Intellectual Property/Branding

Cannabis Trademark AttorneuyWe’ve gone over the obstacles to obtaining federal trademark protection at length, but given recent inquiries our cannabis trademark attorneys have been receiving lately, it seemed high time to revisit what exactly makes a trademark “strong” or “weak.”

I regularly have clients come to me with catchy marks they or their brand consultants have developed, but are not eligible for trademark protection. 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.

One of the most common grounds for rejecting a trademark application is that the proposed mark is “merely descriptive.” For example, “World’s Best Cannabis” would be merely descriptive for cannabis and cannot be registered. Trademarks that are merely the name of an individual, for example, are also ineligible for federal trademark protection. So, a name like “Alison’s Cannabis” wouldn’t fly. Similarly (and this is one we see often in the cannabis industry), marks that are primarily geographically descriptive will be refused registration by the USPTO. For example, “Seattle Cannabis Company” and “Washington Grown” are primarily geographically descriptive and thus not eligible for federal trademark protection.

And on the flip-side, marks can be rejected for being deceptively misdescriptive as well. Interestingly, the USPTO, in its online guidance and resources, gives the following example of a deceptively misdescriptive mark: “[T]he mark ‘THC Tea’ would be deceptively misdescriptive of tea-based beverages not containing THC.” So if you are registering your mark for ancillary goods or services, as we’ve previously suggested, be mindful that including a reference to cannabis in your mark will not render the mark deceptively misdescriptive of those goods or services.

If you’re starting from scratch in branding your company or products, it’s a great idea to run any proposed marks by your trademark attorney before you invest too heavily in brand development. An experienced cannabis trademark attorney will be able to quickly identify marks that are merely descriptive, and can advise whether you run the risk of adopting a mark that is deceptively misdescriptive. And remember, if you don’t intend to obtain a federal trademark registration of your brand, that is still not a reason to adopt a descriptive or weak mark. If your name is a no-brainer, chances are that someone else has already thought of it and used it as well. Or if they haven’t adopted it yet, they likely will down the road. When the market becomes flooded with similar names, it becomes difficult for consumers to tell them apart. Putting in the initial work to develop a strong brand is always worth the effort, especially in a rapidly growing legal cannabis industry.

cannabis marijuana copyright
Definitely worth a shot.

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

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

Let’s look at trademark first. Trademarks are words, phrases, symbols or designs that identify the source of a product and help distinguish that product from that of competitors. However, as we have written about extensively on this blog, federal trademark protection is not typically available to cannabis businesses because the federal illegality of “marijuana” prevents owners from demonstrating lawful use of their marks in commerce—a prerequisite imposed by the United States Patent and Trademark Office.

Fortunately, trademark law is not the sole intellectual property (“IP”) tool a cannabis business can use to protect its logo. Copyright protection may be available as well. Unlike trademark law, copyright law does not prohibit the type of work that is eligible for copyright protection. Accordingly, cannabis-related works, including logos, often may be copyrighted.

To benefit from copyright protection, a cannabis logo must:

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

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

Regardless of those benefits, it is important for cannabis businesses contemplating the federal registration of their logos to understand the possibility that their copyrights might be unenforceable. Because all copyright infringement cases must be adjudicated by a federal court, there is a risk that the federal illegality of cannabis would arise in certain facets of litigation and hinder the enforceability of the copyright. (The same would be true in cannabis patent enforcement cases, as we discussed here.) However, such risk is currently speculative as no cannabis copyright infringement case (or patent infringement case) has been litigated.

Assuming the copyrighted logo of a cannabis business is enforceable, it affords the business the exclusive right over the logo’s reproduction and public display. In addition, copyright protection gives the cannabis business the ability to receive compensation for the use of the logo by others. Not only does copyright protection help the cannabis business enhance its public recognition, it also enables the business to capitalize on its IP assets and helps it secure market dominance and profitability, and this for the life of the copyright holder, plus 70 years.

In conclusion, given the fact that cannabis businesses are presently barred from securing federal trademark registration for their logos, they should consider copyright registration for qualifying logos, in order to achieve brand differentiation and secure a critical competitive advantage. The value proposition for copyrights is all the stronger given the inexpensive and straightforward nature of the registration process.

cannabis marijuana brandingLast week, Lagunitas Brewing Company announced the launch of Hi-Fi Hops, an IPA-inspired sparkling water in collaboration with CannaCraft (under its AbsoluteXtracts brand), a Santa Rosa-based cannabis company. Both the LAGUNITAS and ABSOLUTEXTRACTS marks appear on the packaging for the beverage, and so I thought this would be a great opportunity to explore some of the considerations that should go into any co-branding deal.

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 what happens if the deal isn’t well thought out? 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.

With these points in mind, here are some of the things you should be thinking 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.

  1. 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.

  1. Make sure your agreement is solid and your intellectual property (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 or legal enforcement actions are taken against either of the parties, if there is infringement or misuse of the trademarks, or if the other party does anything that could negatively impact your brand or tarnish your 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.

This is just the tip of the iceberg in putting together 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.

trademark cbd hemp
Official USPTO position on industrial hemp CBD marks.

With the cannabidiol (CBD) industry continuing to boom, I’ve had numerous inquiries from my CBD-selling clients regarding federal trademark protection for their CBD brands, particularly when the CBD they are selling is derived from Farm Bill hemp and grown in accordance with a derivative state program.

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? This is the question I’m hearing on a near daily basis. If my CBD products are “legal under federal law,” why can’t I obtain federal trademark protection? To begin with, the federal legal status of CBD is still tenuous and complicated, and the USPTO’s position here only serves to affirm that. But there is one particularly informative case that helps to illustrate the USPTO’s position on CBD trademarks.

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.

Interestingly, the Applicant also made a tertiary argument that CBD is a cannabinoid found in other plants which are not members of the Cannabis Sativa L family such as Echinacea (coneflower), Heliopis helianthoides (oxeye), etc.. Notwithstanding the accuracy of these assertions, this is an argument I’ve seen made on other trademark applications. But the key here is that the CBD contained in Applicant’s goods is not obtained from any of these other plants. It is obtained from Cannabis sativa L, and therefore falls within the definition of marijuana under the CSA.

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 argues 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.”

So, there you have it. The USPTO’s take on CBD derived from Farm Bill hemp is that it is, for the reasons outlined above, ineligible for federal trademark protection.

cannabis copyright marijuanaCopyright is an aspect of intellectual property (IP) law less frequently considered by cannabis businesses than trademark, trade secrets or even patents it seems. Yet, like these other forms of intellectual property, copyrights can afford their holders with market dominance and profitability when utilized correctly. Almost all marijuana businesses own numerous unregistered copyrights, whether or not they realize it.

This post briefly covers the concept of copyright and how it applies to the cannabis industry.

What does copyright protect?

Copyright is a form of IP law that protects creative expression of ideas. Specifically, copyright protects original works of authorship, including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture.

The cannabis industry protects copyrights in a variety of ways. For example, the writing and photographs on a cannabis business’s website are copyright protected. This might include descriptions of a particular product or just the layout of the website itself. Physical media like labels, product tags, packaging, logos, instructional materials, and product design can all be protected by cannabis industry copyrights. Books that discuss cannabis production methods, such as Ed Rosenthal’s “Marijuana Grower’s Handbook,” also have copyright protection.

Is registration necessary for copyright protection? 

No. A work of authorship is protected the moment it is created and “fixed in a tangible form.” A work is fixed in a tangible form if its expression is sufficiently permanent to allow it to be communicated for more than a transitory duration. Accordingly, registration is not necessary for copyright protection.

However, registration affords significant benefits, particularly in the context of copyright infringement. These benefits include:

  • The right to sue for infringement;
  • Automatic proof that the registrant is the rightful owner of the copyright, which shifts the burden of proof on the defendant to show that the registrant is not the rightful owner or that her work is not protected; and
  • Additional remedies, like statutory damages and attorney’s fees, if the registrant prevails on her infringement claim.

Given the fact that copyrights are inexpensive and quick to register online, we recommend registration in most cases.

Are cannabis copyrights registrable and enforceable?

The Copyright Act contains virtually no prohibitions on what types of work are eligible for copyright protection, including cannabis-related work. Instead, the Copyright Act simply contemplates the level of originality in a given item. And on that point, the Act provides a decidedly low bar to registration, requiring only “a minimal degree of creativity.” For cannabis brands, federal copyright protection is available to protect most business creations, as long as those creations are sufficiently original to be copyrightable.

Nevertheless, it is important to remember that under the Copyright Act federal courts have exclusive jurisdiction over infringement actions. Therefore, like in patent infringement lawsuits, there is a potential risk that the federal illegality of cannabis would be raised in various litigation aspects and would impeded the enforceability of a cannabis copyright. To this date, no cannabis copyright infringement claim has been raised, making it impossible to determine whether cannabis copyrights are in fact enforceable.

What rights does copyright afford?

Copyright affords the holder the exclusive right to control his work through reproduction, distribution, public display and performance.  Copyright also gives the holder the right to be compensated for the use of his work.

How long does copyright protection last?

Generally, works created by individuals are copyright protected for the life of the author, plus 70 years. Works created anonymously, pseudonymously, and for hire are protected for 95 years from the date of publication or for 120 years from the date of creation, whichever is shorter. Compared to the maximum shelf life of a patent, or terms of trademark registration, copyright protections last incredibly long.

How does copyright infringement occur?

Copyright infringement occurs when an individual uses another’s work without permission. Typically, permission is granted through a licensing agreement, which transfers some of the owner’s exclusive rights to another. In addition, the terms of the license agreement may limit the transfer of those rights to a specific period of time, to a physical location or to the means through which the rights may be exercised.

Note, however, that the legal doctrine of fair use, which promotes freedom of expression, permits certain unlicensed uses of copyrighted works, such as criticism, comment, news reporting, teaching and research.

As this post highlights, copyright affords valuable protection of certain intangible business assets.  As such, every cannabis business should take the time to determine which of its assets are copyrightable and whether registration would give them a competitive edge. Given the ease of registration and the rights associated therewith, it’s a no-brainer.

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

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

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

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

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

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

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

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

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

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

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

…all the way through the patent application process.

The cannabis industry relies on trade secrets and increasingly, patents, to protect intellectual property (IP) assets. Patents protect new and non-obvious inventions, including plants, processes, and machines, while trade secrets protect any information, including “patentable inventions,” that provide economic value to the holder if kept confidential. Accordingly, the same information could potentially be protected by patents or trade secrets.

Although patents and trade secrets are alternative protections, marijuana businesses should treat them as complementary to expand the lifetime of a trade secret disclosed in a patent application until the patent issues.

Patents afford the most powerful IP protection in that they provide their owner with a temporary monopoly to exploit her invention, including against those who independently discover the invention. In exchange for this temporary monopoly, the patent owner is required to fully disclose the invention to the public, so that once the patent expires, anyone may freely utilize the invention.

Generally, the disclosure of the invention occurs roughly eighteen months from the date of filing through a process known as “publication.” Publication does not grant the patent nor does it guarantee that the patent will be issued by the United States Patent and Trademark Office (USPTO). Instead, publication simply allows the public to examine the patent application while it is being reviewed.

The initial filing of a patent application does not immediately break the confidentiality of the trade secret disclosed in the application. The law requires the USPTO to keep all patent applications—with a few exceptions—confidential before they are published. Before publication, the trade secret will not lose its secrecy so long as the trade secret owner continues to take reasonable confidentiality measures.

At the end of the eighteen-month period, an applicant may extend the confidentiality of the patent application by avoiding publication. The applicant may do so by expressly abandoning the patent application, or by filing a request for non-publication (so long as the applicant does not seek patent protection in a foreign country). Maintaining an application as confidential as long as possible allows the applicant to delay the disclosure of its invention until the patent issues. In a highly fragmented and competitive market like cannabis, this can make a world of difference.

Once the USPTO decides that the patent application meets all the patentability requirements, the patent will issue in its final form. At that point, even an unpublished patent application inescapably becomes public and loses its trade secret protection. However, in return, the patent holder now has a patent that it can enforce against infringers. In other words, trade secret protection is no longer required.

So despite their significant differences, patents and trade secrets are closely intertwined and should be considered concurrently when applying for a cannabis-related patent. By keeping the patent application from becoming public for as long as possible, you can extend your trade secret protection until the moment the patent issues. That is a critical competitive advantage, especially in a rapidly developing industry.

For more on cannabis patents and trade secrets, check out the following:

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

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

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

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

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

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

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

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

  1. Royalties

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

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

  1. Use of the licensed assets

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

  1. Quality control

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

  1. Indemnification

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

  1. Morality

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

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

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

marijuana cannabis intellectual property
Clearly NOT our style.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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