Federal law and policy

Hacking back isn’t the answer, unfortunately.

As I have discussed for the last two weeks, cannabis businesses have become increasingly vulnerable to cyberattacks. It is natural for a company victimized by data breaches to want to retaliate by hacking back. However, under current U.S. law, which is codified under the Computer Fraud and Abuse Act (“CFAA”), it is strictly prohibited to intentionally access another’s computer without authorization.

Legislators have given some thought to this problem. Most recently, the re-introduction in October 2017 of the Active Cyber Defense Certainty (“ACDC”) Act, a bill sponsored by Congressman Tom Graves (R-Ga) and Congresswoman Krysten Sinema (D-Az), raised questions about the legality of counter attacking. Indeed, the ACDC Act proposes to amend the CFAA and enable victims of cyberattacks to adopt active defensive measures to identify the hackers, destroy information originally stolen from the victims’ networks, and attack the intruders’ servers to interrupt the ongoing attack. Although an eye-for-an-eye form of justice is appealing, unauthorized access to networks is not a good idea. Here is why.

First and foremost, the ACDC Act has not be enacted. This means that the CFAA remains the law of the land, and accessing others’ computer systems without their permission is a criminal offense. Every state law punishes hacking under the computer crime statutes. These crimes carry serious penalties ranging from a class B misdemeanor (punishable by up to six months in prison, a fine of up to $1,000, or both) to a class B felony (punishable by up to 20 years in prison, a fine of up to $15,000, or both).

Second, even if retaliation were legal, most companies would lack the expertise required to safely conduct an offensive cyber operation. It is incredibly difficult to identify individuals and entities behind cyberattacks. Most intruders cover their tracks very carefully by using encryption and by routing strikes through others’ computers. Given this, counter hacking would most certainly result in attacking computer systems and destroying data belonging to innocent third parties.

Then, there is the issue of whether victim companies have the technical proficiency required to effectively take counter measures against cyber intruders. Indeed, the internal tools needed to effectively hack back represent a major undertaking: a high level of expertise, constant vigilance, and huge financial resources. Moreover, it is highly unlikely that companies that could not prevent the intrusion of their networks would manage to take on their attackers on their own digital turf.

Lastly, retaliation by companies that fell victim of a data breach would most certainly impede law enforcement investigations and delete or temper with evidence that could be useful in a prosecution. Unlike law enforcement agencies, companies do not have the relevant technical expertise or diplomatic tools to pursue hackers. Most companies ignore how to preserve a chain of custody that would enable the introduction of untampered evidence at trial. In addition, counter hacking is an incredibly dangerous endeavor because it is very difficult, if not impossible, to see what a company would be up against. In retaliating, a company would run the risk of escalating the situation and of further injuring itself.

As I have discussed before (here and here), no one and no company is immune to cyberattacks. It is understandable that companies, including cannabis companies, are getting tired of being passive and of merely defending against these breaches. However, hacking back is not a feasible option given its illegality and the negative consequences it could have on the retaliating company. When faced with a data breach, don’t let your emotions dictate your actions; instead, stick with a comprehensive plan of action that will help you minimize your damages and let skilled, experienced law enforcement agents do the job of tracking and investigating your attackers.

marijuana federal employment cannabis
Will the laws change for federal worker marijuana use?

Could the federal government protect the rights of federal employees to use marijuana in states where its legal?

Possibly. A bipartisan bill was introduced in Congress on July 28 proposing to protect federal employees’ personal and private use of marijuana in states where it is legal. Congressmen Charlie Crist (D-Fl) and Drew Ferguson (R-Ga) jointly introduced the “Fairness in Federal Drug Testing Under State Laws Act”, which would prohibit federal employers from denying employment or subjecting federal employees to adverse personnel action if they test positive for marijuana and live in a state where it is legal.

Today, because marijuana remains an illegal substance under the Controlled Substance Act, federal employees can be terminated or denied employment if they test positive for marijuana on a drug test (and many federal agencies require regular or periodic testing). The bill would not apply to individuals occupying or seeking positions requiring top-secret clearance (meaning, they could still be tested), and the bill would allow federal employers to terminate employees for being impaired at work.

The bill, while incredibly important for federal employees, could also significantly impact private employers in states with legal cannabis. A majority of states have some form of legal marijuana, either medical or recreational. However, many of those states still allow employers to terminate employees for off-work use of marijuana, even medical marijuana patients. Several states, including Oregon and California, have attempted to pass legislation protecting employees’ off-work marijuana use, but the bills have failed in committees or did not garner enough votes to pass. Thus, both Oregon and California currently have statutes and/or case law allowing employers to terminate employees for off-work use.

So why are the state proposals failing? One big reason is that they have not made exceptions for private employers who contract with the federal government. Private employers who contract with the federal government are required to have drug-free workplace policies in place—meaning they have to terminate employees for positive drug tests to maintain their federal contracts. If the Fairness in Federal Drug Testing law passes, it likely would extend to private employers contracting with the government. And if the federal law passes, states may have a clearer path to protecting off-work use.

It is also important to note that the state laws and cases permitting employers to terminate employees for off-work marijuana use rests on marijuana’s continued classification as a Schedule I controlled substance under the federal Controlled Substance Act. While the Fairness in Federal Drug Testing act would not change marijuana’s status as controlled substance, states would at least be able to rely on the federal government’s position that it will not fire employees for off-work use. It seems more likely that the states where marijuana is legal in some form would be successful in passing legislation protecting employees’ off-work use of marijuana.

It will certainly be interesting to see if the Fairness in Federal Drug Testing bill gains momentum in committee and in front of Congress. We will be sure to keep you posted for any movement on the bill after Congress returns from their August recess.

cannabis marijuana copyright
Definitely worth a shot.

Every business thrives on brand differentiation. One of the most effective ways to promote public identification and recognition is to enhance and protect your brand. Your brand is of course your name but it is also your logo. Beyond that, really, it’s everything about you.

As far as “formal” branding elements, logos are right there at the top. Still, there is a fair bit of confusion among business owners and even lawyers about how logos are legally protected. Are they to be registered as trademarks? Copyrights? Are logos registrable as both?

Let’s look at trademark first. Trademarks are words, phrases, symbols or designs that identify the source of a product and help distinguish that product from that of competitors. The very best way to protect your brand name and logo is to register it as a trademark. However, as we have written about extensively on this blog, federal trademark protection is not typically available to cannabis businesses because the federal illegality of “marijuana” prevents owners from demonstrating lawful use of their marks in commerce, necessary under the Trademark Act.

Although trademark law is the preferred means to protect a logo, it is not the sole intellectual property tool a cannabis business can use. Copyright protection may be available as well. Unlike trademark law, copyright law does not prohibit registration of works that concern illegal subject matter. Accordingly, cannabis-related works, including logos, often may be copyrighted.

To benefit from copyright protection, a cannabis logo must:

  1. Be original to the author, which means the author must have created the work independently (i.e., the work must not be copied);
  2. Possess a “minimal degree of creativity;” and
  3. Be fixed in a tangible form that is sufficiently permanent to be reproduced.

Therefore, logos that are adequately original and ornate have a strong chance of being copyright protected, even without registration. But it is in the business’s best interest to register its logo with the U.S. Copyright Office. Registration affords significant benefits, because it gives the business the right to sue and to be awarded statutory damages and attorney’s fees should it prevail on an infringement claim. In addition, copyright registration is relatively straightforward and inexpensive.

There is one significant catch, however. Many logos consist of words combined with graphic images: For example, Starbucks Coffee’s logo in which the brand name encircles a mermaid design. Trademark law allows both the words and the images to be protected. But copyright law will generally apply only to the graphic elements of a logo. Short phrases, including brand names, tag lines, and titles, are not copyrightable. You can submit a copyright registration for your logo with words and graphics. It will not be rejected by the Copyright Office, because copyright registrations are not reviewed or examined. But your copyright will only cover the pictures in your logo, not the brand names or catch phrases.

There is some risk that the federal illegality of cannabis would arise in certain facets of litigation and hinder the enforceability of the copyright. (The same would be true in cannabis patent enforcement cases, as we discussed here.) However, there is no provision in copyright law prohibiting works that address illegal activity, as there is in trademark law. Such risk is speculative as no cannabis copyright infringement case (or patent infringement case) has been litigated.

Assuming the copyrighted logo of a cannabis business is enforceable, it affords the business the exclusive right over the graphic portion of the logo’s reproduction and public display. In addition, copyright protection gives the cannabis business the possibility of receiving compensation for the use of the logo by others in some circumstances. Keep in mind, however, that a copyright will not allow you to collect royalties every time someone mentions your product by name. Nor would you want to prevent anyone from mentioning your product!

Given the fact that cannabis businesses are presently barred from securing federal trademark registration for their logos, they should consider copyright registration for the graphci portion of logos. While not as valuable as trademark protection, the value proposition for copyrights is strong because registration is cheap and easy.

industrial hemp cannabis farm bill
We like this one.

For the past few months, the U.S. Senate has made significant strides toward legalizing industrial hemp. That is welcome news to many of our clients, who are working with the plant under federally approved Agricultural Pilot Programs, while also dealing with almost absurdly complex issues surrounding the legality of cannabidiol (“CBD”) sales.

The legislative developments began in earnest earlier this year, when Senate Majority Leader Mitch McConnell (R-KY) introduced the short and sweet Hemp Farming Act of 2018 (the “Hemp Farming Act”), which aims to lift an 80-year old ban on hemp as an agricultural commodity. We analyzed that development here.

Then, on June 5th, the Senate adopted its third annual non-binding resolution that recognized “the growing economic potential of industrial hemp” and its “historical relevance,” further suggesting Congress’s intention to legalize the non-psychoactive cannabis cousin of marijuana. Around the same time, Senate Leader McConnell incorporated the Hemp Farming Act into the wide-ranging agriculture and food policy bill known as the 2018 Farm Bill to ensure a greater chance of success, and it worked. Last week, the Senate overwhelmingly approved the 2018 Farm Bill, including the Hemp Farming Act, by an unambiguous 86-11 vote.

As with the Strengthening the Tenth Amendment Through Entrusting State Act (the “STATES Act”), which we covered here and here, the Hemp Farming Act provides for the removal of industrial hemp from Schedule I of the Controlled Substance Act (“CSA”). This removal would explicitly legalize the cultivation, processing and sale of all hemp-derived products, including CBD. This means that if cannabis legislation continues to move forward in Congress—which seems highly probable given the fact that the Hemp Farming Act has passed the Senate and that the STATES Act has reached the House—Congress will likely reconcile these pieces of legislation and industrial hemp prohibition will end.

In addition to removing industrial hemp as a Schedule I drug of the CSA, the passage of the Hemp Farming Act into law would:

  • Empower states and tribes to regulate the production of hemp without fear of federal intervention;
  • Permit farmers to grow, process and sell hemp-derived products as an agricultural commodity, which in turn would create economic opportunities and stimulate economic growth in rural communities;
  • Make hemp plants eligible for crop insurance;
  • Ensure access to public water rights for hemp farmers;
  • Enable hemp farmers to access the national banking system;
  • Recognize that some hemp-derived products, such as CBD oils, have valid medical use;
  • Make hemp-derived products eligible for federal trademark protection; and
  • Advance research opportunities by enabling hemp researchers to apply for grants with the U.S. Department of Agriculture.

Although the passage of the Hemp Farming Act in the Senate is a promising step toward the legalization of industrial hemp, more hurdles must be overcome before the federal legality of hemp becomes the law of the land.  The Hemp Farming Act now must be merged with a competing version from the House, which does not provide for the legalization of industrial hemp, before it can reach President Trump’s desk for signature.

Whether the final version of the Hemp Farming Act will become law is purely speculative at this point; however, the fact that Senate Majority Leader McConnell (i.e., THE most powerful senator) is its most fervent supporter seems to suggest that the Hemp Farming Act is likely to survive and (hopefully) become law. We will definitely keep you posted.

In the meantime, for more on industrial hemp and CBD, check out the following:

marijuana states actIt seems like every year, the old pot guard in Congress tries its hand at some form of marijuana legalization. Although these sorts of actions attract headlines (and votes?), they never seem to go anywhere. But for the first time ever, a real and legitimate bipartisan “respect states’ rights” effort is being pushed by some powerful members of Congress. Specifically, Republican Senator Cory Gardner is picking up the mantle for Congressional cannabis reform and it may actually pass this time (if the MFOA doesn’t get there first).

On June 7th, Senators Gardner and Elizabeth Warren released a bipartisan marijuana bill that would explicitly allow states to determine the fate of marijuana in their own jurisdictions. Here’s a copy of the bill, entitled the “Strengthening the Tenth Amendment Through Entrusting States Act” (“STATES Act”). Most importantly (and wisely, if anyone wants this bill to go anywhere), it doesn’t change the Controlled Substances Act (CSA) on cannabis scheduling and so even if it passes, cannabis will remain a Schedule I controlled substance. But it will mean the CSA will be amended to give each state the freedom to determine how best to address commercial cannabis activity within its own borders, state-approved commercial cannabis activity will cease to be considered drug trafficking, and proceeds from and assets used in legal cannabis operations would not be subject to forfeiture by the Department of Justice (DOJ).

If the bill passes, the CSA would not apply to:

[A]ny person acting in compliance with State law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana . . . any person acting in compliance with the law of a Federally recognized Indian tribe within its jurisdiction in Indian Country . . . related to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana so long as such jurisdiction is located within a state that permits, respectively, manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.

State-legal marijuana businesses would still be in trouble under the CSA for employing anyone “under 18 years of age to manufacture, produce, distribute, dispense, administer, or deliver marihuana.’’ This bill will also remove industrial hemp from the CSA, which would finally square away its precarious legal status regarding its derivative products, like CBD.

Though the Rohrabacher-Blumenauer Amendment prevents the DOJ from interfering with a state’s right to implement medical cannabis laws and regulations, the STATES Act would make it illegal for the Department of Justice to enforce the CSA against state-legal marijuana users or medical or recreational marijuana businesses. Passage of this bill would obviously be a huge, huge step forward for marijuana legalization. This bill would lead to improvements in the banking situation for cannabis businesses and realizing this, some bank are lobbying for cannabis reform to be able to better serve the cannabis industry. Passage will also mean state-legal cannabis businesses can finally secure federally protected trademarks and avail themselves of other federal protections and benefits currently denied to them, including nondiscriminatory tax treatment.

Ironically, the one person we may deserve the most thanks for this big move is Attorney General Jeff Sessions who — as we all know — loathes cannabis. His blitzkrieg to undo state progress on cannabis law reform is backfiring. I previously wrote how Senator Gardner was so irritated by Sessions’s rescinding the 2013 Cole Memo that he took it upon himself to block numerous DOJ appointments. This got President Trump’s attention and led Gardner to receive, according to The Washington Post, “a commitment from the President that the Department of Justice’s rescission of the Cole memo will not impact Colorado’s legal marijuana industry . . . Furthermore, President Trump . . . assured [Gardner] that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.”  And Trump echoed on June 8th that he’d “probably” support the STATES Act.

The STATES Act is a bipartisan bill that does not outright legalize marijuana or even re-schedule or decriminalize it. Couple this with President Trump’s strong dislike of Sessions anyway and it does very much look as though the political stars may finally be aligned to see meaningful marijuana law reform at the Congressional level.

Editor’s Note: A version of this post originally appeared in an Above the Law column, also by Hilary Bricken.

marijuana cannabis MFOA
Our thoughts on the new Senate cannabis bill.

Yesterday, U.S. Senator Chuck Schumer (D-NY) introduced the Marijuana Freedom and Opportunity Act (“MFOA”). The MFOA is also co-sponsored by Senators Bernie Sanders (I-VT), Tim Kaine (D-VA), and Tammy Duckworth (D-IL). Coming on the heels of the STATES Act, the MFOA is the latest–and hopefully a successful–attempt to put an end to America’s unjust and immoral stance on marijuana (show us the way Canada!). The MFOA, as it’s currently drafted, pulls no punches: Its stated purpose is “To decriminalize marijuana, and for other purposes.” It only gets better from there as other provisions are as follows:

  • It officially removes “marihuana” (that’s how it’s spelled in the Controlled Substances Act) as a Schedule I drug of the CSA.
  • It would create the Marijuana Opportunity Trust Fund (“Fund”) – think social equity programs but on a federal level. The Secretary of Treasury would transfer the greater of ten percent of all tax revenue generated by the cannabis industry or $10 million to the Fund. The amount transferred into the Fund would then be made available to small cannabis businesses owned by women, and by socially and economically disadvantaged individuals. There’s no doubt that America’s “war on drugs” has been implemented by law enforcement to disproportionately affect people of color and the poor. Although the establishment of the Fund won’t be able to right that wrong, it’s a step in the right direction.
  • It would authorize up to $250 million over five years for highway safety research and to help expedite the development of enhanced strategies and procedures to reliably determine the impairment of a driver under the influence of THC.
  • It authorizes $500 million over five years for critical public health research to better understand the effects of THC on the brain and the efficacy of medicinal marijuana for specific ailments.
  • It would allow the Alcohol and Tobacco Tax and Trade Bureau to regulate advertisements and promotions in order to prohibit promotions to individuals 18 years of age and under.
  • It authorizes up to $100 million for state and local governments to create expungement or sealing programs for those with prior marijuana convictions.
  • It would still grant States the authority to prohibit marijuana if they decided they preferred to live in the dark ages.

The MFOA has a little bit in it for everyone and hopefully that will lead to its passage: The cannabis industry would be able to operate, and therefore bank, without fear of government intervention; Populations disproportionately impacted by the war on cannabis will have access to capital; Funds will be allocated to prevent impaired driving and promotions aimed at minors, and; States can still criminalize cannabis if that’s their cup of non-THC-infused tea. The MFOA still has a long way to go and who knows what the November midterms or how President Trump’s position on it will vacillate from week to week (or day to day) but let’s make sure to contact our federal legislators and tell them that we demand they support the MFOA.

fda epidiolex cannabis
Big win today for GW Pharma.

In a previous post, we discussed GW Pharmaceuticals, the leading developer of cannabis-based pharmaceuticals. Today, the FDA announced the approval of GW Pharmaceutical’s drug Epidiolex (cannabidiol), an oral solution for treatment of seizures associated with two rare forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. This announcement is important for several reasons.

First, although the FDA has previously approved drugs using synthetic THC as the active ingredient (Marinol, Sydros, and Cesamet), Epidiolex is the first approval for a purified drug substance derived from marijuana plants.

Second, this is the first approval for cannabidiol (CBD), which is not psychoactive, unlike tetrahydrocannabinol (THC), which is.

Third, and perhaps most importantly, the approval of Epidiolex could present the Drug Enforcement Administration (DEA) with an opportunity to review the status of cannabinoids under the Controlled Substances Act (CSA). Currently, CBD from marijuana is a Schedule I substance because it is a chemical component of the marijuana plant. In support of the Epidiolex new drug application, GW Pharmaceuticals conducted clinical and nonclinical trials assessing the abuse potential of CBD, a critical factor in determining appropriate scheduling under the CSA. This means that DEA will likely now consider the appropriate CSA scheduling of Epidiolex in light of these data. It is too early to tell whether DEA will reschedule Epidiolex, but DEA has previously approved Schedule II and Schedule III status for THC-containing products Marinol, Sydros, and Cesamet.

Finally, the FDA confirmed that while it continues to support the development of medical marijuana therapies, it does so only under the existing drug approval process. According to FDA Commissioner Scott Gottlieb, M.D.:

“This approval serves as a reminder that advancing sound development programs that properly evaluate active ingredients contained in marijuana can lead to important medical therapies. And, the FDA is committed to this kind of careful scientific research and drug development. Controlled clinical trials testing the safety and efficacy of a drug, along with careful review through the FDA’s drug approval process, is the most appropriate way to bring marijuana-derived treatments to patients. Because of the adequate and well-controlled clinical studies that supported this approval, prescribers can have confidence in the drug’s uniform strength and consistent delivery that support appropriate dosing needed for treating patients with these complex and serious epilepsy syndromes. We’ll continue to support rigorous scientific research on the potential medical uses of marijuana-derived products and work with product developers who are interested in bringing patients safe and effective, high quality products.”

CBD producers should note that FDA Commissioner Gottlieb makes clear that this does not mean that CBD is now legal:

“But, at the same time, we are prepared to take action when we see the illegal marketing of CBD-containing products with serious, unproven medical claims. Marketing unapproved products, with uncertain dosages and formulations can keep patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.”

Regardless of how Epidiolex is eventually scheduled, it’s now approved, and GW Pharmaceuticals’ aggressive research and development program has pushed the cause of medical marijuana one large step forward.

cannabis marijuana intern
Is your “intern” really an intern?

A simple google search for “Cannabis Intern” turns up around 340,000 results. As an employment attorney, the word “intern” is a major red flag for me — right up there with “independent contractor.”  Why? Because “intern” positions are often misused and many businesses, even sophisticated ones, believe labeling someone an intern means you do not have to pay them.

Employers can—and in certain situations encouraged to—hire interns. Properly classified interns do not have to be paid minimum wage. Employers may have the best intentions hiring an unpaid or low-paid intern. They truly believe the worker will obtain important training and education from the position. That might even be true. But, if a person is providing a service for an employer and is not paid or is paid under minimum-wage, employers could be in a lot of trouble for violation of both state and minimum wage laws.

What makes an intern actually an intern rather than an employee of a company? The U.S. Department of Labor has a seven-part test for determining the status of interns . When evaluating the employment relationship between an employer and an intern a court will consider:

  1. How similar the training is to that which the worker would receive in an educational environment;
  2. The extent to which the training is tied to a formal education program with integrated coursework and academic credit;
  3. The extent to which the program accommodates academic commitments by corresponding to the academic calendar;
  4. The extent to which the internship’s duration is limited to the period of beneficial learning;
  5. The extent to which the internship complements rather than displaces the work of paid employees while providing significant education benefits;
  6. The interns are not necessarily entitled to a job at the conclusion of the training period; and
  7. The employer and the intern understand that the intern is not entitled to compensation for the time spent in training.

No single factor is determinative, but as you can tell there is a common theme of education. Typically, if the worker is receiving some sort of educational credit for the work, they are an intern. If the worker is improperly classified as an intern and has not been receiving pay, then wage and hour laws apply. As previously discussed, failing to pay minimum wage can come with hefty penalties.

If you’re considering hiring an “intern” for your marijuana business, its best to consult with an employment law expert beforehand to provide a legal analysis of whether the position is truly one fit for an intern. After all, even if a state agency considers the “intern” qualified to work in your marijuana business, that doesn’t necessarily mean you can have them work for free.

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:

“What do you do?”

When meeting someone for the first time this is a pretty standard ice-breaker. Usually the responses are pretty innocuous: “I’m in sales” or “I’m in IT”. But if you add “…in the cannabis industry” to those answers you’re bound to get a number of follow up questions. When I tell people that I advise businesses, investors, and ancillary service providers in the marijuana industry, without fail the first question that I get is “Aren’t you worried about the federal government?” I then go into discussion on the Rohrabacher-Blumenaur Amendment (formerly the Rohrabacher-Farr Amendment), the history of the Cole Memo (which although rescinded still plays an important role in banking), and the importance of complying with your state’s cannabis regulations. Lastly, I talk about the change in the national discussion and perception of the cannabis industry. Gone are the days of the “lazy stoner” stereotypes (although perhaps not for U.S. Attorney General Jeff Sessions). Instead we have sophisticated cannabis businesses providing products to a large and diverse section of America – with more and more states looking to legalize either medical or adult-use marijuana activities this year.

For those of us who follow cannabis bills in the U.S. Capitol and in our state legislative houses, it’s clear that there is momentum towards ending America’s shortsighted and draconian war on cannabis (we covered recent developments on the federal level here). While Republicans and Democrats in Congress can’t seem to agree on anything nowadays, support for individual states to regulate cannabis activities as they see fit for their constituents is one of the few areas where bipartisan support exists. Every day, more Republicans in Congress are signing on as sponsors to bills that will support the cannabis and hemp industries (we see you Mitch McConnell!). And now we can add to the list of cannabis supporting Republicans: President Donald Trump?

Could Trump actually point us in the right direction?

Just last week, the President, while boarding a helicopter for the G-7 summit in Canada, mentioned his support for what Senator Cory Gardner (R-CO) is doing. What exactly is Senator Gardner doing you ask? He, along with Senator Elizabeth Warren (D-MA), and Representatives David Joyce (R-OH) and Earl Blumenauer (D-OR), have introduced the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. You’ll recall that Senator Gardner didn’t take too well to A.G. Sessions rescinding the Cole Memo, so he vowed to block all Department of Justice appointments in return. After meeting with the President, Sen. Gardner put an end to his blockade (which we covered, here) when the President assured him that “he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.” At the time of the meeting there was no agreement as to what the “federalism-based legislative solution” would look like. Today there is. Here’s a list of what the STATES Act would and wouldn’t do:

  • It would amend the federal Controlled Substances Act (“CSA”) so that the CSA would not apply “to any person acting in compliance with state law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.”
  • It would also amend the CSA so that the same exclusion would apply to persons acting in compliance with the law of a federally recognized Indian tribe within its jurisdiction.
  • It would deschedule industrial hemp from the CSA entirely.
  • It would make access to banking easier for cannabis businesses as state legal cannabis sales and transactions would no longer be considered trafficking.
  • It would not change the law in states that continue to criminalize cannabis activities.
  • It would not apply to any of the other substances identified in the CSA.
  • It doesn’t guarantee that President Trump will keep his word.

That last point isn’t actually written into the bill, but it’s the 800-pound gorilla in the room that no one can ignore. The President, to be polite, has had a tenuous relationship with the truth and keeping his word, so it’s far from certain that he will throw his support behind the STATES Act. An off-the-cuff remark before meeting with G-7 allies (or are they adversaries now?) does not constitute unwavering support. We’ll have to see more consistent and direct support from the President before we can feel confident that the STATES Act will become law. The President’s support is necessary because he’s still very popular with the Republican base and can therefore give recalcitrant Republicans in Congress cover if they’ve been cannabis opponents previously.

Let’s keep our fingers crossed that the North Korea Summit meeting goes well (who cares about cannabis legalization if nuclear war’s broken out?), that Congress pushes this one through, and that the President carries that high over to the STATES Act.