Mulling the future for marijuana IP

On October 17, many Canadians will no doubt rejoice as the country makes the recreational use of cannabis legal.

While several countries, including Belgium, Chile and Mexico, have adopted a policy to decriminalise the possession of small amounts of cannabis, and others have legalised the medical use of it, Canada will be only the third country to legalise it for recreational use. The other two countries are Georgia and Uruguay (while Israel is set to follow suit in 2019).

Trailing behind Canada’s liberal approach is its neighbour, the US, where cannabis is illegal under federal law; however, some states have legalised cannabis for recreational use. As the US Patent and Trademark Office (USPTO) will not register trademarks for goods and services that cannot be lawfully regulated by US Congress, cannabis-related products will not be granted trademark protection.

David Gold, member of US-based Cole Schotz’s IP office, explains that federal trademark protection depends on the lawful use of the goods and services it covers in commerce.

“Here, we are talking about use in connection with cannabis, which is per se unlawful under federal law,” he says.

“Accordingly, the USPTO, as a matter of trademark law and policy, will not register cannabis-related marks.”

Despite this, the USPTO will grant patents related to the production of cannabis.

Gold says this is because patents are not tied to actual use, whereas a trademark has to be used in connection with the goods and services in commerce. “The USPTO does not even consider the legal status of cannabis when determining patentability,” he says.

With a few exceptions (such as technology used in connection with atomic weapons), the USPTO considers only whether an invention is new, useful and non-obvious when granting a patent.

“If it meets the criteria, it will be patentable—regardless of the fact that the invention is related to cannabis,” he explains.

As a result, US-based cannabis companies may miss out on a range of protective benefits provided by federal trademark registration, adds Marsha Gentner, senior counsel at Dykema.

“Aside from not receiving these benefits, the absence of a federal registration inhibits the ability of the trademark owner to file one lawsuit in a federal district court to address a multi-state infringement by a single party (and to get a nationwide injunction),” she says.

In the courts

Cannabis companies have already been on the defending side of infringement claims.

For example, US-based confectionery company Hershey’s has been on the attack. The company sued California-based dispensary Harborside, claiming that the dispensary’s Jolly Meds products were infringing Hershey’s ‘Jolly Ranchers’ trademark. The case was dismissed in January this year.

The use of cannabis may not be legal on a federal level, but this doesn’t mean that there isn’t support for such a movement.

Currently, the use of cannabis for recreational use is legal in the states of California, Washington, Alaska, Oregon (all of which are on the west coast), plus Nevada, Colorado, Maine, Massachusetts and Vermont.

It is also legal to possess a limited amount of cannabis in Washington, DC.

Meanwhile, cannabis has been decriminalised in Nebraska, Minnesota, Missouri, Illinois, Mississippi, Ohio, New York, New Hampshire, Delaware, Maryland and North Carolina. It is also legal for medical use in several other states.

It may not be a surprise therefore to learn that support for the idea of making cannabis legal on a federal level is growing among US citizens. A 2017 poll from research-based consulting company Gallup showed that 64% of Americans now believe that cannabis should be legalised. This reflects the highest public support shown for the proposal, up from just 36% in 2005.

When Gallup first started polling people on the possibility of legalising cannabis, in 1969, only 12% of US citizens supported the idea.

Despite growing support for legalisation, under the current administration it does not look as though this will change any time soon.

While the USPTO won’t grant trademarks to products in relation to cannabis, there could be circumstances where the office will grant trademarks to products that ‘reference’ cannabis.

For example, trademarks may be granted if the services provided in an application are for the treatment of cannabis addiction, or education services related to the effects of cannabis, says Gentner.

According to the Trademark Manual of Examining Procedure 907, it is only when “the goods or services involve the sale of transportation of a controlled substance or drug paraphernalia in violation of the Controlled Substances Act” that they cannot receive registration.

Alternative protection

There is the potential for companies in the industry to protect their assets in other ways.

“In terms of brand protection, there are select federal statutes applicable to both registered and unregistered marks,” says Gold. “For example, claims for false designation of origin and false advertising under the Lanham Act do not require federal trademark registration.”

Section 15 USC 1125 reads that any person who demonstrates a false designation of a product that “uses in commerce” an element that is likely to cause confusion, or misrepresents the nature of the product in its advertising, is “liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act”.

Gentner says that it has not been established whether the terms “uses in commerce” in the act is applicable to a claimant pursuing a common law trademark infringement claim under the section, “and/or whether it would have any bearing on a false advertising or false misrepresentation claim”, she says.

Gold comments that certain components of an overall brand portfolio may also be protected under copyright and other laws.

State level

There are differing levels of cannabis legalisation in different states.

Some states afford both common law and statutory trademark protection for cannabis-related products.

“Protectability at the state level is most often contingent on the legal status of cannabis and cannabis-related products within a particular state,” Gold says.

“However, the rights afforded at the state level are just that, state-based, and therefore do not protect the trademark holder beyond the geographical boundaries of the state(s) within which the trademark owner operates.”

Gentner adds that some states that have legalised cannabis use have their own trademark registration schemes, laws and remedies for infringement that could benefit cannabis-based companies if they are located in such a state.

“For example, California passed legislation to make it clear that cannabis-related marks may be registered as California trademarks,” she says.

Cannabis companies are taking the initiative in protecting their brands where they can. After versions of one of its strains started to become available elsewhere and marketed under the same name, cannabis producer GG Strains successfully registered the trademark ‘GG Strains’ in Nevada.

With the US’s northern neighbour on track to legalise cannabis, are there opportunities for US companies to look to Canada for business? Gentner thinks there are incentives to go north, although those companies wishing to do so should be careful.

“Companies that have experience might establish facilities in Canada to take advantage of business opportunities there,” she explains.

“But remember, another big issue for legal cannabis in the US is interstate banking.”

Gentner says that because marijuana is a Schedule 1 substance, banks can actually be charged by the federal government for money laundering if they do transactions with marijuana-linked money, even if it’s legal.

“Getting the money from Canada to the US will be a problem without some legislative action on the banking end in the US,” adds Gentner.

As the US population takes a more liberal stance on the use of cannabis, it may be in the government’s best interest to legalise its use on a federal level, some would argue. US-based news outlet Marijuana Business Daily forecasts that annual retail sales generated from cannabis in the US could top $20 billion by 2022. This would represent an increase of more than 200% from 2017.

“I feel pretty confident that a change is coming. One way or another, legalisation will be passed that will moot the ‘lawful use in commerce’ technicality and allow for federal registration of cannabis-related marks, as long as the registrant is acting within the law of the state(s) in which it operates,” comments Gentner.

While she may be optimistic that state governments will continue to take relaxed approaches to the use of cannabis, this could present another dilemma in the future, says Gentner. “Whether truly interstate commerce/business will come to pass is another matter entirely,” she concludes.

Although it may be difficult for cannabis-based companies to protect their brands, growing support and a shift in momentum indicates that the tide may be turning.

Cannabis fact file