Intellectual Property/Branding

cannabis marijuana cobrandI’m currently advising multiple cannabis clients that are seeking to enter into co-branding deals, some with other cannabis companies, some with non-cannabis companies, and some of these clients were initially unaware of the potential risks to their intellectual property (“IP”) that could result from a poorly-drafted agreement (or from failure to adequately protect their IP from the outset).

Most of the industry, at least here in California, is aware of the collaboration between Lagunitas Brewing Company and CannaCraft (under its AbsoluteXtracts brand) that produced Hi-Fi Hops, an IPA-inspired cannabis sparkling water. In Oregon, East Fork Cultivars partnered with Coalition Brewing to create a CBD-infused beer called Certified Hazy IPA. And there are no shortage of other brand collaborations within the industry, from gourmet chocolate to vape cartridges.

Co-branding is a common marketing strategy wherein two or more brands collaborate to create a product that is representative of both or each of the brands. Co-branding can be a great opportunity for publicity and can also serve as an opportunity to introduce one of the co-brander’s customers to the other co-brander’s product. It can be an effective tool for expanding the reach of your brand into other markets if executed properly. Co-branding can also serve to enhance the value of the goods if both of the brands are well-known and respected by their consumers.

But if these types of deals aren’t well thought out and well executed, co-branders run the risk of diluting their brand, or if they are a small company, finding their brand overshadowed by the larger, better established brand. If an agreement is poorly drafted, you may find yourself in a situation without much control over the product or its quality, and a sub-par product could ultimately lead to negative publicity and reputation damage.

Below are some of the things you should think about before entering into a cannabis co-branding deal.

     1.   Choose your co-branding partner wisely.

We’ve talked about this in the context of IP licensing generally, but the same rules apply here. Make sure you feel comfortable with the company you intend to partner with. In a co-branding deal, it’s important that the products or services offered by each co-brander are complementary and that each party stands to gain through affiliation with the other. Ask yourself whether partnering with this other company would expand your consumer base and introduce potential new customers to your product, and whether your brand would provide the same benefit to your partner. The goal with these types of deals is to create a win-win situation for both parties.

In the cannabis industry in particular, it’s also important to make sure that your potential co-branding partner is on solid legal footing. Do your due diligence, and make sure they’re operating in compliance with all applicable state and local laws. If they aren’t, you run the risk not only of reputational harm, but of legal liability.

     2.   Don’t relinquish too much power.

While it’s fine and may make sense for one partner to take the lead in pushing the co-branding deal forward, it’s important for both partners to have input into how the deal is executed. Don’t ever turn over all decision-making authority to your partner, as it’s important to exercise control over how your brand is used at all times. Failure to police your trademarks could lead to big issues down the road, including loss of any trademark rights.

     3.   Make sure your agreement is solid and your IP is protected.

Finally, as always, make sure you aren’t relying on a template or generic agreement. Co-branding agreements are all unique and can be more complex than your typical trademark licensing agreement, not to mention the added complexity of one or more parties being in the marijuana industry.

These agreements will have some similarities to trademark licensing agreements, since each party will, in a sense, be licensing their brand to the other. It is therefore important that each party maintain independent control over their own marks and how they are used throughout the deal. Neither party wants its mark(s) to be diluted or tarnished through the co-branding venture. And each party needs to come out of the deal with all of its IP ownership rights intact.

Control, as I mentioned above, is one of the key considerations in any co-branding deal: Quality control provisions should be fleshed out, and each party should clearly specify how its trademarks are to be used and displayed, where they will be permitted to be used, and how the product will be marketed.

Each party should feel comfortable with the termination provisions of the agreement, and should be able to exit the deal if, for example: sales targets are not met; laws or regulations change in a way that renders the deal legally problematic; legal enforcement actions are taken against either of the parties; if there is infringement or misuse of the trademarks; or if one party does anything that could negatively impact the other’s brand or reputation. To that end, make sure the agreement contains comprehensive representations and warranties from each party, as well as mutual confidentiality and indemnification provisions. Some of these provisions should survive termination of the agreement.

These are only the most basic considerations for constructing a cannabis co-branding deal. These types of ventures can be exciting and drum up a lot of publicity, which has the potential to greatly benefit both parties. But it is essential to carefully consider how your co-branding agreement is drafted, and to make sure that you and your intellectual property are adequately protected.

cannabis trademark scamWe hear from clients on a regular basis who receive fraudulent notices pertaining to their U.S. federal trademark applications, and because we’ve seen an uptick in these scams over the last month, we thought it would be prudent to publish a PSA on the topic, together with what to look out for if you are a trademark applicant or owner.

These trademark scams often come in the form of an official-looking letter or invoice requesting payment related to the trademark application. These letters can come via mail or via email, are formatted to look like an official government document, and list specific details about your trademark application, including an image of your trademark. All of this is public information and readily available, for better or worse, to potential scammers.

A client of ours recently received a letter from a company called Trademark Selection, Inc. that requested a “Registration Fee” of USD 1,360. The letter also provided wire instructions to an account in Florida, and in very fine print at the bottom stated, “By paying the indicated amount you accept this offer that will approve listing this information in the ‘TM SELECTION 2018 / The International Trade Marks and Service Marks’ catalogs.” This letter is a scam.

For clients that utilize our firm for their trademark filings, all correspondence related to those filings come directly from us. We pay filing fees and invoice our clients accordingly. No official U.S. federal trademark-related correspondence will ever come from an agency other than the United States Patent and Trademark Office (USPTO).

Some of these third-party letters include official-sounding words, like “Trademark,” “Patent,” “Registration,” “Agency” or “Office.” Most of them, if you read the fine print, provide for worthless services like those stated above in the Trademark Selection letter, or may offer to provide you updates on renewal deadlines (something you’ve probably already paid your trademark attorney to do). Some of them list no services at all.

Unfortunately, because these notices can look quite official, some companies end up paying them, believing they are legitimate. If you do receive third-party correspondence, it’s always best to check in with your trademark attorney, but chances are, you can and should disregard it.

Here are a few of the companies we’ve seen fraudulent notices from lately:

  • Trademark Selection, Inc.
  • Patent and Trademark Institute
  • Register of Protected Patents and Trademarks
  • ITP Service
  • S. Trademark Compliance Office
  • ITR Register
  • Trademark Edition Ltd.
  • TPP Trademark & Patent Publications

And this list only scratches the surface of what is out there in terms of trademark scams. Again, official correspondence will come from the United States Patent and Trademark Office (USPTO) with an address in Alexandria, Virginia, or will come directly from your trademark attorney. If you receive any official emails, they will come from the domain “@uspto.gov.” If you ever receive one of these suspicious notices, you should contact your intellectual property attorney immediately. The USPTO is also available to answer questions regarding the status of your application.

california cannabis packaging labeling
You simply must reconsider your packaging and labeling.

In early December, California’s cannabis regulators released their proposed final regulations. If the regulations aren’t changed, it’s expected that they will take effect at some point this month, or shortly after. These regulations have some pretty important changes from the current readopted emergency regulations. One of the notable areas of change is the packaging and labeling requirements. In spite of some of the changes, there is almost no grace period for compliance. If the regulations go into effect as is, requirements could change overnight.

For some background, the regulations between the agencies permit manufacturers to package and label manufactured cannabis products such as vape cartridges or edibles, and distributors to package and label cannabis flower. Retailers are not permitted to do any labeling. In large part, this will remain unchanged. But the requirements for different license types will change significantly.

First is child-resistant packaging, which is the only major packaging change that has any kind of transitional period. The proposed final regulations of the California Department of Public Health (“CDPH”), which regulates manufacturers, postpone the child-resistant packaging requirements until January 1, 2020. The Bureau of Cannabis Control (“BCC”), which regulates a number of license types including distributors and retailers, likewise will not require distributors to package cannabis goods in child-resistant packages. However, retailers are forced to ensure that any products sold on their premises are in child-resistant exit packaging until 2020, at which point the manufacturers will need to start providing child-resistant packaging.

Second, the specific labeling requirements will change, and most dramatically for manufacturers. There will be a number of specific changes, including:

  • For manufacturers, if product containers are separable from the outermost packaging (i.e., a product container is inside of a box), then the product container must also contain certain information that would be required on the outermost layer. For edibles, topicals, suppositories, and orally consumed concentrates, all primary panel information—with the exception of the cannabinoid content—must be on the product package. For inhaled products (i.e., dab, shatter, or wax), the Universal Symbol must be stamped on the product package.
  • The manufacture regulations include specific primary and informational panel label requirements for pre-rolls and packaged cannabis flower that are similar to the requirements for manufactured cannabis goods, which must provide certain information, have the universal symbol and government warnings, and identify the cultivator of the flower.
  • For packaged manufactured goods, the DPH will no longer require primary paneling to include THC and CBD content. Instead, the proposed rules state that cannabinoid content “may” be placed on the primary panel packaging. The DPH will allow distributors to label packaging with the correct cannabinoid content after required laboratory testing. Cannabinoid content labeling will include very specific requirements that will vary from product to product.
  • The DPH is prohibiting labels for edibles to contain pictures of the food product inside the packaging, and from making false or misleading claims that products are organic.

Crucially, other than the child-resistant packaging requirements, there will be no transition period in these proposed final regulations. The packaging and labeling rules in earlier emergency regulations included explicit transitional periods for prior modifications, but the proposed final regulations of both the CDPH and BCC specifically delete these transitional period requirements.

What the lack of transitional periods means is that these proposed regulations will change labeling requirements overnight if they are implemented. This will create major issues for distributors and retailers who have products in their possession that suddenly don’t conform to the new final regulations.

For example, retailers cannot accept or sell products except as they will appear in their final form and cannot do any packaging or labeling themselves. This means that products must be labeled in accordance with BCC and CDPH standards. If a package or label is suddenly insufficient, then retailers may be prohibited from selling those products.

Distributors may be in a similar bind. While distributors can package and label cannabis flower, their ability under these proposed final regulations to package or label manufactured cannabis products is very limited: They essentially can only correct labels’ THC content if testing confirms it was inaccurate. The regulations don’t seem to allow distributors, for example, to add required warnings that are not present on packaging.

In sum, if these regulations become final, there may suddenly be a host of products that overnight are not compatible with the regulations. And because these regulations may become final very soon, getting products into compliance now is critical.

cbd trademark fda
It seems that FDA holds the key.

With everyone discussing the passage of the 2018 Farm Bill and its implications for the booming cannabidiol (CBD) industry, there is much speculation as to how the legalization of industrial hemp will affect the treatment of CBD by multiple government agencies, including the United States Patent and Trademark Office. Will the legalization of industrial hemp open the door to federal trademark protection for CBD products? Unfortunately, the answer is not yet clear.

I’ve discussed the “legal use in commerce” requirement for federal trademarks at length in other posts, so I won’t go into too much detail here. But the gist is that in order to procure federal trademark protection for your mark, the goods and/or services for which you are claiming trademark protection must be legal pursuant to federal law. Because the manufacture, distribution and dispensing of cannabis is illegal under the Controlled Substances Act, the lawful use in commerce requirement cannot be met.

But what about CBD? If my CBD products are “legal under federal law,” why can’t I obtain federal trademark protection? Part of the issue that remains, even in light of the legalization of industrial hemp, is that the FDA still says that CBD cannot be sold for human consumption unless it has undergone the agency’s drug approval process. Currently, Epidiolex is the only FDA-approved CBD-based drug, which was rescheduled to Schedule V of the Controlled Substances Act (CSA) in September.

The DEA now defines CBD drugs as follows:

Approved cannabidiol drugs. A drug product in finished dosage formulation that has been approved by the U.S. Food and Drug Administration that contains cannabidiol . . . derived from cannabis and no more than 0.1 percent (w/w) residual tetrahydrocannabinols.”

This definition creates three conditions for a product to be an approved CBD drug. As such, it must:

  1. Be FDA approved;
  2. Be derived from cannabis; and
  3. Have less than .1% THC.

And at least for now, nothing in the 2018 Farm Bill changes this. Without a formal policy change or a change to the FDA’s position, we anticipate that the USPTO will treat CBD products much the same as they have to date, although we wouldn’t be surprised to see a good amount of debate around the subject.

The most informative case that helps to illustrate the USPTO’s current position on CBD trademarks is the Stanley Brothers case.

On December 5, 2014, Stanley Brothers Social Enterprises, LLC filed a U.S. federal trademark application for CHARLOTTE’S WEB, to be used on “plant extracts, namely, hemp oil sold as a critical component or ingredient of dietary supplements.” That application has been alive and the subject of multiple office actions from the examining attorney since, including a final office action that was issued on April 20th of this year (harsh). This final office action is very interesting, because the refusal to register the mark was made final for unlawful use in commerce on two grounds: Lack of compliance with the Controlled Substances Act (CSA) and lack of compliance with the federal Food, Drug & Cosmetic Act (FDCA). I’ll take each of the USPTO’s lawful use determinations in turn.

The Examining Attorney used a pretty standard argument in deeming the Applicant’s goods unlawful pursuant to the CSA stating:

“[i]n this case, the items or activities in the application with which the mark is used involve a per se violation of federal law. See In re Brown, 119 USPQ2d at 1352. Specifically, federal law prohibits the sale, distribution, dissemination and possession of marijuana. That is, under the [CSA] prohibits, among other things, manufacturing, distributing, dispensing, or possessing certain controlled substances, including marijuana and marijuana-based preparations.”

The Examining Attorney goes on to note that the Applicant’s specimens submitted with its application show that the “goods are dietary supplements infused with or which are comprised of cannabidiol (CBD) which is derived from what applicant has called industrial hemp plants which is grown in Colorado.” The Applicant also provided a statement to the USPTO that the goods are “comprised of CBD derived from the plant Cannabis sativa L and that applicant obtains the CBD from more than just the mature stalks and sterilized seeds of the plant. Applicant processes the entire plant including the resins, stalks, stems, buds and flowers …”. Therefore, the Examining Attorney deemed Applicant’s CBD to be derived from the portions of the hemp plant that are unlawful under the CSA.

This argument could become obsolete with the passage of the 2018 Farm Bill.

However, the Examining Attorney also determined that the Applicant’s goods are not in compliance with the FDCA, which prohibits the introduction or delivery for introduction into interstate commerce of a food to which has been added a drug or a biological product for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public. 21 U.S.C. §331(11). The U.S. Food and Drug Administration (FDA) has stated that substantial clinical investigations of cannabidiol have begun and thus products containing CBD may not be sold as dietary supplements. Applicant plainly indicates that its goods are a dietary supplement, both in its application and on its website, and the Examining Attorney analyzes why CBD does not fall into any of the FDA exceptions that would allow it to be marketed as such.

In wrapping up his analysis, the Examining Attorney made a final argument entitled “The 2014 Farm Bill Did Not ‘Legalize’ Hemp on a National Level.” The Applicant here argued that “its goods are not prohibited under either the CSA or the FDCA [because] the 2014 Farm Bill, 7 U.S.C. Section 5940, has effectively overruled the FDCA as well as the CSA by declaring that hemp is a legal product at the federal level and that all things made from hemp are, therefore, legal.” Applicant also argued that the omnibus law prohibits the expenditure of federal funds to prohibit the transportation, processing, sale or use of hemp that is grown or cultivated under the 2014 Farm Bill. Here’s the relevant portion of the 2014 Farm Bill:

“[N]otwithstanding the Controlled Substances Act, or any other federal law, an institution of higher education or a State department of agriculture may grow and cultivate hemp if (1) the industrial hemp is grown or cultivated for the purposes of research conducted under an agriculture pilot program or other agricultural academic research and (2) the growing or cultivating of the industrial hemp is allowed under the laws of the State in which such institution of higher education or State department of agriculture is located and such research occurs.” 7 U.S.C. Section 5940(a).

And here is the Examining Attorney’s succinct response:

“Although applicant is correct that the cited portion of the Farm Bill states that ‘industrial hemp’ is Cannabis sativa L which is less than 0.3 percent tetrahydrocannabinol (THC) on a dry weight basis, the Farm Bill did not make ‘hemp’ and everything made or extracted from hemp ‘legal’ on a nationwide basis as applicant contends. Section 7606 of the 2014 Farm Bill, 7 USC Section 5940, merely allowed universities and/or state departments of agriculture to create pilot programs to grow Cannabis sativa L with a THC content of less than 0.3 percent for purposes of conducting academic or scientific or marketing research. However, this marketing research did not extend to general commercial activity nor did it make all hemp related goods ‘lawful’ on a federal level. The 2014 Farm Bill provision, for example, did not allow those participating in a state pilot program to sell seeds or plants to consumers in other states nor did it allow for goods made under the program, such as applicant’s dietary supplements, to be sold in states which have not established similar pilot programs … The Federal Register notice goes on to state that Section 7606 of the 2014 Farm Bill, 7 USC Section 5940, did not amend the federal Food, Drug and Cosmetic Act’s requirements for obtaining FDA approval for new drug applications or the requirements for conducting clinical trials and research prior to such approval, or the FDA’s oversight of marketing claims such as those in the Warning Letter addressed to applicant. With regard to the Controlled Substances Act, the Farm Bill provision did not alter the provisions of the CSA that apply to the dispensing, distribution and manufacture of drug products containing controlled substances. ‘Manufacturers, distributors, dispensers of drug products derived from cannabis plants, as well as those conducting research with drug products, must continue to adhere to CSA requirements.’ Federal Register, Vol. 81, No. 156 (August 12, 2016). With regard to ‘marijuana,’ a Schedule I prohibited substance, this means that anything which falls within the statutory definition of marijuana, 21 USC Section 802(16), cannot be distributed or disseminated in interstate commerce. This means that if applicant is extracting CBD from all parts of the Cannabis sativa L plant, as applicant has stated, then the goods are marijuana and cannot be sold in interstate commerce under the CSA.”

Obviously, with the legalization of industrial hemp pursuant to the 2018 Farm Bill, a large portion of the Examining Attorney’s argument for denying the Stanley Brothers trademark protection would be irrelevant. However, the FDA-based reasons for denial still stand, and we’ll be waiting in anticipation to see how FDA’s position on CBD changes, if at all. Ultimately, it seems that the FDA holds the key when it comes to federal trademark protection for CBD products.

cbd label copyright trademark
Start from scratch to avoid infringement issues.

We previously discussed the need for manufacturers of CBD-infused foods and beverages (“Manufacturers”) to comply with the Food and Drug Administration labeling rules. However, such requirements are only one of many issues Manufacturers should worry about. Indeed, Manufacturers should also ensure: 1) that their name as well as their logo/design are not infringing on those of another; and 2) that they hold the right to the Trademarks they intend to display on their labels. This post provides a brief overview of the steps Manufacturers should take to shield themselves from infringement claims.

Trademark and/or Logo Infringement

As we explained before, trademarks are words, phrases, symbols or designs (i.e., logos) that identify the source of a product and help distinguish that product from that of competitors. The very best way to protect your trademark is to register it at the state or federal level.

Logos may also be protected under copyright law. Copyright law protects literary, musical, graphic, or other artistic forms in which an author expresses intellectual concepts. Thus, logos that are adequately original and ornate have a strong chance of being copyright protected, even without registration—though it is in the Manufacturer’s best interest to register its Logo with the U.S. Copyright Office, see why here.

Choosing branding that will not infringe the trademark and/or copyright rights of another is a critical step in developing a sound marketing strategy. Infringing will not only result in paying substantial damages to the pre-existing brand owner, it will also lead to massive rebranding costs: Think of all those printed labels a Manufacturer will need to throw away and the products they will need to pull off the shelves.

Therefore, before they start printing their labels (and ideally, before they start marketing altogether), Manufacturers should do their due diligence and conduct comprehensive searches with the U.S. Patent and Trademark Office and the U.S. Copyright Office to ensure that no one has already registered a similar trademark and/or logo.

Ownership of Logo

Some Manufacturers whose labels we reviewed hired a graphic designer to develop their logo, yet, few entered into a written independent contractor agreement (“Agreement”).

This Agreement is a contract between two parties, in this case a Manufacturer and a graphic designer, for a specific service or project (i.e., the development of a logo). It clearly provides why the graphic designer was hired and stipulates that he or she is not an employee of the Manufacturer for legal and tax purposes.

In addition to requiring the graphic designer to carry insurance and to hold any mandatory professional licenses under state and federal laws, the Agreement states that the designer assigns his or her rights in the work product to the Manufacturer. In other words, the logo becomes the sole ownership of the Manufacturer even if its author is the graphic designer (under copyright law, the author of a creative work is automatically the owner of the work, absent any arrangement to the contrary).

Consequently, an Agreement will ensure that the Manufacturer has the right to freely use the logo, including entering into licensing agreements and relying on their logo as a valuable asset.

With the growing popularity of CBD-infused foods and beverages, Manufacturers are eager to enter the market and tend to rush through the marketing process, running the risk of incurring significant recall and rebranding costs. To avoid such financial burden, Manufacturers should consult with experienced CBD business attorneys who can review their product labels and ensured that their branding is indeed theirs to use.

cannabis marijuana trademark ornamentalThe notion of ornamental trademark use is one that many of my clients are initially unaware of when they come to me seeking guidance on how to protect their brands. This is unfortunate, because it’s an important issue to understand in the cannabis industry, where the only federal trademark protection we can obtain is for ancillary goods and services. (See here for the limitations of federal trademark protection in the cannabis industry.) The issue of ornamental use comes up frequently in the context of trademarks for apparel.

The United States Patent and Trademark Office (USPTO) may reject a trademark application if the specimen indicates that the use of the mark is merely ornamental or a decorative feature on the goods and does not function as a trademark to indicate the source of the goods. Here is an example of ornamental use provided by the USPTO:

“[A] slogan prominently displayed on the front of a t-shirt may be considered merely ornamental use and not trademark use. That is, most purchasers of the t-shirts would not automatically think the slogan identified the source of the goods but would view the slogan only as a decoration on the goods.”

Of course, not everything displayed on the front of a t-shirt would be considered ornamental and be ineligible for trademark protection. There are a number of factors an examining attorney will consider in determining whether a logo is ornamental or functioning as a source-identifier. The USPTO has explained that,

“a small, neat, and discrete wording/design located on the pocket or breast portion of a garment (for example, a small design of an animal) may create the commercial impression of a trademark, whereas a larger depiction of the same wording/design prominently displayed across the front of a garment may be more likely to be seen as a purely decorative or ornamental feature of the goods. The size, location, dominance, and significance of your mark as applied to the goods are factors used to determine whether your mark functions as a trademark to identify the source of your goods or is merely ornamental. Although there is no definitive method or place to affix a mark to the goods, the location and size of a mark on the goods is part of the environment in which the public perceives the mark and may influence how the mark is perceived.”

It is also important to keep in mind that common expressions and symbols (like the peace symbol or the phrase “Have a Nice Day”) are normally not the type of matter perceived as a trademark. There are three ways in which an applicant can overcome a refusal based on ornamentality:

  1. By proving inherent distinctiveness;
  2. By establishing acquired distinctiveness; or
  3. By showing that the mark is registered for other goods or services, and thus that the applied-for mark serves as a secondary source indicator.

It is possible for an ornamental design to be inherently distinctive if its primary function is to identify the source of the goods, with its ornamental aspect being only incidental.

In building your cannabis brand, it is important to pursue a trademark strategy that does not open any of your marks up to refusal for merely ornamental use. If you intend to pursue trademark protection for ancillary goods like apparel, be certain that your mark is functioning as a source-identifier for that clothing, and isn’t just ornamental in nature. We’ve seen many instances recently of trademark applications that appear ornamental, and those applications will likely be vulnerable to rejection or challenge.

Happy Thanksgiving!

canada cannabis trademarkNews broke recently that Tweed, Inc., a subsidiary of Canadian cannabis company Canopy Growth Corp., filed a Canadian trademark application on August 31, 2018 for CHRONIC BY DRE, which they subsequently withdrew, apologizing and calling it a mistake. As we’ve written before, the number of trademark filings covering cannabis and cannabis-related goods and services in Canada has increased dramatically since the cannabis legalization process began. This rush to file cannabis trademarks in Canada could have been what spurred Tweed’s employee to rashly file the CHRONIC BY DRE mark without obtaining the artist’s consent and without having any sort of licensing deal in the works. (No matter what jurisdiction you’re in, don’t ever file for trademark protection for a mark that is already affiliated with a celebrity, hoping to beat them to the punch.)

The application filed for CHRONIC BY DRE covered a wide range of goods including body lotion and body creams, essential oils, personal preparations containing cannabis or cannabis derivatives, sunglasses, housewares, jewelry, stationery, pet accessories, clothing, dog and cat toys, beverage products, smoking products and accessories, and “cannabis and marijuana and derivatives thereof, namely live plants, seeds, dried flowers, liquids, oils, oral sprays, capsules, tablets, and transdermal patches.” That’s pretty broad.

For anyone familiar with the trademark application process in the United States, this specification makes Tweed’s registration of the CHRONIC BY DRE mark seem unattainable, but in Canada, it is not (setting aside the fact that Tweed does not have any deal in place with Dr. Dre himself). In the U.S., as we’ve covered extensively, in order to obtain federal trademark protection, your mark must be in lawful use in commerce (or, if you’re filing an intent-to-use application, you must have a bona fide intent to use the mark lawfully in commerce at the time of filing). This precludes the federal registration of any mark for use on goods or services that violate the federal Controlled Substances Act.

And in fact, Andre Young AKA Dr. Dre filed a U.S. federal trademark application for CHRONIC BY DR. DRE way back in 2013, and it was ultimately abandoned. The examining attorney at the time inquired into whether the goods contained marijuana because if they did, the mark would not be eligible for registration.

But back to Canada, where it is possible to obtain a trademark registration for cannabis, and where Dr. Dre would likely be successful (barring other legal obstacles) in obtaining such a registration for CHRONIC BY DRE. Even though it is relatively straightforward 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).

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 whether Canadian trademarks make sense. Because successful brands will be those that think globally, not nationally.

For more on Canadian branding (and marketing) regulations, check out my recent post here.

cannabis litigation trade secrets
Protect them at all costs!

Over the course of the next few weeks and months, we intend to write a number of blog posts about various forms of civil litigation that could arise in future in the cannabis industry. This is the first, and is focused on trade secret litigation.

For those of you who haven’t read some of our earlier posts on trade secret law, here’s a short recap of what trade secrets even are. A trade secret is virtually any form of information, formula, device, method, etc. that is kept secret, and that derives an independent economic value from being kept secret. For example, a cannabis cultivator invents a new process to cultivate cannabis more quickly. That process is valuable not only intrinsically (i.e., because the cultivator can now work faster), but also because it’s secret (because competitors will still be producing cannabis more slowly without the new process). Trade secrets are not limited to technical inventions—they can also include run-of-the-mill confidential information such as customer lists, preferred vendor pricing lists, and so on. The key is secrecy.

Trade secret protection can often be more valuable than patent protection, as trade secrets are kept secret for so long as their owners choose to keep them secret (or until they get released to the public through other means). Patented inventions, on the other hand, are immediately disclosed to the government and anyone with a computer. To boot, a patent owner loses protections after a fixed period of time.

In short, trade secret protection is a great system—if you can keep your secrets secret. But as you can imagine, that can be difficult and expensive to do—and in some cases third parties take your secrets. Thus, litigation is sometimes necessary.

There are a number of ways in which trade secret cases play out, but there are essentially two common fact patterns in the cannabis industry and elsewhere. First, an employee or group of employees leave one company for a competitor and are alleged to take its trade secrets.  Second, a company who comes out with a similar product/device/set of information, and is alleged to have stolen the idea from its competitor.

In the legal world, the theft of a trade secret by any source is referred to as “misappropriation”, and the party from whom the secret was taken can assert civil claims for misappropriation (we won’t address any criminal issues in this post). Until relatively recently, parties were forced to litigate disputes pursuant to various state laws, which are mostly relatively similar. In 2016, the federal Defend Trade Secrets Act (“DTSA”) was passed, which opened up the doors to the federal court system for many plaintiffs who otherwise would have been stuck in state court.

The remedies available under the various trade secret laws vary, but generally include, among other things, damages, injunctions (orders by a court to do or stop doing something), and in some cases, a requirement that the losing party pay the attorneys’ fees of the winning party. The DTSA also allows, in certain circumstances, a plaintiff to obtain an order to seize property that would assist with continued misappropriation of trade secrets.

Why is trade secret law important or applicable to the state-legal cannabis industry? The answer is that the industry is in its infancy, which necessarily means that it will experience great innovation and invention in the coming years—anyone with experience in the industry can attest to that. Unfortunately, and like in any other growth-phase industry, this also means that there may be an abundance of misconduct and theft. Even companies that take steps to prevent misappropriation could be the victims of it in the near future.

Navigating the trade secret landscape may be tough—especially for new cannabis businesses. Spending time and resources up-front to develop safeguards to protect from misappropriation and train employees is critical, even though it may be costly. But by that same token, litigating trade secret disputes can be even more difficult and costly. Consulting with trade secret counsel, both during the normal course of business and after any potential dispute arises, is always a good approach.

cannabis marijuana trademark
Having to re-brand can be pretty painful.

One of my favorite pastimes is perusing the United States Patent and Trademark Office’s (USPTO) Trademark Trial and Appeals Board’s (TTAB) records for disputes involving cannabis, hemp and CBD because there are often valuable lessons to be learned. One such record is the pending Notice of Opposition filed by Heineken Asia Pacific against Hemp Beer Inc., a Colorado company making hemp beer.

As a little bit of background on the trademark opposition process, the owner of a registered trademark can file a Notice of Opposition against a trademark applicant when the opposer believes that the applicant’s pending mark infringes on the opposer’s registered trademark rights. In this case, Heineken owns eight U.S. federal trademark registrations for TIGER, TIGER WHITE, TIGER BLACK, and multiple other variations on the “tiger” marks for “beer, ale, lager, stout, pilsner, porter, and non-alcoholic [malt beverages] beer.”

The applicant in this case, Hemp Beer Inc., makes a hemp beer called “Tiger Hemp Beer,” and has filed for trademark protection with the USPTO for GET THE EYE OF THE TIGER for “beer; beer, ale and lager; craft beers; flavored beer.”

Heineken alleges in its Opposition that “[t]he mark shown in the Opposed Application so resembles the “TIGER” word or design marks previously used in the United States by the Plaintiff, when used or in connection with the goods identified in the Opposed Application, to cause confusion, to cause mistake, or to deceive, and Applicant’s mark is thus unregistrable under § 2(d) of the United States Trademark Act, 15 U.S.C. §1052(d), as amended.”

Now, perhaps the applicant did a search of the TESS database prior to filing its application, and came up with no hits for “get the eye of the tiger” in Class 32 (the class that covers beer). However, a hard lesson that many applicants have learned is that one mark does not need to be identical to another in order to infringe that other mark. And a quick look at Hemp Beer’s branding quickly reveals that they are using a mark (“Tiger Hemp Beer”) that is even more similar to Heineken’s TIGER registrations than the mark for which they’ve filed for federal trademark protection (and it is possible that Heineken has taken separate action on this account).

This serves as a good reminder to conduct a trademark clearance search prior to filing your federal trademark application to make sure that there are no existing “confusingly similar” trademarks to the mark you propose to use. It is also helpful to keep in mind the factors a court will consider in determining whether two marks are confusingly similar (AMF Inc. v. Sleekcraft Boats):

  • Strength of the mark;
  • Proximity of the goods;
  • Similarity of the marks;
  • Evidence of actual confusion;
  • Marketing channels used;
  • Type of goods and degree of care likely to be exercised by the purchaser;
  • Defendant’s intent in selecting the mark; and
  • Likelihood of expansion of the product lines.

“Similarity of the marks” is only one factor, and where the goods are very similar, or where the marketing channels and consumer base is the same, a registered mark may be given a broader scope of protection. The analysis for likelihood of confusion can be quite complex.

Before adopting a new cannabis brand name, we recommend consulting with an experienced cannabis trademark attorney and we also recommend having them perform a trademark clearance search to ensure your brand won’t be infringing any existing registrations. Even if you manage to avoid litigation over trademark infringement, you could still open yourself up to an opposition proceeding with the TTAB months or years down the line, which can be expensive and time-intensive, and should be avoided at all costs.

california cannabis marijuana advertising
Seem likely, anyway.

It’s been a while since we wrote about advertising regulations in California, in large part because the regulations have been a moving target. But with AB 2899 making steady progress, we thought it would be a good time to give a rundown of current Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”) advertising regulations, and what AB 2899 would do to change them.

Currently, Section 26151 of the Business and Professions Code states as follows regarding cannabis advertising:

(a)(1) All advertisements and marketing shall accurately and legibly identify the licensee responsible for its content, by adding, at a minimum, the licensee’s license number.

(2) A technology platform shall not display an advertisement by a licensee on an Internet Web page unless the advertisement displays the license number of the licensee.

(3) An outdoor advertising company subject to the Outdoor Advertising Act (Chapter 2 (commencing with Section 5200) of Division 3) shall not display an advertisement by a licensee unless the advertisement displays the license number of the licensee.

(b) Any advertising or marketing placed in broadcast, cable, radio, print, and digital communications shall only be displayed where at least 71.6 percent of the audience is reasonably expected to be 21 years of age or older, as determined by reliable, up-to-date audience composition data.

(c) Any advertising or marketing involving direct, individualized communication or dialogue controlled by the licensee shall utilize a method of age affirmation to verify that the recipient is 21 years of age or older before engaging in that communication or dialogue controlled by the licensee. For purposes of this section, that method of age affirmation may include user confirmation, birth date disclosure, or other similar registration method.

(d) All advertising shall be truthful and appropriately substantiated.

And Section 26152 states that a licensee (or third-party advertising on behalf of a licensee) shall not do any of the following:

(a) Advertise or market in a manner that is false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific, or technical matter, tends to create a misleading impression.

(b) Publish or disseminate advertising or marketing containing any statement concerning a brand or product that is inconsistent with any statement on the labeling thereof.

(c) Publish or disseminate advertising or marketing containing any statement, design, device, or representation which tends to create the impression that the cannabis originated in a particular place or region, unless the label of the advertised product bears an appellation of origin, and such appellation of origin appears in the advertisement.

(d) Advertise or market on a billboard or similar advertising device located on an Interstate Highway or on a State Highway which crosses the California border.

(e) Advertise or market cannabis or cannabis products in a manner intended to encourage persons under 21 years of age to consume cannabis or cannabis products.

(f) Publish or disseminate advertising or marketing that is attractive to children.

(g) Advertise or market cannabis or cannabis products on an advertising sign within 1,000 feet of a day care center, school providing instruction in kindergarten or any grades 1 through 12, playground, or youth center.

The key with these rules is that all advertising must be tied to a specific licensee and must include that licensee’s license number. So, in the case of a non-licensed third-party looking to advertise a cannabis brand, that company would need to be working with a licensed manufacturer, for example, in publishing those advertisements, and the licensed manufacturer would need to be involved in the advertising such that its identification on the advertisement does not render it false and misleading.

Under AB 2899, the legislature is proposing to do away with the cumbersome requirement that a license number must be included with each advertisement. This would make it much easier for third-parties–including, for example, out-of-state brand licensors–to advertise their products in California, even without a license of their own. Rather than requiring a license number attached to each advertisement, the new legislation states that it would “prohibit a licensee from publishing or disseminating advertisements or marketing of cannabis and cannabis products while the licensee’s license is suspended.” That makes sense to us.

Of course, in addition to state advertising requirements, cannabis licensees should make sure that any outdoor advertising complies with applicable local law. Some local jurisdictions further limit the placement of billboards or signage, or may have other related restrictions. Businesses need to be mindful of that.

We’ll be monitoring AB 2899 closely, as it could give many of our cannabis intellectual property licensing clients more flexibility in how they address the delegation of marketing responsibilities in their licensing agreements. Stay tuned!