Did you know that intangible assets (which include intellectual property – like trademarks) represent 84% of the S&P 500’s value? While there isn’t a space for specific intangible assets like trademarks on a company’s balance sheet, their value should not be ignored. Instead, prioritizing them and focusing on increasing their value is critical to a company’s long-term success. This is just as true in the cannabis industry as it is in any other industry. For cannabis businesses in California, protecting trademarks, which can represent significant potential value, got easier in 2018.

In January, the California Secretary of State’s Office announced that marijuana businesses could begin applying for state trademark registrations. This was great news in terms of adding legitimacy to the marijuana industry and giving marijuana businesses within the state a way to protect their valuable intellectual property. In fact, securing state trademarks is one of the key steps in the 5-Part Trademark Strategy for Marijuana Businesses that I discussed here on the Cannabiz Media blog already.

However, it’s important to understand exactly what rights a state trademark gives you before marijuana businesses operating in California apply for them. This is great news for cannabis businesses in California, but it’s not a perfect solution to protect your cannabis brand and intellectual property in the long-term. Let’s take a closer look.

State Trademarks vs. Federal Trademarks – What Marijuana Businesses Need to Understand

The first thing you need to understand is that state trademarks offer very limited protection of your brand. A state trademark gives you the ability to protect your registered mark from infringement within the state’s borders. Your mark could be words, a symbol, or another identifying element, and its purpose based on trademark law is to put consumers on notice as to the origin of goods and services. In other words, its purpose is to reduce consumer confusion.

It’s less difficult and cheaper to register for a state trademark, regardless of your industry, than it is to register for a federal trademark. However, the protections offered by a state trademark are much more limited than a federal trademark.

First, a state trademark only protects your brand within the borders of the state it’s registered in. If you secure a California trademark for your brand name, it would only be protected within California. If your business ever had the opportunity to expand outside of California, your trademark protection would not extend outside of California.

Furthermore, federal law always trumps state law. That means if a federal trademark has already been registered, and your mark (even if you successfully registered it in California) infringes on the federal mark, the owner of the federal mark wins. Federal trademark law is based on the Lanham Act, which says a federal registration that predates another use of the same mark or a confusingly similar mark has superior rights to use the mark throughout the United States. That includes California. In other words, if you secure a California trademark, you’re not guaranteed to be able to get a trademark in another state or at the federal level (which is what you should really want).

Remember, marks don’t have to be exactly the same or even used in exactly the same industry to be considered confusingly similar! A federal trademark is intended to put everyone on notice of a registrant’s right to use a mark across the entire country.

There is also another piece to the puzzle called Common Law. In the United States, the first person to use a mark in commerce automatically has rights to it, but you need to be able to prove that you’ve consistently used it (in the specific way necessary to enforce your rights) since before another person began using it or tried to trademark it.

Trademark law gets confusing since the entire concept of “likelihood of confusion” can seem subjective, but you have to remember the purpose of trademark law. It’s not to give trademark registrants a tool to stop others from using their marks. The purpose is to protect consumers and ensure they understand where goods and services are coming from.

If there is any concern about confusion, two marks won’t be allowed to co-exist once a trademark infringement is determined. Yes, you get benefits when you register a trademark (and they’re well worth every penny you’ll pay for a federal trademark registration), but you don’t necessarily have to register your mark to have rights to it.

The best thing to do is to speak with an experienced intellectual property attorney who specializes in trademarks for the marijuana industry. Don’t make the mistake of speaking with a general business attorney. To protect your brand for the long-term, you need the right help to complete your trademark application in the manner that will give you the most protection possible and position your brand for growth, expansion, and extension in the future.

Should California Marijuana Businesses Apply for State Trademarks?

Back to the question posed in the title of this article. Should California marijuana businesses apply for state trademarks? The short answer is yes. You should try to get a trademark registration in California to protect your brand name, logo, and other identifiable elements.

Why? Because a state trademark will offer you protection as long as your business operates within the state and as long as a federal registration doesn’t trump your state registration. Since you’ll be using your mark in commerce with a state registration for some time before the U.S. Patent and Trademark Office is willing to issue trademarks to most marijuana businesses, it should be obvious through a simple or comprehensive trademark search at the federal level that you hold a state registration, which would require that the person trying to register the mark would need to use a different mark in California.

In other words, no one else would be allowed to infringe on your mark in the state of California if you have a trademark registration in the state. However, that doesn’t apply to any other state. Also, your registration only applies to the specific goods and/or services identified in the classification section of your state trademark application. That means another company could use the same mark as yours as long as they’re not operating in a competing business, disparaging your mark, or causing confusion in consumers’ minds as to the source of goods of services.

Despite these drawbacks, I still believe it’s in the best interests of marijuana businesses in California to register state trademarks in order to protect their valuable intellectual property today and in the future. Until federal trademark protection is available to all businesses in the marijuana industry, state registration is the only option for marijuana businesses, so use it to your advantage as part of your long-term brand-building and intellectual property strategy.

You can apply for a trademark in California here. If you prefer, the paper application can be downloaded here.

Originally published 1/22/2018. Updated 9/14/2018.

Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.