[co-author: Sydney Jenkins]

A recent lawsuit alleging trademark infringement by AmerikanWeed illustrates the importance of protecting intellectual property in the cannabis industry. Complaint at 9-10, Palmer, et al. v. Komm et al., No. 21-2-13589-3 SEA (Wa. Sup. Ct. filed Jun 21, 2023). Because the plaintiffs obtained a Washington state trademark registration, their recourse is limited to that state. To have recourse against infringement outside Washington, a federal registration may provide additional remedies—if it can be obtained. A recent precedential decision by the Trademark Trial and Appeal Board (“TTAB”) highlights some of the pitfalls to avoid if pursuing federal registration.

THE POTENTIAL BENEFITS OF A TRADEMARK

Trademark owners can take action against competitors using names and logos which consumers may find confusingly similar. Securing a federal registration can/may impede competitors from trading on the hard earned goodwill and brand loyalty of a trademark owner across the nation. However, the TTAB in In re National Concessions Group, Inc. held that state legalization, on its own, does not overcome the Controlled Substances Act’s (“CSA”) barrier to registering a federal trademark for cannabis-related drug paraphernalia. In re Nat’l Concessions Grp., Inc., 2023 WL 3244416, *1 (T.T.A.B. May 3, 2023).

THE CSA IS A HURDLE TO REGISTRATION

The National Concessions Group (“NCG”) applied to register two of its trademarks: BAKKED and the design mark

(collectively the “Marks”) with the United States Patent and Trademark Office (“USPTO”) for use with “essential oil dispenser[s] sold empty, for domestic use.” The applications were refused on the grounds that the goods were illegal drug paraphernalia under the CSA. Trademark registrations cannot be granted on illegal goods. The USPTO has issued guidance that trademarks for cannabis related goods meeting the exemptions in the 2018 Farm Bill may be registered in limited circumstances.Separately, the CSA includes exemptions including Section 863(f)(1) allowing any person authorized by local, state, or federal law to manufacture, possess, or distribute drug paraphernalia (the “Authorization Exemption”); and Section 863(f)(2) exempting any item that is traditionally intended for use with tobacco products, including any pipe, paper, or accessory (the “Tobacco Exemption”).

     NCG did not argue that its goods were exempt from the CSA under the Farm Bill. Instead, NCG argued that the Authorization Exemption and Tobacco Exemption applied. The TTAB disagreed and held that state legalization of cannabis did not provide a basis for federal trademark registration.

THE AUTHORIZATION EXEMPTION DOES NOT PROVIDE A BASIS FOR A FEDERAL TRADEMARK REGISTRATION

NCG argued that because its home state of Colorado authorized the sale of cannabis, its goods fell under the Authorization Exemption. But federal registration grants national coverage and is not limited to the geographic boundaries of any one state. The TTAB noted that Colorado’s legalization provides “authorization that does not extend beyond the borders of Colorado.” Because a federal trademark registration “would be nationwide in effect” the Authorization Exemption based on state legalization “is insufficient” and therefore fails.

THE TOBACCO EXEMPTION IS LIMITED IN SCOPE

Turning to the Tobacco Exemption, the TTAB shut down NCG’s arguments because of a “dearth of evidence” which did not describe “or resemble the goods on which Applicant uses its marks.” NCG analogized its goods to razor blades and postage scales, which could be used for cutting and weighing illegal drugs, but are typically used for more mundane tasks. The TTAB was unpersuaded. NCG submitted an example of its “essential oil dispenser” that featured a third mark—the “DABARATUS” in gold lettering—alongside the Marks. And the evidence showed NCG’s essential oil dispenser is used for inhaling cannabis by ”dabbing.” The TTAB also noted the “consistent references in the evidence to the ‘pre-filled’ version of” the DABARATUS tool.

PITFALLS TO AVOID

The TTAB held that NCG “cannot obtain federal registrations of its marks because [NCG’s] identified goods constitute drug paraphernalia under the CSA, the [Authorization] [E]xemption …, based on state law, does not support federal registration, and the [Tobacco] [E]xemption … does not apply.” It is hard to imagine a worse outcome for anyone applying for a trademark registration. The applications were refused and the TTAB found evidence of a felony in the record. However, NCG’s failure illustrates pitfalls to avoid.

ADDRESS THE EVIDENCE THE EXAMINER CITES

The Examining Attorney initially inquired whether the applied-for-goods included cannabis and were CSA compliant. Among the questions was “will the essential oil dispensers be sold pre-filled with essential oils.” NCG responded by confirming “Applicant’s essential oil dispensers are sold empty” and arguing that the sales were permitted under the Authorization Exemption and Tobacco Exemption. However, Examining Attorneys have shown a willingness to look beyond the four corners of an application when they get a whiff of cannabis.

Here, the Examining Attorney navigated to NCG’s website depicting the DABARATUS tool pre-filled with cannabis distillate. The Examining Attorney maintained the refusal to register and requested bills of sale of the “empty essential oil dispensers” and photos of the goods. NCG submitted photos of the DABARATUS tool shipped empty. But NCG did nothing to address the Examining Attorney’s evidence of advertising depicting pre-filled dispensers.

NCG could have adopted the language of Exam Guide 1-19 to overcome the CSA refusal if its goods were used with hemp. Instead, NCG asserted that the applied-for-goods are sold empty. Addressing the Examining Attorney’s evidence may have allowed NCG to overcome the refusal, but ignoring it did not. When cannabis companies are applying for a federal trademark registration, they can expect to face heightened scrutiny from an Examining Attorney. Being upfront and either adopting the language of the Farm Bill or scrupulously selecting a specimen of use may increase the chances of obtaining registration. Failing to address evidence in the record, such as photos from an applicant’s website, is unlikely to lead to registration. Particularly when the evidence indicates potentially unlawful activity.

DO NOT SUBMIT EVIDENCE OF A CRIME

NCG described its business as selling “essential oil dispensers empty to wholesale distributors across the United States.” In support, NCG submitted an invoice showing sales of the DABARATUS tool and cannabis distillate from NCG’s location in Colorado to a vendor in California. NCG also submitted images of the empty DABARATUS tool in a box for shipping.

Cannabis remains illegal at the federal level. Submitting evidence of interstate trade of the DABARATUS tool and cannabis distillate cut against NCG’s State Authorization argument that its business was lawful and stoked the TTAB’s argument against registration. Cannabis companies operate in a gray area within the confines of state borders. However, submitting evidence of cannabis sales made across state lines may remove an applicant from a gray area and implicate the CSA. Applicants should submit evidence that bolsters their arguments for registration, i.e., that the applied-for mark will not be used for unlawful activity. Such evidence could include lab test results showing the products meet the Farm Bill carve out.

POTENTIAL SOLUTIONS

THE FARM BILL MAY PROVIDE A PATH TO REGISTRATION

Exam Guide 1-19 provides a potential path to registration for cannabis related trademarks. The TTAB cited Exam Guide 1-19 in a recent decision reversing, in part, a refusal to register a trademark for “hemp-infused candles containing hemp” and “an oral vaporizer pen for smoking purposes.” In re Pioneer IP Ints., LLC, 2023 WL 4044954, *1 (T.T.A.B. Jun. 7, 2023) (non-precedential).The TTAB noted that other applications for cannabis related goods have been registered by including appropriate language from Exam Guide 1-19.

Independent of the Farm Bill carve outs and CSA exemptions, the Federal Food Drug and Cosmetic Act (“FDCA”) can also prevent registration. For example, in a precedential opinion, the TTAB affirmed a refusal to register Charlotte’s Web, Inc.’s mark CW for “hemp oil extracts” finding the goods violated the FDCA. In re Stanley Bros. Soc. Enters., 2020 WL 3288093, *7-8 (T.T.A.B. Jun. 16, 2020) (finding “hemp oil extracts” sold by Charlotte’s Web, Inc., a subsidiary of Stanley Brothers Social Enterprises, Inc., met the FDCA definition of food and barring registration regardless of the Authorization Exemption under the CSA).

STATE TRADEMARK REGISTRATION REMAINS AN OPTION

Most states that have legalized cannabis have state law concerning trademark infringement that is similar or identical to federal trademark law. For cannabis companies, it may be worth exploring the benefits resulting from a state trademark registration. State trademark registrations allow for a trademark infringement claim as in Palmer et al. They can also provide evidence that a registrant was using a trademark on a certain date, providing an advantage in establishing priority compared to solely relying on a “common-law right of priority that is proven by business records.” State trademark registrations can provide prima facie evidence of ownership and validity of the trademark in states like California. Consequently, the burden is on a defendant to overcome the presumption of validity in those states.

INDICATIONS OF A WAY FORWARD

The USPTO looks beyond the four corners of cannabis trademark applications. As such, it is important to ensure an applicant’s advertising and marketing match what is submitted to the USPTO. If federal registration is not available, a state trademark registration may provide some advantages. But this decision, and others from the USPTO, highlight pitfalls to avoid going forward for protecting “the finest of grasses.” Steppenwolf, Don’t Step on the Grass, Sam (UMG Recordings, Inc. 1968).