Recreational Cannabis Is Here, and So Are Five Branding Issues to Keep in Mind

Inside Counsel

Branding may not be the first thing that comes to mind for cannabis companies, but trademark issues in the cannabis industry are on the rise. Recreational cannabis is now legal in several states, including California as of Jan. 1, 2018, so how will cannabis products be identified and distinguished? Like anything else, by their brands. Here are some key issues to keep in mind as the cannabis industry continues to grow:

1. Avoid infringement battles.
Selecting a brand name that does not conflict with other brands, even those outside of the cannabis industry, is critical to avoiding early hiccups. Gone are the days when cannabis strains could carry names that play on well-known brands without repercussion. Now that marijuana growers and sellers are becoming actual business entities that trademark owners can identify and sue (and, perhaps more importantly, collect damages), they are facing new legal challenges.

For example, the licensor of “Gorilla Glue” marijuana strains was sued by the glue maker Gorilla Glue in 2017. The parties to The Gorilla Glue Co. v. GG Strains LLC ultimately settled the case later last year—GG Strains agreed to stop using the “Gorilla” name or an image of a gorilla in connection with its strains. Likewise, in Tapatio Foods v. Ponce the makers of Tapatio hot sauce and salsa recently sued makers and sellers of a cannabis-infused “Trapatio” hot sauce that depicted a variation of the sombrero-sporting character featured on the Tapatio hot sauce bottles. This case appears to be headed toward a default judgment against the defendants. And the Girl Scouts of the USA sent cease and desist letters to dispensaries selling “Girl Scout Cookies” strains, with a request to rename the strains. Although it may be debatable whether cannabis consumers would think a glue company, a hot sauce company, or the Girl Scouts have ventured into the marijuana business, defending and litigating such claims is costly.

Even trademark applications for non-cannabis goods and services have come under attack. The Toronto Maple Leaves hockey club is opposing rapper Snoop Dogg’s “Leafs by Snoop” trademark application for lighters, and Jimmy Buffett’s Margaritaville Enterprises successfully opposed “Marijuanaville” for stores and apparel.

The trend is clear. As the cannabis industry expands, brand owners are taking note of cannabis and cannabis-related producers and distributors, and they are not tolerating the use of their brands to sell cannabis-related products. As with selecting a mark in any business, it is important at a minimum to search the USPTO register and to conduct online searches, with the aid and advice of a trademark attorney. This lesson is becoming more apparent to cannabis businesses that previously flew under the radar.

2. File for state trademark registrations, if applicable.
Because cannabis is not legal under federal law, the USPTO does not allow federal trademark registration for cannabis or cannabis-related goods and services. However, state registrations may be available. Although state trademark registrations offer fewer protections than federal registrations (restricted geographic protection, no right to use the ® symbol, no ability to record the mark with U.S. Customs for enforcement), they are worthy of consideration in the absence of federal protection. State trademark registrations provide notice of one’s rights and, along with it, a possible deterrence effect, they are relatively easy and inexpensive to obtain and maintain, and they can offer evidentiary presumptions, depending on the state. They are not, however, shields to claims of infringement. In the Gorilla Glue case mentioned above, for example, the defendant owned state trademark registrations for “Gorilla Glue” in Colorado and for its company name with a logo of a smoking gorilla in Washington. These did not save it from litigation that resulted in rebranding.

The rules and requirements vary by state, and California is one state to watch. California Assembly Bill 64 would create new trademark classifications specific to cannabis, whereas other states allow registration under existing, traditional classifications—the licensor of the Gorilla Glue strain owned state registrations in class 5 (pharmaceuticals) and class 31 (natural agricultural products). There is some tension, however, with the California trademark statute that requires the state’s trademark law to be “substantially consistent with the federal system.” The bill was suspended in August 2017, and it will be interesting to see whether it will make its way through the legislative process this year.

3. File for federal registrations for available products.
As mentioned above, the USPTO will not allow federal registrations for cannabis or cannabis-related products. It will, however, allow registration of trademarks for ancillary non-cannabis goods or services. Cannabis growers and distributors, therefore, may consider registering their brands for promotional items such as apparel or services related to cannabis. The not-so-subtly-named Cannabis Sativa, Inc. owns a registration for its “Hi” brand covering a wide range of apparel, such as t-shirts, mittens, cycling jerseys, and flip flops. The “Hi” brand is also the brand of its dispensaries. The USPTO recently approved an application by well-known cannabis connoisseur Tommy Chong “Chong’s Choice” for various clothing items, as well as for herbs, cigarette papers, tobacco jars, vaporizers, and smoking pipes, the latter of which were allowed with the restriction that “none of the foregoing containing cannabis or for use with cannabis.” Other examples include “From the Earth” for counseling services related to health benefits and risks of using cannabis, “Cannawise” for a marketing agency that serves the cannabis business marketplace, and “” for education services relating to cannabis. As these registrations demonstrate, there is room for federal registrations for non-cannabis goods in the cannabis industry, just not for cannabis itself or goods or services that would run afoul of the Controlled Substances Act (CSA), such as drug paraphernalia.

One important thing to keep in mind is that the United States is a use-based trademark registration system. The owner of the mark must actually be using it on the goods for which it is registered. So if a grower or distributor plans to register a brand for a wide variety of goods, it must be using the mark on those goods. And if a brand owner expressly states that a product does not contain cannabis and is not for use with cannabis, it will need to be prepared to offer specimens that match that description.

Finally, the USPTO can inquire about whether an otherwise lawful description of goods is actually for something prohibited by the CSA and refuse registration if the answer is yes. This means that even applications to register marks such as “Ultra Trimmer” for “agricultural machines” and “Herbal Access” for “retail store services featuring herbs” have been refused registration because the evidence showed that the actual uses were for marijuana.

4. Establish common law rights.
Trademark rights can exist in the United States without a registration. Simply using a mark can confer common law rights in the mark within the geographic area where it is used. Time will tell whether one who uses a mark for cannabis can enforce federal common law rights against an infringer. Unlike the requirement to federally register a mark, which requires lawful use in commerce, the statute that allows brand owners to sue for infringement of common law trademark rights does not contain a “lawful use in commerce” requirement. In fact, in 2016 the Fourth Circuit held that it does not contain a “use” requirement at all in Belmora v. Bayer Consumer Care AG. Without a “lawful use in commerce” impediment, query whether cannabis brand owners will be able to sue for infringement based on federal common law rights. To the authors’ knowledge, this has not been tested. It is one of many new frontiers that the cannabis industry is likely to face in the coming years.

5. Check with a trademark attorney regularly
With the constantly-changing landscape at the intersection of cannabis and trademark law, it is important for rights holders to keep up to date on recent developments so that they can best protect their brands.

Diana Rutowski is an IP partner in Orrick, Herrington & Sutcliffe’s Silicon Valley office. Scott Lonardo is an associate in Orrick’s Silicon Valley office.

Reprinted with permission from the “January 12, 2018 edition of Inside Counsel © 2018 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected]