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August 20, 2018
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In business, a trademark is a valuable asset. It helps a company protect the time and money it invests over the years building a recognizable brand in the marketplace, and it ensures that no one else can trade on that value. Every trademark is a symbol of the brand behind it and has the potential to be worth as much as 80% of a company’s value. Considering the value of the Apple brand, ranked as the most valuable brand in 2018, is $189 billion, it’s easy to understand why investors are so interested in startups that have prioritized creating and protecting intellectual property.
However, trademarks aren’t as easy in the marijuana industry. Yes, trademarks can increase the value of a marijuana license and the business that holds the license exponentially, but the process is quite a bit more complex for marijuana brands than it is in other industries.
To secure a federal trademark from the U.S. Patent and Trademark Office (USPTO) that provides protection and the ability to seek monetary damages from infringers, the product and services represented by the mark must be lawful and sold in interstate commerce. Since marijuana is illegal at the federal level and it can’t be sold across state lines, the USPTO won’t register trademarks for marijuana companies, products, and services. This has been the case for companies that actually touch the plant and for many that don’t.
All hope isn’t lost though! There are ways to secure trademarks that can increase the value of a marijuana license and the business that holds it. You just have to get creative and have a strong trademark strategy in place.
Even though a marijuana business cannot register its brand for trademark protection at the federal level, that doesn’t mean it won’t be able to in the future. In order to position a marijuana brand to receive that protection in the future – when federal registration is allowed – marijuana businesses need to start putting a foundation in place right now.
Furthermore, a trademark strategy puts the rest of the marijuana industry on notice that a business has staked its claim on a specific name, logo, design, or mark. Others are far less likely to use a name that someone else is already using because of a little thing called common law.
The United States is one of the only countries in the world that considers trademark ownership based on a first-to-use basis, not a first-to-register basis. That means marks that haven’t been registered for federal trademark protection can still be protected through common law. Businesses that infringe on a mark that is already being used in commerce to sell similar goods or services will find themselves in big trouble.
Keep in mind, trademark law states that an infringement happens only when marks are confusingly similar in consumers’ minds. Marks don’t have to be exactly alike. If there is the slightest chance that consumers could be confused by the origin of the goods and services, there could be grounds for an infringement lawsuit. This is something many marijuana businesses owners are learning the hard way.
Rebranding is expensive, and lawsuits could destroy a company. If a marijuana business doesn’t have a trademark strategy with the five parts discussed below in place, investors should probably steer clear.
Any name or mark a marijuana business considers using or is already using in commerce should be searched to ensure no other business is using a similar mark offering similar products or services (or that it isn’t reasonable the other business could start offering similar products or services in the future). It’s critical that a comprehensive trademark search is conducted that searches registered federal and state trademarks as well as similar marks, marks pending trademark registration, and marks that are being used in commerce but have not been registered as trademarks (these are protected by common law).
For example, had GG Strains, the cultivators of the Gorilla Glue brand marijuana strain, done a comprehensive trademark search before they started using the brand name in commerce, the company surely would have been notified that a conflict with The Gorilla Glue Company (makers of Gorilla Glue and other adhesive products) could be a possibility. Rather than being part of an ugly lawsuit over the Gorilla Glue name that cost GG Strains money and its brand name (the company must stop using the Gorilla name and gorilla imagery by September 19, 2018), the company could have spent its time and money developing a brand that could have scaled with its business and the marijuana industry.
Similarly, had Shango, the Las Vegas dispensary that sold a marijuana strain called Gurl Scout Cookies, done even a simple trademark search, it definitely would have discovered potential conflicts with the Girl Scouts of the USA’s registered trademark for Girl Scout Cookies that has been active since 1936. Remember, the names don’t have to be exact and the businesses don’t have to be in the same industry for a trademark infringement to occur. Clever misspellings are still infringements!
Interestingly, Oregon released its rules for naming marijuana strains last year and names are not allowed to include “any Girl Scout Cookie – Thin Mints, Dosidos, etc.” Basically, Oregon’s rules say marijuana strain names cannot be false or misleading (e.g., Special K); names of children toys or any character or other item in children’s books, TV shows, or movies such as Optimus Prime or Ewok; or food products marketed to or by children (such as Skittles or Girl Scout Cookies).
The same is true for the conflict between an Ephrata, Washington marijuana shop, High Time Station, and the magazine High Times. Had the business owner cleared his store’s name, he would have chosen a different name rather than having to rebrand after becoming a defendant in a trademark lawsuit.
Any search other than a comprehensive search is not sufficient because matches could be missed (particularly similar marks and common law marks). While a comprehensive search could cost several thousand dollars, that’s a lot less money than rebranding or a lawsuit will be if a business is accused of infringing on someone else’s mark in the future.
Don’t skimp here. Do your due diligence, clear your name through a provider that searches for all marks, including unregistered marks! Typically, you need to work with an intellectual property attorney to get this type of search done. Inexpensive searches you can do yourself or buy online aren’t good enough.
Remember, you don’t have to register a trademark to get protection in the United States. Federal registration gives you added benefits such as the ability to collect damages in an infringement lawsuit, but it’s not required. However, a mark can’t get any protection at all if it’s not used in commerce.
Once a brand name is used in the marketplace, a marijuana business has a chance of claiming common law ownership of it and can try to stop others from infringing on it. Keep in mind, the name has to be used continuously in commerce or the marijuana business could lose its claim to the mark.
Even though marijuana products and services can’t be trademarked at the federal level, they can be trademarked at the state level in many states, including California, Colorado, Michigan, Oregon, and Washington. That means a marijuana business can get some protections for its brands within the state where it operates. State registration can also enable the marijuana business to collect damages in an infringement lawsuit within the state where the mark is registered.
For marijuana businesses that operate in multiple states, trademarks should be registered in all states where its products and services are sold to consumers. These efforts can go a long way in helping the business secure a federal trademark in the future if the USPTO begins accepting applications for marijuana products and service marks.
The USPTO won’t register trademarks for marijuana products and services, but it has registered marks for products and services that are related to marijuana. For example, Cannabis Sativa Inc. filed a trademark application for hats, T-shirts, and other apparel bearing its brand name, Hi, rather than for its Hi-branded marijuana products. Chong’s Choice, comedian Tommy Chong’s brand, has trademarks for vaporizers and tobacco jars but not for its marijuana cigarettes.
For marijuana businesses, staking a claim on a brand name through products related to marijuana is a smart strategy that could help them when federal registration becomes an option. If the USPTO sees that a business has already created consumer recognition for the brand and its relationship to cannabis, it’s unlikely the USPTO would allow anyone else to register the name for marijuana products.
For a mark to be registered at the federal level, it must be used in interstate commerce. Therefore, a strong trademark strategy for a marijuana business includes finding ways to expand the brand across state lines. Ancillary branded products is a great way to do this and ties into the strategy in #4 above.
Interestingly, the fact that GG Strains sold its Gorilla Glue branded T-shirts online, which could be purchased by Ohio residents (where The Gorilla Glue Company is located), played a role in making the case for infringement against the company. In this case, crossing state lines backfired because GG Strains never cleared the brand name. The company lacked a strong trademark strategy to increase the value of its intellectual property, marijuana license, and business, and it paid the price.
The marijuana industry is growing rapidly, and with more money and players in the industry, the number of trademark infringement cases will go up. Remember, not everyone invests in a comprehensive trademark search before they start using a name or mark for their products and services, and that’s where things start to go wrong – although the effects of that mistake might not be felt for a long time.
In fact, the first step of the trademark strategy is also the first question investors should ask marijuana companies: Did you clear the brand names and marks you’re using to represent your products and services to ensure they don’t infringe on any trademarks? After all, rebranding is expensive, and lawsuits can be a company killer. This is a risk that is definitely not worth taking.
Originally published 8/17/17. Updated 8/17/18.
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