The Current State of Trademarks in the Cannabis Industry; And Where Developments May Arise in the Year Ahead

| Dec 21, 2020 | Intellectual Property

The legal landscape for cannabis businesses continues to evolve and is oftentimes highly ambiguous or even contradictory in practice. This is especially true for trademarks, which are largely governed by federal law. Cannabis remains “illegal” on the federal level despite various state laws legalizing its cultivation, sale, and use. That being said, our firm has worked with cannabis clients over the years both in trademark prosecution and litigation. While many limitations still exist, this area of practice is ever-changing, and we can expect more big developments in 2021.

1. Registration

Broadly speaking, cannabis products cannot achieve a federal trademark registration. This is because trademarks must be for lawful use in commerce and marijuana remains unlawful on a federal level as governed by the Controlled Substance Act (CSA). So, what is “lawful” and how can cannabis brands try and protect their trademarks?

a. CBD

In 2018, the Farm Bill was signed into law. As such, hemp and its derivatives, like CBD derived from hemp, that contain no more than 0.3% THC on a dry-weight basis, are no longer controlled substances under the CSA. In other words, CBD products (with very low amounts of THC) have been given an opportunity to achieve federal registration. Confusingly, trademark registrations for marijuana and marijuana by-products, including CBD derived from marijuana, are still unavailable. This means that if your cannabis-related products contain more than 0.3% of THC registration will be refused even if the primary focus of such products is to offer CBD.

Furthermore, even though the Farm Bill has helped hemp-derived CBD products achieve registration, not all hemp-derived products are lawful because certain products may still violate the Federal Food, Drug, and Cosmetic Act. The USPTO will still reject trademark applications covering certain CBD infused products, including foods, beverages, dietary supplements, and pet foods, because such goods may not be introduced lawfully into commerce without FDA approval.

b. Legal Activities Eligible for Registration

You may notice that some cannabis brands have in fact received trademark registrations. This is done in 1 of 2 ways. The first is to apply for a state registration if the state you are offering cannabis goods in has legalized cannabis. The second is to secure federal registration for ancillary services that do not “touch the plant”, or directly involve providing cannabis products for sale in commerce. Such activities may include providing educational or informational services on cannabis, entertainment services such as a podcast or video series which features professionals in the cannabis industry, and offering professional services such as business and consulting or graphic design to cannabis brands. Some brands even have secured federal registration for non-cannabis goods offered such as candy bars (which do not contain THC), or apparel/merchandise with cannabis-related branding. While the federal government is slowly moving towards a future where cannabis may become totally legal, state-level legality has provided for exponential growth of cannabis brands. As such, taking measures now to protect lawful components of your cannabis brand, whether at the state or federal level for ancillary services not directly related to the cultivation or sale of cannabis, are crucial both for long term brand protection and, most importantly, to combat likelihood of confusion. If a cannabis brand owner secures federal registration for legal activities, it could provide for expansion under such marks if and when cannabis becomes legal at a federal level. Such registration can be used to enforce rights against an infringer, even if such an offender is offering cannabis products. However, applicants must be able to declare that such activities are lawful and may even be asked to provide a declaration to such effect in a federal trademark application.

2. Litigation

Cannabis brands are no stranger to trademark infringement suits. As many brands offer both strains of cannabis which reference non-cannabis related brands (i.e. the infamous “Gorilla Glue” or “Girl Scout Cookie”), as well as edibles which look almost identical to popular food brands, there has been uptick in infringement suits from non-cannabis facing brands. Popular hot sauce brand Tapatio has filed several lawsuits against infringers offering THC-infused hot sauces. As has UPS against UPS420.com (a nationwide delivery service for cannabis). It goes without saying that as with any other brand, a cannabis company should avoid branding that is inspired by existing branding. But, what about cannabis brands who have done their diligence and created a non-infringing brand? How are they able to enforce their rights?

In order to succeed on an infringement claim, a plaintiff must prove both ownership of a valid trademark and infringement by the defendant through likelihood of confusion factors. The bulk of trademark infringement litigation comes down to the multi-factor likelihood of confusion test. However, for a cannabis plaintiff, they may never get that far. This is because if a plaintiff cannot prove it has a valid and enforceable mark, the court will not even reach the likelihood of confusion test. Simply put, if a cannabis plaintiff wishes to sue for infringement, it risks a finding that such goods are unlawful and therefore there is no valid and enforceable mark.

a. Kiva Case

Trademark practitioners have been closely following Kiva Health Brands LLC vs. Kiva Brands Inc., et al. A Central District of California case in which a federal judge has ruled that the popular edible brand Kiva [include link – https://www.kivaconfections.com/] could not challenge a federally registered trademark belonging to Kiva Health Brands (a maker of natural foods and health supplements), because the products sold under the KIVA mark are illegal under federal law. The edible brand Kiva argued that it used the mark KIVA first and, accordingly, attempted to cancel Kiva Health’s registered trademark of KIVA for food, as well as sued for infringement relying on its common law rights that proved an earlier date of first use. The judge ruled that Kiva edibles failed to show its earlier use of the name entitled it to common law rights because selling edibles was not a lawfully commercial use of the KIVA mark under federal law.

The Court held that although Kiva edibles marijuana-infused edibles are legal under California law, “its illegality under federal law means that KBI [Kiva Cannabis] cannot have trademark priority” between the parties. Priority of trademark rights between parties ordinarily comes with earlier use of a mark in commerce. It follows that “use in commerce” must be a lawful use. Therefore, the Court held that Kiva Cannabis cannot be the senior user of the KIVA mark as between the parties because its use of its mark was not lawful use in commerce.

The Court also noted there is “a paucity of trademark authority addressing what happens when a product’s legality differs under state and federal law,” but noted that what little authority exists seems to say use in commerce federally illegal cannot be relied on to make a priority argument.

b. VFC Case

In another recent case in the District Court of Colorado, Colorado-based Veritas Fine Cannabis (“VFC”) filed an infringement suit against Florida-based Veritas Farms. The Defendant filed a motion to dismiss VFC’s complaint, which argues in part that the VFC’s claims fail as a matter of law, because VFC does not provide lawful use in commerce. Defendants argue that VFC’s business is illegal under federal law, so therefore cannot rise to the “lawful use in commerce” required to make a claim for federal trademark infringement. Further, the motion to dismiss seeks to dismiss trademark claims related to ancillary common law trademarks for “providing information about cannabis because providing general information as to the purpose and use of applicant’s goods is merely incidental to the sale of goods, and thus not eligible for trademark protection from the USPTO.

The motion to dismiss is currently pending before the District Court of Colorado, but how the Court rules could have serious implications for cannabis trademark applicants and litigants. First, no Court has outright dismissed a complaint for infringement based on unlawful use in commerce (the Kiva decision came close, but the ruling was narrow as to priority claims). Second, many cannabis brands rely on ancillary goods and services to achieve registration. So, if the Court goes so far as to reject these types of marks, it could seriously compromise a method in which cannabis brands have relied on to achieve federal protection for non-cannabis related services.

Despite the uncertain legal landscape, cannabis companies should take any available steps to protect IP interests and brand in this rapidly growing industry. Our firm has worked with cannabis brands both in registration and litigation, on state and federal levels. As this area of the law is rapidly changing (and more changes are expected with a new administration), we will be monitoring the situation closely. Please reach out to us if you are a cannabis brand looking for assistance with your trademarks. This article is not intended to be construed as legal advice.

“…taking measures now to protect lawful components of your cannabis brand, whether at the state or federal level for ancillary services not directly related to the cultivation or sale of cannabis, are crucial both for long term brand protection and, most importantly, to combat likelihood of confusion.”

 

by Doni Robinson
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