MarkIt to Market® – May 2023: Watching the Pot™ | Sterne, Kessler, Goldstein & Fox P.L.L.C.
A LITTLE DAB CAN DO YA IN
In a precedential decision earlier this month, the Trademark Trial and Appeal Board upheld refusals to register two trademarks owned by National Concessions Group Inc. (“National”) on the ground that the goods – essential oil dispenser sold empty for domestic use in Class 21 – comprise illegal drug paraphernalia under the Controlled Substances Act (CSA).
The CSA makes it unlawful to sell, offer for sale, or use any facility of interstate commerce to transport drug paraphernalia, i.e., “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under [the CSA].” 21 U.S.C.§863(d). Based on information supplied by the applicant during prosecution, and additional evidence made of record by the Examining Attorney, the USPTO concluded that the marks are used on drug paraphernalia, violating the CSA.
However, National argued its products do not qualify as prohibited drug paraphernalia under Section 863 of the CSA, because they are exempted under the following provisions set out in Section 863(f):
[Section 863’s prohibitions on drug paraphernalia] section shall not apply to –
- any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items; or
- any item that, in the normal lawful course of business, is imported, exported, transported, or sold through the mail or by any other means, and traditionally intended for use with tobacco products, including any pipe, paper, or accessory.
See opinion p. 6.
National asserted that its goods are used to dispense essential oil and, in the alternative, its goods qualify for an exemption because (1) it has authorization under Colorado law to manufacture, possess, or distribute its goods, or (2) its goods are of the type usually intended for use with tobacco products.
Because the goods are described as an “essential oil dispenser, sold empty, for domestic use,” which is not an unlawful good, the Board looked to extrinsic evidence in the record – including from National’s own website promoting the dispenser as a “dabbing” tool – to determine if the goods are unlawful. The evidence not only explains the “dabbing” process as a trend “in which cannabinoids and terpenes from cannabis are extracted and concentrated…and then, in a device such as a bong or pipe, heated to the point of vaporization,” but also clearly indicates that “dabs” and “dabbing” are terms of art in the cannabis industry. Applicant’s dabbing tool, “available in four strains of Organa Labs oil: Indicia, sativa, hybrid and CBD,” is pictured on its website with packaging featuring the marks at issue in the appeal. (pp. 8-9)
The Board determined that the evidence clearly supported the finding that National’s products constitute drug paraphernalia under the CSA and that the argued exemptions – authorization under Colorado law or supposed traditional intended use with tobacco products – do not support a decision for registration. The Board stated that “any authorization by Colorado…cannot override the laws of other states or federal laws outside Colorado,” (p. 18) and that the exemption is therefore insufficient to support federal trademark registration.
While National craftily argued that its goods could also be used with tobacco products and pointed to various third-party registrations for smoking articles (e.g. rolling papers and e-cigarettes) that support dual functionality for tobacco and marijuana, the Board determined that National’s goods do not qualify for that exception given the dearth of evidence on the record that National’s products are not marketed or sold for use with tobacco-based oils.
While the Board’s position has long been clear on not extending state law exemptions to the federal level as support for “lawful use” in interstate commerce or federal registration, this decision is a good reminder that, just because the description of goods suggests the products are legal under federal law, an applicant’s website and extrinsic evidence may support a finding to the contrary.
This decision again highlights the conundrum facing brand owners in the cannabis space, whose current protection options primarily encompass state and common law rights.
This article appeared in the May 2023 issue of MarkIt to Market®. To view our past issues, as well as other firm newsletters, please click here.
