Federal or State Trademark Registrations?

15 Nov Federal or State Trademark Registrations?

Federal or state trademarks, which should I register? This is a question we regularly get in our IP practice. For cannabis brands in particular, the answer is often straightforward.

The lawful use requirement

The United States Patent and Trademark Office (USPTO) is responsible for registering trademarks at the federal level. According to the Trademark Act (also known as the Lanham Act), for a trademark to be registered, it must be in use in commerce as of the application filing date. USPTO interprets the relevant statutory provision as requiring lawful use in commerce.

Other than hemp (cannabis that contains ≤ 0.3% THC), cannabis remains an illegal substance according to the Controlled Substances Act, meaning that commerce involving non-hemp cannabis is unlawful. Commerce in certain hemp products (for example, CBD foods) is also unlawful on the basis of the Federal Food, Drug, and Cosmetic Act (FDCA or FD&CA).

For brands that wish to register a trademark in connection to non-hemp cannabis and/or unlawful hemp products, the only option may be to register a state trademark. States will generally register trademarks used in connection with goods and/or services that are legal in that state– even if they are illegal federally. However, states may require compliance with licensing and other regulatory obligations as a precondition for registration.

Shorter processing times for state trademarks

According to USPTO, it’s taking the agency an average of 8.3 months to take first action on a trademark application. Assuming all goes well, it’ll likely be a couple more months before the trademark is finally registered. And if USPTO raises any objections, dealing with them means even more waiting time.

By contrast, state trademark registrations can be finalized in a matter of days. For some brands, having something on the books quickly–perhaps just while waiting for USPTO disposition of a federal application–might make a state trademark worthwhile. This is true despite the fact that statutory protections relate back to the date of application for any federally registered mark.

Backup plan in case of a USPTO refusal

The most common reason for a trademark application to fail is likelihood of confusion with an already registered trademark (or one for which a pending application was filed earlier). While likelihood of confusion is also grounds for rejection of a state trademark application (in states where there is substantive review), even the larger state registries have far less trademarks than USPTO’s. Thus, even if a federal trademark application is rejected for likelihood of confusion, there’s a good chance a state application for the same trademark will succeed.

State trademarks may be fine for intrastate activities

Federal registration is appropriate only in cases where the trademark is used in interstate commerce. In this era of internet sales, pretty much anyone selling goods or advertising services through a website is engaging in interstate commerce. According to USPTO, even “intrastate use of a mark may qualify [if] taken in the aggregate, [it has] a direct effect on interstate commerce.”

While it is hard these days to find a trademark whose use would not qualify as interstate commerce, in principle it could exist. Under such circumstances, a state trademark registration would be the only option. And even if a federal registration was possible, as a practical matter it might make sense for a brand to avail itself of the benefits of a state registration (such as lower filing fees and faster processing times). For example, it would be reasonable for a coffeeshop owner in Honolulu who has no plans to open branches outside of Hawaii, to register her trademark at the state level. Should another party use the same trademark in another state (by definition, at least 2500 miles away from the coffeeshop), the negative impact, if any, is likely to be very limited.

The flip side is that, for brands with a planned or existing national (or even international) footprint, state registrations will be of very limited use.

Federal or state trademarks, which should I register? In some cases, it will depend. In others, there is only one answer.