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Waiting to Exhale - Clarity Around Enforcement of Trademarks for Cannabis Goods is a Pipe Dream

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Sterne, Kessler, Goldstein & Fox P.L.L.C

A recent article in Marijuana Business Daily projected that the total economic impact of the cannabis industry will range from $39.2 billion to $48 billion in 2019. Despite this commercial potential, there remains little clarity around the enforceability of trademarks for cannabis and cannabis-related products. As a relatively new arena, characterized by a complicated patchwork of state and federal rights and ever-moving requirements, there is not a lot of precedent to follow.

For those marketing cannabis goods and services exclusively in states where these activities are legal, common law or state trademark rights may be sufficient. However, protecting a brand with national scope is typically advanced by securing federal trademark registration with the U.S. Patent & Trademark Office (PTO) under the Lanham Act. Under the Lanham Act, exclusive rights to a trademark for particular goods/services are granted to the first to use the mark in commerce. And with respect to federal registration, the Lanham Act specifically requires “lawful use,” which the PTO has interpreted to mean uses that do not violate federal laws or regulations, including the Controlled Substances Act (CSA) and Food Drug and Cosmetic Act (FDCA).
 
While the way in which the “lawful use” doctrine has been applied by the PTO is relatively well understood, its application in the context of enforcement is at best hazy. In this update, we summarize three decisions involving trademarks for cannabis or cannabis-related products where courts have touched on the issue of “lawful use” in different ways, reaching different results.

In Woodstock Ventures LC v. Woodstock Roots, LLC, 18-cv-1840 (S.D.N.Y. July 29, 2019), the owner of a trademark registration for WOODSTOCK branded “smokers’ articles” (Woodstock “Roots”) sought a preliminary injunction to enjoin use of the identical mark for recreational marijuana and vaping devices by the owner of the also registered WOODSTOCK mark for music festivals and merchandise (Woodstock “Ventures”). The parties had entered into a coexistence agreement with respect to their registered goods and services. The parties both argued that recreational marijuana and vaping devices were within their respective natural zones of expansion. The court rejected the zone of natural expansion argument on grounds that the sale of recreational marijuana is illegal under federal law and thus neither party was likely to succeed on this claim. In arriving at that conclusion, the district court discussed the PTO’s interpretation of the unlawful use in commerce doctrine and, in direct reference to that administrative policy, held that “the trademark protection afforded to Venture’s mark cannot be extended to federal unlawful cannabis.”   

In stark contrast, only two days later, the court in RooR International BV v. Shouk, 3:19-cv-00027 (M.D. Fla. July 31, 2019) refused to summarily invalidate the plaintiff’s trademark registration on the basis of the unlawful use doctrine. The mark in question in RooR relates to water pipes, which the accused infringer had argued were unlawful marijuana paraphernalia and therefore invalid, depriving the plaintiff of standing. In declining to invalidate the trademark rights on the basis of illegality, the court explained that while the “legal use” in commerce requirement is applied by the PTO as eligibility criteria for trademark registration, under Eleventh Circuit law, a use in violation of the law “must be of such gravity and significance ... so tainted that, as a matter of law, it could create no trademark rights.” The court found that such was not the case here.
 
In another turnabout several months later, the District Court for the Northern District of California applied the unlawful use doctrine in the context of rejecting a claim of prior common law rights in a trademark based on prior use of the mark because the mark was used in connection with cannabis-infused chocolates and other edibles. Kiva Health brands LLC v. Kiva Brands Inc., 19-cv-03459-CRB (C.A.N.D. Sept. 6, 2019).
 
In sum, those holding their breath for clear guidelines may not be able to exhale any time soon.