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August 20, 2018

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Protecting Cannabis Brands (April 20th Edition)

April 21, 2018


Even with cannabis being legalized in some form in 29 states and in Washington D.C., cannabis businesses continue to face challenges that impede their ability to grow and operate like their more traditional counterparts. Federal illegality limits many of the tools and resources available to cannabusinesses that are often taken for granted by other commercial operators. Specifically, the federal government's current stance on cannabis obstructs conventional approaches to building and protecting company brands. As a result, operators in the cannabis industry must think strategically and out-of-the-box to protect their brands while they build goodwill and recognition among consumers.



The Current State of Cannabis Marks


No Federal Trademark Registration For Cannabis


Federal trademark registration - registration with the United States Patent and Trademark Office (USPTO) - benefits registrants in several ways. Perhaps most importantly is that registration creates a presumption that a registrant has rights in a mark across the nation. This allows registrants to enforce their rights and to prevent counterfeit products and copycat businesses from arising across the country.


Unfortunately, to be granted federal registration, you must be using your mark in "interstate commerce." The kicker for cannabis businesses is that "interstate commerce" has been determined to mean legal interstate commerce, and because cannabis is a Schedule 1 drug, selling or transporting cannabis and cannabis products is federally illegal. This means that many cannabis businesses cannot register their marks due to their inability to meet the interstate commerce requirement.


Many companies have tried to slip past USPTO examiners by substituting terms like "cannabis" and "marijuana" with less offensive terms, such as "herb" or "plant matter."  Some applicants were initially successful with this approach, but the USPTO has since become wise to this strategy and it is no longer a viable approach.



Limited State Trademark Protection


Many traditional companies that cannot meet the requirements for federal registration turn to state registration instead. Applying and registering a mark in a particular state produces a presumption of rights in the registered mark much like a federal registration, however, the presumption only exists within the borders of the state in which the mark is registered.


California, for example, allows the registration of cannabis marks as long as:



(1) the mark is lawfully in use in commerce within California; and


(2) The specification matches the classification of goods and services adopted by the United States Patent and Trademark Office.



Lawful use in California requires an operator to first be properly licensed to operate - many cities and counties are still in the midst of the licensing process, so many businesses are not yet eligible for trademark protection. Additionally, it is still to be determined whether cannabis-containing products (opposed to ancillary products such as pipes or vaporizers) fit neatly enough within USPTO classifications to be eligible for state protection.


Thus, even in the most progressive states, trademark protection can be an issue.



What Can We Do To Protect Cannabis Brands?


Common Law Trademark Rights


Absent the ability to qualify for federal or state registration, mark users must fall back on alternative principles to protect their marks. It is possible, through the continued use of a mark and by creating brand recognition among consumers, for a business to earn rights to their marks. However, these "common law" rights do have their limitations.


As with registered marks, protection is limited to the type of goods or services associated with the mark, so companies may be able to use identical marks as long as their goods or services differ enough to consumers are not likely to confuse one of the companies with the other. Additionally, common law rights only exist in the geographic areas where a mark is recognizable to consumers. So, if a company's mark is only recognizable to consumers in Los Angeles, for example, a different company may be free to use the same mark anywhere outside the borders of LA.


As a result, the best thing for a cannabis company to do is to find ways to find ways to make it less likely that other companies will use their marks.



Registration for Ancillary Service Providers and Ancillary Products


Just because your company benefits from the cannabis industry doesn't mean you cannot protect your brand. Ancillary service providers that do not deal directly with the cannabis plant, such as lawyers and consultants, may still meet the legal interstate commerce requirement for federal registration. Likewise, if your company sells products that are related to cannabis but do not contain cannabis, such as rolling papers or tee shirts, you may still be able to obtain trademark protection in regards to those products.


If your company provides ancillary goods or services then, by all means, consider moving forward with your registrations. For companies dealing directly with cannabis products that also provide ancillary goods or services, you may be able to register your marks in those ancillary categories. Competitors may be deterred from using your mark for cannabis products outside the scope of your common law protection if they are limited in their ability to sell the same ancillary goods or provide the same ancillary services.



Product Control and Smart Contracting


As you build your brand and reputation, consumers will want to know they are getting the real deal. Unfortunately, in the world of cannabis, it is easy (and even common) for retailers to mislabel cannabis products with company and strain names that help to sell the products. To prevent your reputation from being diminished by consumers using lower-quality products bearing your mark, there are a few measures that you can take.


If you are a grower, place limitations on how purchasers can use your products. Ensure that your strains are not reproduced by others using contracts and, if possible, by only selling cannabis that cannot be replicated.  For growers and manufacturers, vet your retailers before conducting business to ensure they are reputable and trustworthy. Provide your selected retailers with some means of proving that they are legitimately selling your product, such as a token or certificate. And finally, provide consumers with a list of the retail locations carrying your product, either by posting the list of retailers online or otherwise.


The world's view of cannabis is changing rapidly. It may not be long before all of this information becomes irrelevant and cannabis businesses are afforded the same trademark protections as any other business. In the meantime, stay optimistic and be prepared for laws to continue to evolve. When trademark registration does open up, you'll want to be the first in line with your application.

 About the Author: 


David "Tyler" Bennett is a business and intellectual property attorney, and he is a partner at Verhagen | Bennett LLP.  To learn more about David, please click here.


For questions or comments about this post, please email David directly at: David@VerhagenBennett.com


To make suggestions about future posts, please email: Info@VerhagenBennett.com






© 2018 David T. Bennett — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.