It seems like it has always been an uphill battle for businesses in the marijuana business. Skating on the precipice of state laws, on one side, that may allow for widespread distribution of marijuana in the state, and federal laws, on the other, which criminalize such sale across state lines, owners of these businesses must tread carefully in finding the right way to expand their businesses. One obstacle facing so-called “potrepreneurs” is how to rely on certain legal protections that businesses in non-illicit fields use to stop potentially unfair business practices. Trademark registrations are one important protection, and one that businesses in the retail sector particularly lean on, especially in a product market where the products are fungible. A recent decision by the Trademark Trial and Appeal Board (TTAB) demonstrates that people in the marijuana business will need to be more strategic in how they protect trademarks.

In the case, the TTAB affirmed the United States Patent and Trademark Office’s decision to refuse registration for the mark HERBAL ACCESS for “retail store services featuring herbs” on the grounds that the mark is used in connection with a substance that is illegal under federal law. The TTAB arrived at this conclusion even after the applicant (a Washington state company) argued that the trademark application should be allowed because marijuana is legal to sell in state of Washington.
The Trademarking Decision – Where to File?
The first item on most business owners’ agendas when they start a new business is protection of the house brand, that word, phrase, or symbol that goes on everything from invoices and product packaging to vehicle wraps on the side of delivery trucks. Understandably, the brand name is the first-impression setter for businesses that are involved in distributing products to consumers, differentiating one particular product from dozens of others. Business owners may have put a lot of thought and creativity into the name, which might represent some deeper core meaning for the business and which the business wants to pass on to consumers. But a clever name only goes so far if it is vulnerable to use by a competitor in a different geographical area, a scenario that could actually turn the name into a weapon against the company that created it.

From there, it is a matter of the scope of protection that a business should go after. Usually, this is a fairly simple decision involving a determination of state vs. federal trademark registration, depending on the geographical scope of current business operations and future growth plans. Obtaining a trademark at the state level is quicker, cheaper, and generally easier because trademark applications are not put through the same rigorous examination process that federal applicants must go through. One drawback to the state registration route is that any rights granted under the application are limited to the geographical borders of that state. The practical impact is that a company doing business in multiple states has to register the mark in each state where they are doing business in order to receive the exclusive right to use that mark.

A federal trademark registration promises a more expensive and drawn-out application process, but often carries more robust rights for the trademark owner including exclusivity of use in all 50 states, constructive notice to third parties that the trademark is registered and is a valid trademark, and the ability to sue third parties in federal court and recover higher damages. If a business operates across state lines, or is exclusively an online business, federal registration is a better route for protecting a trademark against third party use because the business only needs one registration to lock-in rights to the name across the entire country.

Federal Trademark Requirements
Because a federal registration grants such a broad swath of rights, applications are subject to meeting stricter requirements. Among such requirements are “lawful” use in interstate commerce regulated under federal law. If a mark is used in connection with an activity that involves a per se violation of federal law, it is unregisterable as a trademark by the federal government.

Given such a restriction, it is perhaps easy to see why a trademark application relating to a cannabis-based business might fail. Marijuana is, of course, a controlled substance under the Controlled Substances Act, which makes it unlawful for a company to sell or trade in the substance. Although the case law background on what exactly is an unlawful use is relatively murky, it appears that examining attorneys in the trademark office who are responsible for reviewing federal applications are more apt to reject an application if it makes any reference to marijuana. As part of the examination process, an attorney at the USPTO typically requests a written response from the trademark applicant as to the legality of the product listed in the goods description.

Federal Law Still Reigns Supreme in Unlawfulness Rejection
The HERBAL ACCESS case demonstrates the dynamic between state and federal law in the analysis of the lawful nature of a substance listed in the description of goods/services in the trademark application. Although the “use in commerce” requirement under the federal Trademark Act clearly references use in commerce that can be regulated by the federal government, any product that would contravene federal law (even if that product is lawful in a particular state) is considered illicit under federal law and, consequently, ineligible for registration.

Seeing, perhaps, that the legal use under state law argument was doomed to fail, applicant contended that some of the services it was offering (namely, sale of herbs) was not illegal and, on that basis alone, the application should be registered. The applicant for HERBAL ACCESS further attempted to argue around the illegal use rejection by saying that the products referred to in the application were merely herbs, not marijuana. The TTAB rejected this argument based primarily on the specimen of use submitted by the applicant itself (which showed a map with wording “Marijuana for the Masses” and a picture of a marijuana plant with the text “Call or stop by today and find out why people consider our marijuana to be the best of the best!”). When looking at this evidence, the board concluded that, clearly, the applicant was selling marijuana. Viewing the presence of marijuana as the equivalent of “poison” in the well of otherwise pure water, the TTAB concluded that one legal item in the description of services did not immunize the entire application from rejection based on unlawfulness of the services.

Trademark Rights for Cannabis Owners
For the time being, it appears that the trademark office will continue to deny applications that include any direct reference to cannabis. While there is always the possibility that the Court of Appeals for the Federal Circuit might re-evaluate their conception of what “use in commerce” means or that Congress will change its stance on cannabis as a controlled substance, business owners in this field would be better-versed in foregoing the federal registration route and sticking with registration in states where the company is doing business. This will give the company the right to exclude third parties from using a similar mark and set the groundwork for bringing claims against third parties in state courts for other injuries such as trademark infringement and unfair competition. A state trademark will not, however, prevent the company from stopping third parties in states where the trademark is not registered, nor will it stop the company from going after third parties that might use a similar name, but on non-competing products (trademark dilution).

To build a broader base for protection of the mark, and if the business provides some other kind of service or product that does not specifically include marijuana as an ingredient or feature, the business might look to a federal registration for a line of business that is not engaging in activities that are unlawful under federal law. Leafly, the self-branded “World’s Cannabis Information Resource”, recently obtained several federal trademark registrations for its LEAFLY mark for various services, including a website for providing information about cannabis strains and effects, and a downloadable app for finding dispensaries. Such a registration (while not specifically for marijuana-based products), could be used to give a business owner a foot in the door to prevent other businesses from using a similar name.

In any event, owners of a cannabis business should carefully consider the risks posed by third parties along with restrictions on trademark registration prior to choosing which strategy to adopt. 

 


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