Intellectual Property/Branding

In keeping with last week’s cannabis patent litigation update, it’s important to discuss a landmark decision that was made by the U.S. Patent and Trademark Office (“USPTO”) Patent Trial and Appeal Board (“PTAB”) on claims involving a cannabis patent just two months ago. On January 3, 2019, the PTAB published its Final Written Decision in the case, Insys Development Co, Inc. v. GW Pharma Ltd., et al. (IPR 2017-00503). SPOILER ALERT: the PTAB found two claims to be unpatentable as obvious, and the remaining eleven claims to be valid (and potentially enforceable in litigation).

In this case, the subject patent was U.S. Patent No. 9,066,920 – “Use of one or a combination of phyto-cannabinoids in the treatment of epilepsy” (“the 920 Patent”). The 920 Patent was originally assigned to GW Pharma Ltd. (“GW Pharma”) and Otsuka Pharmaceuticals Co., Ltd. Some background on GW Pharma: it owns an extensive patent portfolio, many of which are directed to treat disease using cannabis-based formulations. Notably, GW Pharma made history by becoming the first entity to receive FDA approval of the drug, Epidiolex, which contains CBD. Epidiolex was approved to treat two rare forms of epilepsy: Dravet syndrome and Lennox-Gastaut syndrome.

cannabis marijuana patent

Insys Development Company, Inc. (“Insys Development”) is a pharmaceutical company that focuses on cannabinoids and drug delivery systems. Insys Development petitioned the USPTO for an inter partes review (“IPR”) in December 2016 to cancel all thirteen claims of the 920 Patent as obvious based on scientific articles as well as one of GW Pharma’s own published PCT applications.

The two patent claims that were invalidated related to dosing. Although the daily CBD dose given to epileptic patients in the studies was less than the 400 milligrams described in the 920 Patent, the PTAB said it was “logical to think” a higher dose could “increase the anticonvulsant effect.” The PTAB continued, “We find on this record that petitioner has shown sufficiently that a [person of skill in the art] would have a reason to, and a reasonable expectation of success in, increasing the dosage of CBD to at least 400 mg/day to treat partial seizure.”

The remaining eleven claims that survived PTAB review outline additional requirements for administering CBD to treat epilepsy. The PTAB disagreed with Insys Development that these claims were obvious. One claim requires that the CBD be present as a plant extract. Another claim requires the CBD be administered with the cannabinoid THCV. In sum, the PTAB concluded that “[it] find[s] that [Insys Development] has not shown sufficiently where each of the limitations of [these] claims is taught or why a [person of skill in the art] would have combined the teachings of the various references to arrive at the claimed invention with a reasonable expectation of success.”

Consistent with the UCANN case, a key thing to note is that the PTAB treated this cannabis patent IPR challenge as any other, and the fact that cannabis remains a Schedule I drug was not raised as an issue. Coming full circle, it’s likely that IPR challenges of cannabis patents are going to join the overall growing trend of cannabis patent applications and cannabis lawsuits filed.

We’ll know whether either side appeals the Final Written Decision by March 8, 2019.  If an appeal does happen, the case can go through a panel rehearing and then the Federal Circuit, or straight to the Federal Circuit.  Either way, we will keep you posted.

cannabis marijuana trademarkAn interesting Bloomberg article came across my desk a couple weeks ago called, “CBD Craze is Creating a Trademark Problem for a Coffee Brand in Maine.” The article raises a couple of important issues related to the trademark requirement of distinctiveness, as well as the lengths to which one can stretch their trademark protection.

The article recounts a coffee shop and wholesale coffee company in Maine called Coffee by Design, that ultimately adopted the acronym for its name, CBD, as its trademark.  Coffee by Design appears to have filed for trademark protection of CBD for “coffee” and “coffee shops” in 2009. But with Maine’s legalization of marijuana in 2016 and the rapidly growing popularity of CBD, customers began to get confused, thinking that Coffee by Design had CBD, and that CBD products sold throughout Portland, Maine were sourced from Coffee by Design. According to the owners of Coffee by Design, “the [CBD trademark] filing prevents others, nationwide, from using the term CBD for coffee products and coffee shops,” and that they are “well within [their] rights to prevent others from using the term CBD as a trademark in relation to coffee and coffee shops.”

The wording of that last statement is key: a trademark owner can prevent others from using the same mark “as a trademark” in relation to the same goods. The issue that Coffee by Design will face, however, is that other coffee shops are generally not using CBD as a trademark, but as a descriptive term to describe an ingredient added to their beverages. Trademark infringement will be a tough claim to sustain if the shop can’t show that others are using the term CBD as a trademark: in fact, it is well within the rights of others to use CBD to describe cannabidiol. As a matter of public policy, trademark law is not designed to allow trademark owners to prevent others from using descriptive terms in a descriptive manner. This also means that a coffee shop selling CBD-infused coffee (or any other CBD product) could not obtain trademark rights to exclusively use “CBD” on their goods, because such a mark would be deemed merely descriptive.

As we have noted before, there is a spectrum of strength when it comes to trademarks. The distinctiveness, or strength, of a mark will determine both how well the mark performs from a marketing and branding perspective, as well as the level of legal protection to which it is entitled. When a mark is highly distinctive, identifying the owner of the mark as the source of the goods sold, the mark is strong. And when a mark is not inherently distinctive, or when a mark is the same or very similar to one already used by others, the mark is weak. Here are the types of marks on the spectrum, from strongest to weakest:

  • Fanciful Marks: These marks are inherently distinctive and consist of a combination of letters with no meaning; they are invented words. Some examples of famous fanciful marks are EXXON and KODAK. These marks can be more difficult from a marketing perspective initially, because the public must be educated through advertising before they will associate the owner’s goods or services with the mark.
  • Arbitrary Marks: These marks are composed of a word or words that have a common meaning, but have no relation to the goods or services to which the mark is applied. Perhaps the most famous example of an arbitrary mark is APPLE, used on computers. As with fanciful marks, these marks are highly distinctive.
  • Suggestive Marks: Suggestive marks hint at or suggest the nature of a product without specifically describing the product. An example of this type of mark is AIRBUS for airplanes. These marks can be appealing from a marketing perspective, because they require less education of consumers than arbitrary or fanciful marks, but they are also typically entitled to less extensive legal protection.
  • Descriptive Marks: These marks are comprised of words that actually describe the goods or services provided; descriptive marks are too weak to function as a trademark and cannot be registered. Note that it is possible to register a descriptive mark if it has obtained secondary meaning due to use in commerce for some years – in the nascent cannabis industry, however, it is unlikely many marks would meet these requirements.
  • Generic Words: These words and phrases are so inherently descriptive of a product or service as to be incapable of functioning as a trademark; they are the common names of the product or service in question, and cannot be registered.

Perhaps Coffee by Design was unaware in 2009 that CBD was one of the cannabinoids found in cannabis and therefore could not have anticipated a future in which CBD coffee was a thing. But this is a great lesson in why choosing a distinctive mark (and being realistic about the protection your mark will afford you) is critical for any business, including those in the cannabis industry.

cannabis patent litigation
Did UCANN really get USTPO coverage for prior art?

About six months ago, we posted news of the first ever cannabis patent infringement case.  As a reminder, the case was initiated by United Cannabis Corporation (“UCANN”) in the United States District Court, District of Colorado against its in-state competitor, Pure Hemp Collective Inc. (“Pure Hemp”). The subject patent is U.S.P. 9,730,911 – “cannabis extracts and methods of preparing and using same,” which generally covers liquid cannabinol formulations using tetrahydrocannabinol (THC), cannabidiol (CBD), and various terpenes (the “911 Patent”).

Just six months into litigation, Pure Hemp has already responded by filing a Counterclaim and Motion for Partial Summary Judgment, which has yet to be heard. These filings have already raised several issues of first impression. While we plan to cover each of these issues on the blog, perhaps the most fascinating question relates to Pure Hemp’s prior art arguments, which could effectively invalidate UCANN’s 911 Patent altogether.

First, let’s back up with a high-level overview of the term “prior art.” In order to successfully obtain a patent, U.S. patent law requires the applicant to demonstrate that the invention attempting to be claimed is both (1) novel, and (2) nonobvious. Both these factors can be overcome by what is known as prior art – public knowledge, usage, or other types of disclosures. The European Patent Office puts it succinctly: “Prior art is any evidence that your invention is already known.”

Here, one of the key issues to be determined is whether the 911 Patent is obvious and could not be considered novel given the long-standing science and technology relating to cannabis extraction and preparation. In its filings, Pure Hemp makes that exact point by arguing that highly concentrated liquid CBD formulations are “ubiquitous” and “were not invented in this millennium.” One of Pure Hemp’s attorneys, Donnie Emmi, was quoted as saying he believed Pure Hemp had a good chance of invalidating UCANN’s 911 Patent if the Court agreed with their analysis.

Of course, it remains to be seen exactly what Pure Hemp plans to offer in support of its prior art argument. Typically, defendants in patent litigation produce years, sometimes decades, of scientific articles and other writings to demonstrate a given industry’s preexisting research and knowledge. It’s clear this wealth of evidence likely doesn’t exist for Pure Hemp given the general illegality of marijuana to date. This means the prior art could definitely be out there, but hard to definitively prove given that it was driven underground.

It’s also clear that that is about to drastically change for the cannabis industry. With marijuana now partially legalized in thirty-three states, each and every business is clamoring to get its newest formulations of cannabis patented before a competitor. The number of patents issued by the U.S. Patent and Trademark Office has more than quadrupled since 2016. It’s also worth noting that the parties are represented by reputable patent attorneys, and the Court seems to be paying close attention. This case will no doubt clarify and shape the field of cannabis patent litigation for years to come. Stay tuned!

cannabis trademark infringementAs ardent followers of this blog are well aware, one of my favorite pastimes is keeping tabs on who is suing whom in the cannabis industry for trademark infringement. These lawsuits serve as great examples for my clients of what NOT to do when choosing a brand for their company. The last couple of years have provided a couple of big-name cannabis trademark lawsuits, including the Gorilla Glue dispute and the Tapatio Foods lawsuit.

This time, it’s the United Parcel Service (UPS) suing a group of cannabis delivery companies for trademark infringement. The lawsuit was filed in the U.S. District Court for the Central District of California on February 13, 2019 and alleges trademark infringement against United Pot Smokers, UPS420, and THCPlant, all of which market and sell cannabis products. These companies, according to the complaint, offer delivery and logistics services via the websites www.upsgreen.com and www.ups420.com.

In its complaint, UPS accuses the defendants of infringing its family of trademarks, which includes its famous shield logo, and states that the defendants “intended to capitalize off UPS’s extensive goodwill and reputation.” UPS allegedly sent multiple cease and desist letters to the defendants, which were unwisely ignored.

The lawsuit includes claims for trademark infringement, trademark dilution, false designation of origin, deceptive advertising, and unfair business practices, and includes a request for damages, an end to defendants’ infringement, and control over defendants’ websites.

We’ve made this point many times before, but it warrants repeating: Cannabis companies are not immune from trademark infringement claims, and must choose brands that do not infringe the rights of third parties, including third parties outside of the cannabis industry. For ease of reference, here are several past blog posts relating to trademark infringement, and how to choose a brand that won’t get you sued:

And here are the factors a court will consider in assessing whether one mark is likely to be confused with another, proving trademark infringement (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.

The two most basic factors I recommend our cannabis clients evaluate before they select a brand are 1) is your mark similar to or the same as an existing mark, and 2) are you intentionally “riffing” off an existing brand? Remember that parody is not a defense to trademark infringement that will typically fly in a commercial setting. When you choose a mark as a “parody” of an existing brand, chances are you’re actually infringing a registered trademark, and possibly diluting a famous mark, which is exactly what is alleged here, in the UPS case. And the fact that you knew of the senior trademark would absolutely play against you in litigation, as your infringement would be deemed willful.

These two factors are only the beginning of the analysis. There are instances where similar, or even the same brand names can coexist if the goods those brands are used on are completely different and marketed through separate channels to disparate groups of consumers. The analysis for likelihood of confusion can be quite complex.

Before adopting a new brand name, we recommend consulting with an experienced trademark attorney and we also recommend having them perform a trademark clearance search to ensure your brand won’t be infringing any existing registrations.

california cannabis trademark
 

State trademarks for cannabis goods and services have been an ongoing saga in California that we have written about extensively. For a little background, until January 1, 2018, obtaining state trademark protection in California was not possible due to Sections 14270-14272 of the Model State Trademark Law of the California Business and Professions Code, which are simply titled “Miscellaneous.” Section 14272 states the following:

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

However, in December of 2017, the California Secretary of State’s Office announced that customers would be able to register cannabis-related trademarks or service marks so long as the following requirements are met:

  1. The mark is lawfully in use in commerce within California; and
  2. The specification matches the classification of goods and services adopted by the United States Patent and Trademark Office.

The Secretary of State’s Office has reiterated that it will only accept applications insofar as the goods and/or services in question fit within an existing classification code from the USPTO’s Identification of Goods and Services Manual. Therefore, it is easy to register for things that fit squarely within the USPTO specifications, like retail services. Cannabis goods are a bit more problematic, although we have developed strategies to protect these as well.

All of this has been based on administrative policy declared by the Secretary of State’s Office, not on legislation or a change to the California Business and Professions Code, but Senate Bill 185, which was introduced on January 30, 2019 and just went to committee, would change that.

SB 185 notes that existing law in California provides for registration of trademarks where the classification of goods and services for those marks conforms to the classifications adopted by the USPTO, but proposes that for marks for which a certificate of registration is issued on or after January 1, 2020, applicants would be authorized to use “specified classifications for marks related to cannabis, including medicinal cannabis, goods and services that are lawfully in commerce under state law in the State of California.” Designated classifications of goods for cannabis products would streamline the process for trademark registration in California and provide cannabis companies with greater security regarding the enforceability of their registrations.

Additionally, SB 185 provides that the Department of Food and Agriculture, in conjunction with the State Department of Public Health and pursuant to MAUCRSA, must establish a certification program for cannabis and manufactured cannabis products comparable to the federal National Organic Program and the California Organic Food and Farming Act. As we’ve written before, it is not permissible to use an organic designation on cannabis products unless that designation is pursuant to state law or pursuant to a private certification, since the U.S. Department of Agriculture generally regulates that certification under the Organic Foods Production Act.

SB 185 lays the groundwork for some important improvements to the way cannabis companies protect their brands and the establishment of an organic certification program will benefit both companies and consumers. We’ll be following this bill closely and hope it doesn’t stall in committee. Stay tuned!

canada marijuana trademark

With Canada’s new trademark law set to take effect on June 17, 2019, U.S. cannabis companies should be considering whether it makes sense for them to file for trademark protection in Canada.

Most significantly for foreign applicants, a Declaration of Use will no longer be required, meaning that you do not need to actually use your mark in Canada in order to qualify for trademark protection. This is in contrast to the United States, where trademark registration requires proof of lawful use in commerce. The upside to this regulatory shift is that U.S. companies can get a jump on procuring Canadian trademark protection prior to entering the Canadian market. But the inevitable downside is that trademark trolls will now have an open door to “squat” on trademarks that are used by companies in other countries. These trolls often aim to force companies into negotiations for use of trademark rights to their own brand. Filing for protection in Canada will be an important tool for U.S. cannabis companies to avoid such a scenario.

Furthermore, cannabis goods can be specified in any Canadian trademark application. “The following terms are, at this time acceptable by the Office: ‘dried cannabis’ or ‘dried marijuana,’ ‘live cannabis plants,’ ‘medicinal marijuana for temporary relief of seizures,’ ‘medicinal marijuana for temporary relief of nerve pain.’” “Cannabis oil,” however, is not acceptable. It is important that the language used in your specification comports with the Canadian Goods and Services Manual.

Another notable change to Canada’s trademark law is that a range of non-traditional types of marks will now be registrable, including scents and tastes, holograms, moving images and textures.

Remember, though, that 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 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).

Because of the removal of the Declaration of Use requirement in particular, we strongly urge all of our cannabis clients to consider applying for trademark protection in Canada. If you fail to do so, someone else may beat you to it, preventing you from obtaining any right to use your brand in the Canadian market.

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.