Written By: Cathleen Rocco
Most cannabis entrepreneurs are well aware of the importance of branding. The cannabis market is highly competitive, and distinctive, evocative branding can mean the difference between lackluster sales and a blockbuster business.
Cannabusinesses Brand Identity
Creating strong brand identity starts with the selection and clearance of distinctive brand identifiers – words, logos, and packaging that are used in combination with selling, marketing, and packaging your goods and services to inform consumers that you and/or your business as the source. These brand identifiers referred to as trademarks, service marks, and trade dress (hereafter collectively referred to as “trademarks”), help consumers quickly identify your goods in a sea of similar products and distinguish them from those of your competitors. Ideally, they will also suggest desirable qualities of the goods or create favorable associations with respect to lifestyle and/or social status.
Cannabusinesses and Trademarks
Once a trademark has achieved recognition in the marketplace, unscrupulous competitors will often use the same or, more commonly, confusingly similar marks to sell counterfeit goods, thereby diverting sales revenue away from the mark’s owner. Further, reputational damage can result if the counterfeit goods are inferior to the legitimate ones, further contributing to lost revenue. If the goods are dangerous, consumers can be injured or even killed. Unauthorized use of the marks (known as “infringement”) therefore not only harms the business owner, it also defrauds and sometimes causes real physical harm to consumers.
Discouraging counterfeiters requires securing legally enforceable rights to exclusive use of the mark.
Enforceable “common law” trademark rights automatically accrue through use – however, their scope is geographically limited to regions in which sales have actually occurred and nearby regions to which expansion is “reasonably foreseeable.” Moreover, enforcement is cumbersome, often requiring the filing of multiple lawsuits in multiple states, which is costly and diverts time and attention away from the business. Winning requires presenting evidence that consumers associate the mark with the legitimate business, which evidence can be prohibitively expensive to acquire.
Securing federal trademark registration of a mark expands the geographic scope of protection nationwide, provides access to federal courts and allows infringers to be pursued with a single lawsuit, thereby greatly reducing the administrative burden of enforcing rights. However, federal trademark registration is precluded where sales of the goods or services are contrary to federal law. Federal registration is currently precluded for marks used to market or sell products that are illegal under the Controlled Substances Act, such as cannabis plants, cannabis-derived cannabinoid ingestibles and psychedelics. Further, although the Farm Act of 2018 exempted hemp and hemp-derived products having less than 0.3% from the CSA, cannabinoid ingestibles are illegal under the Federal Food Drug and Cosmetics Act (FDCA), because CBD and other cannabinoids have been and are now the subject of clinical trial investigations and, per the FDA, do not have a substantial history of use as a food substance by a substantial number of people prior to being tested as a drug. While the FDA regulations are still evolving, the US Trademark Office is currently refusing registration for cannabinoid ingestibles.
In cases where federal registration is not an option, state registration of marks can sometimes provide a workaround. State registration provides state-wide protection despite geographically limited sales. The use of state trademark registration for cannabis and psychedelics requires competent legal advice. Where feasible, careful attention must be paid to corporate entity structuring as well as some strategizing with respect to the products themselves.
Hoban Law Group has expert trademark attorneys who can assist you with determining the best way to protect your branding, and who can aid you in halting infringement if it happens.