Arkansas’ Harvest Cannabis Dispensary Receives Preliminary Injunction in Trademark Dispute

When Conway, Ark.-based Harvest Cannabis Dispensary submitted its medical cannabis business application in 2017, they had never heard of Arizona-based Harvest Health & Recreation, which is now a multistate cannabis operator. The family-owned company simply chose a name that focused on the aspects of the plant they were trying to sell, according to Executive Director Robbin Rahman.

“We came up with the name in 2017, and it was a family effort,” Rahman told Cannabis Business Times and Cannabis Dispensary. “We had a list of names that we were going through in 2017, and this was the one that kept sticking. … We were just coming up with names that we thought spoke to us and reflected what our values would be.”

The company submitted its application in September 2017, and after a brief delay sparked by lawsuits over the state’s licensing process, Harvest Cannabis Dispensary received its license in 2018 to open a storefront in Central Arkansas.

A few months later, in early 2019, the Harvest Cannabis Dispensary team came across an article in a local publication saying that Harvest Health & Recreation would be involved in the operations of Natural State Wellness Dispensary and Natural State Enterprises, which operate a dispensary in Little Rock and a cultivation facility in Newport that are both managed by Harvest Health & Recreation and branded as Harvest House of Cannabis and Harvest of Newport.

“We really didn’t know who that entity was,” Rahman said. “We had no experience with them. We’d really never heard of them.”

Rahman and his team inquired with Harvest Health & Recreation about their involvement in Natural State’s operations and their plans in the state, and continued to build out the Harvest Cannabis Dispensary business, which opened its doors to patients in October 2019. Rahman said he never received a satisfactory response from Harvest Health & Recreation about its Arkansas operations.

Meanwhile, the company moved to acquire a state trademark in Arkansas, which is obtained when an entity sells its goods as commerce in the state.

“That’s really different from the way the federal system works, where you can have an intent to use reservation [and] even if you haven’t done any sales, you can file an application saying you intend you use it, and then as long as you provide actual use within six months after the trademark has been created, everything will relate back to the date you filed your application,” Rahman said.

In November 2019, Harvest Cannabis Dispensary sought and received an Arkansas trademark for its tradename under state law.

Then, in December, the team noticed that Natural State Wellness Dispensary had put up a Harvest House of Cannabis sign at its dispensary.

“That shocked us because we didn’t know they were going to use the name in the state,” Rahman said. “We realized there would be some involvement, but we didn’t realize that was the involvement, that they were actually going to operate the thing themselves. … . It just seemed absurd to us that this out-of-state operator who wasn’t even an owner was going to put their name on the building, particularly because we’d been operating in the state for several months and we were already here.”

Harvest Cannabis Dispensary decided to defend its rights in court and filed a trademark infringement lawsuit against Natural State Wellness Dispensary and Natural State Enterprises in January.

“We filed the lawsuit for trademark infringement, asserting state trademark rights, and as a component of that, we sought to enjoin them from using the name while the case is pending, and that’s called a preliminary injunction,” Rahman said.

Circuit Judge Susan Weaver granted the preliminary injunction in the case May 27, and Rahman is optimistic that a permanent injunction will be granted upon completion of a trial.

“What we were able to demonstrate in the first part of the case is that there is a high likelihood that we’re going to succeed on the merits of a trial that will occur over the course of the next year or so,” he said. “The judge’s ruling agreed with us on all of the key points.”

The most critical point, Rahman said, is the argument that federal law provides no protection for cannabis operators, which can take many different forms. In this case, it means that Weaver rejected Harvest Health & Recreation’s argument that federal trademark rights gave them the right to use the name in Arkansas, even though the company had never existed there before.

“The other critical finding was that we were a senior user in Arkansas,” Rahman said. “We had opened first. We conducted sales first and pursued Arkansas law, so that makes us the senior user, [and] we get the ability to exclude others from using that name in the state of Arkansas.”

Weaver also found that Harvest Cannabis Dispensary used the name in good faith, Rahman added. “We had never heard of them, we didn’t know who they were, so we were not trying to trade on anything they were doing in Arizona, which, as far as we can tell, that was the only state they were in at the time when we chose the name.”

Rahman also noted that Harvest Cannabis Dispensary is not pursuing Harvest Health & Recreation in its lawsuit, and the company is not a defendant in the case.

“We don’t really care about their federal trademarks,” he said. “We aren’t trying to invalidate them with this lawsuit. We’re just focused on the Arkansas entities.”

As a result of the preliminary injunction, Natural State Wellness Dispensary has rebranded itself as Little Rock House of Cannabis, which is a relief to the Harvest Cannabis Dispensary team.

“I think it just reinforces the belief that we had all along, that we get to use that name in this state, and all of our branding that we spent time working on thus far remains good and valid, and we’re going to continue to use that name in the state,” Rahman said. “Now, as we’ve been arguing, there’s only going to be one Harvest in Arkansas, and that’s my store, so we don’t have to worry about another Harvest causing confusion amongst customers, our vendors and the public.”

More broadly speaking, Rahman said the case illustrates the continuing tension between federal and state law, which extends far beyond trademarks.

“When you have something that’s federally illegal but permitted under state law, there are just a lot of tensions that you have to grapple with,” he said. “It rears its head in a number of ways—trademark isn’t the only one. The tax law has onerous provisions that only exist because there’s this duality of federal illegality and state legality. Bankruptcy law is not available to cannabis operators because it’s federally illegal. And trademark law is very undeveloped because the federal system does not apply to cannabis operators because it’s federally illegal.”