The cannabis industry is growing rapidly, with global sales expected to reach nearly $149 billion by 2031. Considering the ongoing discussions on the legalization for cannabis and of cannabis-derived products observed in the EU and the US in recent years, we can see a surge in companies that are beginning to invest in the market as a serious profit opportunity. Though the industry has seen significant improvement, particularly around legality, it continues to face many challenges, including in the area of intellectual property.
Recently, the Trademark Trial and Appeal Board (TTAB) has rejected yet another cannabis-related trademark, despite state-level legalization. Trademark application was submitted by the National Concessions Group, a Denver-based subsidiary of Canadian cannabis consumer goods company SLANG Worldwide. The company sought to protect the brand name “Bakked” for selling what the firm characterizes in its application as an “essential oil dispenser, sold empty, for domestic use.” Administrative Trademark Judge Cindy ruled the trademark to be unlawful under the Controlled Substances Act (CSA).
The rise of cannabis brands
The medical and recreational marijuana growing and retail industry, which includes both employer and non-employer establishments, has flourished recently with revenues, profits, employment, wages and the number of businesses growing between 20% and 30% from 2016 through 2021, per IBISWorld. In particular, Headset found there was a spike in sales of products like beverages, edibles, vapes, and pre-rolls. The 2021 edition of the estimated that the European cannabis market would be worth €3.2 billion ($3.75 billion U.S.) by 2025.
In the US, cannabis for medical purposes is now legal in 37 states. When it comes to Europe, medical cannabis is currently fully legal in countries such as the United Kingdom, Germany, Spain, Luxembourg, Netherlands, Italy, Poland, Switzerland, Portugal, Denmark, Croatia, Czech Republic, Greece, Ireland, and Norway. Recreational marijuana remains illegal (albeit often decriminalized) in many EU member states and 32 states of the United States, based on public health policy.
Trademark is a sign capable of distinguishing the goods or services of one company from the goods or services of other companies. In practical terms, trademarks are closely connected to branding as it is often the visual element alongside the name of a brand that represents the trademark distinguishing the company’s product and service offerings from those of competitors. Brands are essential to consumers and add value to companies and the marketplace as a whole. Trademark registration is generally advisable for all businesses regardless of their industry, as it provides legal means for brand protection against infringement attempts while at the same time boosting company performance.
As the legality and availability of cannabis products continues to grow, having strong, recognizable brands will become increasingly important in order to stand out from the competition. However, brand owners selling cannabis or cannabis-derived products in the US and EU can be rather hesitant when it comes to registering trademarks for such unconventional products, due to lack of certainty when it comes to the regulation on the subject matter.
Trademark Law in the US and EU
In December 2018, the Senate passed the new Agriculture Improvement Act (The Farm Bill of 2018), which removed “hemp” from the Controlled Substances Act’s definition of marijuana. This meant that cannabis plants and derivatives such as CBD that contain no more than 0.3% THC on a dry-weight basis are no longer controlled substances under the CSA. This move has created an opportunity for businesses to obtain trademarks for hemp-derived goods and services, so long as businesses meet certain conditions. In order to regulate the expected surge in new applications, in May 2019, The United States Patent and Trademark Office (USPTO) released Examination Guide 1-19, providing guidance related to its handling and examination of trademarks for cannabis and cannabis-related goods and services.
As CBD is a substance undergoing clinical investigations, the USPTO is likely to refuse registration of trademarks for foods, beverages, dietary supplements, or similar products containing CBD, because sale of such products without approval of the U.S. Food and Drug Administration (FDA) violates the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. Chapter 9.
When it comes to the EU law, there is no EU-wide legislation specifically concerning the registrability of trademarks where the sign includes references to cannabis or where the goods and services specifically cover cannabis and derivative products or their production. However, registrations of cannabis-related trademarks still have a high chance of failing due to the violation of “public policy or to accepted principles of morality” (Article 7(1)(f) of Council Regulation (EC) No 207/2009).
Example cases
CJEU in the Bavaria Weed case
In June 2018, German company Bavaria Weed GmbH filed an application with the European Union Intellectual Property Office (EUIPO) for a figurative mark to represent its services related to cannabis for therapeutic purposes. The simple design stylized the company’s title-case name as one word, flanked on the left by the dark silhouette image of a lion holding a cannabis leaf. Cannabis became legal for medical use in Germany in 2017, and though full legalization has been seriously considered ever since, it remains illegal for recreational purposes under the German Federal Narcotics Act. As such, it is not entirely surprising that the EUIPO refused to register Bavaria Weed’s proposed trademark on the grounds that it ran contrary to public order. In a decision reached not long after Bavaria Weed’s application was filed, examiners argued that the use of the term “weed,” which is generally associated with cannabis’s recreational use as a depressant, has put the mark in conflict with Article 7(1)(f) of Regulation 2017/1001 by promoting and trivializing a criminal activity — despite the company’s known status as a purveyor of therapeutic cannabis.
Bavaria Weed appealed the EUIPO’s decision, and their case eventually reached the CJEU in April 2020. The company’s argument began by positing that because the intended use of their product was therapeutic and not indulgent, a mark defining it could not be in defiance of public morality. However, the General Court, in its judgment of 12 May 2021, reaffirmed that as the sign evokes the recreational use of marijuana, the Boards of Appeal rightly found that the relevant public would perceive it as promoting, or at least downplaying, the use of marijuana as a prohibited and illegal substance.
The Green Solution
The Green Solution is a Colorado-based cannabis company that filed a trademark application for the phrase “The Original Cannabis Dispensary” in 2014. The company had been using the slogan in its marketing and advertising and sought to obtain federal trademark protection for it.
However, the United States Patent and Trademark Office (USPTO) rejected The Green Solution’s application on the grounds that the use of the word “cannabis” violated federal law. Specifically, the USPTO cited the federal Controlled Substances Act, which classifies cannabis as a Schedule I controlled substance and makes it illegal to use or sell at the federal level.
The USPTO stated that “Registration is refused because the applied-for mark as used on the specimen of record is merely a descriptive statement of fact and does not function as a mark to indicate the source of applicant’s goods.” The Green Solution appealed the decision, arguing that the slogan had acquired secondary meaning in the marketplace and was distinctive enough to warrant trademark protection.
In 2019, the Trademark Trial and Appeal Board (TTAB) upheld the USPTO’s decision to reject The Green Solution’s trademark application. The TTAB stated that the use of the word “cannabis” violated federal law and that the slogan was not distinctive enough to warrant trademark protection. The TTAB also noted that the phrase “The Original Cannabis Dispensary” was descriptive of the nature of the goods and services provided by The Green Solution, which further weakened its claim to trademark protection.
Takeaway
The registration of cannabis-related trademarks continues to be a significant challenge, as businesses operating in the cannabis industry are often denied trademark protection. As the legal landscape around cannabis continues to evolve, consulting a professional trademark attorney may be more important than ever for businesses operating in this space. Experienced attorneys can help businesses navigate the complex process of obtaining trademark protection and can advise them on the best strategies for protecting their intellectual property in an industry that remains in a legal gray area.
Source Lexology
https://www.lexology.com/library/detail.aspx?g=3a74b421-3e00-47ca-8f15-7c1795b3e693
