CHOOSING A BUSINESS OR BRAND NAME FOR A CANNABIS BUSINESS
Trademark issues for the cannabis and CBD business
CHOOSING A BUSINESS OR BRAND NAME FOR A CANNABIS BUSINESSWhen cannabis business owners choose a name for their company and for their brand of products and services, they need to ensure that the business name and brand selected will not infringe the trademark rights of anyone else. Just because marks related to cannabis products and services cannot be federally registered, it does not mean than any name or mark can be used. Trademarks can be federally registered for other ancillary or related goods and services. Additionally, common law trademark rights are still enforceable.
Most people are aware that they cannot use the same mark on the same goods or services as someone who already owns that trademark. A quick internet or USPTO database search can usually turn up these types of *direct hit* (exact match) conflicts. But that is not enough. Did you know that there are also 50 state trademark registers as well? Since federal trademark protection is not available for cannabis industry products and services, state registrations take on greater importance as it is the primary brand protection strategy available to brand owners. Clearing a potential business or brand name requires a search of all 50 state registers. Unfortunately, not all are available for free searching on the internet.
And what about common law trademark rights for unregistered brands? Many businesses do not register their marks, but they still enjoy trademark protection under state unfair competition laws. These can be uncovered by searching state corporation records and domain name records. Most businesses will have formed a corporation or limited liability company, or registered a website domain name. This can help uncover potential business and brand names that may currently being used as unregistered marks.
But clearing a potential business name or mark for use can*t stop at *direct hit* (exact match) searches. Not only can you not use a mark that is the same as a registered trademark, you cannot use a mark that is confusingly similar to a registered trademark. Analyzing and comparing marks to determine if they are confusingly similar is often more subjective than objective. This is one of those areas where experience matters and helps to produce more accurate conclusions.
There are a number of factors to be considered in this analysis:
1. Strength of the mark (how unique it is and whether other businesses in the same industry use similar words, word roots or imagery);
2. Proximity of the goods (how related are the products and services * would a potential customer think they both came from the same source?);
3. Similarity of the marks (sound, look and commercial impression);
4. Evidence of actual confusion (is there proof customers actually confused the two businesses in the past?);
5. Marketing channels used (e.g. internet sales, brick and mortar stores, wholesale, etc.);
6. Type of goods and the degree of care likely to be exercised by the purchaser (is this something a consumer takes a long time investigating or is it an impulse purchase?);
7. Defendant*s intent in selecting the mark (bad faith; did the business do due diligence before adopting the mark to ensure it would not be infringing?); and
8. Likelihood of expansion of the product lines (do businesses in this industry tend to expand into the same products and services?).
It can be even a bit more difficult when it comes to searching and comparing stylized marks, logos and other graphic marks. Searching just the literal elements (letters and numbers) of a mark is only half of the searching that needs to be done to clear the mark for use if it includes any stylized elements, graphics, fonts or colors.
If you perform an initial DIY internet search and uncover some marks that could be potential barriers to your use of a proposed mark, consulting an experienced trademark attorney can help you evaluate the data and make informed decisions before adopting your new business name or brand. Undertaking this due diligence can avoid liability for trademark infringement and needless costs for rebranding. With all of the money you are investing in launching a new business, it is a good use of your resources to lay a solid foundation for your business and the name it could have for decades.
CAN I FILE AN INTENT-TO-USE TRADEMARK APPLICATION TO PROTECT A TRADEMARK FOR WHEN MARIJUANA IS LEGALIZED FEDERALLY?Barriers to obtaining brand protection for cannabis-related marks are high. As long as marijuana remains a Schedule I controlled substance, federal trademark protection will not be available for goods or services related to the marijuana industry. But with discussion of removing cannabis from the federal list of controlled substances, I have been asked if applications can be filed in anticipation of such legalization. Unfortunately, a recent TTAB decision makes clear that federal trademark applications can*t be filed in anticipation of federal legalization of marijuana (removal of the drug from Schedule 1 of Controlled Substances Act (*CSA*)).
Under the CSA, it is unlawful to sell, offer for sale, or use any facility of interstate commerce to transport drug paraphernalia, defined as any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under the CSA. Trademark applicants have attempted to register trademarks for goods and services such as *retail store services featuring medical marijuana,* in International Class 35, and *dispensing of pharmaceuticals featuring medical marijuana,* in International Class 44. Registration will not be refused for lack of lawful use in commerce unless either (1) a violation of federal law is indicated by the application or other evidence *, or (2) when the applicant*s application-related activities involve a per se violation of a federal law. The TTAB has ruled that marijuana manufacturing, cultivation, use, distribution and dispensing activities to be a per se violation of the CSA. It has also refused to consider any modification of that position based upon the official federal official position to not enforce the laws, differentiating between non-enforcement and legalization.
During the trademark application prosecution of In re PharmaCann, the Examining Attorney refused registration on the ground that Applicant could not allege a bona fide intent to make lawful use of the marks in commerce because the services identified involved the distribution and dispensing of cannabis, which is a controlled substance whose distribution and dispensing are illegal under the CSA. The applicant appealed the refusal to the Trademark Trial and Appeal Board (TTAB). In its opinion, the TTAB explained that for a mark to be eligible for federal registration, *any goods or services for which the mark is used must not be illegal under federal law.* When an Applicant files on an intent-to-use basis (meaning they intend to use the mark in commerce in the near future), the identified goods or services with which the mark is intended to be used must not be illegal under federal law, because *it is a legal impossibility for the applicant to have the requisite bona fide intent to use the mark.*
Thus, there can be no bona fide intent until cannabis is federally legalized. Only then can a federal trademark application be filed for a mark related to marijuana manufacturing, cultivation, use, distribution and dispensing activities. Until then, brand owners will need to rely on state trademark and common law trademark protection.
TWO STRATEGIES FOR CANNABIS BRAND PROTECTIONBarriers to obtaining brand protection for cannabis-related marks are high. The federal illegality of marijuana under the Controlled Substances Act makes brand protection and trademark law particularly complex for the cannabis industry. As long as marijuana remains a Schedule I controlled substance, federal trademark protection will not be available for goods or services related to the marijuana industry. For states that have legalized marijuana, state trademark protection may be available. Navigating state and federal trademark laws to protect cannabis related marks is possible, but advanced trademark strategies are needed. This is an area where professional guidance can provide a good return on investment.
There are three ways in which a brand owner can establish trademark rights:
1. Establishing common law trademark rights in its existing market by using the mark in connection with their goods or services in commerce;
2. By registering the mark with one or more state trademark registries to expand rights to protect the mark in the entire states where it does business; and
3. By registering the mark with the United States Patent and Trademark Office to protect the mark in the entire United States.
Since federal trademark registration is not available for goods directly involving cannabis, businesses can obtain registration for other legal goods or services that they sell. If another cannabis industry competitor attempts to use the brand mark in association with goods and services not included in the registration (products and services relating to marijuana), the mark owner can then assert a *likelihood of confusion* argument against any would-be infringers.
The brand owner can also use state trademark registration in each state it does business. Though the protection afforded by a state trademark is geographically limited to the state of the registration, they provide enhanced legal remedies over common law rights.
Both of these strategies are a good *plan B* brand protection strategy until federal registration becomes available to the cannabis industry.
TRADEMARK PROTECTION FOR CBD PRODUCTSWith the passage of the 2018 Farm Bill which legalized industrial hemp by removing the crop from the Controlled Substance Act*s definition of *marijuana,* will lead to increased sales and opportunities for hemp-derived cannabidiol (*Hemp-CBD*) companies in 2019. Let*s look at how the legalization of industrial hemp affects trademark applications filed at the United States Patent and Trademark Office.
Even though CBD products are *legal under federal law,* the FDA still says that CBD cannot be sold for human consumption unless it has undergone the agency*s drug approval process. There are three conditions for a product to be an approved CBD drug:
1. Be FDA approved;
2. Be derived from cannabis; and
3. Have less than .1% THC.
The most informative case that helps to illustrate the USPTO*s current position on CBD trademarks is the Stanley Brothers case. Stanley Brothers Social Enterprises, LLC filed a U.S. federal trademark application for CHARLOTTE*S WEB, to be used on *plant extracts, namely, hemp oil sold as a critical component or ingredient of dietary supplements.* In addition to being refused on the basis of the CSA and FDCA, the application was refused because *[t]he 2014 Farm Bill Did Not *Legalize* Hemp on a National Level.* The relevant portion of the 2014 Farm Bill stated *[N]otwithstanding the Controlled Substances Act, or any other federal law, an institution of higher education or a State department of agriculture may grow and cultivate hemp if (1) the industrial hemp is grown or cultivated for the purposes of research conducted under an agriculture pilot program or other agricultural academic research and (2) the growing or cultivating of the industrial hemp is allowed under the laws of the State in which such institution of higher education or State department of agriculture is located and such research occurs.*
The Trademark Examining refused the application on the ground that
Although applicant is correct that the cited portion of the Farm Bill states that *industrial hemp* is Cannabis sativa L which is less than 0.3 percent tetrahydrocannabinol (THC) on a dry weight basis, the Farm Bill did not make *hemp* and everything made or extracted from hemp *legal* on a nationwide basis as applicant contends.
The FDA-based reasons for denial still stand, and it seems that the FDA holds the key when it comes to federal trademark protection for CBD products. However, there is little information provided by the Food and Drug Administration (*FDA*) about how Hemp-CBD products for human consumption (foods, dietary supplements, and cosmetics) should comply with the FDA requirements, and it could be another 18 to 24 months before the FDA makes a decision regarding the approval of Hemp-CBD products.
Until then, Hemp-CBD manufacturing companies should be cautious and conservative when labeling and marketing their CBD products.
TRADEMARK PROTECTION FOR CBD PRODUCTSChoosing branding that will not infringe the trademark and/or copyright rights of a third party is a critical step in developing a sound and fiscally responsible marketing strategy. Infringing will not only result in paying substantial damages to the pre-existing brand owner, it will also lead to massive rebranding costs. Count the dollars wasted for all of those printed labels a manufacturer would need to throw away, not to mention the products they will need to recall and pull off the shelves. Think about new websites, social media accounts and the loss of the internet search history and ranking. What is you could avoid all that risk for less than $1,500? Sound like a worthwhile investment?
Trademarks (and service marks) are commonly (but not limited to) words, phrases (slogans and taglines), symbols, colors or designs (logos and other stylized marks) that identify the source of a product and help distinguish that product or service from that of competitors. The best way to protect a trademark is to register it at the state or federal level. Logos that are adequately original and ornate may additionally be protected under copyright law as visual works.
Therefore, before launching a new brand of CBD products (building a website, printing labels other marketing activities), CBD manufacturers should do their due diligence and conduct comprehensive searches with the U.S. Patent and Trademark Office and the U.S. Copyright Office to clear the proposed names, logos and label designs.
Ownership of The *Creatives* for Your Brand
Many CBD manufacturers don*t have in-house marketing staff and engage outside graphic designers to develop their logo, photography, *copy* (written) content, videography, website and product packaging. However, many have not secured ownership over the *creatives* through a written agreement such as a written independent contractor agreement, copyright assignment or work for hire agreement (*Agreement*).
The written agreement must state that the designer (photographer, copy writer, videographer, etc.) assigns his or her rights in the work product to the CBD manufacturer hiring and paying for the creative content. This is critical because under copyright law, the *author* of a creative work is automatically the owner of the work, absent any written agreement to the contrary.
This transfer of copyright will ensure that the CBD manufacturer has the right to freely use and reproduce the creative content, including registering trademarks including the creative content, registering copyrights including the creative content, entering into licensing agreements and the ability to enforce all of these rights against would-be infringers.
With the growing popularity of CBD-infused products, CBD manufacturers are eager to enter the market and tend to rush through the marketing process, running the risk of incurring significant recall and rebranding costs. To avoid such financial burden, CBD manufacturers should consult with experienced CBD brand and business attorneys who can review their product labels and ensured that their branding is indeed theirs to use.