Research, product development and marketing represent the biggest costs for a cannabis company. At the same time, many cannabis products are easily copied by unscrupulous competitors, who profit while avoiding the costs of bringing those products to market. So, what can cannabis companies do about copycats?
At stake in such situations is the investment of time, money, expertise and creativity that goes into developing and marketing new products. Fortunately, it is possible to protect that investment by securing patents, trademarks, trade secrets or copyrights, or some combination of them. How are IP rights valuable? They can be used to prevent or halt copying. They provide leverage in licensing negotiations, as well as serving as a basis for litigation that can recover up to three times the actual monetary damage incurred by copying. IP rights are also assets that can increase a company’s valuation and generate revenue.
Trademark Rights for Cannabis and Hemp Companies
Trademark rights are widely appreciated in the cannabis industry as a valuable tool for protecting branding. They can be federal (which is currently limited in scope) or state. Trademark rights are created upon the use of a mark on products or services sold in the US, however registration can expand the geographic scope of protection despite geographically limited sales. Trademark rights can be indefinite if sales are continuous and/or periodic annuity payments are timely made.
Patent Rights for Cannabis and Hemp Companies
Patent rights protect useful technology. Patent rights include utility patents, plant patents and design patents. Related are plant variety protection certificates, which protect plant varieties that are propagated sexually (i.e., by seed). All patent rights are of limited duration (the period depends on the type of patent), and, like trademarks, also require periodic annuity payments to maintain.
Trade Secret Protection for Cannabis and Hemp Companies
Trade secret protection is most appropriate for information that confers a competitive advantage and that is not common knowledge, likely to be disclosed or easily reverse-engineered. Trade secrets are rooted in contract – no application is necessary – and can last indefinitely so long as the information remains confidential. A well-known example of a product protected as a trade secret is the formula for Coca-Cola®.
Copy Rights for Cannabis and Hemp Companies
Finally, copyrights protect creative works (e.g., the artwork on labels or advertising copy or graphics). The definition of “creative” is broad, and can include things like lists, instructions and the like. Copyrights are automatic but are more robust if “© 20xx by [author’s name]” appears on the work and an application is submitted along with a copy of the work to the Library of Congress.
Another aspect of IP is IP-related risk management. A freedom to operate (“FTO”) analysis can help companies avoid copying (even inadvertently) subject matter that may be protected by the IP rights of others., The potential liability can be considerable, and seeking the opinion of a trained attorney can go a long way towards avoiding or mitigating it once it occurs.
We strongly encourage you to consider the advantages of securing IP protection for your products and taking the necessary steps to avoid IP-related risks. Hoban Law Group has the best cannabis attorneys in the country, and our IP group is no exception. We can help you avoid infringement-related expenses, increase the valuation of your company, and put you in a position of strength with respect to licensing negotiations and litigation.