Understanding intellectual property law is important when choosing a brand name
With so many cannabis companies finding themselves in legal hot water over their choice of brand names, it’s useful to understand how to select a trademark that can be built into a valuable, proprietary brand that doesn’t infringe any other party’s trademark rights.
A trademark is a word or symbol that indicates the source of goods or services for an enterprise. A business needs to be able to own its trademark just like it may own its property, plant and equipment. Well-chosen marks become sources of monetary brand equity and drivers of corporate valuation.
Cannabis businesses can only obtain state trademark protection for cannabis products and services at this time, but trademarks should be selected with federal trademark laws and practices in mind. Existing state trademark laws are largely modeled after federal laws, but well-chosen trademarks could be registered at the federal level if and when that option becomes legally available.
When developing and selecting a trademark, it is important to realize that you will be heavily investing in the mark, and if you are successful, it will become your brand and the most valuable asset for your company.
Developing valuable marks and brand names that will avoid legal challenges is a difficult task that increasingly requires creative thinking and professional expertise. A brand name can become a competitive advantage for a business; therefore, it is important to develop and select a mark that is “highly differentiated” within the industry and ultimately the economy.
Under U.S. trademark law, trademarks are classified into five basic classifications along a continuum ranging from the strongest and most protectable to the weakest that cannot be registered. These five classifications are: fanciful marks, arbitrary marks, suggestive marks, descriptive names and generic terms. Marks can be registered in all of the categories except the generic classification.
The most valuable marks are often fanciful or words that are made up and may have no meaning other than as a brand. Names like Exxon, Kodak and Xerox are classic instances of fanciful marks that are commonly quoted as examples in the law. These marks offer the greatest opportunity to create positive associations between the respective mark and a business, product or service.
Trademarks should be thought of as an asset with a peripheral field extending around it, indicating the strength of its legal rights. If it is registered for a single product like extracts of tinctures, and in a certain class of goods like medical marijuana, then its rights are for that specific product in that kind of goods. As it becomes more famous, it may be registered additionally for paraphernalia, edibles and infused beverages that extend its intellectual property rights to a larger share of the entire cannabis industry. If it is a very famous trademark, such as Coca-Cola, its periphery of rights goes beyond its product category and industry classification, and it may be enforced against for all goods and all industry classifications.
From a legal perspective, fanciful marks generally have the greatest scope of protection against third-party infringement because there is no reason for its word to be used for any other purpose than the trademark itself.
Arbitrary marks are words that are used as a trademark that have no natural association with their goods or services. For example, the use of the word “Apple” for computers and smartphones is entirely arbitrary, and yet, as time has passed, it has become incredibly memorable and highly differentiating for Apple products over less unique names like Hewlett-Packard or LG. Classic examples of arbitrary marks are Venus for pencils and Black & White for whisky. With these kind of marks, there are reasons that others may use words like “apple” or “Venus,” but the registered trademarks have a periphery of rights that extends to almost any use in any industry — certainly not for the selling of apples as a generic product, but the scope of rights around arbitrary marks can become nearly omnipresent.
Suggestive marks indicate some quality or characteristic of the respective business, product or service, but they do not describe the product or service. One of the most famous is Caterpillar for construction and heavy earth moving equipment. With that name, you can just imagine large tractors slowly moving across a terrain with no roads in sight like a caterpillar in the wild.
Other well-known marks are Greyhound for speedy transportation by bus, Nike for running shoes, KitchenAid for kitchen appliances, Facebook for personal social media, or Google for computing. These marks differentiate the businesses or their products, and uniquely suggest what they are or do.
In some cases, descriptive marks can be registered, but they commonly are not. They are hard to build into brands because they are not highly differentiating and are often diluted since they are used by many different businesses to brand their products and services. Descriptive terms that report a characteristic of an article or service, such as “quick delivery service” or “soak” for bath salts, are considered to be “merely descriptive” and do not successfully differentiate a trademark or a brand from many other uses in commerce.
Examples of descriptive marks are Crystal Clear for televisions, Bud Light for light beer, and Bed & Breakfast for lodging. These kinds of marks aren’t memorable, making them hard to enforce and expensive to defend. Sometimes descriptive marks can become distinctive if they are in the market long enough and may be allowed a limited trademark registration. Mostly, these marks require no imagination and are almost entirely the opposite of highly differentiated marks. Surnames also fall into this category. Brands based on surnames, such as “Smith’s Repair Shop,” are not likely to ever be registered because no one can own either the name (Smith) or the noun (Repair Shop) it modifies. Additionally, geographic terms are also available for all to use, such as “Champagne” for carbonated alcoholic beverages, or “Idaho” for potatoes. These regulated appellations are considered to be “geographic indicators” and are only allowed for products from their respective locale through certification.
As all trademarks are intended to indicate the source of goods or services, generic terms, by definition, are incapable of indicating a source and thereby are the antithesis of trademarks. Generic words that refer to a class of which an article or service is a member, such as “bread,” “yogurt” or “greeting card,” cannot function as an indicator or origin.
Examples of generic terms in the cannabis industry are words such as “cannabis,” “marijuana,” “vaporizer,” “medical cannabis,” “THC” and “CBD.” These words must be free for everyone to use, and thus no one can trademark or own those respective words.
Once a business or enterprise has selected its trademark or brand name, it is also very important to make sure the word is not owned or being used by another enterprise. Commonly called “clearance,” a trademark search must be performed by a qualified individual to make sure that no other party has already registered the mark or is using it in commerce and has prior legal rights. It is always better to go back to the drawing board than to discover someone else already owns it after you have made a substantial investment. The recent instance of the Gorilla Glue cannabis strain breeders being sued by the Gorilla Glue liquid adhesive brand is an unfortunate example of violating another party’s trademark rights that required the infringer to stop using a mark that had already become famous in its industry. Of course, there are other examples of infringement and there will likely be more before the industry comes to understand the reality of trademark rights.
You don’t want another business suing you over trademark rights, which could mean paying monetary damages, disgorging ill-gotten gains, starting all over to name your company or your products or, in the worst case, going out of business.
In summary, fanciful, arbitrary or suggestive marks are considered to be the strongest marks that can most easily be protected, owned and defended against confusion and infringement. If a company is serious about its business and intends to grow and become successful, it is important to adopt a trademark from the protectable categories.
In the end, if you give your trademarks and brand names due diligence, they will deliver competitive advantage, brand loyalty and enhanced business valuation.
Lindsay Moore, Ph.D. is the CEO of KLM, Inc., a strategic planning firm located in Boulder, Colorado. She is a former adjunct professor of law at George Washington University Law School and was recently named to the IAM Strategy 300, an annual listing of the world’s leading intellectual property strategists, for the ninth year in a row. She can be reached at firstname.lastname@example.org.