Branding and Innovation in the Cannabis Industry

Intellectual property opportunity and risk.

More than half of America’s 50 states have legalized marijuana distribution and use to some extent, with a trend of greater and broader legalization and, we hope, sensible regulation. Federal legalization of hemp tracks this trend. The legal and regulatory thicket for cannabis businesses includes intellectual property, too. The past nature of cannabis as a black-market good and its transition to ordinary consumer good presents a lot of business opportunities. It also presents risks. There are no special intellectual property laws for cannabis, but the history and present day of the industry lead to special IP considerations.

[To read more of Marina Lang’s thought leadership click here]

Trademarks

There’s plenty of branding space for cannabis. We have seen old brands being brought into cannabis-related markets, sometimes with the brand owner’s permission and sometimes not. We have seen a lot of new brands, too, often colliding.

Trademark registration makes a lot of sense for cannabis businesses, especially those with consumer brands. The best registration is at the federal level, though many states also register trademarks. The US Patent and Trademark Office (USPTO) will not register trademarks for illegal products, though. Selling cannabis across state lines remains illegal, so it’s a bad idea to try to register a trademark as a cannabis brand. On the other hand, thoughtful drafting of a trademark application can avoid government refusal to register.

Don’t try to federally register trademarks for marijuana goods, but register them for something else.

US trademark applications encompassing cannabis products will be refused unless they are directed to a “lawful use.” The Farm Bill declares as lawful those goods that are derived from “hemp.” Better yet, the bill gives a pretty clear definition of hemp. Specifically, hemp consists of goods derived from hemp plants that contain less than 0.3% THC on a dry-weight basis.

[For more on SoCal IP Lawgroup LLP’s approach to Intellectual Property click here]

The 2018 Farm Bill, however, is not a catchall for every hemp-derived good. Depending on the product at issue, other federal laws may come into play, such as the Controlled Substances Act (CSA) and the Federal Food, Drug, and Cosmetic Act (FDCA). Whereas the Farm Bill newly defines the legal uses and definition of hemp, the CSA still defines, governs, and prohibits the manufacture, sale, and distribution of “marijuana.” Experts generally agree that cannabidiol (CBD) is encompassed within the CSA’s definition of federally prohibited marijuana. Thus, a trademark application should not try to cover CBD or “cannabis-derived” goods.

The FDA retains its authority to regulate products containing cannabis or cannabis-derived compounds. Most cannabis businesses should consider whether their products are subject to the FDCA. Trademark applications in International Class 5, which includes pharmaceuticals, often trigger heightened attention from the FDA. To be sure, FDA interference depends largely on how the product is labeled and marketed, and of course, its intended use. Contingent on those considerations, “dietary supplements” may now draw FDA attention. Ingredients that are derived from parts of the cannabis plant that do not contain THC or CBD may fall outside the agency’s scope and thus be legally marketed. Much is left unsaid, and arguably not regulated, in the “legal definition” of cannabis products.

At the state level, receptiveness to cannabis-related trademarks varies a lot and is even more dynamic than at the federal level. If a cannabis business is and will always be truly local, a state trademark registration can make sense. Most of the cannabis businesses we have seen have far greater ambitions. Few expect to stay in one state, so federal registration usually makes sense.

Conflicts among cannabis brands have become more common and public. The ordinary tests apply: the sound/sight/meaning test to compare two brands, the Sleekcraft factors in California and the Polaroid factors in New York. Yet judges have shown dramatically varied willingness to help cannabis companies with their trademark claims. Several federal judges have refused trademark-infringement claims by cannabis companies, even when the trademarks were registered. Others have not been bothered that marijuana is illegal under federal law or that hemp might be in a gray zone. Cannabis companies can be just as stubborn with brands that we see in other markets, though most want to avoid lawsuits and usually seek resolutions that are faster, more predictable, and less expensive.

Patents

Though cannabis is a very old plant, we have seen tremendous innovation in strains, uses, and peripheral products. Unlike trademarks, the doors of the USPTO are open to cannabis patents. This has led to something of a land rush by speculators, especially in an effort to claim expanses of the cannabis landscape as proprietary. This kind of land rush has happened many times before and the patent system has numerous safety valves, many of which were developed to address the dreaded patent trolls.

We see plenty of opportunity to patent new cannabis strains, whether developed through genetic engineering and protected by utility patents or developed through more traditional techniques and protected by plant patents. As with trademarks, enforcement of these rights in the courts remains a challenge, but in time we expect the courts to be more receptive. Thus, a patent secured today might not be a powerful barrier to competition, but during the life of the patent it could.

Even more opportunity lies in patents for processed cannabis goods such as edibles and concentrates, and in peripheral markets such as packaging and flower mulchers. However, as with other kinds of markets, it’s best to patent the things that competitors will copy. Patenting your secret process usually has little benefit and blows the secret: Your competitors learn from your patent and you might never know that they copied you. Thus, it’s usually much better to patent products rather than manufacturing processes.

Cannabis IP Do’s and Don’ts

  • Do register your cannabis trademarks.
  • Do be mindful of federal versus state trademarkregistration options.
  • Don’t use someone else’s brand, especially if the consumer spaces overlap.
  • Don’t try to federally register trademarks for marijuana goods, but register them for something else.
  • Do patent your new strains, processed cannabis products, and peripherals.
  • Don’t patent secret processes, techniques, or machines.
  • Do stay out of court.
  • Don’t be afraid to challenge another’s IP rights, especially if they are weak.

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