Even though California law is set to recognize cannabis as a lawful, for-profit consumer product starting in 2018, existing law provides very little assurance to entrepreneurs that they will be able to establish protectable cannabis trademarks. This legal update explains (1) the current deficiency in California law, (2) the basic long-term strategies aspiring cannabis companies should consider, and (3) the prospects for a legislative fix.
1. THE CURRENT STATE OF TRADEMARK LAW and Cannabis Trademarks
Under California and federal trademark laws, trademark rights arise when a trademark is “used in commerce.” Ordinarily, this means that once a commercial activity involves use of a trademark, the business using the trademark can “register” of those rights. Both the state of California (through the California Secretary of State) and the federal government (through the U.S. Patent and Trademark office, or “USPTO”) provide a trademark registration system for that purpose.
Because the federal Controlled Substances Act defines cannabis as a Schedule I substance, however, the USPTO does not consider cannabis activity to be a “commercial use” that qualifies for trademark protection.
But what about the California Secretary of State? Unfortunately, the California Secretary of State does not currently recognize trademark rights arising from sale of cannabis. While this policy seems to conflict with recent cannabis legislation, there is some rationale to support it.
First of all, commercial cannabis activity is currently not a typical commercial activity. Rather, it is an activity that is defined as a crime by certain California statutes but, under certain other statutes (e.g., Health & Safety Code section 11362.775), enjoys qualified immunity from prosecution under certain circumstances. And that immunity requires that businesses generate no profits from their cannabis activities, further distinguishing such businesses from those that traditionally rely on trademark rights.
Second, the California Model State Trademark Law requires the Secretary of State to use the same system the USPTO uses when classifying goods and services for trademark purposes. Because the USPTO refuses to classify cannabis at all for trademark purposes, this provision arguably leaves the Secretary of State with no legal basis to register cannabis trademarks.
2. LONG TERM STRATEGIES TO CONSIDER for Cannabis Trademarks
Despite these legal obstacles, even cannabis companies can establish protectable trademarks by following a multifaceted, long-term approach.
It may seem obvious, but if you want to have trademark rights at all, you must use your mark and fulfill the “use in commerce requirement.” In other words, if you want to exclude other cannabis companies from using your trademark in competition with you, there is little reason to wait before rolling out the trademark first. Start using your mark on cannabis as soon as possible.
Meanwhile, give thoughtful consideration to whether your business involves any goods or services that do not violate the Controlled Substances Act. Examples include branded apparel, lighters, rolling papers, vape pens, informational or educational websites, and any other goods and services that do not necessarily involve cannabis. To the extent you are offering such goods and services, you may already have trademark rights that you could seek to register with the USPTO.
You can contact Rogoway Law Group for guidance on how to execute these strategies.
3. THE PROSPECTS FOR A LEGISLATIVE FIX
Given the sheer magnitude of the California cannabis market and the competition that it will involve, there will be intense pressure on the legislature to address the defect in the state’s trademark laws. Indeed, lawmakers have already attempted legislation to do so.
For example, Assembly Bill 1575 (“AB 1575”), which the Assembly approved in June 2016 but is indefinitely delayed by the Senate Appropriations Committee, is a “clean up” bill intended to clarify various provisions of the Medical Cannabis Regulation Act. More recently, on December 12, the Assembly introduced AB 64, a bill intended to clarify various parts of the Adult Use of Marijuana Act. Both bills include a trademark provision that would instruct the Secretary of State to begin treating cannabis products and related services as “lawfully in commerce in the State of California” beginning in 2017.
Regardless of whether the full legislature approves AB 1575 or AB 64 specifically, it is clear that the cannabis trademark issue is an issue that has lawmakers’ immediate attention. Future legislation to improve and clarify the state’s existing cannabis laws is very likely to include the straightforward fix needed for the state’s trademark system.
