Photo of Alison Malsbury

Every brand needs protection, and Alison extends her knowledge of intellectual property and corporate law to our cannabis clients, ensuring their businesses are protected.

We’ve written (and talked) extensively about the dos and don’ts of filing cannabis-related state and federal trademarks, and we all know by now that you cannot obtain a federal trademark registration for goods or services that are not lawful pursuant to federal law. But I’ve heard a lot of creative arguments in this space, and have had many clients indicate an interest in challenging the status quo at the United States Patent and Trademark Office (USPTO).

Unfortunately (or fortunately, depending on how you look at it), the Trademark Trial and Appeals Board (TTAB) has handed down numerous opinions of precedent that lay forth the USPTO’s position on the “lawful use in commerce” requirement in detail. In this post, I thought it would be useful to breakdown the TTAB’s analysis on this issue via their In re PharmaCann LLC opinion, which was issued in June of 2017.

marijuana cannabis trademark
No lawful use in commerce = no trademark.

In the PharmaCann case, the Applicant sought registration of two trademarks: PHARMACANN and PHARMACANNIS, both for “retail store services featuring medical marijuana,” in International Class 35, and “dispensing of pharmaceuticals featuring medical marijuana,” in International Class 44. The Examining Attorney refused registration of both marks pursuant to Sections 1 and 45 of the Trademark Act, 15 U.S.C. §§ 1051 and 1127, on the ground that Applicant could not allege a bona fide intent to make lawful use of the marks in commerce because the services identified involved the distribution and dispensing of cannabis, which is a controlled substance whose distribution and dispensing are illegal under the federal Controlled Substances Act (CSA), 21 U.S.C. §§ 801 et seq..

In its opinion, the TTAB pointed out that it has “consistently held that, to qualify for a federal … registration, the use of a mark in commerce must be ‘lawful’.” In re JJ206, LLC, 120 USPQ2d 1568, 1569 (TTAB 2016) (affirming refusal to register POWERED BY JUJU and JUJU JOINTS for cannabis vaporizing and delivery services for lack of lawful use in commerce). The TTAB further elaborated that for a mark to be eligible for federal registration, “any goods or services for which the mark is used must not be illegal under federal law.” In re Brown, 119 USPQ2d 1350, 1351 (TTAB 2016). And even if an Applicant files on an intent-to-use basis (meaning they intend to use the mark in commerce in the near future but have not done so yet), if the identified goods or services with which the mark is intended to be used are illegal under federal law, “the applicant cannot use its mark in lawful commerce, as it is a legal impossibility for the applicant to have the requisite bona fide intent to use the mark.” JJ206, 120 USPQ2d at 1569.

In general, registration will not be refused for lack of lawful use in commerce unless either “(1) a violation of federal law is indicated by the application or other evidence …, or (2) when the applicant’s application-related activities involve a per se violation of a federal law.” Brown, 119 USPQ2d at 1351. In the case at hand, the TTAB deemed the Applicant’s marijuana distribution and dispensing activities to be a per se violation of the CSA. The analysis here was pretty straightforward, where the CSA prohibits, among other things, manufacturing, distributing, or dispensing controlled substances (21 U.S.C. § 841(a)(1)), and where marijuana is a Schedule I controlled substance under the CSA. 21 U.S.C. § 812(c) Schedule I (c)(10).

The Applicant here made two arguments in opposition to the TTAB’s position. The first argument was that “[s]ince 2009 the Department of Justice has consistently refused to treat medical marijuana as an illegal drug by consistently refusing to enforce the Controlled Substances Act against it.” In making its argument regarding the federal government’s lack of enforcement against medical marijuana businesses operating in compliance with state law, the Applicant relied on the (now rescinded) Cole Memorandum. But the TTAB clarified that it had previously decided in JJ206 that the Cole Memorandum “provides no support for the registration of a trademark used on goods whose sale is illegal under federal law,” and that this determination applied with equal force to the Applicant in this case’s intended use of its marks for distributing and dispensing medical marijuana.

The Applicant’s second, and more novel, argument was that “Congress has taken the same position as the Department of Justice,” because in the Consolidated and Further Continuing Appropriations Act of 2015 (as renewed in the Consolidated Appropriations Act of 2016, subsequent continuing resolutions, and in the Consolidated Appropriations Act of 2017), Congress has prohibited the Department of Justice from utilizing funds to prevent states that have legalized medical marijuana from implementing their own state laws authorizing the use, distribution, possession, or cultivation of medical marijuana. The Applicant’s argument was that Congress’ decision not to fund the DOJ to enforce the CSA against medical marijuana, “it would make no sense and serve no purpose for the Board to take a different position…”.

The TTAB, however, found this second argument equally lacking, and relied on United States v. McIntosh (833 F.3d 1163, 1169-70 (9th Cir. 2016)) for its analysis. In that case, the court concluded that the Appropriations Acts and the Rohrabacher-Farr Amendment did not make medical marijuana legal under the CSA. The TTAB applied that conclusion to the case at hand and rejected the Applicant’s argument.

These TTAB opinions are instructive in that they give us a clear view into how the USPTO is lawful use in commerce requirement; although the legal status of cannabis and particularly the federal government’s enforcement efforts remain murky, so long as marijuana remains a Schedule I controlled substance, federal trademark protection will not be available.

For other posts on cannabis trademarks, check out the following:

cannabis trade secretIn the world of intellectual property (“IP”), there are four categories under which your IP may fall:

  1. A trademark is any word, phrase, symbol and/or design that identifies and distinguishes the source of the goods of one party from those of others. Similarly, a service mark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of a service rather than goods. Trademarks are your brand names, and can remain in place forever so long as you are making actual, lawful use of your mark in commerce.
  2. A patent is a limited duration property right relating to an invention that is granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention. Patentable materials may include machines, manufactured articles, industrial processes, chemical compositions, and certain plant genetics. Design patents will give the patent holder exclusive rights to exploit the patented materials for 15 years from the filing date, and a utility patent or plant patent will be valid for 20 years from the filing date.
  3. Copyrights protect original works of authorship including literary, dramatic, musical, and artistic works, including poetry, novels, movies, songs, computer software, and architecture. Generally, for works created by an individual, copyright protection lasts for the life of the author, plus 70 years. For works created anonymously, pseudonymously, and for hire, protection lasts 95 years from the date of publication or 120 years from the date of creation, whichever is shorter.
  4. Trade secrets (the subject of this post) in general can be comprised of any confidential business information that provides a company with a competitive edge. Trade secrets can include manufacturing or industrial secrets like recipes, formulas, processes or techniques, as well as commercial secrets, such as client lists or business plans that have commercial value because of their secrecy. Unauthorized use of this information by anyone other than its owner is an unfair practice and violation of the trade secret. The key to trade secret law is that something is only regarded as a trade secret so long as it’s kept secret.

Many clients come to me with the belief that patent protection is more valuable than trade secret protection, but that isn’t always the case. Where patent protection is available for a limited duration, trade secrets can provide their owners with protection so long as the secrets are not disclosed to anyone. In some cases, this can be a very long time. Perhaps the most famous example of a trade secret is the recipe to Coca-Cola. Coca-Cola claims this to be the “world’s most guarded secret,” as it is known to only a few key employees at any given time. The recipe is locked in a purpose-built vault in the company’s museum in Atlanta.

If Coca-Cola had opted instead to patent their recipe, it would have been disclosed to the public, and they would have had the ability to exclusively exploit the recipe for only 20 years. Protection under trade secret law, however, will benefit them for much longer, but the key is in taking adequate steps to prevent trade secrets from being revealed. In a case for misappropriation of trade secrets, one of the factors considered by the court is whether the owner of a purported trade secret implemented adequate measures to keep their secrets secret.

Steps that can be taken to protect trade secrets include limiting the number of individuals who know the secret, implementing security protocols in the facility that holds the secret, and requiring employees and others with access to the trade secret to sign a thorough confidentiality and non-disclosure agreement (NDA). These types of agreements are used extensively by marijuana businesses.

Although trade secrets abound in the cannabis industry, information and techniques have also been shared quite freely for a very long time. And information that has been disclosed is not subject to trade secret protection under the Uniform Trade Secrets Act or the Defend Trade Secrets Act of 2016. However, even if you determine that your recipes or processes or other business information doesn’t qualify for trade secret protection, they may still have value as proprietary information, which can be licensed. For this reason, we encourage all of our clients to have confidentiality and non-disclosure agreements in place with their employees and with other key individuals with whom they transact business. Even if you don’t have a claim for misappropriation of trade secrets under trade secret law, you can still go after someone in court to try to stop them from disclosing your confidential information or for damages for having disclosed such information pursuant to your NDA.

The necessity for keeping trade secrets secret is why it is important to consult with an IP attorney as early in your development process as possible to determine whether patent or trade secret protection makes the most sense. And regardless of whether your business materials meet the criteria for trade secret protection, every company should have a form NDA that they can have employees and others exposed to confidential information sign.

marijuana cannabis brand licenseLast week I had the pleasure of attending the International Trademark Association’s (INTA) Annual Meeting in Seattle, where trademark practitioners from around the world convened to geek out on all things brand-related. One of the prevalent topics of conversation was trademark licensing. While we’ve discussed at length some of the challenges of entering into Intellectual Property (“IP”) licensing deals in the cannabis industry, I thought it would be helpful to discuss a few of the key licensing terms discussed at INTA that should be negotiated in any trademark licensing deal, regardless of the industry.

  1. Royalties

How payment will be structured is a pillar of any trademark licensing deal, and the way that royalties are structured can often be a source of contention between the licensee and licensor. In the cannabis industry, you’ll need to contemplate what royalty structures are permissible under state cannabis laws, and what implications a royalty based on revenue will have on your state cannabis license. For example, in Washington State, a licensing deal with a royalty structure based on profits or revenue would trigger the “true party of interest” requirements under the Liquor and Cannabis Board’s regulations. In California and Oregon, taking a royalty based on revenue or profit will qualify you as a “financial interest holder” in a licensee.

Other considerations include whether to ask for a lump sum payment up front (which is something that a licensor may be in favor of, but that might be burdensome to a start-up licensee). You’ll also need to determine the frequency of payments and what kind of accounting must be provided to the licensor.

  1. Use of the licensed assets

In general, a licensor will want to exercise as much control as possible over the use of the licensed IP, where a licensee will likely prefer more flexibility. This can be a particularly difficult issue in a highly regulated industry like cannabis, where state regulations often limit the control a licensor can exercise over certain elements of the use of the IP. It is therefore critical for both parties to have a solid grasp of state cannabis regulations as they pertain to the use of the licensed IP.

  1. Quality control

As with use of the licensed assets, a licensor will want to maintain as much control over the quality of the products sold under its licensed brand(s) as possible. In fact, licensors must exercise sufficient control over the quality of the products made pursuant to the license, or risk losing their trademark rights to abandonment. A licensee on the other hand will typically prefer less stringent quality control provisions and will at least seek provisions that provide it with an opportunity to cure or mitigate before license termination. A licensor may require that provisions granting an opportunity to cure be limited in certain ways, such as in the event of a breach that would cause serious reputational harm to the licensor.

  1. Indemnification

Indemnification and limitation of liability are often heavily negotiated, where a licensor will both parties will typically require indemnification from the other for a variety of IP infringement and product liability problems.

  1. Morality

This is one of the more interesting topics that was discussed at INTA, and is one that seems particularly relevant given many current events. A morality clause may be included in any licensing agreement, but is particularly relevant in agreements involving individual celebrities that are collaborating with brands. These agreements are becoming more and more prevalent in the cannabis industry. A morality clause will provide for termination of the agreement in situations where a party’s moral conduct does not conform with the standards provided for in the agreement. This could be limited to criminal acts, but need not be. The key is to clearly spell out all scenarios that could lead to termination in the agreement, and if a party to an agreement poses particular concerns to the other side, those concerns may be addressed through a morality clause.

Cannabis licensing deals are unique, and although these types of clauses may appear in any licensing agreement, the ways in which the parties approach them will be different, and will vary from jurisdiction to jurisdiction. As always, this makes it critical to incorporate a cannabis regulatory analysis into any IP licensing deal.

For more on cannabis IP licensing, check out the following:

marijuana cannabis intellectual property
Clearly NOT our style.

Last Thursday, my colleagues Vince Sliwoski, Mike Atkins, and John Mansfield and I put on a webinar addressing the unique intellectual property issues faced by companies in the cannabis industry. If you missed the live broadcast, it’s available here. We received many great questions during the presentation, but an hour and fifteen minutes simply wasn’t enough time to answer all of them. So this post will address some of the questions that were asked, but not answered, during the webinar.

What is the difference between a trade name and a trademark?

A trade name is equivalent to a “doing business as” name, or a fictitious business name. It is an assumed name under which a company does business, and it typically registered at the local and/or state level. A trademark, on the other hand, can be registered at either the federal or state level and is used to protect your brand name. A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. Owning a registered trademark gives the owner certain rights, including the right to prevent others from using confusingly similar marks on the same or similar goods or services. A trade name, even if registered, does not bestow any of these rights on the trade name owner, although use of a trade name may generate common law trademark rights.

Aren’t all federal trademarks of cannabis products unenforceable because sales of cannabis in interstate commerce are prohibited?

Yes. One of the requirements for federal trademark registration is lawful use in interstate commerce. Cannabis is a Schedule I drug pursuant to the Controlled Substances Act.

Can you obtain trademark protection for ancillary, information services related to a cannabis industry brand? What if that brand is identical to one used on cannabis products?

Yes. So long as the goods or services for which you intend to register your mark are lawful pursuant to federal law (i.e. they do not violate the Controlled Substances Act), you are eligible for federal trademark protection.

Does TM protection require use, or is prospective use sufficient? 

Federal trademark registrations may be obtained through either use, or an intent-to-use. Note that an intent-to-use trademark application requires a bona fide intent to use the mark lawfully in commerce at the time of filing.

How do you report someone infringing on your trademark or intellectual property?

There is no system for “reporting” infringement. It is the responsibility of the trademark owner to enforce their own rights, which is typically done through cease and desist letters and, in more extreme cases, through litigation.

Can a company trademark a name, phrase or slogan that consists of common industry words (i.e. “Natural Grown Cannabis”)?

Generally, no. In the example above, all of the words are descriptive of the goods that are likely being sold – trademark protection is not granted to marks that are “merely descriptive.” Generic and descriptive terms should be avoided when choosing a brand that is eligible for trademark protection.

Regardless of a company’s inability to currently obtain federal trademark protection, once cannabis is federally legal, will that company be able to assert priority based on prior use, and therefore prevent all others from using their mark?

Possibly, but this is a complicated question. First, common law rights are often geographically limited to the area in which the mark has been used. Given that cannabis is currently regulated state-by-state, most brands are used only in certain states. Furthermore, trademark protection requires lawful use in commerce – it is unclear how the USPTO and/or federal courts would view common law trademark use that was not lawful under then-existing federal law.

If a brand successfully secures a trademark in one cannabis-legal state, can they also secure trademarks in other cannabis-legal states, even if they’re not currently selling or operating in those other states?

No. Nearly all states require lawful use in commerce in that state in order to secure state trademark rights.

These questions are only a handful of those we received during the webinar, and we intend to address additional questions related to copyright, patent and trade secrets in the coming weeks. Stay tuned!

San Luis Obispo California marijuana cannabis

As of May 1, the City of San Luis Obispo is one step closer to permitting adult-use cannabis retail stores. At its most recent meeting, council members approved the first reading of a draft ordinance intended to regulate marijuana businesses. Currently, Ordinance 1633 which was adopted in March 2017, expressly prohibits all commercial and industrial, medical and recreational cannabis activity within city limits.

Pursuant to Ordinance 1633, the Council directed staff to monitor developments in other jurisdictions, monitor development at the federal level, engage with the community regarding various land use and taxation issues, and return to the City Council with a recommendation. We now have those recommendations, which would establish new Municipal Code provisions that would become effective if a cannabis revenue measure is placed on the November 2018 General Election ballot and approved by voters.

Specifically, staff recommended “repealing the current ban on commercial cannabis business activity and establishing standards to protect public health and safety regulating personal cannabis cultivation, cannabis business operators, and permitted cannabis business activities in the City.” Staff also recommended land use regulations for commercial cannabis activity and personal cultivation and provided for the creation of overlay zones where the proposed regulations would apply.

Before regulations are adopted, though, staff will still need to return to City Council with additional implementing measures, including zoning map amendments for the proposed overlay zones, criteria for ranking permit applications, and a fee schedule for applications and annual licenses.

A summary of the proposed ordinance was provided in the Staff Report as follows:

  1. Allows for access to medical and recreational marijuana in the City, with storefront and delivery options (at least one storefront will be reserved for a holder of a medicinal retail license)
  2. Prohibits onsite consumption
  3. Establishes a two-step process requiring prospective business operators to be certified and ranked prior to applying for a land use permit
  4. Includes requirements for energy and water efficiency, and limits total amount of cultivation, to ensure consistency with City climate action goals
  5. Limits manufacturing uses to non-volatile extractions only
  6. Limits cultivation to indoors only, and total City-wide amount of cultivation allowed to 70,000 square feed of total canopy coverage within indoor areas, cumulatively (includes total canopy of either horizontal or vertical growing situations)
  7. Provides for the creation of overlay zones where cannabis business activity may be permitted, and buffers within those overlay zones for cannabis retail stores of 300 feet from residential zones, and 1,000 feet from schools, and parks
  8. Requires retail stores to be located at least 1,000 feet apart
  9. Only three retail storefronts, which must be on arterial streets, will be allowed within the City

According to the City Council, they intend to adopt regulations by early summer of 2018, but given that the voters must approve a tax revenue measure in November in order for the ordinance to go into effect, we’re still looking at quite some time before the City begins accepting permit applications. We will keep you posted!

marijuana cannabis trademark

An issue we’ve seen with increasing frequency among clients and prospective clients alike is a misunderstanding of the basic requirements for obtaining federal trademark protection in the United States. We’ve worked through the issues surrounding federal registration of cannabis and cannabis-goods before, and it is common practice in the cannabis industry to obtain federal trademark protection for ancillary goods and services that do not violate the Controlled Substances Act. But the key to obtaining such trademark protection is that you must either be using the applied-for mark in commerce, or you must have a “bona fide intent” to do so. This post will explore what exactly it means to have a bona fide intent to use a mark in commerce, and what level of proof will be required to substantiate it.

A common scenario is that a cannabis business owner thinks of a name that sounds great–one they would ideally like to use on their cannabis goods and services–but they know they can’t obtain federal trademark protection for anything that is federally illegal. So, they start brainstorming similar goods and services for which they could register, oftentimes looking to large, established companies’ trademark registrations for inspiration. The problem, however, is that the cannabis company often does not have a plan in place for actually selling those goods or services. This can be a big problem.

Recall that there are two bases on which one can file a U.S. federal trademark application: actual use or intent-to-use. An application based on actual use requires proof of that use in the form of photo specimens showing the mark on the goods and a date of first sale. An intent-to-use application, on the other hand, requires “only” that the applicant have a bona fide intent to use the mark in commerce. This is a great tool for start-ups to ensure that their brand is protected while they’re getting their business off the ground. But it also raises the question of what truly constitutes a “bona fide intent” to use a mark?

Section 1(b) of the Trademark Act allows federal trademark applications to be filed based on a “bona fide intent” to use the mark in commerce, and this intent must be stated in the application under penalty of perjury. The Act further states that an intent-to-use trademark filing must be “under circumstances showing good faith.” This language indicates that there must be some objective evidence of good faith, a position that courts have consistently agreed with.

While the USPTO does not require that an applicant submit proof of their bona fide intent at the time of application, an application may be challenged on the basis of lack of bona fide intent at the time the application was filed. This is why it is critical to be able to prove your bona fide intent to use the mark in commerce at the time of filing.

Case law, including Honda Motor Co. v. FriedrichWinkelmann, provides some guidance for applicants who are unsure if they’ve met the threshold of having a bona fide intent to use their mark in commerce, and helps us understand what types of objective evidence of a bona fide intent must be shown. The Honda case involved an opposition by Honda to FriedrichWinkelmann’s application to register VIC for “vehicles for transportation on land, air or water” and related goods. The Trademark Office in this case stated that in order to raise a genuine issue of material fact as to its intent to use on a motion for summary judgment, an applicant must rely on specific facts that establish the “existence of an ability and willingness to use the mark in the United States to identify [the goods in the application] at the time of the filing of the application.”

This case, among others, reaffirms the importance of having documentary evidence to support your bona fide intent to use the mark in commerce at the time of filing. This evidence may consist of business plans, marketing plans, or correspondence with potential manufacturers, distributors or licensees, but there is no bright line test as to how much or what kind of evidence will be sufficient. When filing a U.S. trademark application, it is important to consult with your attorney about the validity of your intent to use your proposed mark. Sometimes, it may make sense to wait to file until you have a business plan in place, or until your intent is easily substantiated.

If you have any burning questions about this topic, or anything else related to intellectual property protection in the cannabis industry, be sure to tune into our free webinar, “Intellectual Property in the Cannabis Industry” on May 17th from 12pm – 1:15pm PDT. The webinar will be moderated by Vince Sliwoski, and I’ll be joined by John Mansfield and Mike Atkins to talk about trademarks, copyrights, trade secrets, and patents, all in the context of the cannabis industry. Hope to see you there!

marijuana cannabis trademark
Keep your head up for infringers.

Given the dramatic increase in the number of cease and desist letters I’ve been writing for clients who have discovered companies ripping off their brands, I thought it timely to revisit the discussion surrounding trademark monitoring. We talk a lot about the difficulties of obtaining trademark protection for cannabis-related marks, but often forget that the battle isn’t over when a registration issues. Even after you have completed the onerous process of prosecuting (registering) 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 keep would-be infringers at bay.

Although the USPTO will vet your application against marks that have already been federally registered and will issue your trademark registration if there are no confusingly similar registered marks, the Office will not actively monitor or seek out infringers, nor will they prosecute infringers. Monitoring for and prosecuting infringers is therefore your job, as the trademark owner. If you do not monitor and enforce your trademarks, there will be nothing stopping other companies from adopting your name or logo, or a variation thereof, for their own use.

Infringing companies may violate your ownership rights for a variety of reasons: They may be ignorant of the rules around copying, or they may feel like the risk of litigation is worth taking given the potential upside associate with your proven name or logo. An infringing company may also have had a similar idea to yours, but failed to secure a federal trademark registration due to likelihood of confusion with your mark. In any case, if the infringer is using your mark on a subpar product or a product your company would rather not be affiliated with, that can be damaging to your brand. Thus, vigilance on the part of a trademark owner is key to preventing infringement.

Below are a few basic tips for monitoring potential infringers of your mark:

  1. 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.
  2. 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.
  3. 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. These services can be particularly helpful if you hold trademarks in multiple domestic and international jurisdictions.

If you do encounter a company you believe to be infringing your trademark, you should contact a cannabis intellectual property (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 ultimately, litigation if necessary.

We wrote a few months ago about proposed changes to California’s rules governing temporary events, and last week, we saw the first big casualty of the current permitting requirements under the Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”). High Times hosted its Southern California Cannabis Cup over the weekend, but was forced to do so without cannabis sales and without open consumption.

Pursuant to MAUCRSA, a state licensing authority may issue a state temporary marijuana event license to a licensee authorizing onsite cannabis sales to, and consumption by, persons twenty-one years of age or older at a “county fair or district agricultural association event, provided that certain other requirements are met.” One of these requirements is local approval: In all circumstances, licensed commercial cannabis activity must be conducted in accordance not only with state law, but with local law as well.

marijuana cannabis california event
It probably won’t be the first time.

Two days before the event was scheduled to begin, the San Bernardino City Council unanimously (by a 6-0 vote) denied High Times’ permit to conduct the SoCal Cannabis Cup at the National Orange Show Events Center. This denial was based on an ordinance passed the week prior that requires city approval for these types of cannabis events within city limits. The City Council also noted High Times’ failure to meet the 60-day advance lead time required for event approval pursuant to state law.

High Times opted to host the event without a temporary event permit, and without any cannabis vending or authorized cannabis consumption. Prior to the event, a High Times spokesman told Leafly that “any cannabis consumption at the three-day event will be strictly bring-your-own.” This strategy presents its own problems, where nothing in MAUCRSA permits any person to:

  • Smoke or ingest cannabis or cannabis products in a public place;
  • Smoke cannabis or cannabis products in a location where smoking tobacco is prohibited; or
  • Smoke cannabis or cannabis products within 1,000 feet of a school, day care center, or youth center while children are present.

High Times also indicated that it intended to utilize an “interpretation of pre-legalization regulations governing medicinal collectives and cooperatives” by creating a cannabis consumption area accessible only by people with a doctor’s recommendation to use cannabis. But there is nothing in Proposition 215 that explicitly authorizes these types of consumption areas, or renders them exempt from local law approval.

In fact, earlier last week the Bureau of Cannabis Control (“BCC”) issued a notice to all stakeholders clarifying that “lawful participation by bureau licensees in any temporary cannabis event that allows sales and/or consumption is dependent upon issuance of the appropriate licenses from the bureau,” and that licensees participating in unlicensed events would be subject to disciplinary action. The notice went on to state that although qualified patients and their caregivers that continue to operate collectively or cooperatively without a state cannabis license are not subject to certain state criminal sanctions based solely on their cultivation or manufacturing of cannabis for medicinal purposes pursuant to Health and Safety Code section 11362.775 until the section is repealed on January 9, 2019, there is nothing in the Code that authorizes “collectives” or “cooperatives” to participate in cannabis events, commonly known as “Proposition 215” events, where cannabis is sold and/or consumed.

In High Times’ cases, the BCC was actually willing to permit the SoCal Cannabis Cup if the City Council approved. But as we all know by now, cities and counties have extensive authority to regulate commercial cannabis activity, and without local approval these activities will not be legal.

For more on California cannabis events and social consumption, see:

marijuana intellectual property licensing
Licensing agreements can get complicated. Start with who owns what.

We’ve written extensively about the potential pitfalls of intellectual property (“IP”) licensing deals, which are prolific within the cannabis industry. (For a few select articles, try here, here and here). Recently, news broke of another licensing-related lawsuit, this time involving Tommy Chong. According to the lawsuit, Chong and his son allegedly conspired to steal profits from Evergreen Licensing LLC. The complaint seeks damages for breach of contract, fraud and unjust enrichment.

The complaint alleges that after three years and $1 million spent on the project, Chong and his son conspired to “take it all away, even hacking into Evergreen’s Gmail account in order to misappropriate social media sites that plaintiffs created for the project.” The plaintiffs further allege that they were cut “entirely out of the picture, the project and the revenue and profits the project was going to generate and is generating.” It all sounds pretty unfair.

Unfortunately, these types of allegations come as no surprise given some of the proposed deals that have come across our desks. IP licensing is often seen as a quick and easy way to enter the marijuana industry, without having to clear the hurdles of state and local licensing and regulatory compliance. But unfortunately, this simply is not the case. These deals are complicated and fraught with unique cannabis-related issues beyond those posed by state and local regulations.

In addition to regulatory compliance, those contemplating a cannabis-related IP licensing deal need to understand the fundamentals of intellectual property, and this often begins with determining who actually owns what. In the cannabis industry in particular, information, strain names, and industry terminology have been shared freely since long before state-level legalization, and this compounds the difficulty faced by cannabis business owners in protecting their IP.

Ownership of IP in the cannabis industry is fraught with issues, as we’ve discussed before, in large part because the USPTO will not issue federal trademark registrations for cannabis-related marks. Far too often, cannabis companies come to us with proposed licensing deals where basic due diligence quickly reveals the licensor simply does not own what it claims to own.

If you’re looking to license IP from another company, here are the most basic questions you should be able to answer about that 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 an “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?
  • 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 list is only the beginning of the questions that will need to be asked and answered, but failing to address these issues at the outset of a deal is a recipe for litigation, as we see in the case of Tommy Chong. As a business owner considering entering one of these deals, don’t be distracted by big names or big promises: If the IP doesn’t exist and if ownership cannot be demonstrated, there is no real value to be had. Although IP licensing in the cannabis industry is complex, there are creative and valuable solutions to be had, but those require a solid understanding of both IP law and state and local cannabis laws to execute.

marijuana trademark canada
Some U.S. companies are looking north for trademark protection

With U.S. federal trademarks being impossible to obtain for cannabis goods and services that violate the Controlled Substances Act, my trademark clients are beginning to ask questions about their options for international trademark protection. Canada, having legalized cannabis and being our closest neighbor, is usually one of the first countries my clients are interested in.

According to a recent piece written by a group of Canadian attorneys at Torys LLP, the number of trademark filings covering cannabis-related goods and services in Canada has increased dramatically since talk of cannabis legalization began.

Canada has made some big changes to its Trademarks Act that will likely be implemented early next year, and these changes will make it much easier to register trademarks. In particular, Canada will remove the requirement that a trademark be “used” prior to registration issuing. In the U.S., an applicant can file a trademark application prior to making use of their mark in commerce if they have a bona fide intent to do so (this is called an “intent to use” application), but in order for a registration to actually issue, the applicant will need to submit a “Statement of Use” to the USPTO within six months from the date the Trademark Office gives a “Notice of Allowance.” One of the policy reasons for this “use” requirement in the U.S. is to prevent trademark “squatting,” where individuals register marks without any intent to use them in order to either prevent others from making use of the marks, or to extract payment from those wishing to do so.

It is indisputable that by removing the “use” requirement for trademark registration, Canada will be opening the doors to “trademark trolls” and “squatters.” According to the Torys attorneys, there are nearly 2,000 trademarks listed on the Canadian trademarks register with goods or services containing the words “cannabis” or “marijuana.” More than half of those applications were filed since January 2017 (apparently, as of five years ago, fewer than 100 such applications had been filed, making for a 1,900 percent increase in cannabis-related Canadian trademark applications). This rush to file for trademark protection makes sense, where companies will be forced to either register their marks, or risk losing them to third parties or squatters.

But given how relatively straightforward it is to obtain a trademark for cannabis goods or services in Canada, there are many restrictions placed on how those cannabis trademarks can be used via the proposed cannabis regulatory framework. For example, cannabis trademarks may not be used to promote cannabis goods:

  • In a manner that appeals to children;
  • By means of a testimonial or endorsement;
  • By depicting a person, character or animal, whether real or fictional;
  • By presenting the product or brand elements in a manner that evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk, or daring;
  • By using information that is false, misleading or deceptive, or that is likely to create an erroneous impression about the product’s characteristics, value, quantity, composition, strength, concentration, potency, purity, quality, merit, safety, health effects or health risks;
  • By using or displaying a brand element or names of persons authorized to produce, sell or distribute cannabis in connection with the sponsorship of a person, entity, event, activity or facility, or on a facility used for sports, or a cultural event or activity; and
  • By communicating information about price and distribution (except at point of sale).

With the exception of the fourth point, which could be construed as somewhat vague and certainly subjective, many of these restrictions on advertising and labeling are contained in the various state cannabis regulatory regimes here in the U.S., so these limitations should come as no surprise to cannabis business owners.

For cannabis business owners in the U.S., it may make strategic sense to consult with a trademark attorney with experience filing cannabis-related applications to consider filing for trademark protection in Canada. Successful brands will be those that think globally, not nationally.