Trademarks are key---they boost industry by providing certainty on investment.

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. 45Unlike with trademarks, [*374] obtaining a patent does not require an applicant to show that the product is lawfully used in interstate commerce. 46Patent 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. 49From the earliest [*375] 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. 50In 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. 51The Lanham Act defines "commerce" as all imports and exports that are subject to Congress's power under the Commerce Clause. 52As such, federal trademark protection is only available to marks used in commerce which Congress has the authority to regulate. 53This 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

[*376] The 2018 Farm Bill created an avenue for federal trademark registrations covering certain products derived from hemp only. 55However, 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. 56Trademark 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. 57It should be noted that the 2018 Farm Bill did preserve the FDA's authority to regulate products containing cannabis or cannabis-derived compounds, and because of this, registration of goods containing CBD, such as foods, beverages, pet treats, or dietary supplements, may [*377] still be refused as unlawful under the FDCA. 58For example, the use of a drug or substance in foods or dietary supplements that are undergoing clinical investigations without the approval of the FDA violates the FDCA, and CBD is currently under FDA investigation. 59With respect to applications for marks for cannabis or cannabis-related services, the marks will be examined for compliance with the CSA and the 2018 Farm Bill. 60

III. Premise

A. The Significance of the Cannabis Industry

Cannabis is the most widely cultivated, trafficked, and consumed drug worldwide. 61The global experiment of legalizing and commoditizing cannabis has demonstrated that cannabis as a product is here to stay, and gaining U.S. federal legal protection is a crucial issue for the industry. 62With more governments recognizing its [*378] potential, cannabis companies becoming major contributors to the world economy, and external entities recognizing the commodity as an investment opportunity, it is clear that the industry will meaningfully impact international trade. 63

Worldwide recognition of cannabis use beyond a substance to smoke inspired a "green rush" which has generated billions of dollars in sales and consistently inspires promising projections for the future of the market. 64

[Footnote 64]

See TOM ADAMS ET AL., THE STATE OF LEGAL CANNABIS MARKETS: 2020 UPDATE 4 (Sandra Leader et al. eds., 7th ed. 2020) (identifying $ 10.2 billion in global sales in 2018 and $ 14.9 billion in 2019, a 45.7% increase in one year).

[Footnote 64 Ends]

As a result of these lucrative projections, the cannabis market has seen large and influential companies make sizable investments. 65 Investments and mergers within the industry have made cannabis one of the fastest-growing consumer products in North America, with estimates that U.S. cannabis penetration rates will eventually reach one in five American adults. 66

[*379] B. Barriers to Brand Protection in the Cannabis Industry

The federal illegality of cannabis leaves many cannabis businesses' trademarks unprotectable, even if the goods are made and sold in jurisdictions where cannabis is legal. 67Currently, there is a gap in trademark law that leaves goods and services that are legalized under the majority of state laws disqualified from federal protection. 68 [*380] This roadblock creates significant challenges for businesses in the cannabis industry who seek to protect the goodwill they establish in their brands and prevent other businesses from using confusingly similar marks on related products. 69

[Footnote 69]

See Parna Mehrbani, The challenging state of brand protection in the cannabis industry, PORTLAND BUS. J. (Sept. 5, 2019), archived at https://perma.cc/GP7QGXL9 (discussing the difficulties that barriers to trademarking present to budding cannabis business); Alex Collins, Selling Legal Weed: How Branding, Websites, & Marketing are Everything in This Game, MEDIUM (Mar. 25, 2019), archived at https://perma.cc/ER4G-T8Y2 (emphasizing that "companies that put branding first and foremost as their foundation are positioning themselves leagues ahead of their competition," largely because good branding builds trust with consumers). "Cannabis branding will bring greater legitimacy and offer trust for new patients and consumers." Collins, supra. See also Josh Gerben, How to Protect Your Marijuana Brands and Trademarks, GERBEN (Jan. 31, 2021), archived at https://perma.cc/YV9R-H6T6 (discussing trademarking approaches in the marijuana industry).

[Footnote 69 Ends]

While the 2018 Farm Bill changed the definition of hemp and created a narrow channel for trademarking cannabis-derivate goods and services, it did not offer blanket legality for hemp products. 70The lack of federal protection available to the cannabis industry means that brand owners cannot claim priority of use; instead, owners and [*381] companies must turn to state law for protections. 71In states where cannabis has been legalized for medicinal or recreational use, state trademark registrations can be obtained for available marks that are already in use in connection with the sale of legal goods and services. 72For example, in order for an applicant in Massachusetts to receive state trademark registration as a cannabis company, the company must have the relevant permits and licenses on file in Massachusetts and the company's corporate documents must reflect that it is engaged in the production or sale of cannabis products. 73That company may then promote its products and develop a logo, but the advertisements may not incorporate medical symbols, images of marijuana or marijuana paraphernalia, nor "colloquial references" to cannabis and marijuana in the logos. 74

The crux of the analysis for any cannabis company's federal trademark eligibility is whether or not the company sells goods or offers services that comply with federal law; to the extent that a company is selling products that comply with both the CSA and FDCA, those products are likely eligible as well. 75In the precedential [*382] case, In re Stanley Brothers Social Enterprise 76, the TTAB held that ingestible products containing CBD remain ineligible for federal trademark registration under the FDCA, which prohibits the use of drugs that are undergoing clinical investigations. 77Stanley Brothers argued that the Industrial Hemp Provision of the 2014 and 2018 Farm Bills excludes industrial hemp from the relevant sections of the FDCA. 78Though the provision allows the cultivation of hemp for certain industrial purposes, the TTAB reasoned that Stanley Brothers' permission to legally cultivate hemp was irrelevant because illegal use [*383] overrides legal cultivation. 79Because the FDCA governs the addition of botanical compounds undergoing clinical investigation, and CBD is a botanical compound undergoing clinical investigation, the Industrial Hemp Provision did not exclude Stanley Brother's hemp oil extract from the FDCA. 80This decision means that the only CBD products eligible for federal trademark protection are non-ingestible products, therefore the most popular--and profitable--CBD products are still excluded. 81Trademark registration is a key asset to establish, promote, [*384] and differentiate a business in the increasingly competitive cannabis marketplace, and there is a high potential for significant payoff if the business actively asserts and enforces its IP portfolio to prevent competitors from copying its protected products. 82

[Footnote 82]

See The Cannabis Industry and its Intellectual Property, supra note 71 (noting the benefits of an IP portfolio in cannabis). Once a brand is trademarked, the intellectual property is ready to be monetized through commercial use, business valuation, licensing, buy/sale, and enforcement. Id.

[Footnote 82 Ends]

C. Digital Advertising of Cannabis Products

Trademarks allow businesses to effectively utilize the Internet and social media for product advertisement. 83

[Footnote 83]

See Rubinstein, supra note 6 (emphasizing the importance of trademarking for business success). Consumers' purchasing decisions are influenced by trademarks and the reputation such brands represent. Id. The brand is the first thing customers enter into a search engine or social media platform when looking for specific products and services. Id. "Higher traffic on a website or social media platform translates into higher rankings, bringing even more traffic, more customers and more brand recognition." Id.

[Footnote 83 Ends]

Due to its federally illegal status, national advertising of cannabis products is not permitted and states cannabis sellers cannot legally target out-of-state [*385] consumers. 84The 2018 Farm Bill did not clarify the legality of hemp marketing, leaving policies on intrastate hemp advertising up to the discretion of the states. 85However, once the advertising crosses interstate lines, as digital marketing does, federal laws apply and the marketing is prohibited. 86

Currently, in addition to dealing with the complexity of each locality's regulations, cannabis businesses are also excluded from marketing through popular digital advertising platforms. 87Controlling companies like Google, Reddit, Pinterest, Twitch, Twitter, Amazon, [*386] and Meta have policies of rejecting CBD advertisements. 88For example, Facebook allows only pre-approved drug companies to run adverts on its platform and does not allow pictures that depict cannabis products. 89As of 2020, digital marketing spending for legal cannabis is positioned to surpass traditional marketing spending for the first time in history. 90This suggests that the future of cannabis marketing is digital, necessarily transcending state lines, but the trends indicate that the digital giants will reject cannabis advertisements as long as it is federally illegal. 91

[Footnote 91]

See id. (speculating "digital advertising provides an ideal medium for compliant cannabis and CBD advertising, because modern ad targeting technology can leverage known user data to display ads directly to appropriate audiences -- such as those 21 and over."). See discussion infra Section IV.A (analyzing how federal illegality has placed constraints on the ability of cannabis brands to market both federally and locally).

[Footnote 91 Ends]

D. Global Approach to Cannabis Regulation

When it comes to cannabis regulations, the world is sharply divided; while it is illegal in the U.S., it is legal in other countries, such as Canada and members of the European Union ("EU"). 92These countries handle the registration of marks for cannabis differently, [*387] making it less difficult to register. 93Nonetheless, in the U.S., where federal registration of cannabis trademarks is not permitted, there are 3,000 active trademark applications pending with the word "cannabis" in the statement of goods and services, over 1,000 with the word "marijuana", and over 7,000 with the word "hemp". 94

Canada became the second country to legalize the recreational use of cannabis on a national level in 2018 and this prompted changes to the Canadian Trademarks Act. 95Amendments to the Canadian Trademarks Act recently took effect and provide that Canadian cannabis companies no longer have to demonstrate use of the mark, such as through evidence of a commercial sale of their product or advertisement of a food service, prior to getting their trademark formally registered. 96Instead, the amendments allow for immediate registration of a trademark once it has completed the advertisement period and also allow cannabis businesses to utilize the Madrid Protocol and file centrally for registration in 120 countries while relying upon a foundational Canadian registration. 97

[Footnote 97]

See id. (setting forth the amendments make Canada a member of the Madrid Protocol). As a member, "a company or person can file a trademark application in a centrally administered system and then select which member States it wants the mark to apply in." Id. "Applications are still considered on a country by country basis; for example, if a Canadian company desires protection in the UK, the UK Intellectual Property Office (UKIPO) which will make the final decision regarding approval." Id. See Nuzayra Haque, Navigating the Maze of International Cannabis Trademarks, IPWATCHDOG (May 3, 2017), archived at https://perma.cc/ETN7-A73Q (stating that the Madrid System was designed to offer trademark owners an avenue for filing international trademark applications through a single platform representing more than 80% of world trade).

[Footnote 97 Ends]

To file an [*388] application through the Madrid System applicants must use the Nice Classification for registration of international marks. 98Importantly, under the Madrid Protocol, trademark owners have an avenue for filing international trademark applications through a single platform which can also avail them to the benefits of the Paris Convention for Protection of Industrial Property 1883 ("Paris Convention"). 99 This option allows a trademark owner to claim priority in countries or territories that are members of the Madrid System and the Paris Convention within six months of filing the base application in a member country. 100Evidently, the amendment to the Canadian Trademarks Act has enabled Canadian cannabis trademarks and, as of March 2020, approximately 2,000 trademarks were listed on the Canadian trademark register with goods or services containing the word "cannabis" or "marijuana"; many of these applications were filed within the last two years. 101Additionally, because there is no longer a use requirement prior to filing these applications, trademark owners can apply for protection before entering the Canadian market and may help establish priority rights for the brand owner's marks both in Canada and internationally. 102

[*389] In the EU, trademark owners seeking to register their marks relating to cannabis or cannabis-related products can apply directly in countries where cannabis use is legal in some capacity, like in Spain and Belgium, where private cannabis growth and consumption is permitted. 103A trademark owner can also apply to the European Union Intellectual Property Office ("EUIPO"), which does not have an explicit blanket ban on trademark registration for cannabis and cannabis-related products, though an application may receive an objection on the basis that it is contrary to public policy. 104The EUIPO has been known to register EU trademark applications that cover cannabis products without explicit restriction to those goods with higher THC content, but applications have also been refused [*390] where marks are considered to be suggestive of illegal activity. 105For applicants from EU Member States where cannabis use is legal, these public policy considerations may not be barriers to filing an international cannabis trademark application through the Madrid System. 106Under the Madrid System, the International Bureau takes precedence, and as of January 2020 cannabis was officially added as a registered good under the Nice classification system, thereby reducing the risk that the authorities will not approve an application. 107

IV. Analysis

A. Cannabis Branding & Advertising

Brands are generally valued higher when federal trademark registration is secured, and cannabis branding is a crucial strategy to build legitimacy and interest that will drive recognition and repeat sales. 108

[Footnote 108]

See PROTECTING YOUR TRADEMARK, supra note 7, at 1 (setting forth the protection provided by federal registration). See also Rubinstein, supra note 6 (explaining how trademarks provide value beyond your core business). Trademarks can lead the way for expansion from one industry to another or to the acquisition of a business. Id. See also Collins, supra note 69 (recognizing the increasing importance of brands expressing their niche as many different entrants to the cannabis industry emerge). Branding will become even more important with edible products. Id. See also The Cannabis Industry and its Intellectual Property, supra note 70 (asserting that in order to succeed in the post COVID-19 new economy, companies must be able to protect their brands and intellectual property assets). "Early protection of intellectual property is a critical component of any business seeking to secure a competitive advantage in the market." Id. Despite the complications, companies must proceed forward with an active intellectual property program for protection of their cannabis products and services to avoid becoming roadkill in the competitive landscape. Id.

[Footnote 108 Ends]

Companies are required to create branding that is permitted [*391] according to state regulations. 109For example, in Massachusetts, the products need to be sleek and professional to appeal to an increasingly sophisticated market and to break negative perceptions post-prohibition, but shall not incorporate "colloquial references" to cannabis and marijuana in the logos. 110This rule seems straightforward, until one considers how many potentially prohibited references there truly are in modern vernacular--this vast array of slang terms related to cannabis and the effects of cannabis are a direct result of its illegality and the need to discreetly refer to the products in a way less easily identifiable to authorities. 111 For companies already limited to the trademarking protections of state law, this restriction on branding will undeniably limit the ability of existing companies to market their existing and well-known brands in Massachusetts, and constrain new cannabis businesses in the state from establishing recognizable, strong marks. 112

[*392] It is crucial to consider this limitation within the context of the purpose of trademarking; trademarks are intended to enable consumers to associate a trademark with a certain product from which they expect a certain quality, thereby creating a feedback loop where producers benefit from brand loyalty and are incentivized to produce consistent quality goods to uphold their brands. 113

[Footnote 113]

See Collins, supra note 69 (hypothesizing that retailers and cannabis companies that are able to utilize effective branding with clear messaging they demonstrate through their website are more likely to retain clients, grow their customer base, and position themselves for long term success). Additionally, if manufacturers of cannabis products have access to federal trademarks, the federal infringement standards and presumptions will enable trustworthy brands to spend fewer resources on intellectual property litigation and allocate those funds to investing in their products. Id.

[Footnote 113 Ends]

While some U.S. brands have experienced considerable financial returns within the state markets, federal illegality has placed constraints on the ability of cannabis brands to utilize tools to increase their market presence and profitability, not only federally, but also locally. 114 [Footnote 114]

See Hunt & Williams-Hall, supra note 95, at 55 (considering whether Canada offers cannabis companies superior opportunity for brand growth prospects than the United States). In the United States, cannabis brands are restricted from effectively utilizing franchising to expand across state lines. Id. Since Canada's legalization of recreational marijuana in 2018, the cannabis industry has witnessed a significant number of U.S. cannabis brands moving north to Canada to capitalize on the freedom and growth potential afforded in a legalized marijuana market. Id.

[Footnote 114 Ends]

B. The "State" of Infringement

The clash between cannabis-related trademark rights being granted by states and prohibited by the federal government can put business owners in a compromised position. 115Cannabis brand owners can seek state-based trademark registrations in states where cannabis is legal to prevent local competitors from using confusingly similar brands; however, this approach will not provide companies with a cause of action against another company operating in another [*393] state. 116

[Footnote 116]

See Gerben, supra note 69 (explaining how few registrants utilize state trademark databases because they rarely give any additional protection over federal trademark law as federal trademark law preempts state trademark laws). See also Sehgal, supra note 49 (discussing how trolls in the trademark industry are taking undue advantage of the trademark registration process).

[Footnote 116 Ends]

Under this current system, a California cannabis brand with California trademark protection could invest significant resources into marketing their high-quality cannabis products, while a Nevada cannabis company could adopt the same mark and sell inferior products, causing consumer confusion as to the source of the goods. 117 Consumers purchasing their cannabis products near the border of California and Nevada, or viewing marketing materials for the goods online would, be particularly vulnerable to deception from the Nevada brand. 118

In this scenario, it is easy for the Nevada company to act with the intent to deceive consumers into thinking they sell the same quality cannabis goods as the reputable California company. 119However, because the California company is only eligible for state protection, there is no cause of action available to stop the Nevada company's infringement; as such, access to federal trademarks for cannabis products will benefit cannabis merchants and consumers in similar situations. 120 The advantage of federal trademarks includes lesser [*394] consumer confusion, better quality cannabis products, and stronger legal benefits for owners claiming infringement--making federal legality the only viable option to cease current state cannabis trademark infringements. 121

C. Third-Party Trolls

Brand protection in this evolving area is likely to require higher levels of investment than more traditional industries largely due to the increasing number of illicit third-party activities. 122 Varied systems of trademark protection across the globe may permit third parties to obtain priority in identical or similar trademarks based upon illegitimate objectives of holding the brand hostage until an agreed payment is reached with the legitimate brand owner. 123 With rising demands for cannabis and cannabis-related products and services, there may be an increased number of "trolls" that seek to register intellectual property before the rightful owner and then later attempt to [*395] extort payment to transfer the rights to the rightful owner. 124

[Footnote 124]

See Natter & Sblendorio, supra note 58 (highlighting the importance of being aware of the shifting legal landscape). With the growth of cannabis product markets, the risk of trademark trolls in this industry is on the rise. Id.

[Footnote 124 Ends]

Trolls establish de minimus use of a mark using a business logo used by a well-known cannabis company that is not eligible for federal trademark protection. 125

[Footnote 125]

See Sehgal, supra note 49 (explaining that trolls primarily "exploit their registrations against legitimate parties with the aim of extracting profits by either filing lawsuits as a means [for settlement] or to attain licenses from trademark holders.").

[Footnote 125 Ends]

Without the ability to lawfully use their cannabis products in commerce, the rightful cannabis brand owner cannot take advantage of the "first-to-use" system in the United States, but rather fall victim to trolls that claim priority rights to the mark. 126 All a troll needs to do is spot a popular cannabis brand that is deprived of federal trademark protection, establish use in commerce by affixing the logo to a legal good, such as a t-shirt, and register the mark. 127

If the rightful cannabis brand owner wishes to reclaim its mark, it is forced to license the mark from the troll or purchase the trademark rights. 128

As a solution, the U.S. could consider following Canada's lead in amending the prior-use requirement, allowing trademark owners to apply for protection before entering the U.S. market. 129This would [*396] allow brand owners to establish priority rights without the requirement of commercial sale of their product before getting the trademark formally registered; because the use requirement would be irrelevant, the legality of the use would no longer be a barrier to protection. 130With the ability to gain federal trademark protections, U.S. cannabis brands would be allowed to utilize the Madrid Protocol for international protection as well. 131The ability to enforce brand protection would incentivize U.S. cannabis companies to invest in establishing recognizable brands with a reputation for consistent-quality products. 132

D. How U.S. Cannabis Companies Can Join the Global Competition

It is important to consider that the cannabis industry continues to grow globally. 133 In the global trademark system, if an application is based on a treaty, such as the Paris Convention or the Madrid Protocol, use is not required at all before registration. 134Apart from registration issues, there is a question as to whether a cannabis trademark can be used and enforced despite not being able to be registered. 135Many countries acknowledge common law rights, and [*397] in these countries it may be possible to create trademark rights even though the local trademark office does not permit registration of cannabis trademarks per se. 136For most trademark owners, direct registration of trademarks for the specific goods or services of interest is the best practice because such registrations cover the core goods and services and will be supported by use of the trademark on those goods and services when the time comes to satisfy use requirements. 137

As an alternative to amending the prior use requirement, Congress could amend the Lanham Act to explicitly include language stating that goods and services are not "unlawful" for federal trademark purposes in states where the goods and services are legal. 138The proposed language could read: the term "bona fide use" includes services or products in accordance with state law and which federal authorities have explicitly deemed they will not prosecute. 139As a result of such an amendment, cannabis products that are legal under state law will more easily meet the bona fide use requirement, however this amendment would still leave food and dietary supplements with added CBD unprotected because of the ongoing FDA clinical investigations. 140Nonetheless, this amendment would clear up the meaning of "unlawful" in the Lanham Act and, as such, cannabis-product trademark applicants and the products' consumers could receive the economic, health, and legal benefits that come with a [*398] federal trademark. 141By amending the Lanham Act, Congress would clarify that legalized state marijuana products will not be considered unlawful for federal trademark purposes, making it easier for producers of cannabis products to obtain federal trademarks. 142Producers would benefit economically and legally, and consumers will know which brands to trust. 143

E. Emphasis on Business Implications

Given the current regulations with cannabis-related trademarks, companies should ensure that the goods or services associated with that trademark are not illegal under the CSA and continue to monitor developments on a state-by-state and nation-by-nation basis; following trends, it is expected that legalization will [*399] continue to expand to additional jurisdictions. 144From the business development side of the cannabis market, it is important to consider that intellectual property alone is a business asset, and if properly protected, intellectual property assets can increase the perceived or actual value of a business. 145As the world continues to expand its recognition of the legitimacy of the cannabis industry, more countries will move to direct protection for these trademarks as the law throughout the world begins to conform to commercial reality. 146

Until we see federal legislative change on the cannabis trademarking front, the best course of action for cannabis companies to acquire and enforce trademark rights is to develop common law rights through sales and seek state-level registrations in those states wherein cannabis is legal. 147Beyond this, brand protection must be approached systematically by using trademark filing treaties as appropriate to maintain global priority, and such an approach likely requires federal legalization of a wider range of cannabis products in [*400] the U.S. 148 Without such protections, U.S.-based cannabis brands cannot competitively join in the global cannabis market. 149

V. Conclusion

Within the federal framework of the U.S. there is a system of state autonomy where state governments act as laboratories where laws and policies are tested at the state level. When it comes to cannabis, the states have done the testing and the results are in: it is time for nationwide legalization. The majority of states across the country have been turning to cannabis businesses as a source of entrepreneurial growth, tax revenue, investment opportunity, and employment for their citizens. The economic benefit of legalizing cannabis is apparent on the state-level. If the U.S. wants to be successful in capitalizing on the huge cannabis market that the states have already established, legislation must enable U.S.-based cannabis companies to secure federal trademark protection and join the global green-rush. Given the rapidly growing influence of the cannabis industry on the economy, there is a significant need for national legislation that enables cannabis companies in the U.S. to secure federal trademark protection. While this can be accomplished by amending the Lanham Act's registration requirements, practically speaking it is time for the U.S. to legalize cannabis.