California Cannabis Trademarks: The “Legal Use In Commerce” Debate

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california cannabis trademark
In California, trademark use comes before registration.

It was big news for California cannabis business owners when the California Secretary of State’s office announced that it would be accepting applications for cannabis-related trademarks under limited circumstances. Until January 1st, one of the biggest hurdles for California cannabis brand owners had been the inability to secure California state trademark registrations for their marks. But we are still receiving a lot of questions from clients regarding whether they are actually eligible for those registrations, particularly when they have not yet received their temporary or full license from the state, or even when they are not yet operating.

As we’ve discussed before, one of the key requirements for obtaining a California state trademark registration (or a federal trademark registration, for that matter) is that you must be making lawful use of the mark in commerce at the time of your application. For any state trademark application, this means you must be making lawful use of your mark in commerce within that state. This requirement has created a good deal of difficulty for those seeking to enter into cross-state brand licensing deals, but it’s also creating some confusion here in California, where it isn’t always clear what “legal use” of a mark entails.

The California Secretary of State’s office has indicated that it will accept trademark applications for goods and/or services that fit within an existing classification code from the USPTO’s Identification of Goods and Services Manual. While it will be easy to register for things that fit squarely within the USPTO specifications, like retail services, registering for cannabis products themselves will prove less clear cut. So every application must specify goods and/or services that the applicant is actually selling, and the sale of those goods and/or services must be legal under state law. Note that mere token sales of goods or services are insufficient to support trademark registration.

To sort through the requirements for a successful state trademark application, it’s useful to go back to the basics of legal trademark use under federal law.

One of the key considerations in any trademark application is that it doesn’t matter how clever the wording of your specification of goods and services is, if you aren’t actually selling goods or services that comply with the relevant law. For example, under federal law, calling your goods “dried herbs,” “dried plant matter,” or “agricultural goods” will not fool the examining attorney if what you are actually selling is cannabis.

How this will play out at the state level, however, is less clear, where the sale of cannabis is now legal for those with a state license (we are intentionally taking a conservative position on this, as a trademark registration that is open to challenge and cancellation down the line could end up doing an applicant more harm than good). As under federal trademark law, you must actually be selling the goods you specify in your application, and the goods you are selling must comport with state law. The Secretary of State’s office has taken a rather ambiguous position here, but we think it’s the best they could do given the lack of legislation amending California’s trademark law. Until the state establishes a specific class under which businesses can register their marks for cannabis products, we expect to see trademark applications with intentionally vague specifications of goods and services, which won’t benefit anyone, including trademark owners.

And remember that this determination does nothing to increase your odds of obtaining a federal trademark, even though the state has deemed your use “lawful.” An applicant must have a bona fide intent to use their marks lawfully (under federal law) in commerce under Sections 1 and 45 of the Trademark Act, 15 U.S.C. §§ 1051, 1127.

Note that even an application filed on an intent-to-use basis could be rejected if the record indicates that the identified goods or services are unlawful, because actual lawful use in commerce is not possible. Many applicants have tried and failed to make an argument that because they sold goods only in states that allow for the legal sale of cannabis, their current and intended use therefore constitutes lawful use in commerce under the Trademark Act. The USPTO has repeatedly rejected this argument, citing a decision that “the fact that the provision of a product or service may be lawful within a state is irrelevant to the question of federal registration when it is unlawful under federal law.” In re Brown, 119 USPQ2d 1350, 1351 (TTAB 2016). In other words, the federal interdiction against cannabis will control over state law cannabis legalization.

The takeaway here is that lawful use in commerce will be key to obtaining a California State trademark registration that will hold up in court, and provide you with adequate brand protection. It’s better to hold off on filing your trademark application until you are certain you meet all the legal requirements under trademark law, than to rush and file an application that could be subject to cancellation. We cannot stress enough the importance of engaging with an experienced trademark attorney to ensure that your application is viable before you file.

Source: https://www.cannalawblog.com/california-cannabis-trademarks-the-legal-use-in-commerce-debate/

 

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