Cannabis Trademark Litigation: Tread Carefully

14 Dec Cannabis Trademark Litigation: Tread Carefully

Federal cannabis trademark litigation is a difficult proposition. In a recent case filed by Wunderwerks, Inc., a company that sells beverages infused with CBD and THC additives, we see another unfortunate example of this. Federal courts, at least, are still no friend to the cannabis industry.

Wunderwerks had sued Dual Beverage Company LLC (“DBC”) in California district court for a variety of federal and state trademark infringement claims. Wunderwerks alleged that DBC infringed on Wunderwerks trademarks when DBC began to sell its W*NDER branded beverages. Most recently, Wunderwerks filed a motion for a preliminary injunction. The motion sought to restrain DBC from further causing consumer confusion by continuing to sell these products. That motion was denied, and the Court was very clear that the product itself was a huge reason for the denial.

To back up, the bar is admittedly very high for obtaining a preliminary injunction, in cannabis trademark litigation or standard trademark litigation. The moving party needs to establish four factors:

1. A likelihood of success on the merits;
2. The moving party is likely to suffer irreparable harm in the absence of preliminary relief;
3. The balance of equities tips in the moving party’s favor, and
4. An injunction is in the public interest.

Here, the Court found that each of the factors weighed against granting the preliminary injunction to the cannabis trademark owner. The Court’s decision was heavily influenced by the illegality of marijuana under federal law.

Wunderwerks’ likelihood of success on the merits

Here, the Court noted that there was serious question as to whether Wunderwerks’ federal trademark was even valid, because it encompassed an illegal product under federal law. After a short discussion of lawful hemp versus unlawful marijuana, the Court concluded:

“Based on the evidence presented, the Court finds the “WUNDER” federally registered mark is likely to be invalid because plaintiff’s products encompass products illegal under federal law, and thus lawful use in commerce cannot be established.”

Wunderwerks’ likelihood of suffering irreparable harm

While Wunderwerks argued it had lost and will continue to lose business opportunities due to DBC’s infringement, DBC argued that because Wunderwerks was selling an illegal cannabis product under federal law, it was not entitled to any presumption that it was suffering irreparable harm. The Court agreed. It ultimately concluded that Wunderwerks’ argument was “speculative” and found this factor also weighed in DBC’s favor.

The balance of equities

Along the same line of reasoning, the Court concluded that the injunction would effectively stop all of DBC’s cash flow, but the impact on Wunderwerks’ cash flow was again, speculative. Ultimately, because the moving party has the burden to establish that the balance of equities favored granting the injunction, the Court found that Wunderwerks’ failure to do so was another factor for denying the motion.

Whether the injunction is in the public interest

Finally, even though the Court acknowledged that DBC didn’t make any public interest argument at all in its responding papers, the Court itself concluded there was no public interest in Wunderwerks’ favor:

“However, the Court finds the public interest does not weigh heavily in plaintiff’s [Wunderwerks] favor because, although plaintiff’s products may be legal under state law, the products offered by plaintiff are illegal under federal law.”

Clearly, some courts are still hesitant to afford cannabis trademark owners any relief at all, especially in the federal litigation context. We’ve been following all types of cases to see if things are improving, but this case is a reminder that the court system is slow to come around.

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If you’re interested in other articles in the cannabis trademark space, here are two primers to start:

And, for more articles on federal courts and the illegality defense with respect to cannabis, see the links below: