Cannabis Trademarks After Federal Legalization

27 Feb Cannabis Trademarks After Federal Legalization

What will happen with cannabis trademarks after federal legalization? This question comes up regularly, but unfortunately lacks a clear answer (or even an unclear answer). On the one hand, with cannabis no longer unlawful at the federal level, USPTO will be able to register trademarks for cannabis products. But beyond that, nothing is clear.

Whose use is it anyway?

The cornerstone of trademark law in the United States is use in commerce. A trademark cannot be registered if it is not used in commerce. In case of a dispute between two parties using the same mark, the prior user will win out, even if the later user registered the mark first.

However, use in commerce must be legal. This means that use of trademarks in connection with cannabis products does not constitute use in commerce for federal trademark registration purposes at this moment in time. But on the day federal legalization takes effect, such use will constitute use in commerce under federal trademark law.

As you can see, Legalization Day will be the first date of use in commerce for a lot of cannabis trademarks. For most brands, this will not be a problem: In fact, having Legalization Day on their trademark certificates seems like a pretty cool thing.

But what happens if a trademark is being used by two different brands? Can the brand that first used the mark claim a prior right?

Use in commerce before federal legalization may not count

The honest answer to this last question is, frustratingly, we do not know. However, a very relevant precedent suggests that prior users may not have a stronger claim. When examining applications for hemp trademarks, USPTO draws a distinction between use in commerce before the enactment of the 2018 Farm Bill and use in commerce after the bill became law. The fact that hemp is now legal does not “legalize” hemp-related activities pre-Farm Bill.

If the same logic is applied, the clock for use in commerce will start ticking at the moment federal legalization begins-–and not a second earlier. This could well lead to situations where the date of first use is exactly the same for identical or similar marks.

It is possible that USPTO will anticipate these issues and formulate guidance. Yet, given the nature of the problem, it may not be possible for USPTO to come up with a comprehensive solution. Looking at which applicant used the mark first (even if it was not legal to do so at the time) would offer a practical approach, but has downsides from a public policy standpoint: If activity that was illegal at the time confers benefits on those who carried it out, it may incentivize ongoing and future illegality.

Will trademark registrations for non-cannabis products help after federal legalization?

Trademark rights are closely linked to specific goods and services. A common misconception is that brands “own” trademarks, but that is not quite right, certainly not to the extent it suggests a brand has exclusive rights over a particular word, phrase, or logo, no matter how it is used.

During a recent trip to New York City, I enjoyed a spectacular bagel at Zucker’s Bagel and Smoked Fish. If upon return to Seattle I decided to open a bagel shop called Zucker’s, I would be infringing on Zucker’s federal trademark rights (or more accurately those of BCN Provisions, LLC, the trademark registrant). But if I opened a furniture store called Zucker’s, that would almost certainly not constitute an infringement of the Zucker’s trademark.

By the same token, if a cannabis brand registers a trademark for their apparel merch, their trademark protection will not extend to other products. It follows that a cannabis brand’s trademark registration for non-cannabis products will not necessarily give them a leg up when USPTO opens its service window for trademark applications describing cannabis products.

This said, USPTO could end up considering registrations for other products if it finds itself before two competing applications for the same mark. If it does, it might also consider the relatedness between cannabis and those other products. There are also court precedents that could bring about similar results (or new precedents might be set).

Imagine a scenario in which two brands are using the same trademark. One registered the trademark for tote bags and baseball hats, while the other one registered the same trademark for hemp prerolls. We are not saying this will happen, but would it not make sense for USPTO or a court to give more weight to the second registration? In the end, though, we will just have to wait and see how this plays out.

Federal legalization of cannabis might not make all trademarking problems go away

In practice, cannabis brands face two major obstacles when it comes to registering their trademarks. One is the Controlled Substances Act (CSA), under which cannabis whose THC content exceeds 0.3% is prohibited (and categorized as marijuana). The second is the Federal Food, Drug, and Cosmetic Act (FDCA), under which certain cannabis products are unlawful on safety grounds. If legalization encompasses only a lifting of the CSA prohibition, cannabis brands will still be unable to register trademarks that describe products that are unlawful under the FDCA, such as Hemp CBD foods and drinks.

So what to do?

Given the inherent uncertainty as to what will happen after federal legalization, there is no surefire formula to secure trademarks in anticipation. However, following certain trademarking fundamentals cannot hurt cannabis brands, and in fact could end up providing an important edge. When making branding decisions, brands should not assume that pre-legalization use in commerce will not count for anything (even though that might be the case). At a practical level, they should ensure they are documenting use in commerce.

Brands should also consider doubling down on expansions of their trademark protection scope through registrations for ancillary products such as merch, smoker’s articles, and training workshops. Such legal use in commerce could end up being an important factor in future treatment of cannabis trademark issues. Brands should also engage in some wargaming regarding possible approaches by USPTO and the courts. For instance, to the extent weight is given to registrations for non-cannabis products, the relatedness of these products to cannabis may come into play. Brands should not neglect these considerations when crafting their business plans.