AuthorMoffat, Viva R.

TABLE OF CONTENTS I TRODUCTION 1942 I. T RADEMARK L AUNDERING: A SUCCESSON THE SURFACE 1948 A. Trademark Laundering Expl ained 1951 B. Trademark Lau ndering in Practice 1961 1. How Cannabis Companies Have Obta ined Tra demark Registrations, Notwi ths tanding the Federal Prohibition and the Lawful Use Doctr ine 1963 2. How Lawyers Have Helped in the Pursuit of Trademark Laundering 1971 II. THE T RADEMARK L AUNDERING TRAPS 1978 A. For Cannabis Companies and Cannabis Consumers, Registration Is a Trap 1978 1. The WOODSTOCK Dispute as an Illu st rative Example 1979 2. The Counterfactual 1984 3. Consequences for Consumers and a Way out for Courts 1985 B. Traps for Trademark Lawyers 1986 III. ELIMINATI NG THE T RADEMARK L AUNDERING TRAPS 1989 CONCLUSION 1996 INTRODUCTION

On July 14, 2021, Senate Majority Leader Charles Schumer introduced the Cannabis Administration and Opportunity Act, a 163-page bill that would, among other things, legalize and regulate marijuana at the federal level. (1) As state after state legalizes marijuana for use by their citizens, (2) it now appears only a matter of time before the fifty-year-old federal prohibition on marijuana becomes a thing of the past. (3) Until then, however, federal illegality continues to cast a long shadow over marijuana businesses and their consumers. (4) Although those businesses are licensed, taxed, and regulated by the states authorizing their activities, federal prohibition means that they must pay onerous federal tax rates (5) and have little access to even the most rudimentary banking services. (6) For their part, marijuana consumers risk their employment, public benefits, and even their liberty for engaging in conduct permitted by their states, simply because the federal government continues to prohibit marijuana. (7) This is a strange and unstable legal environment, one Justice Thomas recently described as "a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana." (8) According to Justice Thomas, "[t]his contradictory and unstable state of affairs strains basic principles of federalism and conceals traps for the unwary." (9)

One aspect of this half-in, half-out situation is the difficulty cannabis businesses have in obtaining federal trademark protection for their products. (10) The "lawful use" doctrine prohibits the registration of marks in connection with illegal goods, and the doctrine has been deployed by the United States Patent and Trademark Office (PTO) to preclude registration of trademarks for marijuana products, notwithstanding the legality of the applicant's business under state law. (11) But the unavailability of federal trademark protection is not just an issue for cannabis companies; it is also a problem for cannabis consumers and thus significantly impedes the goals of the trademark system. Trademarks are not only, and not even primarily, for the benefit of their owners. Instead, by conferring rights on trademark owners, trademark law aims to protect consumers from confusing and deceptive behavior in the marketplace and to ensure fair competition. (12)

While this is true with regard to all branded goods and services-knowing on a road trip that you can get what you like at McDonald's instead of taking your chances with a roadside diner, for example, or choosing a Seiko watch over a cheaper imitation because of its reputation for reliability and dependability--it is particularly significant with regard to cannabis products. Many cannabis consumers are new to the market and may be unsure of which products and modes of delivery are most appropriate for them. (13) Although marijuana is less dangerous than some legal substances like tobacco and alcohol, its overconsumption can still be very disconcerting. (14) In this context, the absence of trademark protection can have serious consequences. For example, when news reports emerged that one Colorado company's high-CBD, low-THC product, called "Charlotte's Web," might be effective in the treatment of epileptic seizures in children, (15) companies in other states started selling fake Charlotte's Web products, some with very high levels of THC, others containing dangerous pesticides. (16) Because the Colorado company had no federal trademark protection, it had little recourse against those copycat producers, and consumers had no way of distinguishing between the "real" Charlotte's Web products and the confusing (and potentially dangerous) knock-offs. (17)

Given that trademark law serves to protect consumers and to regulate the marketplace to ensure fair competition--as well as to protect the businesses that own marks--its unavailability in the marijuana context has only become more problematic as the market has grown. Several years ago, when the cannabis industry was still in its infancy, two of the authors of this Article wrote about the potential hurdles to obtaining intellectual property protection for marijuana businesses. (18) We noted in particular that some marijuana businesses had begun engaging in what we termed "trademark laundering": applying for federal trademark protection for a mark to be placed on legal products and then using the mark on both legal and illegal goods--on t-shirts and marijuana, for example. (19)

Trademark laundering is a way to sidestep the lawful use doctrine, providing some brand protection for cannabis companies and some degree of consumer information and protection. It is by no means a perfect solution, but we predicted that the practice would expand because it provides a toehold of trademark protection for marijuana businesses even with the federal prohibition in place and may enable those businesses to more easily acquire comprehensive trademark rights thereafter. (20) We also predicted that lawyers and law firms might hesitate to enter appearances on behalf of marijuana clients because of the ethical complications involved in representing a client engaged in illegal activity in federal court or before a federal agency. (21)

As the nation appears to be moving toward a post-marijuana-prohibition legal regime, the time is right for assessing the state of marijuana marks today and the predictions we made earlier. While we were right about some things, the reality has been more complicated than we anticipated and, as Justice Thomas describes, the situation has turned into a set of traps for the unwary--unwary cannabis companies, unwary cannabis consumers, and unwary lawyers. (22)

When we last wrote on this topic, it seemed plausible that many intellectual property lawyers--who regularly appear in federal court and before federal agencies--would hesitate to represent marijuana businesses in general and, in particular, would be disinclined to engage in trademark laundering because of the potential deception involved. (23) But in fact, mainstream law firms and intellectual property lawyers with a broad federal court practice, many of whom had earlier hesitated to represent marijuana companies, have stepped into the field to assist with, among other things, trademark registration and enforcement. (24) And they have done so by filing a dizzying number of trademark applications for cannabis companies, engaging in the practice of trademark laundering even more aggressively and creatively than we anticipated. (25) On the surface, at least, trademark laundering has been a success.

But the trademark rights that cannabis companies have obtained may not be all that they hoped for and are certainly less than we anticipated. An examination of the PTO's practices concerning marijuana marks and the federal courts' treatment of trademark disputes involving marijuana companies reveals significant issues. In particular, the PTO's approach to marijuana marks has turned out to be problematic in ways that undermine the goals of the trademark system. This is, in large part, because the PTO, citing the lawful use doctrine, requires cannabis companies to include disclaimers in connection with many of their trademark applications: cannabis companies must state that they do not seek federal trademark registration for marks used in connection with marijuana or other illegal goods. (26) At first blush this seems sensible enough--trademark registration is not available for use in connection with illegal goods, after all--but the disclaimers have been applied broadly and, at times, misinterpreted by the federal courts in ways that undermine and conflict with trademark's goals of preventing consumer confusion and policing the marketplace. This dynamic has already played out in trademark infringement litigation, allowing the use of potentially confusing marks to proceed unchecked and inequitably conferring the benefits of trademark protection. (27) As we shall demonstrate, there are a number of instances in which it would have been better for both cannabis companies and their consumers if the companies had simply not registered their marks at all. This is not a sensible result.

This Article proceeds as follows. In Part I, we share the results of our survey of the current state of cannabis trademarking practices and explain why we predicted that trademark laundering would be the best approach for the cannabis industry to secure some degree of trademark protection (and why that would also be good for consumers) while marijuana remains federally illegal. As we predicted, cannabis companies have vigorously sought to protect their marks and have filed federal trademark registrations for marks used in connection with a huge range of (fully legal) goods and services, while also using the very same marks in connection with the sale of (federally illegal) marijuana. In other words, they have engaged in trademark laundering and have done so much more creatively and aggressively than we anticipated. In addition, many lawyers have been willing to assist them in this endeavor.

While cannabis companies have indeed been able to acquire some level of trademark...

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