Competing claims of prior use collapse into murkiness and litigation.

In trademark law, the first use of a mark within a particular territory usually establishes trademark ownership in that territory. As such, a cannabis company may own a trademark in a given state that (a) is identical to the mark used by a different company in a different state; (b) would be in direct conflict with the other company’s rights if the different states became subject to a uniform system; and (c) is nonetheless a valid mark within the company’s home state. These issues are particularly significant for cannabis companies that desire to expand into new states, because their expansion plans may be limited or thwarted by a competing claim for trademark ownership in a different territory. For example, established brands with valid marks operating in legal states like California may not be able to claim priority in newly legal states where other entities may seek to use the same marks.

Federal decriminalization or legalization of cannabis would presumably bring an end to this system, but it is unclear what the resulting system would look like or how priority disputes might be resolved. This uncertainty will be especially problematic for large and popular brands whose products are already widely counterfeited and sold by black market players in states where cannabis is still illegal. Given the territorial nature of trademark law, it may even be that counterfeiters in illegal states have a head start as to priority, as compared with the original companies that created the marks but operated strictly in accordance with state law.

Congress May Not Provide Additional Clarity but the Experience with Alcohol and Hemp Is Instructive

If and when cannabis is federally legalized, the state-by-state trademark regime will likely collapse into a murky pool of convergent and competing rights. Congress has shown neither an appreciation for these cannabis trademark issues, nor a willingness to solve them. But these issues will certainly affect businesses’ bottom lines and result in litigation.