Can We Give State Cannabis Trademarks Some Teeth While Waiting for a Federal Solution?

Cannabis trademarks. By now, most IP lawyers know two things about them.

First, even though cannabis is legal in an increasing number of states (9 allow recreational use; 29 allow medical use), the United States Patent and Trademark Office (USPTO) is refusing applications to federally register cannabis trademarks, no matter the home state of the applicant, until the substance gets reclassified by or removed from the Controlled Substances Act (which doesn’t seem to be on the immediate horizon).

Second, state trademark registrations are available for cannabis businesses (in states where cannabis is legal), but they are a grossly inadequate substitute for federal registration.

So what is the solution for cannabis business owners and trademark professionals? Should we wring our hands until a critical mass of public opinion forces the federal government to act? Or should we propose practical solutions that can be implemented even in the current political climate? Russell Jacobs, a lecturer at the University of Washington School of Law, has taken the latter approach in an article entitled: “Cannabis Trademarks: A State Registration Consortium Solution,” published in the Washington & Lee Legal Review.

The Problem with State Registrations

As Jacobs describes, state trademark registrations have several limitations when it comes to protecting cannabis brand owners. Let’s say a legitimate entrepreneur starts a promising marijuana business in State A and registers her mark in State A; before she really gets off the ground, a pirate residing over the border in State B intentionally copies the name, opens up shop, and registers the mark in State B.

There is not much our legitimate State A brand owner can do about it. First, most state laws require use within the state as a precondition for registration, so the legitimate State A brand owner was not able to defensively register a State B trademark to block the pirate. Second, the State A registration cannot serve as the basis for a lawsuit as to use or registration in State B. A common law unfair competition count can be equally unhelpful in this scenario, because the State A brand owner would have a hard time showing any goodwill in State B.

Moreover, Jacobs explains that some state trademark registrations create only the presumption of proper registration, not the presumption of exclusive rights in a particular geographic area. This means that our State A entrepreneur’s rights might not even extend throughout all of State A, let alone to State B.

The upshot of this and other state registration limitations: weak trademark laws make it easier for bad actors to trade off another company’s goodwill with impunity, and more difficult for good faith actors to avoid consumer confusion. Meanwhile, trademark law fails to fill its core purpose: to help consumers distinguish between different brands and choose the one they trust (which is especially important with regard to stuff you put in your body).

The Proposed Solution

As a semi-permanent solution to this problem, Jacobs proposes what he calls a “State Registration Consortium” among states where marijuana is legal. The legislation necessary to create this consortium would have the following features:

  1. A system to easily identify cannabis marks on the state registries, not by eliminating state use of the USPTO’s classification regime, but by adding an “M” to cannabis registration numbers, which will help marijuana businesses acting in good faith to identify conflicting marks and instead develop unique branding.
  2. Additional presumptions of validity, ownership and exclusive statewide rights for cannabis marks. This will allow marijuana business to invest in developing goodwill without fear of intrastate and interstate competitors using the same mark.
  3. Reciprocal recognition of state trademark registrations among participating states (similar to international reciprocity). A home-state registration would be valid in other participating states, and block the opportunistic adoption of marks by goodwill free riders.
  4. The combination of reciprocal recognition and presumptions of ownership and exclusive rights across states would require a means for the owners of prior rights in any “member” state to object to a “State Registration Consortium” registration, similar to an opposition proceeding brought before the TTAB. Jacobs suggests a voluntary arbitration system to fill that function.
  5. A “bad faith” provision preventing registrants in states inside the consortium from trying to benefit from the goodwill of business outside the consortium.
  6. A grandfather provision to protect common law rights developed before the existence of the consortium. This provision would in some cases permit multiple businesses to maintain concurrent rights to the same mark in different jurisdictions.

Jacobs acknowledges that his proposal would not address disputes between state cannabis marks and conflicting federal registrations for related goods. For example, in a dispute between a traditional bakery in a non-cannabis state and marijuana cookie maker in a cannabis state, the federal registration is going to win every time until there is a national solution to this issue. But while we wait for that solution, check out the full article, which you can download here.

Editor’s Note: In addition to lecturing at the University of Washington, Russell Jacobs is also Director, Corporate Counsel for Starbucks Coffee Company, a Foley Hoag client. The views in his article, and by extension this blog post, obviously do not necessarily represent the views of Starbucks.

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