Intellectual Property/Branding

california cannabis marijuana advertising
Seem likely, anyway.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

marijuana trademark cannabis licenseI’ve worked on many celebrity licensing and endorsement deals, and my firm’s cannabis intellectual property lawyers have received countless inquiries from companies looking to partner with one celebrity or another. And while the best of the deals can be very lucrative (and interesting) for everyone involved, plenty of them fizzle out for one reason or another. Often, the excitement over the prospect of partnering with a celebrity can blind businesses to the bigger intellectual property and trademark issues they should consider before negotiating one of these deals.

Earlier this month, Above the Law published a great article on the potential pitfalls of utilizing personal names as trademarks, as is done in celebrity licensing deals. The author noted the recent trademark litigation brought by a company that owns a registered trademark for SWIFTLIFE for “consulting services in the field of design, selection, implementation and use of computer hardware and software systems for others” against none other than Taylor Swift and her “SwiftLife” app. And while a celebrity’s name and likeness can be protected under rights of publicity or privacy law, this case raises the issue of when and how personal names can be recognized as trademarks.

In the United States, a person’s name can be eligible for trademark protection only if that individual is able to establish secondary meaning for their name. In other words, a celebrity will only be able to trademark their name if, through use of the name, it has come to identify a single source of origin for a particular set of goods or services. And it isn’t enough for the name to be well-known – the name must actually be associated with a set of goods or services in order to qualify for protection. While for a celebrity like Bob Marley, the connection to cannabis goods may seem clear, for many other celebrities, there is simply no connection at all and establishing trademark protection would be difficult (even setting aside the federal issues surrounding cannabis trademarks, which we have written about at length).

Some key takeaways to consider if your cannabis business is looking to partner with a celebrity for a licensing deal are as follows: First, the more unique the name or moniker, the better the chance of that name being protectable. And second, consider whether the celebrity name has a strong association with the cannabis products you’re looking to sell, as this will help determine whether the name could be shown to have secondary meaning. A licensee should be secure in the licensor’s ability to protect what it is licensing, otherwise what is the licensee paying for?

With a number of celebrities having jumped on the cannabis branding bandwagon–including the Marley estate, Snoop Dogg, Willy Nelson, Whoopi Goldberg and Melissa Etheridge, along with many lesser known celebrities who have used their name to promote ancillary cannabis products–these deals are certainly promising. Though trademark registrations are at play for many of these brands, the rights of publicity of the celebrities are at the center of each of these branding deals. Because state law and not federal law regulates the right of publicity, it is not subject to the same restrictions based on legality of use as federal trademarks. This makes enforcement in the event of infringement much easier for celebrities.

It’s important to remember, however, that using one’s name and likeness to sell cannabis is not without risk. Even ancillary companies face the risks posed by federal illegality, since these companies and their financial backers could be subject to charges of aiding and abetting or conspiring to violate the Controlled Substances Act for providing goods and services to cannabis businesses. Given the proliferation of celebrity-branded cannabis, however, this appears to be a risk that many celebrities are willing to take to become early entrants into the cannabis market.

It’s clear that celebrity licensing and endorsement deals in the cannabis industry are trending, but if your company is seeking a celebrity partnership, be sure to assess the deal not only from a business perspective, but from a legal perspective as well. While celebrity trademark rights in the cannabis industry are particularly difficult, rights of publicity have provided celebrities with a powerful tool for establishing and protecting their cannabis brands. This is a real leg up in an industry where federal law has made brand protection such a complex legal issue.

Hacking back isn’t the answer, unfortunately.

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

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

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

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

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

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

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

cannabis marijuana patent litigation

In previous posts, we’ve puzzled about why no one has filed a cannabis patent infringement case, despite the large number of patents granted for cannabis plants and compounds. See here, here, here, and here.

That all changed last week. United Cannabis Corporation (“UCANN”) has now filed what is believed to be the first cannabis patent infringement complaint. The case is United Cannabis Corporation v. Pure Hemp Collective, Inc., case no. 1:18-cv-01922-NYW, in the United States District Court for the District of Colorado.

The patent asserted is U.S.P. 9,730,911, “cannabis extracts and methods of preparing and using same.” The claims in the patent generally cover liquid cannabinol formulations using tetrahydrocannabinol (THC), cannabidiol (CBD), and various terpenes. See, for example, claim 10: “A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is cannabidiol (CBD).”

Although the UCANN complaint does not specify which claims are being asserted, it appears that the plaintiff may focus on CBD-related claims, e.g., claims 10-15, rather than claims for THC. The complaint devotes several paragraphs to discussing FDA’s recent approval of Epidiolex, a CBD-based drug, as we discuss here and here. The complaint suggests that FDA will reclassify CBDs generally as Schedule II or Schedule III drugs. While it is clear that FDA will do a reclassification, it is not clear that it will reclassify all CBDs, rather than just the Epidiolex compound.

In any event, we expect to see more cannabis patent litigation soon, perhaps in Colorado, California, Oregon or elsewhere. Whether it will be a trickle or a flood remains to be seen, but we will be following the UCANN case closely and providing regular updates.

For more on cannabis patents, see our series here:

With implementation of Canada’s Cannabis Act (the “Act”) set for October of this year, many of our clients owning brands that will be sold in both the United States and Canada are beginning to wonder what the implications of new branding and marketing regulations will be. So far, more than 1,500 trademark applications for cannabis and cannabis-related products have been filed with the Canadian Trademark Office, and that number is certain to grow as legalization rolls out.

The Act, through its regulation of packaging, addresses many of the same concerns as certain state statutes in the U.S.: preventing false and misleading advertising and prohibiting advertising that is appealing to children. Some of the key prohibitions contained in the Act are on testimonials and endorsements, the use of real or fictional people, characters or animals, and branding or packaging that connotes “glamour, recreation, excitement, vitality, risk or daring.” Interestingly, there was discussion in the government’s Proposed Approach to the Regulation of Cannabis of implementing a plain packaging regime, something we’ve long suspected could be applied to cannabis.

The new regulations will require that all cannabis products be packaged in a manner that is tamper-evident, child-resistant, prevents contamination, and keeps cannabis dry. Packaging must be opaque. Pursuant to the Proposed Approach to the Regulation of Cannabis, licensed processors must label the package in which the cannabis product is contained in both French and English, and the following information would be generally required:

  • Name and contact information of the processor who packaged the product;
  • Product description;
  • Product lot number;
  • Product weight or volume, depending on the product class;
  • Packaging date (and expiry date, if one has been set);
  • Recommended storage conditions;
  • THC / CBD content (expressed as the percentage of THC / CBD the product could yield, and by unit or dose, if applicable); and
  • Inclusion of the statement: “KEEP OUT OF THE REACH OF CHILDREN”.

Under the Act, it is prohibited to promote cannabis in a manner that is false, misleading or deceptive, or that is likely to create an erroneous impression about its characteristics, value, quantity, composition, strength, concentration, potency, purity, quality, merit, safety, health effects or health risks. This aligns well with what we’ve seen in U.S. jurisdictions with regulated cannabis.

However, interestingly, the Act also prohibits promotion of cannabis brands using foreign media:

“It is prohibited to promote … cannabis, a cannabis accessory, a service related to cannabis or a brand element of any of those things in a publication that is published outside Canada, a broadcast that originates outside Canada or any other communication that originates outside Canada.”

This regulation could have serious implications for brands that are looking to position themselves not only in Canada, but also in other jurisdictions, including the U.S. The Canadian government has made it a priority to ensure that companies cannot evade the Act’s advertising and promotion restrictions by merely promoting the products abroad.

Sponsorship by Canadian cannabis companies will also be prohibited (perhaps even if a particular brand is only sponsoring events or individuals abroad). As such:

“It is prohibited to display, refer to or otherwise use any of the following, directly or indirectly in a promotion that is used in the sponsorship of a person, entity, event, activity or facility:

  • A brand element of cannabis, of a cannabis accessory or of a service related to cannabis; and
  • The name of a person that
    • Produces, sells or distributes cannabis,
    • Sells or distributes a cannabis accessory, or
    • Provides a service related to cannabis.”

Clearly, the implications of Canada’s cannabis advertising regulations will be far-reaching once they are implemented in October. For brands that intend to have a presence in both the U.S. and Canada, it will be particularly important to ensure that no advertisements or promotions produced in the U.S. run afoul of the Act, as they could ultimately jeopardize the license(s) in Canada and open the responsible individuals up to liability. Having an understanding of how Canada’s rules will impact your brand, if you intend to expand beyond the U.S., will be critical in the coming months.

cannabis cybercrime
Protect your business and its data from theft.

To our surprise, many of our clients remain convinced that they are immune to cyberattacks. Yet, cannabis businesses house incredibly valuable information, making them exceedingly vulnerable to these attacks. This misplaced confidence has led numerous cannabis companies to operate without the necessary protective measures. Given the fact that more than 4,000 attacks occur daily, this post briefly discusses how cybercrime is affecting the cannabis industry and provides basic precautions companies should take to reduce the risk of falling prey to cyber hackers.

The most common type of cybercrime is known as ransomware. Ransomware is a form of malware that targets a business’s sensitive information for extortion purposes. This information may include customer lists, trade secrets, financial information and research and development information. Specifically, hackers block access to a database or system until the user agrees to pay a ransom. Not only does the temporary, and potentially permanent, loss of critical data disrupts a business’s regular operations, it also creates massive financial losses associated with restoring systems—assuming the business pays the ransom and that the hacker provides access back to the database—and severely damages the business’s reputation.

Bringing about awareness and training your team is a paramount preventative measure. Indeed, effective precautionary measures can significantly mitigate the risk of falling victim to a cyber infection. Here are a few simple precautions cannabis businesses should take:

  1. Educate Your Personnel: Attackers often enter a business by deceiving an internal user to disclose a password or click on a virus-laden email attachment. You should therefore remind your employees to never click or open unsolicited email attachments. In addition, you should emphasize the importance of not sharing personal passwords to be able to determine how your system was compromised in the event of an attack.
  2. Use Complex Passwords: You should use 12-character or longer passwords and change your passwords regularly.
  3. Enable Strong Spam Filters: Strong spam filters will prevent phishing emails, which purport to be from reputable companies to induce individuals to reveal personal information, from reaching the end users and will authenticate incoming emails.
  4. Set Anti-Virus and Anti-Malware Programs: Setting anti-virus and anti-malware programs will automatically and frequently scan your database and system to detect threats and filter files from reaching end users.
  5. Shred Physical Documents Containing Sensitive Information: Avoid old fashioned dumpster diving by shredding all sensitive information you may have printed or written down.

Although ransomware is the most commonly known and used technique, it is no longer the sole method of attack used against cannabis businesses. You may recall the precarious situation in which MJ Freeway, the giant cannabis compliance software system, found itself in 2016 and again in 2017. The company’s databases were hacked, preventing MJ Freeway from processing transactions and precluding over 1,000 dispensaries from tracking sales and inventories for weeks. These cyberattacks against MJ Freeway revealed a new kind of cybercrime where no extortion demands are made, but rather are used by competitors to destroy valuable data to gain a competitive advantage.

The MJ Freeway case highlights the concerning fact that cybercrime variants are continually emerging, making companies, including cannabis businesses, increasingly more vulnerable to these attacks. Accordingly, cannabis businesses must stop underestimating the value of their data and must protect it by putting in place a comprehensive data security system that will minimize their risk of attack and ensure the continuation of their financial success in this high-risk cyber environment.

cannabis copyrightI previously discussed how cannabis works of authorship, including the design of sufficiently original logos (only the graphic elements of the logo, not the words), are copyrightable. I also alluded to the possibility that such copyrights may be unenforceable due to the federal illegality of cannabis. Indeed, whether a cannabis copyright is enforceable remains speculative as none of the U.S. federal district courts (which hold exclusive jurisdiction over copyright infringement cases) have issued an order in a cannabis copyright lawsuit. Today, I revisit this issue by looking at whether federal district courts have enforced other copyrighted illegal works and how those legal decisions may help us determine the likelihood of courts enforcing cannabis copyrights.

Under current copyright law, illegal works are often treated similarly to other works. Illegal works are entitled to copyright protection and are eligible for registration so long as the works are:

  1. Original, meaning that the works are independently created by their authors and possess a “modicum of creativity;” and
  2. Fixed in a tangible medium of expression, which allows for their reproduction.

A certificate of registration from the U.S. Copyright Office is a prerequisite to initiate a lawsuit for copyright infringement—including lawsuits alleging infringement of illegal works. To establish copyright infringement, a plaintiff must prove two elements: First, ownership of a valid copyright, for which the certificate of registration will provide prima facie evidence; and second, that the defendant copied substantial elements of the copyrighted work.

Copyright law does not require the plaintiff demonstrate the legality of the work’s content. The currently prevailing view is that “even illegality is not a bar to copyrightability.”

Because illegal works are copyrightable, illegality is not generally a defense in an infringement suit. For example, the Ninth Circuit Court of Appeals has held that fraudulent content is not a defense to infringement. The Fifth Circuit Court of Appeals reached a similar decision when it dismissed the defense of obscenity to a claim of copyright infringement.

Favoring the enforcement of copyrighted illegal works is also consistent with their authors’ constitutional right to freedom of speech. If Congress were to impose copyright restrictions on illegal works, it would essentially censor these works, which would likely be deemed unconstitutional.

So, given the fact that the prevailing view under U.S. Copyright law is that illegality is not a bar to either copyrightability or enforceability, it is likely most U.S. federal district courts would enforce cannabis copyrights. Therefore, the strong likelihood of a court enforcing cannabis copyrights, combined with the ease and minimal cost of copyright registration, should incentivize you, cannabis businesses, to copyright your work.

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. The very best way to protect your brand name and logo is to register it as a trademark. However, as we have written about extensively on this blog, federal trademark protection is not typically available to cannabis businesses because the federal illegality of “marijuana” prevents owners from demonstrating lawful use of their marks in commerce, necessary under the Trademark Act.

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

To benefit from copyright protection, a cannabis logo must:

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

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

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

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

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

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

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.