Legalized But Not Recognized: Brand Protection Without Federal Registration

The federal prohibition of marijuana in the U.S. has made it difficult for cannabis businesses (particularly those that handle the marijuana plant, but also for those that deal in closely related services and accessories) to protect their brand identity, even when they are operating legitimately under state law. Brand protection is typically and most effectively implemented by way of federal trademark registration, which grants the owner of a trademark or service mark a series of advantages in using and defending the mark. Such protection, however, is not available for goods and services that violate federal law.  Cannabis businesses that handle marijuana are consequently denied federal protection for their products and services, and businesses that provide services or accessories ancillary to the plant-handling cannabis business community can sometimes face the same obstacles, but none of these businesses are completely without options to protect their branding. They can and should make use of a range of alternative state and federal solutions to navigate the challenges to cannabis brand protection. In a consumer-facing industry like cannabis, a business’s inability to preserve the hard-earned goodwill of its customers can be particularly damaging.

This article is the first in a series of three articles where we will explore alternative ways to protect a cannabis business’s brand identity in the absence of a right to obtain federal trademark registration. We begin with a brief overview of the obstacles faced by cannabis businesses, both the businesses that handle the marijuana plant, as well as businesses that provide ancillary goods and services.

Federally Registered Trademarks

The Lanham Act grants the U.S. Patent and Trademark Office (the “USPTO”) the authority to issue federally registered trademarks and service marks in the U.S., but only for goods and services used lawfully in commerce. While 11 states and Washington D.C. have legalized marijuana for recreational use and 33 states have legalized marijuana for medicinal purposes, at the federal level it remains a Schedule 1 drug under the Controlled Substances Act (the “CSA”). Therefore, at the federal level, it is illegal to cultivate, offer for sale, or sell marijuana, or any equipment primarily intended to, or designed to, introduce marijuana into the human body.  In other words, even in a state where marijuana has been “legalized,” it is still a violation of federal law to cultivate, sell, possess or otherwise use marijuana in commerce.  (It is important to note, however, that the Agriculture Improvement Act of 2018 amended the CSA definition of “marijuana,” so that “Hemp” — i.e., marijuana strains producing less than 0.3% concentration of tetrahydrocannabinol — is no longer a Schedule 1 drug under the CSA.)

The bottom line is that, except where the product or service relates to “Hemp,” the USPTO will refuse to grant federal trademark registrations for marijuana as a commercial good, or service mark registrations for marijuana-related services like distribution, or to some ancillary products and services facilitating its use.

Consequently, cannabis businesses are routinely deprived of a suite of rights granted to owners of federally registered marks. Those rights include a legal presumption of ownership and the exclusive nationwide right to use the mark, public notice of claim/ownership of the mark, the ability to record registration with the U.S. Customs and Border Protection in order to prevent importation of infringing goods, legal entitlement to use the federal registration symbol ® (which gives the public notice of a mark owner’s registered rights), the ability to bring infringement and other claims before federal courts, and a basis to obtain registration protections in certain other foreign countries.

Domain Name Disputes

Domain names are the unique names used to identify a website. For example, cannabisbusinessexecutive.comis the domain name of this website. In the age of digital commerce, a business’s domain name is a crucial part of its brand identity. In the event that a domain name is registered for unlawful purposes (e.g., a cybersquatter registering a domain containing a trademark or service mark they do not own for the purpose of selling it back to the rightful owner or otherwise capitalizing on the brand identity of the mark’s owner), two alternative remedies are available to challenge improper registration: 1) the Anti-Cybersquatting Consumer Protection Act (the “ACPA”), a federal statute that provides a cause of action for abusive domain name registration, and 2) the Uniform Domain Name Dispute Resolution Policy (the “UDRP”), a non-exclusive contractual-based arbitral proceeding for resolution of domain name disputes.

Cannabis businesses are disadvantaged under both remedies because any mark they seek to protect will not be federally registered. To prevail under either the ACPA or the UDRP as holders of unregistered (i.e., common law or state registered) marks, cannabis businesses face a heightened burden when compared to owners of federally registered marks. Holders of unregistered marks have to establish that their marks are valid and entitled to protection by showing they are “distinctive” (or, alternatively, in the case of the ACPA, “famous”). A showing of distinctiveness turns on a range of factors, including: the length and nature of use, sales associated with the mark, the nature and extent of advertising related to the mark, the degree of public recognition of the mark, and data gathered from consumer surveys. A mark is famous if it is “widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” The federal prohibition against the sale or other commercial use of marijuana makes it more difficult to meet this test of distinctiveness, in large part because of the geographic limitations a state-by-state regulatory scheme imposes on them.

How Can Cannabis Brands Protect Themselves?

In articles II and III of this three-part series, we will set forth a range of solutions to the foregoing challenges faced by both “plant-touching” cannabis businesses, as well as their counterparts providing ancillary goods and services, face in protecting their brand identities. Article II will discuss solutions rooted in federal law, including the establishment of existing coverage that may be useful as a spring-board to the broader protection of cannabis if its prohibition under the CSA is ever lifted.  Article III will focus on state and common-law solutions that afford a level of protection that, while less robust than the protection offered to federally registered trademarks, can nevertheless be useful in establishing and protecting the goodwill associated with marijuana-related goods and services.

______________________________________________________________________

About The Authors

Partner Jeffrey Johnson and Vedad Tabich co-authored this article. Jeff leads the firm’s Cannabis practice is a member of Pryor Cashman’s Intellectual Property, Corporate and Technology Groups; Vedad’s admission to the New York Bar is pending. Partner Teresa Lee, who co-chairs Pryor Cashman’s Trademark Practice, also contributed to the article.