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How to Protect Your Trademarks When You Can’t Protect Your Trademarks

Federal trademark registrations are invaluable tools for emerging businesses. They put the world on notice of a company’s name; they can secure nationwide priority over others using similar names; they distinguish a product in the marketplace; they provide crucial advantages in trademark infringement lawsuits; and they are instrumental in building goodwill. But if you sell cannabis, a federal trademark registration will not do any of those things for you … because you can’t get one.

Someday, the USPTO policy may change and there could be a gold rush for federal cannabis trademark registrations.The United States Patent and Trademark Office (USPTO) continues to refuse to register federal trademarks for cannabis businesses, even if the sale of cannabis is legal in the state where the businesses are located. The USPTO’s reasoning goes something like this: federal trademark law allows for the registration of trademarks associated with goods in “lawful” commerce, which means that the goods are not illegal under federal law. Cannabis, and its psychoactive component, THC, remain Schedule I substances under the federal Controlled Substances Act (CSA). Therefore, irrespective of state laws to the contrary, and irrespective of whether the federal law is actually enforced, the manufacture and sale of cannabis is not “lawful” commerce.

This reasoning is of fairly recent vintage. In 2009, by which time about fifteen states had legalized medical cannabis, Attorney General Eric Holder announced that the Drug Enforcement Administration would cease raids on state-sanctioned medical cannabis facilities. The USPTO followed Holder’s lead in 2010 and created a new category of acceptable goods and services for marks related to “medical marijuana.” Within months, however, the USPTO had retreated from this “mistake” and changed its practice manual expressly to preclude such registrations.

David Kluft headshot
David Kluft, partner in the Boston office of Foley Hoag, LLP

Many argue that the USPTO’s position is unjustifiable as a matter of public policy. Making it easier to infringe the trademarks of state-sanctioned businesses does not advance the purposes of the CSA, and it directly undermines a key goal of trademark law, which is to prevent the proliferation of confusingly similar trademarks. But the merits of these arguments have been lost on the USPTO, which continues to refuse to register marks for anything it perceives to be prohibited by the CSA.

So if you own a cannabis business, what can you do to protect your goodwill while the federal government maintains its current policy? Below are some ideas. Admittedly, none of them– individually or collectively – is a substitute for federal registration. But each of them is better than nothing, and all of them may help to establish your ownership and priority when and if the USPTO changes its policy.

  1. State Trademark Registrations. Each state has its own trademark registration system. State registration may offer protection from infringers within the state, or at least within the parts of the state where the registrant operates, and for that reason alone it is probably worth the small cost involved. However, state registration will have little to no efficacy outside the state. You cannot use a State A registration to file a lawsuit in State B, or to stop infringement in State B, or even to prevent conflicting registrations in State B. Additionally, most state trademark registrants, unlike federal registrants, do not benefit from presumptions of validity and ownership in the litigation context.
  2. Related Federal Registrations. Many cannabis businesses also pursue federal registrations for whatever aspects of their business are not prohibited by the CSA. For example, even though the USPTO refused the POWERED BY JUJU mark for cannabis vaporizers (because it was CSA-prohibited “paraphernalia”), it allowed the same company to register the same mark for “vaporizers for smoking purposes not for use with cannabis.” The USPTO has also allowed registrations for cannabis-related business consulting (e.g., CANNACARD; PRAIRIEJUANA); investment analysis (e.g., FORTUNE420); clothing (e.g., CANNABIS COUTURE, THE MARIJUANA COMPANY); and for CBD – as opposed to THC – derivatives (e.g., CBD LIQUID GOLD). Once the USPTO permits federal registrations for cannabis marks and the inevitable disputes over ownership arise, such federal registrations for these related products and services are likely to be highly persuasive evidence in the registrants’ favor. Moreover, even in the current legal climate, federal registrations (especially when cited in a demand letter) are of great practical use in convincing others not to use confusingly similar marks.
  3. Common Law Unfair Competition. Unfair competition is a state common law cause of action that was a precursor to modern trademark law, and it is still available to protect commercial goodwill even in the absence of a state or federal trademark registration. However, unfair competition law has similar territorial restrictions as state registration. In some cases, the protected territory may be even narrower, limited only to the area within which the plaintiff can prove consumer recognition of the mark.
  4. Other Intellectual Property Protection. Copyright law, unlike federal trademark law, has no “lawful” commerce requirement, and the U.S. Copyright Office regularly issues registrations for cannabis-related copyrights. While copyright will not protect a short phrase such as a business name, it will protect a creative logo design or original packaging, and can be very effective when it comes to getting infringing uses taken down from the internet. Note also that the USPTO does not appear to have the same qualms about legality when it comes to patents, and it often grants patent protection to useful, new and non-obvious inventions related to the cannabis industry.
  5. Save stuff. Finally, if you do nothing else, save stuff. Document that first sale; keep a copy of that first shipping invoice; and save that file containing your original packaging design. Someday, the USPTO policy may change and there could be a gold rush for federal cannabis trademark registrations. Your lawyer is going to ask you for proof of your first uses of the mark, and you don’t want your response to be a glassy stare. So keep your eyes on the eventual prize and stay ready.

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Protecting Your Cannabis Plant IP

You’ve bred a new strain of cannabis, or perhaps discovered an excellent new hybrid outgrowing the other plants in your cannabis plot. Can you claim the new plant as yours and legally protect it? The short answer is potentially yes. The long answer follows below:

Plant Patents


Since a 1930s’ Act passed by Congress, the US government has permitted a person land, and (ii) asexually reproduces that plant, to apply for a Plant Patent. If granted, the Plant Patent will protect the patent holder’s right to “exclude others from making, using, selling, offering for sale and importing the plant, or any of its parts.” In other words, if you have a Plant Patent, you have a monopoly on that particular plant and its progeny plants, as long as they are asexually reproduced (for example, from cuttings – i.e. a clone). There is a hole in the protection – once you’ve sold or given anyone the plant they can use the seed or pollen from it without your permission.

Originally this sort of coverage was thought to be useful for things like new apple varieties, which are often from spontaneous new mutants found by farmers in their orchards (i.e. “cultivated land”). But is it possible this coverage can be extended to cannabis plants? The answer is yes. Unlike the traditional refusal of the US Patent & Trademark Office (USPTO) to register “offensive” or “disparaging” trademarks on moral grounds, US patent law does not have any well-established “morality exception.” And, indeed, Plant Patents have already been issued for cannabis strains. In December 2016, US Plant Patent No. 27,475 was issued for a cannabis plant called “Ecuadorian Sativa.” This plant is said to be distinct in its exceptionally high level of a particular terpene (limonene) at levels of 10 to 20 times the usual range, and is a single variety of a cross between what are commonly named as Cannabis sativa and Cannabis indica.

How do you get a Plant Patent? Firstly – a Plant Patent is not automatically granted. The application has to be written correctly, and the USPTO will examine it to determine if your plant is new and distinct (non-obvious) from other known varieties, that it is described as completely as is reasonably possible, and that it has been asexually propagated. In addition, if the plant was “discovered” as opposed to “invented” then the USPTO will need to be shown that it was found in a cultivated area. A plant discovered simply growing wild cannot be patented. If you pass these hurdles, you will have a Plant Patent that lasts for 20 years.

Utility Patent
 

Another type of patent that can protect your new cannabis plant, and much more besides that, is a Utility Patent. Utility Patents have a longer history than Plant Patents in the US and, while they may be harder to obtain, a Utility Patent gives you broader protection than a Plant Patent. A Utility Patent can cover not only the plant itself, but if properly written can also cover parts of the plant, uses of the plant, methods used to create the plant, methods for processing the plant, and even edibles (like brownies) that contain an extract from that plant. If granted, the Utility Patent will protect your right, for 20 years from the date you filed the application, to “exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.” An additional protection is that if the invention you claim in the patent is a “process,” you can assert the Utility Patent to exclude others from importing into the United States any products made by that process. Of course, given that present U.S. federal law regards cannabis as a DEA Schedule 1 drug, this importation blocking right is currently irrelevant. Nevertheless, it should be remembered that utility patents have a 20-year term, and Federal law may shift during that time.

Utility Patents are harder to obtain than Plant Patents. The USPTO will examine your application to determine whether what you are claiming protection on (for example: plants, cells, methods or processes) is new and non-obvious, does not cover a naturally occurring product or process, and is fully described. The simple description used in a Plant Patent is not enough for the more rigorous description needed in a Utility Patent. In addition, meeting the “enablement requirement” of a Utility Patent may require you to have the plant strain deposited with a recognized depository which will maintain that specimen plant – and you must agree that the public is permitted to access that deposit if a Utility Patent is granted to you.

So has the US government granted any patents on cannabis plants? Yes it has, multiple patents. A recent example is US Utility Patent No. 9,095,554 granted to Biotech Institute LLC (Los Angeles), which covers hybrid cannabis plants of a particular type with a CBD content of greater than 3%, as well as methods of breeding or producing them. Biotech Institute was also granted claims in the same Utility Patent for cannabis extracts from those plants, and edibles containing the extract. In this case, the plant samples were deposited with the NCIMB, which is a recognized depository in Aberdeen, Scotland. It should be noted that while the depository has to be internationally recognized, it does not have to be in the US. Another corporation, GW Pharma Ltd. (a UK firm), was early in the game and, according to USPTO records, has more than 40 U.S. Utility Patents issued relating to cannabis in some form or another, the earliest dating back to 2001.

Plant Variety Protection Act


A third type of protection is potentially available under the Plant Variety Protection Act (PVPA) if you breed a new cannabis plant by sexual reproduction. Colloquially, this protection is more often known as “breeder’s rights” and the USDA administers it. This right is not mutually exclusive with other protections – in 2001 the U.S. Supreme Court ruled that that sexually reproduced plants eligible for protection under the PVPA are also eligible for Utility Patents.

In theory, obtaining a PVPA certificate is a relatively straightforward procedure for seed reproduced plants, which are new, distinct, uniform and stable. If you are granted a PVP certificate it will last for 20 years from the grant date. You can bring a civil action against someone who sells, offers for sale, delivers, ships or reproduces the covered plant. So have any PVPA Certificates been issued for new cannabis strains? We have reviewed the USDA published certificates for the last two years and have not found any. Why is this? One obstacle may be what happens after you file your application. The US code governing these certificates states that a seed sample “will be deposited and replenished periodically in a public repository.” However, the government body that administers the PVPA, the USDA, specifically requires that all applicants submit a seed sample of at least 3,000 seeds with an 85% or more germination rate within 3 months of filing the application. Sending cannabis seeds in the mail to a federal agency – that’s a deterrent given current uncertainty. Ironically, the location that the seeds must be sent to is Fort Collins in Colorado, a state where cannabis has been decriminalized. The USDA’s published PVPA guidance describes courier delivery of the seed sample to the Fort Collins repository, but does not mention hand delivery of the seed samples. We contacted the seed depository and were informally told that seed samples can be deposited by hand delivery – but this still entails handing over to a federal agency actual seeds of a plant which is a DEA Schedule 1 drug. In any event, no PVPA Certificates that have yet been issued for new cannabis strains. It is possible that a new federal administration might deschedule cannabis, permitting an easier route to PVPA coverage. But for the present at least, PVPA protection may be hard to obtain.

Notice

The views expressed herein are those of the authors and do not necessarily represent those of Amster, Rothstein & Ebenstein, LLP, or its clients. Nothing in this article is to be construed as legal advice or as a substitute for legal advice.

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Enforcing Your Patent Without Litigation

Patent litigation can be costly; the median cost can be more than $3 million. Even as the owner of a patent, you should explore all options before deciding to file an infringement suit. Litigation should be your last resort, even if your lawyer is convinced you can win. Winning a patent lawsuit is not likely your true goal. Remind your confident lawyer that the stronger your case, the greater your options.

Patent litigation is expensive and distracting for everyone. The expense is astronomical. A recent survey by the American Intellectual Property Law Association, “2017 Report of the Economic Survey,” stated that the median cost to litigate a patent case is $3,000,000. In addition to the out-of-pocket costs, there are the distractions that keep you from running your business. Patent litigation means years of endless meetings, depositions, document productions, and days in court.

William H. Honaker, member and attorney at Dickson Wright

Patent litigation is also uncertain. Like my 92-year-old father who recently was cut off on the highway. He chased down the young guy at a red light, jumped out and pounded on the guy’s window, and said. “ONE of us is getting his ASS kicked.” Patent litigation is the same; someone is getting their ass kicked. Many surprises can develop in a patent case leaving the outcome a question.

As cannabis-related businesses grow and enter the business main stream, patent litigation will increase. More businesses will get patents. Patents are valuable to businesses: they protect margins, protect market share and increase the asset value of the business. They do this by preventing competition.

The winds of change are blowing, as I read the article by Walters, G. “What a Looming Patent War Could Mean for the Future of the Marijuana Industry.” The article referenced United States Patent No. 9,095,554, stating:

“On August 4, 2015, US officials quietly made history by approving the first-ever patent for a plant containing significant amounts of THC, the main psychoactive ingredient in marijuana, according to the patent’s holders, their lawyers, and outside experts in intellectual property law.”

At first, this made me acutely aware that we are on the threshold of a brave new world, where legalized cannabis is driving great changes in the way we look at a now-legitimate industry.

Then, I had a little chuckle when I read the words of a longtime cannabis activist:

“It’s going to be a mess,” said Tim Blade, a longtime grower and activist who founded California’s annual Emerald Cup cannabis competition. “Marijuana growers developing new varieties are going to have to spend a lot of money on attorneys.”

It’s clear Mr. Blake was starting to see through the haze of an unregulated industry that’s been under the radar until now. And what he saw was going to be a real buzz-kill. So how can you avoid litigation?

Both sides of the lawsuit will suffer. Typically, litigation should be avoided if at all possible. The good news is there are alternatives. You can take advantage of your patents without suing for infringement.

By knowing what you want, you can then know the options you have.The Myth About Patent Litigation

Before we explore alternatives, you may find some comfort in the fact that about 90% of patent suits are settled; (see Pridham, D. “The Patent Litigation Lie”, found in Forbes. Of those not settled, only 1% to 5% are litigated, (see LaBelle, M. “Against Settlement of (Some) Patent Cases” found in Catholic University of America, Columbus School of Law, 2014.) The cases not settled and not litigated are concluded through summary judgment or other motions prior to trial. But, even though only 1% to 5% make it to trial, getting to settlement or other non-trial resolutions is still uncertain, expensive and distracting.

Avoiding Patent Trials

Options open up when you understand what you want, and what you are willing to accept. First, you must know what you want to achieve, what you will sacrifice and how that will affect the accused infringer. Maybe you want to put the accused infringer out of business. You might be satisfied if they changed their product. You may want then to pay for their infringement, or only sell in certain geographic areas. By knowing what you want, you can then know the options you have.

Simple Agreement

Talk to the accused infringer and discuss your position and listen to theirs. You may be able to come to terms. I represented a client who was faced with asserting their patents against a competitor. The product was a huge success, and the patent was very strong. The competitor was clearly cornered, and like any cornered animal, it had no alternative but to fight. But there was an alternative. The client realized this and offered the competitor a different design. Not as good, but acceptable. The two agreed to the re-design, saving both millions in litigation costs and giving both certainty in the outcome.To avoid the loss of the patent, the owner decided to license, rather than sue, infringers.

License Agreement

Work out a license. As the patent owner, you have the ability to grant others the right to use your invention, for a fee or other terms. You define the terms and allow the accused infringer to continue their activities, or a variation of them. You can limit sales to certain industries, geographic areas, customer size, charge a royalty, allow for a specific time period to continue selling, etc. You can even cross-license technology with the accused infringer.

A client had a very successful product, but it was protected by a weak patent. Weak because others could challenge the patent and likely win. To avoid the loss of the patent, the owner decided to license, rather than sue, infringers. That allowed the owner to remain in control of the patent and receive a stream of income from the licensees. The licensed parties were limited to geographic areas, and not permitted to expand beyond them.

Mediation

Agree to have an independent third-party mediator consider your case. Mediation is an opportunity to have one or more independent mediators review the evidence and provide a decision. Every aspect of the process is agreed-upon by the participants. The parties can agree to the type of evidence that can be presented, the length of time of the mediation, the number of witnesses if any, the effect of any decision, whether evidence can be used later in a trial, whether the proceeding is confidential, whether the decision is advisory, etc.Getting the full value from a patent doesn’t always require litigation

At a minimum, mediation gives everyone an independent view of the case. This independent view can lead to more informed negotiations. It can show both parties what an independent evaluator considers the strengths and weaknesses of each side’s case.

Mock Trial

A variation of mediation is a mock trial. Again, the parties can set the rules. The difference is the Mock Trial would use actual jurors to hear each side’s case, normally a very short summary. This summary can take the form of a closing argument, brief testimony from key witnesses, or the reading of their statements. Mock trials are usually used to give the parties an idea of what a typical jury thinks, and help the parties better understand their respective positions.

Getting the full value from a patent doesn’t always require litigation. Historically, only a tiny fraction of patents are litigated. To avoid litigation as a patent owner, keep the lines of communication open with the accused infringer. Think about your actual goal. It’s rarely winning a lawsuit (that’s the goal of a lawyer, not a business person). Your goal is more likely a beneficial result that business people will both understand; a result that works for both of you.

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Enforcement of Intellectual Property Rights for Cannabis Put to Test in Federal Court

A number of cannabis businesses have pursued federal intellectual property protection for their cannabis-related innovations, such as U.S. patents that protect novel cannabis plant varieties, growing methods, extraction methods, etc. Enforcement of such federal IP rights requires that the IP owner file suit in federal court asserting those rights against another cannabis company. However, given that cannabis is still illegal under federal law, the industry is uncertain about whether a federal court will actually enforce cannabis-related IP rights. This question might be answered soon.

The potential impact of this case goes way beyond the two parties involved Orochem Technologies, Inc. filed a lawsuit in federal court in the Northern District of Illinois on September 27, 2017, seeking to assert and enforce trade secret rights against Whole Hemp Company, LLC. According to the complaint, Orochem is a biotechnology company that uses proprietary separation methods to extract and purify cannabidiol (CBD) from industrial hemp in a way that produces a solvent-free and THC-free CBD product in commercially viable quantities.

The complaint goes on to say that Whole Hemp Company, which does business as Folium Biosciences, is a producer of CBD from industrial hemp and that Folium engaged Orochem to produce a THC-free CBD product for it. According to the allegations in the complaint, Folium used that engagement to gain access to and discover the details of Orochem’s trade secret method of extracting CBD so that it could take the process and use it at their facility.

The complaint provides a detailed story of the events that allegedly transpired, which eventually led to an Orochem employee with knowledge of the Orochem process leaving and secretly starting to work for Folium, where he allegedly helped Folium establish a CBD production line that uses Orochem’s trade secret process. When Orochem learned of these alleged transgressions, it filed the lawsuit, claiming that Folium (and the specific employee) had misappropriated its trade secret processes for extracting and purifying CBD.

While the particular facts of this case are both interesting and instructive for companies operating in the cannabis industry, the potential impact of this case goes way beyond the two parties involved.

If it moves forward, this case will likely provide a first glimpse into the willingness of federal courts to enforce IP rights that relate to cannabis. Orochem is asserting a violation of federal IP rights established under the federal Defend Trade Secrets Act (DTSA) and is asserting those rights in federal district court. As a result, the federal district court judge will first need to decide whether a federal court can enforce federal IP rights when the underlying intellectual property relates to cannabis.

If the court ultimately enforces these federal trade secret rights, it could be a strong indication that other federal IP rights, such as patent rights, would also be enforceable in federal court. Since the outcome of this case will likely have a far reaching and long lasting impact on how the cannabis industry approaches and deals with intellectual property, it’s a case worth watching.

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