CANNA BIZ PROTECT ITS MARK?: TRADEMARKING CHALLENGES IN THE BUDDING CANNABIS INDUSTRY.

• Author: Garbuz, April M.

1. Introduction

   Cannabis is an estimated three-hundred billion-dollar industry with the potential to have one trillion dollars of global market capitalization in the next decade, despite the industry's extensive universal prohibition. (1) The plant integrates an endless array of commodities, including pharmaceuticals, beauty products, plastics, textiles, foods, and beverages. (2) With this high potential for profitability, companies are ramping up their development of cannabis products and rushing to pursue intellectual property protection for their products. (3) However, while businesses are cultivating cannabis-related brands, gaining intellectual property rights for these products is challenging. (4) The current state of cannabis and intellectual property laws leaves emerging cannabis businesses at a distinct disadvantage compared to companies in other industries. (5)

   Trademarks are a valuable form of intellectual property that businesses use to protect and build their brands. (6) Companies aspire to own a federal trademark registration because it provides several significant advantages over state or common law rights alone. (7) In a precedential decision in June 2020, the Trademark Trial and Appeal Board ("TTAB") affirmed the refusal to register a trademark for a cannabidiol ("CBD") product marketed as a dietary supplement, reasoning that hemp oil extract was per se unlawful under the Food, Drug, and Cosmetics Act ("FDCA"). (8) This decision is a roadblock for cannabis products seeking trademark registration because the TTAB is reluctant to grant registration covering cannabis derivatives in the absence of full national legalization of cannabis. (9) Given the rapid increase in cannabis products and their impact on the global economy, there is a significant public policy need for national legislation that enables cannabis companies in the U.S. to secure federal trademark protection. (10)

2. History

   1. The Evolving Legislative Landscape of the Cannabis Industry

      1. The Illegality of Cannabis

         Before 1937, cannabis sustained an expansive history as an unregulated therapeutic agent and valued resource. (11) The illegality of cannabis in the U.S. came about after the Mexican Revolution, when Mexican immigrants brought their use of cannabis to southwest America. (12) While Americans were highly familiar with cannabis, as it was present in almost all medicines available at the time, Mexican immigrants referred to the plant as "marihuana," a foreign term in America. (13) The media played on the public's prejudices and fears by spreading claims about the immigrants' dangerous behaviors, including their marijuana use. (14) As a result, Americans grew fearful of the plant and deemed it illegal. (15)

         In response, El Paso, Texas enacted the first U.S. ordinance banning the sale or possession of cannabis in 1914, and by 1931 twenty-nine states outlawed cannabis. (16) The 1930s were flooded with hearings on developing a cannabis law. (17) At these hearings, false claims were made about cannabis, such as that it caused men of color to become violent. (18) This imagery became the driving force behind the Marihuana Tax Act of 1937 ("Marihuana Tax Act"). (19) The Marihuana Tax Act was framed as a revenue measure; however, the language and implementation effectively brought about prohibition. (20)

         Decades later, the Marihuana Tax Act was ruled unconstitutional and the Nixon administration encouraged Congress to pass the Comprehensive Drug Abuse Prevention and Control Act, bringing all preceding anti-drug legislation under one statute. (21) This chapter included the Controlled Substances Act ("CSA"), which ranked substances according to danger and the likelihood of abuse, and it placed cannabis in the most restrictive category. (22) With this classification, cannabis became illegal under federal law, until 2018, when the Agriculture Improvement Act ("2018 Farm Bill") re-classified hemp and marijuana as two different substances under the CSA. (23) As a result of this reclassification, CBD products can be legally sold throughout the U.S., even though cannabis remains illegal at the federal level. (24)

      2. The Differences Between Hemp and Marijuana Cannabis is a genus of a plant with human use dating back thousands of years for its recognized therapeutic and medicinal benefits as well as social utilization. (25) Cannabis, hemp, and marijuana are all terms for plants in the Cannabaceae family. (26) Hemp is one of the fastest-growing agricultural crops, requiring little to no pesticides, less industrial processing post-harvest, and low overall environmental impact; and has extensive application in paper, textiles, biodegradable plastics, and fuel. (27) Hemp plants contain low levels of the intoxicating component, THC, and high levels of the non-intoxicating component, CBD. (28)

         The level of THC is the legally defining line between hemp and marijuana. (29) Hemp is generally defined as cannabis that contains 0.3% THC or less, while cannabis exceeding 0.3% THC is categorized as non-hemp cannabis, or colloquially, marijuana. (30) This distinction is necessary because hemp products contain more CBD, which is not psychoactive, and marijuana products contain more THC, which is psychoactive; resulting in hemp gaining wider acceptance in society. (31)

         Historically, the word "marijuana" has been used to refer to all forms of cannabis as a drug. (32) There were no distinctions in the plant types until the industry was more widely explored. (33) Today, it is common to refer to "marijuana" and "cannabis" interchangeably, while hemp remains in its own category. (34) This may seem confusing as the term "cannabis" technically refers to the entire genus of flowering plants that includes both hemp and marijuana, but the psychoactive and non-psychoactive elements connect to the social definitions. (35)

      3. The Friction Between State and Federal Cannabis Legislation

         While cannabis is illegal under federal law, in recent years the majority of states have legalized cannabis for medical use, recreational use, or both. (36) This inconsistency between state and federal law is possible because the states retain substantial sovereign authority under The Constitution, and the federal prohibition of cannabis does not preempt state legalization. (37) Taking advantage of this state sovereignty, many states have adopted expansive laws legalizing marijuana for recreational use, while most other states allow for at least limited use of medical marijuana under certain circumstances. (38) Though medical marijuana laws differ across states, most include provisions that permit closely regulated businesses to cultivate, process, possess, and sell large quantities of cannabis. (39) Further, patients with a prescription from a doctor may purchase and possess small quantities and cultivate a limited number of cannabis plants. (40)

         When the states took control of the cannabis policy by passing laws permitting usage, they created a gray area where cannabis is lawful at the state level but prohibited under federal law. (41) If state cannabis usage influences interstate commerce, then Congress has the authority to prohibit it and, as a matter of federal law, the federal government is entitled to seize cannabis from anyone who possesses it. (42) Even though state law creates a property interest in legally owned cannabis, not all state-created rights rise to the level of a constitutionally protected interest and, as a result, federal courts have found that there is no protected property interest in cannabis. (43)

   2. Intellectual Property Protection in the Cannabis Industry

      Even though cannabis is illegal under federal law, recent years have seen a drastic increase in cannabis-related patent and trademark applications. (44) U.S. law provides avenues for patenting cannabis through plant patents and utility patents. (45) Unlike with trademarks, obtaining a patent does not require an applicant to show that the product is lawfully used in interstate commerce. (46) Patent protection is useful for various inventions, such as new strains of a cannabis plant or methods of creating cannabis extracts. (47) Because trademark protection requires a showing of lawful use in commerce, it offers its own set of caveats. (48)

      The trademark requirement for lawful use in commerce is rooted in the origin of federal trademark protection. (49) From the earliest known times, trademarks have been used to designate ownership of property or to identify a manufacturer of specific goods, but the first federal statute dealing with trademarks in the U.S. was struck down by the Supreme Court for exceeding the powers granted to Congress by the Copyright Clause. (50) In 1946, Congress responded by passing a trademark act ("Lanham Act") which was grounded in its broad power to regulate interstate commerce and continues to govern federal trademarks today. (51) The Lanham Act defines "commerce" as all imports and exports that are subject to Congress's power under the Commerce Clause. (52) As such, federal trademark protection is only available to marks used in commerce which Congress has the authority to regulate. (53) This protection provides brand owners with valuable benefits beyond common law and state-registered trademark rights, including the preservation of national expansion and presumption of trademark ownership and validity. (54)

      The 2018 Farm Bill created an avenue for federal trademark registrations covering certain products derived from hemp only. (55) However, some hemp products and all other cannabis-related products are ineligible for federal trademark protection because such goods may not be used lawfully in commerce. (56) Trademark applications that were filed on or after December 20, 2018 for goods including cannabis or CBD-derived hemp that comply with these parameters will no longer be refused registration as being in violation of the CSA. (57) It should be noted that the 2018 Farm Bill...