The Marijuana Problem

Though states across the country have relaxed their marijuana laws, and marijuana businesses have opened and grown, problems remain.  Many new marijuana businesses are finding that, although their state is accepting of those little green buds, the big boys at the fed are not.

Much of trademark law is covered by federal statute, including trademark registration. Federal Trademark law precludes registration of marks that, among other things, are used to  identify goods or services that are illegal in commerce. Because marijuana is still illegal according to federal law, many businesses are finding that they cannot obtain registration in their marks.

In a recent appeal to the Trademark Trial and Appeals Board (TTAB) the Board affirmed the examining attorneys finding that ULTRA TRIMMER, which identifies  “agricultural machines, namely, a trimming machine for trimming leaves, plants, flowers and buds,” would not be afforded trademark registration. The reason being that the applicant “was not making lawful use in commerce of its mark because Applicant’s goods were illegal ‘drug paraphernalia’ within the meaning of Section 863 of the CSA. 21 U.S.C. § 863.” The Board and examining attorneys have consistently rejected marks for the same reason.

It’s understandable that an examining attorney and the Board would deny protection. It is not their job to make law, change law, or enforce it as they see fit. They have to follow the law, and for now, according to federal law, marijuana is illegal.

You may think, “what’s the big deal”?; but in any booming industry, which the marijuana industry clearly is (Fortune), trademarks are critical. A business in Colorado that has been working diligently, learning the industry, and growing their name, may want to expand to say, Washington, Massachusetts, or even a different part of their state. And, as any serious business does, they’ll want to reduce risk. One way is to apply for trademark registration with the USPTO. (Unregistered marks offer some protection, but at a much lesser degree.)  If they obtain a registration in their mark, no other business in the US can use it or a confusingly similar mark. That part of their business is protected, and risk is reduced. But without such registration, that business will risk any other business coming along and confusing the public with a similar mark. 

The further problem is, not only are these businesses kept from obtaining federal trademark registration, which could hurt their expansion and make enforcement more challenging, they may in fact find that they have no protectable trademark rights at all. Section 43 of the Lanham Act (federal trademark statue) provides for a cause of action for many forms of unfair competition, including trademark disputes — whether registered or not. Therefore, normally, if a business infringes on your trademark rights, whether involving a registered mark or not, you have a federal cause of action against that business. But, does a marijuana business have rights that the federal judiciary is willing to protect? Many practitioners say no. As far as I know this has not yet been tested in court, but the logic goes that if the USPTO is not willing to provide protection through registration, because the mark in question involves illegal activity, then a federal court will also not provide protection through a law suit, likely finding that the illegal activity precludes trademark rights of any kind. How this issue is approached by courts is yet to be seen, but it no doubt adds to uncertainty in the marketplace.

So, when a marijuana business finds that another business is infringing its trademark rights, there is a chance that business will have no federal recourse. And because most trademark disputes are handled in federal courts, that business may well find that they have no way of protecting their brand. Yes, a business could theoretically bring a cause of action in a state court (which happens sometimes), but procedural hurdles may keep such a suit from staying in that court. Therefore leaving them with no way to enforce their rights. (This problem has also come up in other cases of trademark registration canellation/refusal, like the Redskins case — it is unknown at this time if the same law that precludes registration would also preclude a federal cause of action.)

I’m sure this issue will get worked out in due time, but for now, many businesses are functioning in a rather precarious world, in which their business may have no trademark protection whatsoever.