Avoiding a Bad Trip: How Cannabis Companies Can Mitigate the Risk of an Infringement Lawsuit | Dickinson Wright
Over a decade has passed since recreational cannabis began to see legalization at the state level. Yet cannabis businesses continue to grapple with protecting their brands, as trademark protection at the federal level remains unavailable. The current hodgepodge of state trademark regimes will undoubtedly result in litigation and a race to register federal marks once Congress legalizes cannabis. While there is no indication that Congress intends to account for cannabis trademark issues when passing legislation to legalize recreational cannabis at the federal level, these issues will undoubtedly affect businesses’ bottom lines and result in litigation.
For instance, in the aftermath of CBD trademarks becoming legal at the federal level, CBD companies from different states that had used similar marks quickly resorted to federal trademark litigation as in CBD Industries, LLC v. Majik Medicine, LLC, 2021 WL 6198664, February 12, 2021, WDNC, (litigation over the use of “CBD MD” trademark).
As cannabis businesses continue to evolve, two issues should be at the forefront of any branding strategy:
- Avoiding potential trademark infringement claims
- Protecting the business’ brand through trademarks
In this post, we will discuss how to avoid infringement claims. In subsequent posts, we will discuss how a cannabis business can use trademarks for brand protection as well as how a business can implement employment agreements to further protect their intellectual property.
To register a federal trademark with the US Patent and Trademark Office (USPTO), a trademark must be “lawful” under federal law. Therefore, marks used to identify cannabis products violate federal law (as cannabis is still a controlled substance at the federal level) and cannot be federally registered. And, notably, although trademarks for hemp-derived CBD products containing no more than 0.3% tetrahydrocannabinol (“THC”) are lawful under the 2018 Farm Bill, the Food and Drug Administration (FDA) has held that it is illegal under federal law to add CBD to any food or dietary supplements.
While federal trademark protections may be unavailable to cannabis companies, these companies are still at risk for federal trademark lawsuits. Indeed, cannabis companies are increasingly under scrutiny for using famous marks, which is a common practice in the cannabis space. For example:
- Subway IP LLC v. Budway, Cannabis & Wellness Store (cannabis mark parodying famous Subway mark)
- Wrigley Jr. Company v. Roberto Conde, et al. (cannabis mark parodying famous marks, such as “Skittles”)
- Robert Kirkman, LLC v. The Toking Dead (cannabis company parodying the famous “Walking Dead” television marks).
Significantly, as cannabis companies grow, they need to be mindful of the fact that a larger customer base brings more public spotlight, which makes any instances of trademark infringement easier to identify (increasing the risk of trademark litigation). It is common for a growing business to be targeted by brands looking to make a statement and enforce their marks.
Sometimes, trademark infringement lawsuits are motivated by the concept of “dilution by tarnishment.” Dilution by tarnishment occurs when the reputation of a famous mark is harmed through association with another similar mark or trade name. However, two relatively recent Supreme Court decisions have made it possible to potentially challenge the constitutionality of the dilution provisions set forth under federal trademark law (i.e., the Lanham Act). Unsurprisingly, the owners of famous marks usually police them vigorously, and, in many instances, these owners will balk at any perceived association or endorsement between their renowned mark and a cannabis product.
Put simply, cannabis companies should consider conducting due diligence before investing in brands that play off a parody. The longer the parodied product is on the market, the higher the exposure. Thus, the duration of the lifecycle of parodied products may be one of the most critical factors for cannabis companies to consider. Proper due diligence can keep a company apprised of potential trademark infringement claims relating to their business and product lines – especially as these companies grow their business and their products become better known. Indeed, the tendency of cannabis products to reference popular culture or parody a famous mark can create serious risks of potential trademark claims. Cannabis companies should be proactive about trademark infringement risks, or they will likely end up entangled in a trademark lawsuit.
The trademark 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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