Ninth Circuit Upholds Trademark Protections for Manufacturer of E-Cigarettes Containing Delta-8 THC

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The Ninth Circuit affirmed a preliminary injunction in favor of AK Futures LLC (“AK Futures”), a manufacturer of e-cigarette and vaping products, against Boyd Street Distro, LLC (“Boyd Street”), a Los Angeles-based storefront and smoke product wholesaler that had allegedly been selling counterfeit versions of AK Futures’ products. The lawsuit centered on AK Futures’ “Cake”-branded delta-8 tetrahydrocannabinol (“delta-8 THC”) products. Delta-8 THC is a chemical compound that occurs naturally in the cannabis plant and can be grown into either hemp or marijuana depending on cultivation method. The FDA categorizes delta-8 THC as a “psychoactive substance” with “intoxicating effects” similar to delta-9 THC, which is the component responsible for the “high” people experience from using cannabis.

AK Futures originally devised its Cake brand in October 2020, which was depicted in a two-tier cake overlaid with a stylized letter “C”. The company registered the Cake logo with the US Copyright Office and also filed trademark applications for the word Cake and the Cake logo (logos depicted below).

AK Futures sued Boyd Street in June 2021 for copyright infringement and federal unfair competition and false designation under the Lanham Act. The district court granted AK Futures’ motion for a preliminary injunction and enjoined Boyd Street from selling goods bearing imitations of AK Futures’ two Cake logo trademarks.

Boyd Street appealed the preliminary injunction but not the finding that it was selling counterfeit versions of AK Futures’ Cake products. Instead, Boyd Street argued that AK Futures could not own a valid trademark in connection with Cake-branded products because federal law forbids possession and sale of delta-8 THC. Since only lawful use in commerce can give rise to trademark priority, Boyd Street claimed a brand used in connection with delta-8 THC products was not eligible for trademark protection. AK Futures responded that the 2018 Farm Act legalized delta-8 THC products and its use of the Cake trademark in commerce was lawful.

The Ninth Circuit rejected Boyd Street’s argument and found AK Futures was likely to prevail on the merits of its trademark infringement claim. The Ninth Circuit noted that the Farm Act removed “hemp” from the definition of marijuana in the Controlled Substances Act, thereby eliminating hemp as a Schedule I controlled substance. “Hemp,” under the Farm Act, was defined as the cannabis plant as well as its “derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 [THC] concentration of not more than 0.3 percent on a dry weight basis.” Because AK Futures’ e-cigarettes are hemp-derived and contain less than 0.3 percent delta-9 THC, the court ruled AK Futures’ Cake products fit comfortably within the Farm Act’s statutory definition for hemp.

Boyd Street argued that (1) delta-8 THC is still considered a Schedule I substance by the DEA, and (2) Congress never intended to legalize psychoactive substances like delta-8 THC in the Farm Act—only industrial hemp.

The Ninth Circuit was not persuaded by either argument. Although the court disagreed with Boyd Street’s interpretation of the DEA’s position on delta-8 THC, it concluded the Farm Act overruled any contrary agency interpretation by the DEA. In addition, the court stated the text of the Farm Act did not support Boyd Street’s congressional intent argument. The court observed that the term “industrial hemp” was not included in the Farm Act’s definition of “hemp” or the exemption from the Controlled Substances Act. Finding that irreparable harm would occur in the absence of an injunction, and that an injunction was in the public interest, the Ninth Circuit affirmed that AK Futures was entitled to a preliminary injunction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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