Karen Bush, a lawyer for the Office gave three reasons for the denial: laws barring the creation of "scandalous" trademarks, prohibitions against "false associations," and the lack of consent from either Sen. Barack Obama and Osama Bin Laden to use their names. A copy of the rejection letter can be found here. [Courtesy of The Smoking Gun].
Mr. Batlle has said that the denial of the trademark will not deter him, and that he will forge forward (sans trademark) in producing T-shirts, mugs, and various other forms of knick knacks and kitsch with this cheeky image emblazoned on them.

Mr. Batlle's website is here.
Hat-tip to New York Times, their article is here.
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