It did so by first clarifying that the statute is being interpreted narrowly, in an effort to preserve its constitutionality. As construed, it applies only to statements made knowing that the statement is false with an intent to deceive, and only to statements that are actually meant to be actual statements of factual matter as opposed to statements not calculated to be taken literally such as "satirical, rhetorical, theatrical, literary, ironic, or hyperbolic statements." Thus, as interpreted by the 10th Circuit, "only outright lies—not ideas, opinions, artistic statements, or unwitting misstatements of fact—are punishable under the Act." But the Stolen Valor Act removes the requirement found in fraud or defamation statutes that have been previously upheld as constitutional in the face of First Amendment challenges that "the lie induced reliance or caused discrete harm."
The 10th Circuit reasoned that there is no general constitutional protection for knowingly made false statements of fact under the First Amendment, even though there are some instances where such statements are insulated from liability because they would have the effect of chilling some other form of protected speech. But, given their construction of the statute, the 10th Circuit concluded that this particular subset of knowingly false statements of fact made with an intent to deceive about their factual truth related to the military decorations that one has received does not chill legitimate protected speech and by its narrow content scope implicitly excluudes all sorts of false statements that would involve only immaterial statements of fact.
The 10th Circuit notes, quoting the brief of a law professor who blogs at a site in the sidebar:
Since New York Times, Garrison, and Gertz, courts have
extended the “false statements of fact” exception to cover many categories of false-speech statutes, including laws punishing fraud, false-light invasion of privacy, intentional infliction of emotional distress through false statements, trade libel, perjury, unsworn false statements of fact made to governmental officials, impersonation of a governmental official, false claims regarding university degrees and professional licenses, falsehoods in connection with political campaigns, falsehoods likely to provoke public panic, and falsehoods that are likely to lead to physical harm. See Brief for Eugene Volokh & James Weinstein Amici Curiae Supporting Petitioner at 3–11, United States v. Alvarez, No. 11-210 (U.S. Dec. 7, 2011); Brief for Eugene Volokh Amicus Curiae Supporting Plaintiff at 1, United States v. Strandlof, No. 09-cr-00497 (D. Colo. Jan. 15, 2010).
An even better set of constitutional laws to which the Stolen Valor Act is analogous, are those criminalizing certain kinds of trademark and servicemark violations. Military honors and decorations are essentially trademarks that designate the quality of a soldier just as a servicemark can be used to distinguish the quality of a particular individual's personal services, that belongs to the United States government. And, there is no good reason why it should be possible to sanction someone criminally for falsely using a private servicemark without an individualized showing of reliance or harm, but it should not be possible to do the same thing when the servicemark is granted by the U.S. government (the laws criminalizing claims that one has degrees that one does not have are also quite analogous in this regard when a state university is involved). The argument that the United States government has something in the nature of an intellectual property right in decorations and honors that it issues is a natural and reasonable one.
Coming close to this analysis, the 10th Circuit notes the line of cases establishing that "Congress has made it a crime to falsely purport to speak on behalf of the government" and that Congress has taken "steps to protect the intellectual property associated with medal designs[.]"
The 10th Circuit three judge panel ruling was made with one judge dissenting. The dissenting judge argued that an injury must exist to criminalize false statements of fact and unlike the majority (which also did not believe that injury was a constitutional requirement, citing many counterexamples) did not feel that this could be established on a generalized basis for this class of statements as the majority.
In my view, the 10th Circuit in this case has it exactly right on the merits, making a subtle, but easy to apply in practice rule that is not prone to slippery slope constructions that would erode free speech rights. Indeed, I wouldn't be at all surprised to see the U.S. Supreme Court affirm the 10th Circuit in this very case and use this case to overrule contrary federal court authority.
The 10th Circuit ruling creates a circuit split between it and the 9th Circuit, with several other cases going both ways in the appellate pipeline in other circuits. The final word will almost surely come from the U.S. Supreme Court sooner or later. And, the very clean facts of the underlying offense and careful reasoning of the 10th Circuit in its opinion in this particular case make it an attractive one for a U.S. Supreme Court interested in affirming that 10th Circuit position that the Stolen Valor Act is constitutional and quite possibly doing so in a unanimous ruling.