Federal trademark protection creates brand preference which boosts investment and market share.

One of the primary purposes of protecting trademarks is to help consumers identify the goods and services they want to purchase and distinguish them from those they want to avoid.94 The importance of brand recognition is highlighted in Trans-High Corporation's ITU application for CANNABIS CUP in 2014.95 When the USPTO rejected the application, Trans-High responded with "strong policy reasons why the USPTO should be taking steps preparing for and favoring the potential for national trademark rights in the cannabis industry," including consumer exposure to "different entities . . . sell[ing] different marijuana strains with different strength or attributes in different states under the same trademark."96 Trans-High noted, "if and when marijuana is legal under federal law," federal trademark protection for cannabis-related goods and services will mitigate this risk, reducing the likelihood that consumers will be subject to "unpredictable purchasing and consuming experiences."97

Although restrictions on federal trademark eligibility create a risk of confusion resulting in consumers not getting what they want, there is also a risk that this confusion will have negative safety and quality control implications. In 2019, former FDA Commissioner Scott Gottlieb issued a statement discussing the risks to consumers from companies illegally selling cannabis products for medicinal purposes.98 Per Gottlieb, these companies often market and [*185] distribute "unapproved products with unsubstantiated therapeutic claims."99 Some examples of these unsubstantiated claims include assertions that CBD has stopped cancer cell mutations, slowed the progression of Alzheimer's disease, and reduced withdrawal symptoms.100 These claims put patients and consumers at risk because "deceptive marketing of unproven treatments" may lead patients to choose these treatments over "appropriate, recognized therapies," thereby depriving them of legitimate treatment.101 Additionally, these products may contain harmful ingredients not yet disclosed or evaluated by the FDA.102 Federal trademark protection for cannabis and cannabis-related products can mitigate these risks because trademarks prevent consumer confusion about the source of goods and services.103

Ferrara Candy Company, the manufacturer of popular candy product Nerds, found itself at the center of such a problem when Akimov, LLC, a Florida-based cannabis company, distributed and advertised THC-infused products bearing imitations of Ferrara's federally protected marks.104 In a similar but unrelated extreme instance of consumer confusion that threatened consumer safety, a pair of Utah children were "hospitalized after eating [a] THC-infused candy that was accidentally distributed to their families by the Utah Food Bank."105 These unfortunate scenarios further exemplify the consumer safety risks that may arise due to consumer confusion regarding cannabis-related products and branding.

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B. Federal Trademark Ineligibility Prevents Business Development

In the early 1900s, a young Coca-Cola Company sued The Koke Company of America for trademark infringement.106 The Supreme Court ruled in favor of Coca-Cola, finding that its mark had a well-accepted meaning associated with Coca-Cola's product alone, and that "defendant's mixture [was] made and sold in imitation of plaintiff's and that the word 'Koke' was chosen for the purpose of reaping the benefits" of Coca-Cola's goodwill.107

Now imagine Company A, a small cannabis company named GreenLeaf operating in New Jersey where cannabis has been legalized. Company B, operating in New York, where cannabis has also been legalized, gets wind of what GreenLeaf is doing and decides to change its name to Green-Leaf while selling similar products in deceivingly similar packaging. Regular consumers of GreenLeaf find themselves in the adjoining state and see Green-Leaf 's products. They purchase Green-Leaf 's products under the assumption they are buying goods from GreenLeaf. They later spread the word to their friends and family residing in the adjoining state to purchase products from Green-Leaf, believing them to relate to GreenLeaf. Not only does GreenLeaf lose out on profits gained by Green-Leaf, but it also has no legal remedy beyond state-level protections as it is ineligible for federal trademark registration. Restricting cannabis farmers' and business owners' access to federal trademark protections impedes their ability to build recognizable brands and receive adequate legal protection. In both the actual case and the hypothetical, Coca-Coca and GreenLeaf are trying to build their brands and protect themselves from infringers. Yet, the now-iconic Coca-Cola Company successfully obtained a legal remedy when a competitor infringed upon its trademark, while GreenLeaf would have no such luxury.108 This double standard is inequitable; Coca-Cola received trademark protection because it produced soda products, while GreenLeaf would not be entitled to the same benefits simply because they make a different product. By willingly extending trademark protection to a sugary cola beverage and denying as such for marijuana, the federal government has quite boldly decided it has the authority to choose people's vices. Marijuana's federal illegality, and the associated stigma facing the industry, should not justify the lack of protection for cannabis companies operating in states where marijuana is legal, particularly when studies show that marijuana is not more dangerous than other legalized products like tobacco.109

[*187] Similarly, cannabis farmers and businesses commonly struggle to access capital and financial services because cannabis is still federally illegal.110 Banks and financial institutions are hesitant to loan money, provide funding, or do business with cannabis farmers and businesses, especially given the ever-changing legal status of the cannabis industry.111 Lack of federal trademark eligibility exacerbates this problem by preventing cannabis farmers and businesses from establishing brand preference, and thus brand value, among consumers.112 Brand preference creates value by "measurably improving profits, cash flow, and share."113 A study by the Marketing Accountability Standards Board found a direct link between consumer brand preference and external market metrics, including market share and price premiums.114 Financial institutions and investors are more likely to invest in businesses with higher brand value, and cannabis farmers and businesses are particularly disadvantaged at [*188] building this asset because of federal trademark ineligibility.115 Additionally, small-scale farmers and businesses face the risk of being driven out of the industry as the market continues to flood with "vast quantities of indistinct marijuana" and their product value is consequently cheapened.116 This problem could be mitigated if farmers and businesses were able to reap the benefits of federal trademark protection.

Without the ability to build recognizable brands, receive legal protection, and access capital, it is consequently more difficult for cannabis farmers and businesses to expand into other states. Because cannabis businesses can only take advantage of state-level trademark protections, their marks will not protect them in states where the marks are not registered.117 While state-level trademark protections are a viable alternative for cannabis farmers and businesses, they are of limited value because of their lack of reach and limited jurisdiction when compared to federal trademark registration.118 Marijuana businesses are uniquely limited when they are forced to rely on state law trademark protections, attempt expansion into other states, and face potential litigation in another state whose "courts may not be friendly fora."119

C. Change on the Horizon: Expectation of Future Federal Legalization

As of April 2024, twenty-four states, D.C., and Guam have legalized recreational marijuana.120 In 2022, related ballot measures failed by relatively narrow margins in Arkansas, North Dakota, and South Dakota.121 [*189] Recreational marijuana legalization will also be on the November 2024 ballot in Florida.122 Experts predict that trending state legalization, coupled with President Biden's recent efforts to review cannabis scheduling under the CSA, will likely "increase pressure on Congress and the rest of the federal government to either decriminalize or legalize cannabis under federal law."123 In 2023, the Department of Health and Human Services recommended that the Drug Enforcement Administration ("DEA") "significantly loosen federal restrictions on marijuana" by rescheduling cannabis from Schedule I to Schedule III under the CSA, consistent with President Biden's 2020 presidential campaign messaging that cannabis should be removed from Schedule I of the CSA.124 Even more recently, in April 2024, the DEA agreed to reclassify marijuana from a Schedule I to a Schedule III substance under the CSA as part of the Biden administration's efforts to reform national cannabis regulatory policy.125 Additionally, in late 2022, President Biden "announced that his Administration granted unconditional pardons to individuals charged [*190] with or prosecuted for simple cannabis possession and urged all state governors to do the same."126 Americans welcomed these initiatives, signaling that more federal cannabis reform might be underway.127

Rapid state legalization and consideration of ballot initiatives regarding cannabis, coupled with President Biden's cannabis reform efforts, increase the odds that cannabis will become federally legal, regardless of current uncertainty. Expectations of legalization will shape the next steps toward recognizing federal trademark protections for cannabis-related goods and services. These expectations signal that lawmakers and courts should quickly find the best way to protect cannabis business owners and address related intellectual property issues. Because many states have already legalized marijuana, the current landscape provides a great opening to test whether trademark protections will benefit cannabis business owners and how to course correct if problems arise. The cannabis industry's rapidly evolving legal landscape makes the issue of intellectual property protection even more timely, urgent, and relevant.