Intellectual Property/Branding

Cannabis patentsOur previous post in this series discussed the legal sources for cannabis patent rights. This post and later posts will address some questions about what patents could mean for the cannabis industry.

Today’s question is: Do cannabis patents create monopolies?

Today’s short answer is: Yes and No, but probably less than you might think.

A patent is a government-created monopoly, giving the patent holder an exclusive right to make, use and sell the patented invention. A patentee doesn’t have to let anyone else use her patent (there is no mandatory licensing in the United States), or even use the patent herself. Once the patent expires, it belongs to the public forever. Though the law abhors a monopoly, patents are an exception. The theory is that granting inventors a few years of exclusivity encourages the creation of products beneficial to society.

A patent is not an unlimited monopoly, however. To start, a patent is only good for a limited time, usually about 20 years from the patent filing date. Since it can take three or more years to get a patent granted, that often means a patent lasts 17 years or less in the real world. Patents cannot be renewed; once the patent expires, anyone can practice it at no cost.  Compared with trademarks, which could have indefinite terms, or copyrights, some of which can last as long as a century, the patent term is short.

Also, only inventions that are new and not obvious can be patented. If something has been publicly used or on sale for at least a year, it’s probably unpatentable by anyone. The legal meaning of “obvious” is different and more complicated than the dictionary definition. For our purposes, if a claimed invention could be readily made by a skilled person who was familiar with the prior art, it is obvious. These two requirements of novelty and nonobviousness are intended to ensure that the patent system narrowly rewards creators, not merely collectors or aggregators of products to which the public already has access.

Perhaps most importantly, a patent’s coverage is often much narrower than it appears. You can consider a patent to be like a real estate deed. The deed for your house may refer to the property at “1st and Main,” but that doesn’t mean you own everything at that address. Your actual property lines are set out in the deed’s legal description, e.g., by detailed surveying designations. Similarly, the scope of a patent is limited by the claim or claims, which are found in the last part of the patent following the words “I claim” or “What is claimed.” Here is a hypothetical cannabis utility patent claim, based on an issued patent:

What is claimed is:

1) A cannabis plant that produces a flower comprising:

[a] a terpene profile where myrcene is not the dominant terpene;
{b] a terpene profile defined as terpinolene, alpha phelladrene, and myrcene;
[c] a terpene oil content greater than 1.5%; and
[d] a CDB content of less than 3%.

Properly interpreting a patent claim is a notoriously squirrely activity. Even if you understand the technical features of the claim, there is an entire body of often-conflicting law on claim interpretation. But one principle is paramount in determining the scope of a claim: the patent covers only inventions that have each characteristic, known in patent law as an “element,” set out in the claim. If a plant had elements [a], [c] and [d], but did not have terpinolene in its terpene profile as required by element [d], it would not infringe that patent.

Our next post will consider more issues about patents and their effects in the cannabis industry.

Cannabis patents
Cannabis patents

In cannabis intellectual property (IP) law, as in most areas of cannabis law, separating the flowers from the weeds is difficult. There is a lot of misinformation available on the internet and elsewhere about whether pot is protectable under patent or similar laws, and what patentability means for the industry.

This post gives an overview of IP protection potentially available for cannabis strains and related plants. Under U.S. federal law, new plant varieties can be protected under the Plant Variety Protection Act (PVPA), as a plant patent under the Plant Patent Act (PPA), or as a utility patent under the Patent Act. Plant varieties could also be trade secrets or subject to contractual (licensing) protection.

PVPA: The Plant Variety Protection Act protects sexually reproduced (by seed) or tuber-propagated plant varieties, except for fungi or bacteria. The statute, which is administered by the Department of Agriculture, usually provides 20 years of almost-exclusive rights after the date on which the plant variety is certified. A variety for which PVPA certification is sought must be new, which is similar to the novelty requirement under the Patent Act. The variety must also be distinct, uniform, and stable, accordingly to USDA regulations. A certificate holder may pursue civil infringement remedies in court.

PPA: The Plant Patent Act protects asexually reproduced (e.g., by cuttings, grafting and budding) plant varieties, which are not tubers. For PPA protection, the Patent and Trademark Office requires that a variety be new, nonobvious, and have some de minimus utility, among other things. These requirements are common to all U.S. patents, and are the subject of extensive statutory and case law interpretation. In addition, a patented plant must differ from known plants by at least one distinguishing characteristic which is more than that caused by different growing conditions or fertility. A plant patent is limited to one genome of the plant, so that mutations or hybrids would not be covered in the patent, but would be separately patentable. Plant patents expire 20 years after the filing date of the application for the patent. A patentee may pursue civil infringement remedies in court.

Patent Act: Utility patents under non-Plant Patent Act law can be granted for plants, seeds, plant varieties, plant parts (e.g., fruit and flowers), and processes of producing plants, plant genes, and hybrids. As with other patents, a variety sought to be patented must be new, nonobvious, and have some utility, among other things. Civil infringement remedies are available in court.

Trade secrets/licensing: Though trade secret protection might be available to plant varieties, the ability of a skilled person to independently reproduce the variety in question could eliminate any protectable secret. Some breeders have sought to protect plant varieties by licensing contracts that purport to limit the use or distribution of the variety. Often known as “bag-tag” or “seed-bag” licenses, these are generally covered by state law.

The PVPA, the PPA, and the Patent Act all provide exclusive rights for 20 years, which can be enforced in court. The PVPA and the PPA differ primarily depending on whether the plant is sexually (PVPA) or asexually (PPA) reproduced. Utility patents may have more stringent requirements for applications than plant patents, but generally offer broader protections than plant patents. In particular, whereas a plant patent has only a single claim that defines the scope of the patent, a utility patent can have multiple claims, each addressing different parts of the plant or ways of using the plant that are disclosed in the specification of the patent. Also, utility patents are available for both sexually and asexually reproducing plants.

IP protection for cannabis plants used to be theoretical, but this changed recently. In the last two years, the PTO has issued plant patents, e.g., U.S. PP27475 P2 (Cannabis Plant Named ‘Ecuadorian Sativa’), and utility patents, e.g., U.S. 9,095,554 (Breeding, Production, Processing, and Use of Specialty Cannabis). In the next installment of the Cannabis Patent Primer, I will discuss what cannabis patents mean to the cannabis industry and try to dispel some of the patent myths common to the industry.

cannabis Intellectual property
I want my own IP….

If you co-own a cannabis business, you probably have a formal operating agreement that sets out who owns what—at least if you’ve been reading this blog. As I noted in my previous blog post, your cannabis company probably owns some intellectual property (IP): trademarks, copyrights, trade secrets, or patents. But who owns the IP, if, as is common, the operating agreement is silent on this issue? You may not have thought much about this, but you should. As any divorce lawyer can tell you, many assumptions about who owns what turn out to be mistaken.

LIke any other kind of property, IP is subject to general default rules that establish ownership, at least to begin with. The default owner of a patent is the human inventor. The default owner of a trademark is the entity (human or not) that uses the mark in commerce. Caution: it is easier to state these IP default rules in the abstract than to apply them in the real world. For example, though there is an ownership rule in copyright law called “work for hire,” it turns out it doesn’t apply to many people who are hired to create copyrightable works. Making mistakes about these default rules can lead to disappointment, or litigation.

You can diminish this risk, however, by making your own IP ownership rules. Virtually all of the default IP rules can be contracted around. A well-drafted IP ownership contract allows the parties to arrange their conduct knowing who will own the resulting IP. It will also discourage those who might try to take advantage of uncertainty to claim ownership of IP.

Co-owners of a business: IP issues arise in connection with a business formation in at least two situations: (1) some or all of the owners come to the business with preexisting IP, like brand names or trade secrets; and (2) the business will create new IP during operation. An IP agreement can define ownership so that the business will not be left without important assets (such as the brand name of the company) if the partner who brought IP to the business decides to leave. It can also provide ways to protect IP owned by the corporation, such as by requiring inventors to assist with patent filings or assign IP rights.

Deals with other businesses: Many deals between businesses have IP consequences. For example, a joint venture to create new growing processes could result in creating trade secrets or patentable inventions. In a distribution agreement, it is common for one party to have a license to use the other party’s trademarks. Determining the ownership of IP is critical when two companies work together.

Employer/employee/independent contractor: Any time a business entity pays a human being to create something, IP ownership issues will arise. Many businesses assume they know the default rules that apply depending on whether the human is called an “employee” or an “independent contractor.” The rules distinguishing these categories, however, vary from state to state, and are notoriously hard to apply. So, an IP agreement should not turn on the classification of the worker. Having a solid IP ownership agreement will allow both parties to concentrate on creating IP, and will lower the risks of disputes if and when the relationship ends.

IP ownership agreements need not be separate documents. The appropriate language can be included in your cannabis company’s operating agreement or even in its employee handbook. If you really want your own IP, however, don’t rely on the default ownership rules.

For more previous posts on cannabis litigation, go here for Cannnabis Litigation: Spotting Criminal Law Issues in Cannabis Cases and here for Cannabis Litigation: How to Avoid IP Disputes by Changing Your Oil Filter.

Cannabis trademark law
Will the wraps come off cannabis trademarks?

Last week, in an 8-0 opinion in the Matal v. Tam case, the United States Supreme Court ruled that the disparagement clause of the Lanham Act violates the First Amendment’s free speech clause. For those unfamiliar with the case, in 2011, Simon Tam attempted to register The Slants (the name of his band), as a federal trademark. But the USPTO examining attorney rejected the application, on grounds that the name was an offensive reference to Asians.

Section 2(a) of the Trademark Act, 15 U.S.C. §1052(a), bars any trademark registration of immoral, deceptive or scandalous matter, and states that no trademark may “disparage … or bring … into contempt or disrepute” any “persons, living or dead.” Some characteristics of a mark that can result in rejection include references to sex, offense to religion, race or to honor, and references to illegality. Interpretation of this prohibition is (and you probably would guess) both subjective and fluid, creating a good deal of uncertainty as to what actually constitutes disparagement.

According to Tam, “he and his bandmates wanted to reclaim the term as a badge of pride.” The Court of Appeals, and now the Supreme Court, found that the disparagement clause “offends a bedrock First Amendment principle: speech may not be banned on the ground that it expresses ideas that offend.” In Justice Kennedy’s concurring opinion, he stated that a “law that can be directed against speech found offensive to some portion of the public can be turned against minority and dissenting views to the detriment of all … The First Amendment does not entrust that power to the government’s benevolence. Instead, our reliance must be on the substantial safeguards of free and open discussion in a democratic society.” We couldn’t agree more.

So how does this opinion affect cannabis trademark applications? Substantively, not a lot. Obtaining a federal trademark registration for use on cannabis-related goods presents a host of challenges, and none of that has changed. You still must make legal use of your mark in commerce to obtain a federal trademark registration.

But we were seeing the rejection, at least initially, of some trademark applications for goods and services that were ancillary to the cannabis industry – goods and services that CAN qualify for registration – based on references in the mark to immoral or scandalous matter. Ultimately, subjective denial of a trademark application based on the nature of speech it contains should not generally be within the power of the PTO. It stands to reason that if disparaging marks cannot be denied registration and are protected by the First Amendment, the same principal ought to apply to “immoral” or “scandalous” marks. Thus, the PTO may not be able to reject applications that make reference to things like being “high,” which could be considered “immoral” or “scandalous,” because those references are protected by the First Amendment.

Cannabis licensing dealsAs we wrote a few days ago, the Washington State Legislature recently passed SB 5131, which updates Washington’s cannabis laws and includes a provision that explicitly addresses licensing agreements. The bill has yet to be signed by Washington Governor Jay Inslee, but we are nevertheless exploring what the implications of these new regulations will be for our clients with existing and pending intellectual property licensing deals.

Section 16 of the bill reads as follows:

Sec. 16.   A new section is added to chapter 69.50 RCW to read as follows:

  • A licensed marijuana business may enter into a licensing agreement, or consulting contract, with any individual, partnership, employee cooperative, association, nonprofit corporation, or corporation, for:
    • Any goods or services that are registered as a trademark under federal law or under chapter 19.77 RCW;
    • Any unregistered trademark, trade name, or trade dress; or
    • Any trade secret, technology, or proprietary information used to manufacture a cannabis product or used to provide a service related to a marijuana business,
  • All agreements or contracts entered into by a licensed marijuana business, as authorized under this section, must be disclosed to the state liquor and cannabis board.

On its face, this provision does little to change things for those with existing licensing deals, except that those deals will now need to be disclosed to the licensee’s enforcement officer. But the provision does validate the position that these types of licensing agreements were permissible under the rules all along, which provides some level of security to the parties as to the legitimacy of the contracts.

The big question that remains unanswered is whether the State’s acknowledgement of the permissibility of “licensing agreement[s]” is also an acknowledgement of the permissibility of standard trademark licensing practices, including royalties. Currently, it is impermissible under the rules for a licensor to receive a royalty based on sales or profits from a licensee, where that licensor has not been vetted by the Liquor and Cannabis Board (LCB) as a true party of interest. Undisclosed true party of interest relationships are grounds for license cancellation by the LCB, so it’s important to structure these deals so they do not implicate Washington’s true party of interest rules when dealing with an out-of-state licensor, or a licensor that simply would not meet the state’s requirements.

Even if state cannabis law reform in Washington makes the state law compliance piece of any trademark licensing deal more straightforward, these deals are still by no means as cut and dry as your typically IP licensing deal. Ownership of IP in the cannabis industry remains a tricky issue, in large part because the USPTO will not issue federal trademark registrations for cannabis-related marks. Cannabis companies routinely come to us with proposed licensing deals where basic due diligence quickly reveals the licensor simply does not own what it purports to own. As a refresher, if you are looking to get a license for another company’s IP, here are the most basic questions you should be able to answer about that other company and its IP:

  • Does the licensor own any federal trademark registrations?
  • If so, what goods and/or services do those trademark registrations cover?
  • Was the description of goods and/or services filed with the USPTO accurate and true? Were there possible misrepresentations?
  • Are the trademark registrations based on actual use, or upon intent-to-use?
  • What representations and warranties is the licensor making (or, often more importantly, not making) regarding the marks?
  • If the licensor doesn’t own any federal trademark registrations, is it licensing someone else’s trademarks?
  • Does the licensor have a master licensing agreement? Do the terms of any proposed sub-licensing agreement mirror that master licensing agreement?
  • What quality control standards will you be held to by the trademark owner? Could these standards amount to impermissible control over a licensee under Washington’s cannabis rules?
  • Has the trademark owner warranted to keep all USPTO filings up-to-date?
  • Does the licensor own any state trademark registrations?
  • If so, has the licensor made lawful use of its mark in commerce in the state of registration?
  • Does the licensor have any common law trademark rights? Can the licensor even legally acquire common law trademark rights in your jurisdiction?

This is a substantial list, but it only scratches the surface of the issues you and your cannabis IP counsel must consider before you enter into any IP licensing deal. Parties are often quick to skip straight to negotiating commercial terms for a deal, without ever assessing whether the rights they are licensing actually exist. Just as with any other type of property, like a house or a car, a licensor of intellectual property must actually own the rights to that property to be able to confer those rights to another party. Seems basic, but it’s truly shocking to see the deals we’ve seen put together by attorneys who either do not know cannabis or, more often than not, do not know the intricacies (or even the basics) of intellectual property law.

Though cannabis IP licensing deals remain complicated, it’s encouraging to see the Washington State Legislature acknowledge and condone their existence. We’ll be following this bill closely to see whether its passage results in any changes to the current difficulties surrounding a royalties-based payment structure.

So stay tuned.

California cannabis trademarkOne of the biggest hurdles for California cannabis brand owners has been the inability to secure California state trademark registrations for their marks. This has been a point of confusion for many clients who have successfully registered their trademarks in states like Washington, Oregon and Colorado, and hoped to do the same in California.

Until recently, the California state government has been steadfast in refusing to register marks used on cannabis, despite cannabis having been legal in California since 1996. This policy was rooted in Sections 14270-14272 of the Model State Trademark Law of the California Business and Professions Code (CBPC), which are simply titled “Miscellaneous.” Section 14272 states the following:

The intent of this chapter is to provide a system of state trademark registration and protection substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946 (15 U.S.C. Sec. 1051 et seq.), as amended. To that end, the construction given the federal act should be examined as non-binding authority for interpreting and construing this chapter.

Recall that there are three ways in which a brand owner can establish trademark rights:

  1. By using the mark in connection with their goods or services (legally) in commerce;
  2. By registering the mark with the United States Patent and Trademark Office (USPTO); and
  3. By registering the mark with an appropriate state trademark registry.

California cannabis companies have, to date, needed to rely on federal trademarks registered with the USPTO (if they could get them for ancillary goods or services), and common law rights that may not even exist in California, given Section 14272 of the CBPC.

But Assembly Bill 64 will change all this. Recognizing the inconsistency between current state trademark law provisions and the new cannabis regulations, AB 64 states the following:

This bill, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, would, notwithstanding those provisions, authorize the use of specified classifications for marks related to medical cannabis and nonmedical cannabis goods and services that are lawfully in commerce under state law in the State of California.

This is great news for California cannabis companies, but there are a few things to keep in mind:

  1. State trademarks will not be available until January 1, 2018, and then only for cannabis companies that operate in compliance with California state law. Unlicensed cannabis businesses will not be eligible for California state trademark protection;
  2. The same difficulties surrounding cross-state IP licensing deals will still exist in California (see Cannabis IP Licensing: It’s Complicated); and
  3. Federal trademarks are still unavailable for goods and services that violate federal law, so developing a brand protection strategy that involves federal trademark registrations for ancillary goods, and state trademarks for cannabis goods, will still be key. See Cannabis Trademarks: Back to the Basics

Though the protection afforded by a state trademark is geographically limited to the state of registration, state trademarks do provide some level of protection greater than common law rights. And AB 64 will give California cannabis business owners much greater flexibility in developing a brand protection strategy that encompasses their cannabis products.

 

 

China counterfeit lawyers
There are a lot of fakes out there, in the cannabis industry too.

As we’ve previously written, my law firm, which does considerable international trade and China law work in addition to our regulated substances practice, has on all fronts been getting an influx of clients complaining about counterfeit cannabis goods and seeking our help in dealing with the problem. The problem of counterfeit goods in the cannabis industry has only continued to grow over the last year.

I was interviewed earlier this year about the lawsuits brought by Roor pipes against nearly 200 smoke shops and convenience stores, alleging those stores are selling counterfeit Roor bongs in violation of Roor’s U.S. federal trademark registration. Though those lawsuits may be on uncertain ground from a federal trademark law perspective, Grenco Science, maker of the G-Pen brand vaporizer, recently found success in federal court against counterfeiters.

Earlier this year, Grenco sued more than 65 different online retailers for selling counterfeit G-Pen products. Most of the offending companies were based in China, which is consistent with the majority of the counterfeit cases my firm handles. Some of the lawsuits settled out of court, but many of the Chinese companies failed to respond to Grenco’s complaints filed in court – also a common occurrence when trying to pin down a Chinese company in U.S. court. In light of this, a federal judge in Illinois granted Grenco $47 million in damages, which equates to $1 million from each of the 47 companies found to have infringed Grenco’s federal trademarks, as well as injunctions against each of the companies ordering them to cease sales of the counterfeit goods.

Of course, getting a judgment against a Chinese company for trademark infringement is only half the battle – Collecting on these judgments is another matter. Oftentimes, U.S. judgments against Chinese companies are worth very little. A U.S. judgment against a Chinese company can lead to collection, but for that to occur, one must know about the operations of the Chinese company and one must be prepared to be legally creative in figuring out how and where to act in using the U.S. judgment to go after the Chinese company’s assets.  We’ve written extensively about this process on our firm’s China Law Blog, and you can read more about it here and here.

Given the difficulty in enforcing these judgments it is critical that you as a business owner take preventative steps to ward off counterfeiters, and to know what to do in the unfortunate event someone does counterfeit one of your goods. And as we tell all our clients: investing in these preventative steps now is always way less expensive than fighting a legal battle (and trying to enforce a judgment) in court down the road.

So what preventative steps should cannabis businesses take to address counterfeiting? Prevention hinges on first identifying your intellectual property (IP), determining what categories it falls into, and then protecting it accordingly in the relevant jurisdictions. The design of a novel device like a water pipe, for example, could be subject to patent protection. Though we’ve blogged extensively about the difficulty in obtaining federal cannabis trademarks, federal patent law does not contain the same “legal use in commerce” requirement, or a prohibition on “immoral or scandalous” matter. A patent is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office (USPTO), and this property right gives the inventor “the right to exclude others from making, using, offering for sale, or selling the invention in the United States or importing the invention into the United States.” Patents are often the most powerful tool in fighting counterfeit goods.

Patent infringement is not the only way counterfeiters can rip off products. Oftentimes, when talking about counterfeits, we’re talking about trademark infringement (as in the G-Pen and Roor cases) rather than patent infringement. A counterfeiter could, for example, slap your logo on its vape pen, exploiting the goodwill and notoriety you’ve established through your brand. Of course, the best way to prevent trademark infringement is to register your trademark with the USPTO. Though it is not possible to obtain a federal trademark for use on goods that violate the Controlled Substances Act (CSA), it is often possible to obtain trademark protection for goods that do not violate the CSA, like many smokers’ accessories. A trademark gives the owner the exclusive right to use their mark on the specified goods in commerce, and it gives the owner a right to seek remedy in federal court in the event of infringement.

If you are having your products manufactured in China (or anywhere else overseas), as is the case these days with so many of our clients, you need to protect your IP there as well. Because if you don’t register your trademark or your design patent in China, someone else almost certainly will and then that someone else will be able to stop your products from leaving China because those products violate their intellectual property! For more on this, check out China: Do Just ONE Thing: Register Your Trademarks AND Your Design Patents, Part 1 and China: Do Just ONE Thing: Register Your Trademarks AND Your Design Patents, Part 2. You should also check out Your China Factory as your Toughest Competitor for the contractual steps you need to take to prevent your own manufacturer in China from selling your product worldwide, and likely at prices far lower than you can ever match.

But logistically, how does enforcing your IP rights against counterfeiters play out? Typically, it doesn’t make sense to take the alleged infringer straight to court. Litigation is expensive, and there is often room to negotiate. When you know who the infringing party is, your attorney can contact them with a cease and desist letter directly. But when the party is, for example, a third party seller on a larger platform like Amazon or Alibaba, tracking down the infringer is much more difficult. See also China Counterfeiting: 8 Common Myths and Alibaba and Small Business Owners.

The protocol for dealing with online retail platforms in taking down counterfeit goods will vary depending on the company. With every online retail platform with which our lawyers have worked (be they in the United States or in China), the process is expedited greatly when our client alleging a counterfeit is able to offer up proof of its own IP rights. This is particularly true with trademarks, where infringement is often apparent, and the retail platform can quickly decide to suspend a counterfeiter’s account. Without verifiable IP rights, the retail platform is put in a difficult position of having to figure out who has the right to sell what. This involves complicated legal analysis, and takes substantial time and resources, as well as back-and-forth with both parties. In the meantime, you’re likely losing business. See How To Remove Counterfeits From Alibaba.

So the lesson here is two-fold. First, make sure you’ve identified your intellectual property and that you’ve taken every step possible to register and protect it. Second, if you suspect a company is selling a counterfeit of your product, contact your attorney immediately and develop a strategy for blocking the counterfeit sales, whether through direct communication with the counterfeiter, or by working with the relevant online retail platform. There is often much that can be done to stop a counterfeiter before resorting to filing a lawsuit, and ending up with potentially un-collectable judgment.

Cannabis trademark lawyerWe advise our cannabis clients regularly on how to choose a brand name that is eligible for trademark protection. For example, the strength of a mark depends on its distinctiveness – fanciful and arbitrary marks are protectable, while merely descriptive marks are not. But the other key component to choosing a brand name that can be successfully registered as a trademark is choosing a mark that is not the same as, or confusingly similar to, an existing registered trademark.

This “likelihood of confusion” standard often confuses business owners trying to brand their cannabis and ancillary products. Not only can you not use a mark that is the same as a registered trademark, you cannot use a mark confusingly similar to a registered trademark.

The Ninth Circuit, in AMF Inc. v. Sleekcraft Boats, developed the following eight-factor test for determining whether one mark is confusingly similar to another:

  1. Strength of the mark
  2. Proximity of the goods
  3. Similarity of the marks
  4. Evidence of actual confusion
  5. Marketing channels used
  6. Type of goods and degree of care likely to be exercised by the purchaser
  7. Defendant’s intent in selecting the mark
  8. Likelihood of expansion of the product lines.

Some of these factors are clear-cut, and some are highly subjective. The Ninth Circuit has repeatedly reaffirmed that this is a flexible test, but it is useful to consider these factors when choosing a name for your brand that may be similar to another registered mark. For example, if the other, similar mark is a well-known brand, or a household name, your risk of infringement goes up. If the goods you are selling are similar to the goods provided by the other brand, your risk goes up. Likewise, if the marks are very similar, if similar marketing channels are used, or if either company intends to expand into the market of the other, your risk of infringement goes up. You will notice that the court also considers the intent of the defendant. This means that if you knew from the outset that your mark was similar to a registered mark, the court is less likely to look favorably on your case.

Last month, the Trademark Trial and Appeal Board (“TTAB”) dealt with the issue of likelihood of confusion in Margaritaville Enterprises, LLC v. Rachel A. Bevis, where the Applicant had applied to register the mark MARIJUANAVILLE for “T-Shirts, Hats, Sweat Shirts, sweat pants, Jackets, Socks” and “Drive-through retail store services featuring coffee and related goods; Retail apparel stores; Retail clothing stores.” Margaritaville Enterprises, LLC, the Opposer, opposed the registration of the MARIJUANAVILLE mark on the ground of likelihood of confusion with its registered MARGARITAVILLE trademark. The MARGARITAVILLE trademark is owned, in part, by Jimmy Buffet, and is a coined term based on Buffet’s famous “Margaritaville” song.

In determining whether a likelihood of confusion exists between MARGARITAVILLE and MARIJUANAVILLE, the TTAB first noted that the fame of the prior mark plays a dominant role in balancing the likelihood of confusion factors. “Margaritaville” was released in 1977 and inducted into the GRAMMY Hall of Fame in 2016. The TTAB concluded that the MARGARITAVILLE mark had been the subject of sustanined and widespread media and popular culture exposure, and was indeed famous, weighing heavily in the Opposer’s favor.

In comparing the similarity of the marks, the TTAB points out that “[t]he proper test is not a side-by-side comparison of the marks, but instead ‘whether the marks are sufficiently similar in terms of their commercial impression’ such that persons who encounter the marks would be likely to assume a connection between the parties.” Furthermore, “the focus is on the recollection of the average purchaser, who normally retains a general rather than a specific impression of trademarks.” This is an important distinction to keep in mind when selecting a trademark.

Here, the Opposer argued that the two marks were similar in sound, appearance, connotation and commercial impression, and the TTAB agreed. The opinion found “both marks are similar insofar as they are single-term 14 letter marks comprised of five syllables, each commencing with the same letter string ‘mar-‘ and ending with the suffix ‘-ville.’ As to their connotation and commercial impression, the record shows a public association between the two terms as representing a similar ‘state of mind’ induced by either a cocktail or marijuana.” On this basis, and after analyzing the other likelihood of confusion factors, the TTAB rejected the MARIJUANAVILLE trademark application.

The lesson to be learned from this (and other cases) is that choosing a mark for your cannabis or ancillary brand that won’t infringe an existing trademark is not as simple as avoiding identical marks. The analysis for likelihood of confusion is nuanced, and it’s important to conduct a full-fledged trademark clearance search with the help of an experienced trademark attorney (preferably one who knows the cannabis industry) for marks that are the same and similar to your proposed mark before you file your trademark application and before you invest in brand development and marketing.

 

 

Cannabis luxury brands
Will any company become the Rolls Royce of cannabis?

There’s an exception to every rule.

When I talk to clients about cannabis branding generally, I tell them to focus first on the product. Selling an inferior or inconsistent product is hard — the marketing is easier if the product sells itself. Trademarks are important because they provide an easy way for a customer to recognize that a product comes from your company, and customers have come to trust the product, not because there is something inherently cool about any particular name or logo. Companies that put brand first and product second have to figure out how to convince consumers that their product represents something without having actually demonstrated anything over time. It’s a tough sell.

But if you’re going to develop your brand first as an “upscale” cannabis brand, it doesn’t hurt to have celebrity connections and good PR. Enter Beboe, a California brand of vaporizers and infused pastilles. Beboe has managed to get featured in the New York Times Style Section, Vanity Fair, Harpers Bazaar, and a host of other outlets. How did they get all this press? By getting celebrities to invest in their brand and to come to their launch party. Beboe’s founders fit the bill — one of is a celebrity tattoo artist and the other is a former fashion executive who spent some time working at Privateer Holdings. With their powers combined, they have been able to pull some real muscle from both celebrity and fashion publications.

Granted, this marketing route won’t exist for everyone. Orlando Bloom can only go to so many cannabis branding parties before he’s had enough. But in a broader, sense, the question remains whether the cannabis market will support “luxury” branded products that are heavily marketed as such to consumers.

We saw the first attempt at this in 2013, when former Microsoft executive Jamen Shively called a press conference in the Columbia Tower in Seattle to introduce the new brand he was co-founding, “Diego Pellicer.” Shively said that Diego Pellicer was going to be the first and greatest luxury cannabis brand, and he predicted it would mint more millionaires than Microsoft. Diego Pellicer received a ton of press coverage, but it seemed to stumble in finding a business model that would work and it has taken time to get off the ground. Diego Pellicer has shifted its focus and it now bills itself as “the worldwide leader in property acquisitions and leasing in the emerging cannabis arena.” Several other companies have attempted similar “big bang” branding strategies, but there still is no go-to brand out there that has established itself as THE “luxury cannabis brand,” with a track record of strong sales over time.

This isn’t to say that early stage brand development is a bad thing. There’s a real chance Beboe will be hugely successful. Any press is good press for new, unknown companies. But what experience has shown time and time again is that for long-term success in the cannabis industry the product must back up the story the press is telling about it. If you are claiming to be a luxury cannabis brand, what people find inside of the box has to meet a high quality hurdle. Or as Seth Godin so ably puts it, “it’s important that these words be true, that your product, your service and its place in the world match the story you’re telling about it.” Otherwise, customers will figure out that your marketing was all smoke and mirrors, and you will be looking at another flash in the pan.

Cannabis trademark lawyersWith so much discussion surrounding the difficulties of obtaining trademark protection for cannabis-related marks, it’s easy to forget that the battle isn’t over when a registration issues. Even after you have completed the onerous process of prosecuting your trademark application, there is no automatic guarantee that others won’t attempt to use your mark, or a confusingly similar mark. Enforcing your trademark requires constant monitoring to ensure that others are not infringing your mark.

Although the USPTO will vet your application against marks that have already been federally registered, and will issue your trademark registration, they will not actively monitor or seek out infringers, nor will they prosecute infringers. Monitoring for and prosecuting infringers is your job, as the trademark owner. There is nothing stopping other companies from adopting your name, or a variation on your name, for their own use. They may not be successful in securing a federal trademark application due to likelihood of confusion with your mark, but they can continue using the mark until someone makes them stop.

Vigilance on the part of a trademark owner is key to preventing infringement. Here, we’re including some basic tips for monitoring potential infringers of your mark.

First, regularly search the Internet. This is common sense. Perform Google searches for your trademark, and for your logo if you have one. Google Alerts comes in handy here as well. Set up an automated search and receive email alerts every time new pages containing your mark are indexed.

If you really want to delve into things, search the Trademark Electronic Search System (TESS) on the USPTO website. This search engine allows you to search the USPTO’s database of registered trademarks and pending applications to find marks that may be similar to yours. Pending applications may give you some insight into companies that are using or attempting to use marks that are similar to or the same as your own. For additional information on searching the USPTO’s database, which can get a bit complicated, go here.

Aside from self-monitoring, there are many companies and law firms that provide trademark monitoring services for their clients. These companies conduct regular monitoring searches for your mark.

And of course if you do encounter a company you believe to be infringing your trademark, you should contact a cannabis IP attorney right away. An experienced IP attorney can walk you through your options for dealing with an infringer, including cease and desist letters, settlement negotiations, and litigation.