religious and sports figures who say it's time for a change.
"If the most basic sense of morality, decency and civility has not yet convinced the Washington team and the NFL to stop using this hateful slur, then hopefully today's patent ruling will, if only because it imperils the ability of the team's billionaire owner to keep profiting off the denigration and dehumanization of Native Americans," Oneida Indian representative Ray Halbritter and National Congress of American Indians Executive Director Jackie Pata, two of the leading forces in the campaign to change the name, said in a statement.
The Redskins quickly announced they will appeal, and the team's name will continue to have trademark protection while the matter makes its way through the courts — a process that could take years.
A similar ruling by the board in 1999 was overturned on a technicality in 2003.
"We've seen this story before," Redskins attorney Bob Raskopf said. "And just like last time, today's ruling will have no effect at all on the team's ownership of and right to use the Redskins name and logo. We are confident we will prevail once again."
Snyder and others associated with the team have long argued that the Redskins name is used with respect and honour and is a source of pride among many American Indians.
The ruling involves six uses of the Redskins name trademarked by the team from 1967 to 1990. It does not apply to the team's American Indian head logo.
If it stands, the team will still be free to use the name but will lose a lot of its ability to protect its financial interests. It will be more difficult for the team to go after others who print the Redskins name on sweatshirts, jerseys or other gear without permission.
"Joe in Peoria is going to have a pretty good argument that he could put the 'Redskins' name on some T-shirt," said Brad Newberg, a copyright law expert in Virginia.
Newberg estimated that the ruling, if upheld, could cost the team tens of millions of dollars per year. Forbes magazine puts the value of the Redskins franchise at $1.7 billion and says $145 million of that is attributable to the team's brand.
The board exercised its authority under a section of the Trademark Act of 1946 that disallows trademarks that may disparage others or bring them into contempt or disrepute. Over the years, the courts have rejected arguments that the First Amendment guarantees the right to register any name as a trademark.
In reaching its decision, the board drew on the testimony of three experts in linguistics and lexicography and combed through old dictionaries, books, newspapers, magazines and even vintage movie quotes to examine the history of "redskin," looking specifically at whether it was considered disparaging at the time the trademarks were issued.
The board concluded that today's dictionaries "uniformly label the term 'offensive' or 'disparaging'" — a change that took place between the late 1960s and the 1990s — and that its derogatory nature is further demonstrated by "the near complete drop-off in usage of 'redskins'" as a term for Native Americans beginning in the 1960s.
Also, the board said a "substantial" number of Native Americans — at least about 30 per cent — have found the team's use of the term to be offensive.
The ruling follows decisions earlier this year that rejected trademark requests for "Redskins Hog Rinds" and "Washington Redskin Potatoes."
Courts overturned the board's 1999 ruling in part because the plaintiffs waited too long to voice their objections after the original trademarks were issued. The case was relaunched in 2006 by a younger group of Native Americans who only recently became adults and would not have been able to file a case earlier.
The chorus of critics against the use of the name has grown over the past year.
President Barack Obama himself said last year that he would think about changing the name if he owned the team.
On Saturday, a major sector of the United Church of Christ voted to urge its 40,000 members to boycott the Redskins. On Capitol Hill, half the Senate recently wrote letters to the NFL urging a change because "racism and bigotry have no place in professional sports."
Washington Mayor Vincent Gray suggested Wednesday that the name will almost certainly have to change if the team ever wants to build a new stadium in the city.
Snyder, who has vowed repeatedly never to abandon the name, declined to comment as he walked off the field after a practice Wednesday.
Redskins players have mostly avoided the topic.
"Our job as players is to focus on what we can on this field day-in and day-out and let the legal people take care of that stuff," quarterback Robert Griffin III said. "And when it's the right time, then we can voice whatever it is we know about the situation."
The Redskins have responded to critics by creating a foundation to give financial support to Indian tribes. Suzan Shown Harjo, a leading figure in the trademark case, called the foundation "somewhere between a PR assault and bribery."
Supporters of a name change hailed the decision.
"Daniel Snyder may be the last person in the world to realize this," Senate Majority Leader Harry Reid said on the Senate floor, "but it is just a matter of time until he is forced to do the right thing."
AP National Writer Eddie Pells in Denver and Associated Press writer Sam Hananel contributed to this report.
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