Potential State Trademark Reforms for the Cannabis Business
Although cannabis is presently legal for medical use in 33 states and for recreational use in 10 states, it remains illegal under federal law.[1] However, the United States Patent and Trademark Office (“USPTO”) will not register a trademark that covers goods that are illegal under federal law, irrespective of its legality at the state level.[2] Thus, while state trademark registrations are available for cannabis businesses in the states in which it is legal, the USPTO rejects trademark applications for cannabis goods and services.[3]
The lack of access to the federal trademark regime poses a significant hurdle to sellers in states where cannabis is legal, as they now need to promote their business by engaging in activities such as branding and marketing.[4] In Cannabis Trademarks: A State Registration Consortium Solution, Russell W. Jacobs describes the ways in which the state trademark regime is too weak to allow sellers to effectively promote and market their business.[5] First, use of the trademark is a statutory precondition for the registration of any state trademark.[6] However, this allows for a competitor to appropriate this brand for use in another state before the original brand owner can enter the market of the other state, by opening its own locations or perhaps licensing the brand to a third party.[7] Moreover, it is difficult for the original brand owner to bring a lawsuit alleging trademark infringement or unfair competition in such a situation because a brand owner’s rights are limited to either his or her trading area or the brand’s zone of reputation.[8] As a result, the brand owner will need to establish either consumer recognition of its mark in the second state, which would require sales or advertising in the second state, or bad faith by the user of the brand in the other state, who had the knowledge of the brand being used in another state before using it.[9]
Second, in most states, the state registration of a trademark neither creates a presumption of ownership nor provides any exclusive rights for the owner of a state trademark.[10] Thus, registration of a state trademark serves more of a notice purpose, rather than a mechanism to stopping a potential competitor from using the same trademark.[11] Third, applicants for state trademarks are statutorily required to designate the goods or services for which the trademark will be used in connection in terms of either USPTO practice or historical classifications, neither of which includes any cannabis-related goods and services.[12] This forces a cannabis business owner to apply for a state trademark with some sort of “broad, vague, or ancillary description of goods and services.”[13]
Thus, Jacobs proposes a reciprocal state cannabis trademark system as a potential solution to the deficiency of protections for cannabis-business owners under state trademark law.[14] His system would require two main reforms. First, he proposes changes to the state trademark statutes that would open registration for cannabis-related goods and services and also create a presumption of exclusive rights in all trademarks used in connection with such goods and services.[15] Second, all states that have legalized cannabis would grant reciprocity to trademarks registered in other legal states, thereby allowing for brand recognition to flow through all of the legal states.[16]
Footnotes
