A US Trademark Trial and Appeal Board (TTAB) ruling that refused a trademark due to its association with cannabis products could have wide implications for the fledgling state-legal cannabis industry in the United States. One expert tells us there is a “frightening possibility” the ruling may stop any major brand owner considering licensing their marks for use on legal cannabis products – and that, overall, the IP situation for the industry is worse today than a year ago.
Late last week, the TTAB ruled in In re Morgan Brown that a mark used in relation to cannabis products could face refusal even if it is also used in association with non-cannabis products. The evidence in the case showed the applicant’s trademark for the term HERBAL ACCESS, filed for “retail store services featuring herbs”, was used in sales of a good that is illegal under federal law and, therefore, the court deemed the use as unlawful. According to subsequent analysis of the ruling, businesses located in states with legalised cannabis may no longer register marks for non-cannabis goods that they offer for sale alongside cannabis-containing products – which appears to be a blow for brands in the state-legal cannabis industry that is worth upwards of $7.1 billion and was predicted to be on course to grow to $44 billion by 2020.
Particularly irate about the decision and its implications is Gregory Wesner, an attorney and shareholder at Lane Powell. He tells World Trademark Review that the ruling “robs the consuming public and the mark owner of the benefits [of a federal trademark] if the mark so much as touches cannabis”. To explain why, Wesner presented a hypothetical situation that will be familiar to many brand owners that sell multiple product lines: “A respected organic tomato producer in the agricultural area of Eastern Washington State owns has a federal trademark registration for tomatoes – let’s imagine the mark is ‘Growlux’ and the company is ‘Growlux Inc’. This company is then awarded a Washington State producer-processor license to cultivate cannabis. Up until In re Morgan Brown, Growlux Inc could apply the Growlux mark to cannabis products to signal to the public that cannabis sold under the Growlux mark likely reflected the same quality cultivation practices as tomatoes sold under the mark. Cannabis was not, per se, covered under the registration, but consumers were free to make this connection. Under Morgan Brown, Growlux Inc is not able to leverage its quality reputation into the legal cannabis market. In my view this is against the public interest, because corporate citizens can no longer use their marks to leverage their good reputation if cannabis is involved.”
It isn’t just the inability to use trademarks to demonstrate a positive consumer standing that is potentially affected by the decision. Wesner argues that it also has huge implications for major brands that may have been considering licensing out their marks for use on cannabis-containing product lines. “Here’s a frightening possibility,” he states. “If Mars Inc, for example, decided to license the Snickers mark to a legal cannabis producer in a legal cannabis state, to be applied on candy bars containing cannabis only in that state, the teaching of Morgan Brown is that Mars Inc could lose all of its US registration rights for the Snickers mark for non-cannabis containing candy. If any major brand holders were considering licensing their marks for use on state-legal cannabis, Morgan Brown probably stopped any such thinking.”
This particular decision can be appealed to the US Federal District Court, although Wesner notes that it will be “expensive to do” as the law requires the appellant to pay the ‘costs’ incurred by the TTAB before they can lodge an appeal.
This is a particular blow for the state-legal marijuana industry as it is still in its rapid initial growth phase. To date, recreational cannabis is legal in four states (and Washington DC), while medical marijuana is legal in 20 other states. Predictions suggest more states will be legalising cannabis in some form in the next couple of years (and it is one issue that is not necessarily dependant on the result of the upcoming presidential election). Furthermore, as this updated graph demonstrates, trademark filings that include the term ‘cannabis’ or ‘marijuana’ have continued to increase since 2010 – but the additional risks and barriers of IP could halt that growth.
Looking ahead, the challenge being faced by those businesses in the state-legal marijuana industry is “more challenging” than when we looked at this topic last year, according to Wesner, with “the lack of definitive federal guidance really making it difficult for brand owners to set a coherent brand strategy”. He expands: “The DEA has tremendous power to set the agenda by where it places cannabis on the CSA schedules. There is speculation that rescheduling cannabis might be a legacy issue for the Obama Administration, but so far the DEA has not acted. The lack of federal guidance has made things more challenging, and Morgan Brown, which was issued from a fairly low-level federal agency but has the force of law, does nothing to clear this up. Ultimately, it is worse today, and the only thing that will give some clarity is the rescheduling of cannabis from of CSA Schedule I.”