Doobie-ous Competition: How a Cannabis Company Can Use Employment Agreements to Protect Intellectual Property | Dickinson Wright
In our prior posts, we discussed the two issues that should be at the forefront of any branding strategy:
- Avoiding potential trademark infringement claims, and
- Protecting the business’ brand through trademarks
In this post, we briefly discuss how cannabis businesses can implement employment agreements to further protect their intellectual property.
Terminating an employment relationship carries certain risks for any new or rapidly growing business. Former employees might:
- Start a competing business
- Join a competitor and share the knowledge, skills, and trade secrets acquired at your business
- Begin soliciting your customers
Depending on the state in which your business operates, you may be able to use certain employee agreements to mitigate this risk, such as non-compete agreements, non-solicitation agreements, and non-disclosure agreements. Notably, most state laws treat these agreements harshly and with great scrutiny because they can restrict a person’s ability to engage in their chosen livelihood. So, these types of agreements must be carefully drafted to be enforceable.
The cannabis industry presents a unique opportunity for former employees to misappropriate a company’s intellectual property. In the trademark context, for instance, an employee can quit their job at a Michigan cannabis company, move to California, and establish an identical cannabis company—using the exact same trademarks and branding. In this example, if the Michigan cannabis company has not taken any steps to protect its marks in California, fewer remedies (if any) are available to stop its brand’s misappropriation. Thus, carefully drafted employee agreements can help to protect a cannabis company’s intellectual property rights on a broader, nationwide scale—despite the fact that federal (national) trademark registration is not yet available.
The legal landscape in the context of recreational cannabis remains murky and riddled with pitfalls for unassuming business owners. That is why it is important to hire attorneys with trademark experience, who know the cannabis industry and how to navigate its thorny trademark issues.
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