Almost exactly a year ago, I wrote about the upturn in the cannabis business suing each other for trademark infringement (unlike non-cannabis companies suing cannabis companies, which is common and what you can read here, here, and here). The present case was the lawsuit between Harvest Dispensaries Cultivation & Production Facilities, LLC, Arizona, and Harvest on Geary, Inc./ Harvest Off Mission, Inc., San Francisco.
While this case has been resolved, the HARVEST brand has again become an issue, this time in Arkansas. Harvest Cannabis Dispensary (I will call it the "Harvest of Arkansas") is a small, family-owned cannabis company in the city of Conway, Arkansas. Harvest of Arkansas filed a lawsuit against Natural State Wellness Dispensary and Natural State Enterprises, which are subsidiaries of Arizona-based multi-state operator ("MSO") Harvest Health. The two companies operate a pharmacy in Little Rock and a cultivation facility in Newport. In late May, Harvest of Arkansas announced that it had received an injunction against the company's Arizona subsidiaries (the "NSW Entities"), which prevented the NSW Entities from using the HARVEST name in connection with its Little Rock pharmacy and the Cultivation to continue use facility in Newport.
Harvest of Arkansas acquired the HARVEST brand in 2017 and opened its Conway facility long before the NSW companies opened their facilities, giving Harvest of Arkansas superior state-owned trademark rights in the HARVEST brand.
The NSW companies failed to argue that they owned trademark rights under federal law, which is not surprising since we wrote extensively about the restrictions on federal trademark protection for cannabis companies. However, it is rare that a small local operator can fight for its trademark rights against a much larger operator with multiple states. Although the case may be unusual for this reason, it sheds light on the continuing problems that cannabis companies face in protecting their brands.
This challenge is particularly important for MSOs who are forced to rely on 1) federal trademark rights for relief goods and services that do not directly protect their cannabis goods and services, and 2) a patchwork portfolio of government trademark rights that are carefully maintained must when the operator enters new markets. Most states have a "use in trade" requirement to maintain trademark protection. In most cases, this means "legitimate commercial use" that prevents MSOs from simply submitting to protect their trademark in all 50 states, rather than receiving a federal trademark. Cannabis companies must apply for state trademark rights as soon as their brand is already used in the state's trade. This leaves the door open for other operators to establish an earlier use of the brand.
This will inevitably be an ongoing challenge for MSO cannabis companies looking to build national brand awareness, and is another reason why it is so important that we develop a solution to the ban on preserving federal cannabis trademark protection. Allowing operators in different countries to take over and develop the same brand inevitably leads to confusion among consumers, which is not good for businesses and also not good for consumers.