The U.S. Patent and Trademark Office’s policies to refuse applications to register trademarks that identify non-hemp cannabis products, as well as certain hemp CBD products, reflect an inappropriately doctrinal approach that ultimately makes Americans less secure. As the cannabis industry continues to enter the business stream, extending branding rights to the products of cannabis companies would provide additional incentives for them to develop a reputation for quality and safety and differentiate them from actors on the fringes of legal markets at the state level. In addition, it would enable cannabis companies to work with law enforcement to prosecute counterfeiters who sell unregulated products.
In March it was reported that Florida law enforcement agencies expressed concern that “THC-laced sweets and snacks … get into the hands of children and adolescents.” THC refers to tetrahydrocannabinol, “the substance … primarily responsible for the effects of marijuana on a person’s state of mind.” The level of THC in a cannabis plant determines whether that particular plant is legally considered marijuana or hemp. Cannabis with a THC concentration of more than 0.3% on a dry weight basis is considered marijuana, a planned drug under the Regulated Substances Act. In contrast, cannabis with 0.3% THC or less is considered a hemp, which is not a controlled substance according to the CSA, after the 2018 Agriculture Improvement Act, commonly known as the 2018 Farm Bill, came into force.
While hemp and hemp products containing 0.3% THC or less are no longer treated as controlled substances, certain hemp products that contain cannabidiol are still illegal under federal law. CBD itself is not illegal. However, according to the U.S. Food and Drug Administration, food, dietary supplements, and drugs containing CBD cannot be legally sold under the Federal Food, Drug and Cosmetic Act.
The THC candies found in Florida were of particular concern to officials because “some of the marijuana foods are difficult to spot at first glance.” In a Facebook post, the Charlotte County Sheriff’s Office (CCSO) warned: “Without looking closely, you would never find out that these candies, which bear a remarkable resemblance to ordinary candy, [are] in fact, THC infused foods. “
The photo below, courtesy of the CCSO, clearly shows packaging that clearly shows the trademarks of famous confectionery brands such as Skittles and Nerds. As the CCSO notes, the true nature of candy only becomes apparent upon closer inspection. For example, a Cheetos bag shown in a picture supplied by the Sarasota County School District has a small square with the letters “THC” printed on it in the lower left corner with contents in milligrams that are illegible in the picture supplied. In the lower right corner is a triangle that frames a cannabis leaf and an exclamation point with the letters “CA” underneath.
Those familiar with the terminology and imagery of cannabis will be immediately made aware of the presence of the term THC and the familiar form of the cannabis leaf. However, it can be assumed that there are many people who are unable to make the connection between these symbols and marijuana. As a result, there is a real risk that in some cases the foods will be consumed by people who do not wish to consume THC or cannabis at all.
It is precisely because of the risks that fakes such as the sweets found in Florida bring with them that the laws of the USA – and that of practically every country in the world – protect trademark rights. Legislators want the public to be reassured that the Skittles bag they buy from a store in Sarasota or Bradenton, Fla. Is made by or under the authority of the Wrigley Co. and that Wrigley has the exclusive right to use Trademarks such as SKITTLES and prohibits unauthorized use of these trademarks.
The fact that the counterfeit candies found in Florida contain a controlled substance is certainly topical, but largely irrelevant in the context of trademark rights. Needless to say, a candy maker like Wrigley doesn’t want a product with THC in a branded bag. At the same time, it doesn’t want any real sweets of unknown origin in such a bag. This is true for a number of reasons, not least because of the potential for lost profits. Additionally, companies like Wrigley don’t want the reputations they’ve built over decades to be tarnished by the unsanitary or foul tasting counterfeits of some criminals.
For their part, government agencies are concerned about the risks counterfeit products pose to consumers. By definition, counterfeiters are working on the edge of the law; Their business model is based on anonymity and the associated lack of accountability. If a candy maker is willing to infringe a brand for a profit, there is a good chance they are willing to ignore food safety laws, just as we shouldn’t expect counterfeit toy makers to abide by the regulations Observe child safety.
Trademark rights play a key role in the efficient functioning of consumer markets and encourage companies to innovate by protecting their exclusive right to monetize their brands. These rights also offer additional rewards for maintaining high standards of quality and safety.
However, the Florida THC candy case is a reminder that many cannabis companies operating legally in more and more states are being denied trademark protection to the detriment of the public. The USPTO is opposed to trademark registration for products deemed to be marijuana – that is, cannabis above the 0.3% THC limit – as well as certain CBD products, such as foods, that the FDA deems unlawful for sale.
Challenges for cannabis companies
Like companies in other sectors of the economy, cannabis companies are at risk of their products being counterfeited. As with other cases of counterfeiting, this poses risks not only for cannabis companies themselves, but also for consumers.
For example, imagine a company that legally manufactures CBD foods under Washington state law. This company is subject to strict government oversight in its home state, but is not eligible for federal trademark protection against an anonymous infringer who sells food produced in a completely unregulated manner.
Another risk is the incorrect identification of products. For example, a counterfeiter could market products that contain THC with counterfeit labeling, indicating that they are only hemp products. Incorrect information about the amount of THC or CBD can also occur.
The THC foods found in Florida presented potential consumers with serious risks. Fortunately, the fact that the counterfeits hurt the brands of household names like Cheetos and Skittles likely helped set off alarms. Perhaps a teacher who eats real Cheetos noticed something crooked about the packaging of a student’s Cheetos bag. One parent may have been surprised by the soft consistency of the foods, which contradicts how the actual cones should feel.
At least for now, however, few, if any, cannabis companies enjoy such high brand awareness, meaning that few people experience irregularities in packaging or product features.
In addition, companies such as Wrigley, Ferrara Candy Co., and Frito-Lay Inc., owners of the Skittles, Nerds, and Cheetos trademarks, typically run trademark protection programs. As part of these programs, they conduct market surveillance to detect traffic in their counterfeits and integrate counterfeit protection technologies into their original products.
They also work with law enforcement agencies, for example, filing their intellectual property with customs agencies such as U.S. Customs and Border Guard to facilitate efforts to prevent the trade in counterfeit goods.
A way out?
Cannabis companies are largely not provided with anti-piracy tools. A company can spot fakes, but it can’t be of much use if there isn’t an enforceable brand. The logical solution to addressing this issue is to have cannabis companies that are properly registered with the state agencies register their trademarks at the federal level for all of their products, including those deemed marijuana, as well as those not by the FDA to enable approved CBD products.
The USPTO’s Examination Guide states that “federal use of a trademark must be lawful under federal law in order to form the basis for federal registration,” and recalls the authority of Section 907 of the Trademark Manual for the examination process. The manual again refers to various agencies, including Sections 1 and 45 of the Trademark Act.
It is worth noting that the word “legal” does not appear in Section 1 at all, while Section 45 defines “trade” simply as “all trade that can lawfully be regulated by Congress”.
In practice, however, lawful use has become a requirement that has been confirmed by several relevant rulings by the trademark litigation and appeal authority. According to TTAB:
to hold it differently would be to place it [USPTO] in the unusual position of accepting a consignment in trade as the basis for registration which is illegal under a law that specifically regulates the flow of goods in trade.
Given USPTO and TTAB practice, the only realistic way to extend trademark protection to cannabis companies may be through a change in trademark law or new federal legislation. Such an initiative would be a step towards harmonizing federal law with the changing cannabis landscape in the country without requiring lawmakers to consider changing the legal status of marijuana and CBD themselves.
Given that extending full trademark protection to cannabis companies would be in the public interest if unregulated products don’t get into the hands of consumers, this shouldn’t be a controversial move.
Editor’s note: A version of this article first aired on Law360 on May 3, 2021.