Trademark Challenges Impact the Marijuana Industry
by George H. Pike
How times have changed. I recently discovered that my hometown has one of the largest “legal” marijuana dispensaries in the country. Marijuana has been “legal” for medicinal use in most of the U.S. for as long as the last 20 years. Recreational use of marijuana has been “legal” in a small, but growing, number of states since first being “legalized” in Washington and Colorado in 2012. My current state of Illinois has “legalized” recreational marijuana use, starting on Jan 1.
| The problem in the marijuana industry is that federal trademark protection is not available for goods or services that cannot be lawfully used as defined by federal law.
The quotes around “legal” and “legalized” in the previous paragraph (which I’ll stop doing now) indicate that while many states have legalized marijuana for either medicinal or recreational use, marijuana remains illegal under federal law. The Controlled Substances Act (Title 21, Section 812 of the U.S. Code) classifies marijuana as a Schedule I controlled substance, meaning that according to the federal government, the drug has a high potential for abuse and no currently acceptable medical use.
Hemp and its use, however, are exempt and legal. The difference between hemp and marijuana is in the variety of the cannabis plant and the amount of THC (the psychoactive component of marijuana) the plant contains. Hemp must contain less than 0.3% of THC, whereas marijuana strains can vary dramatically from 1% THC up to as much as 32%.
The combination of state legality with federal illegality, along with the development of “designer” strains of marijuana with varying THC percentages, have created some challenges for protecting trademarks and other intellectual property (IP) rights for those in the legal marijuana industry. The marijuana industry is increasingly robust, with national and global company involvement, venture capital and stock market funding, and needs for brand identification and marketing. It has the same IP protection needs and challenges as any other industry, but is hampered by the scattered legal landscape that it operates in.
COMMON LAW TRADEMARKS
In broad terms, there are three ways in which a company can obtain legal protection for its branding and trademarks. The most traditional has been through a common law trademark. These marks—the concept of which dates back centuries—are a reflection of a consumer’s connection between a manufacturer and its particular product. They are an outgrowth of consumer protection law, which provides that once a consumer connects a particular product with its manufacturer, it is an unfair business practice for another to take that connection or confuse the consumer. Common law marks exist once the marketplace makes that connection, but until that happens, they are vulnerable.
Better protection exists with state trademark registration, although the protection is only available within the state’s jurisdiction. The best form of trademark protection occurs at the federal level, in which a mark is registered with the United States Patent and Trademark Office (USPTO). Federal registration provides a legal presumption of ownership, ensures nationwide protection, establishes a firm date of trademark application when compared with competing uses, and provides a legal foundation when pursuing competing and confusing marks.
The problem in the marijuana industry is that federal trademark protection is not available for goods or services that cannot be lawfully used as defined by federal law (Title 15, Chapter 22 of the U.S. Code). Since marijuana remains an illegal substance under federal law, marijuana products cannot be lawfully used. Because of this, the USPTO refuses to accept registration for any product or service related to marijuana, including company or dispensary names, marijuana strains, extracts and preparations such as liquids or edibles, equipment used for dispensing or consuming marijuana, and similar products and services.
The “lawful use” requirement has a broader reach than just being applied to marijuana. Certainly, any other registrations related to illegal drugs would be declined. Federal trademark registrations have been denied for chemicals, pesticides, and other products that require federal registration before use; drug and cosmetic products that don’t meet federal food and drug labeling requirements; and some trademarks that attempt to use federally restricted terms and labels—a surprisingly long list that includes “Central Intelligence Agency” and “Smokey Bear.”
An exemption was recently carved out for the growing CBD industry. CBD, or cannabidiol, is another extract from cannabis plants that contains less than 0.3% of the “high”-producing THC. In 2018, Congress exempted CBD extracted from hemp plants from the Controlled Substances Act, provided that the CBD contains less than 0.3% THC. CBD and CBD oils have been used in a wide range of products—oils and lotions, liquids and edibles, and bath salts and beauty products, among others.
There is continuing research on the medicinal value of CBD, including in the treatment of pain and anxiety. However, the FDA has only formally approved one CBD-based drug. Because of this, trademark registrations for specific CBD products that advocate a health benefit may be refused, as they would need FDA approval in order to be lawful.
STATE TRADEMARK REGISTRATION
The marijuana and CBD industries can still use common law trademark principals and state registration to protect their brands. State registration may be effective for local dispensaries to obtain limited protection for their store names and major product lines. This would provide some security against local competition.
Common law trademarks protect the association of a particular product with its specific supplier or manufacturer. Growers, distributors, and dispensaries often use clever and catchy names for their particular strains of marijuana or product lines, and as those names become connected with those suppliers, common law trademark protection against unfair competition and trade practices may serve to prevent other suppliers from using the same marks.
A BAD TRIP?
Common law trademarks cut both ways, however. As part of my research for this column, I went to the website of the large dispensary in my hometown and took a look at its menu. (Some days I do have a pretty fun job!) I noted that it has “budtenders” rather than bartenders and a 20-page menu of THC and CBD products. However, among the names of its various cannabis strains, I noted several famous brands, including that of a ’70s rock band, a current television show, a brand of condiment, and a famous cookie company. While those names are clever and catchy as applied to marijuana, to the extent that they violate existing brands and trademarks, that could end up being a really bad trip.