Like a country with no ocean, intellectual property rights without the protections afforded by the federal government are acknowledged but not respected. There are a plethora of issues a cannabis business faces when filing for a federal trademark, all of which diminish brand value and the possible remedies federal registration provides.
The authority of the USPTO lies in Article 1, Section 8 of the Constitution, “the Congress shall have power… To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”
In 1946, Congress passed the Lanham Act, also known as the Trademark Act of 1946, which governs federal trademark law including the registration, maintenance, and protection of trademarks. To acquire a federal trademark an applicant must prove that its mark is both distinctive and used in interstate commerce. Trademarks include words, names, symbols, colors, sounds, and smells that help a brand differentiate and distinguish its products or services to consumers.
A federally registered trademark provides its owner with a number of protective benefits including: constructive notice to the public of the registrant's claim to the mark and a presumption of ownership; a presumption of the registrant's exclusive right to use the mark nationwide in connection with the goods or services specified in the registration; the ability to use the US registration as a basis for priority registration in other jurisdictions; and the ability to record the US registration with the US Customs Service to prevent importation of infringing goods. These protections form the bedrock that a brand requires to establish its presence on a national and international level.
Trademarking Cannabis at the Federal Level
Between 1993 and 2013, 503 cannabis related trademark applications were filed with the USPTO. In just the past two years, the USPTO received 748 cannabis related trademark applications. Obviously this influx is directly attributable to the recent legalization of adult recreational cannabis use in Colorado, Oregon, Washington, and Alaska, and the potential and probable legalization in California and a number of other states.
In April 2010, the USPTO created a new trademark category for processed plant matter for medicinal purposes, namely medical marijuana. However, the USPTO quickly reversed course after just three months, calling the category a mistake. During the brief life of the newly established class, no cannabis trademarks were granted by the USPTO. In the years since, the USPTO has clarified its position on cannabis trademarks, and has denied any applicant whose product or service directly touches the plant. Section 907 of the USPTO Trademark Manual of Examining Procedure (TMEP) states that:
In order for an application to have a valid basis that could properly result in a registration, the use of the mark has to be lawful, i.e., the sale or shipment of the product under the mark has to comply with all applicable laws and regulations. If this test is not met, the use of the mark fails to create any rights that can be recognized by a federal registration.
In 2011 the USPTO updated TMEP to directly address registering a cannabis mark, and the discord between federal and state law:
Evidence indicating that the identified goods or services involve the sale or transportation of a controlled substance or drug paraphernalia in violation of the CSA would be a basis for issuing an inquiry or refusal… regardless of state law, marijuana and its psychoactive component, THC, remain Schedule I controlled substances under federal law and are subject to the CSA's prohibitions.
The position of the USPTO is clear. Cannabis is a Schedule I controlled substance, Schedule I controlled substances are illegal under the CSA, no trademarks will be issued for products or services that violate the CSA. This hardline position of the USPTO has pushed cannabis businesses (and their attorneys) to think and act creatively. Like many burgeoning industries that operate in the grey between legal and illegal, cannabis businesses have turned to alternative methods to protect and grow their brands.
Trademarking Ancillary Products
A workaround for cannabis companies looking to achieve federal trademark protection is to register ancillary products with their desired mark. One thing to keep in mind is use in commerce means, “the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.” This means that a cannabis company cannot register a trademark for a product or service that they do not intend to use in commerce. Another issue lies in how an examining attorney would treat a cannabis company’s ancillary product. If the examine attorney finds that the non-cannabis product may potentially violate the CSA, she may issue an inquiry or denial, in accordance with the TMEP.
Despite all of these hurdles, the benefits of a federally registered trademark may outweigh the negatives. The holder of the mark would be entitled to use the registered trademark symbol, cite the registration in demand letters, and rely on the registration protections in an infringement action.
At the state level trademarks are protected by common law unfair competition principles as well as state trademark statutes. Registration of a state trademark allows its owner to file claims for trademark violations under the state trademark statute, and puts an official date on a trademark registration. Currently, Washington, Colorado, Oregon, Nevada, and Arizona all allow trademark registration for cannabis and cannabis related products. However, California’s trademark statute closely mirrors the Lanham Act. This means that California cannabis businesses will be denied trademark registration if their products or services directly touch the plant.
On a positive note for California cannabis businesses, registration is not a condition for owning a protectable trademark. Also, business names and fictitious business names may be protectable as a trademark by filing formation documents with the state, “which creates a rebuttable presumption that an entity has the exclusive right to use the trade name filed, as well as a confusingly similar name.”
Licensing cannabis products allows companies that have established a reputation in their home state to build upon their brand and goodwill by offering their products in other cannabis friendly jurisdictions. However, because cannabis and cannabis products cannot be legally moved across state lines, this is easier said than done. To complicate the matter further, each state has limiting residency requirements which may prohibit out of state individuals and entities from investing or operating in the cannabis trade.
Cannabis businesses have utilized a number of different methods to ensure uniform production and packaging, and to provide consumers with consistent products such as: establishing a management company that provides equipment, non-cannabis supplies, and training to licensees, in exchange for a royalty on each product sold; selling branded packaging; and supplying all of the non-cannabis ingredients to a licensee.
Opportunities in California under MCRSA
On October 9, 2015, California Gov. Jerry Brown signed into law the Medical Marijuana Regulation and Safety Act (MCRSA). The MCRSA comprised of three bills (Assembly Bill 243, Assembly Bill 266, and Senate Bill 643) is intended to provide “comprehensive regulatory framework for the production, transportation, and sale of medical marijuana.” While the MCRSA only applies to medical marijuana, it is widely anticipated that these regulations will serve as the foundation for legalized recreational adult use by 2018.
There are intellectual property implications that come along with the passing of MCRSA. Assembly Bill (AB) 266 prohibits cannabis packages and labels from being attractive to children. This will directly impact a cannabis companies brand strategy by limiting its ability to use colors and images that may be deemed too alluring to minors. There is also potential that cannabis packaging will be treated similar to cigarette packaging in Australia and some European countries, where branding is limited to nondescript type at the bottom of a cigarette package.
MCRSA calls for the creation of a certified organic cannabis designation and organic cannabis certification program. Organic certification is governed by the National Organic Program (NOP), a regulatory program housed within the USDA. According to the USDA, “NOP-accredited certifying agents may not certify the domestic production of industrial hemp [or marijuana].” This means that until cannabis is rescheduled, cannabis businesses will not be able to obtain a USDA organic certification.
MCRSA also allows for the establishment of cannabis appellations. Appellations are legal defined geographic locations used to identify where a particular food product is grown (i.e., Napa Valley for wine). Under MCRSA, it is unlawful to label, market, or package cannabis claiming it was grown in a particular appellation, when it was not. In a non-Schedule I world, a cannabis appellation group would have the potential to apply for a certification mark with the USPTO. A certification mark certifies that goods or services originate in a specific geographic region. However, as with trademarks, the USPTO will not register a certification mark that violates the CSA.
Cannabis companies that provide products and services that do not directly touch the plant are able to register federal trademarks. For example Leafly (a website that provides its visitors with cannabis recommendations, dispensary locations, and cannabis related events), and Weedmaps (a website that finds local dispensaries, delivery services, and doctors’ offices) were both granted federal trademarks.