Cannabis industry insiders commonly joke that a year working in cannabis is like a dog year in any other business, because things are constantly changing. Federal, state and local policymakers are always coming out with a new rule or requirement, and businesses always find new and innovative ways to improve their products, supply lines and the consumer experience.
CBD products may be for sale everywhere, but the Food and Drug Administration (FDA) still prohibits their use in consumer products; give it six months and the FDA may completely reverse policy, or perhaps not — even crystal balls can’t provide accurate predictions. In the meantime, sales departments in hemp and marijuana companies across the country struggle to control the things that they can and strategize for those things they cannot.
Perhaps the most important factor companies have control over is their brand. Building brand awareness for a startup is always hard, but even more complicated in an industry with no legacy brands that had the time to build deep consumer loyalty. Each company currently in the market is competing to create that loyalty and long-term brand identity. This is an economic opportunity of a generation.
To stand out, consumers need to know who you are. That’s where your trademarks come in. The distinctive words, imagery, “look and feel” and other sensory input that tells consumers the source of a good or service is a trademark. For most companies, this includes the name and logo, but may also include product names, slogans and other source identifiers. Each is a trademark if it is capable of indicating to consumers the source of the goods or service. Companies that do not have a strong trademark risk being confused with their competitors — for good or bad.
With new cannabis startups each month, and new cannabis products debuting each day, many companies are struggling to find new names and imagery that differentiate their products and company from their competitors. This problem is not unique to cannabis. Many legal and marketing practitioners have warned about “trademark congestion” generally, where all good trademarks for companies and products are taken up by prior brands. With more than 6.7 million trademark applications filed with the U.S. Patent and Trademark Office between 1985 and 2016, it is not hard to imagine that nearly every distinctive combination of words and images has been used before and that most protectable combinations have already been registered. That poses a particular challenge for marketers trying to stand out in a crowded industry.
In addition to trademark congestion for similar, existing brands, official cannabis trademark registration is limited to those products that can demonstrate a “lawful use in commerce.” Despite federal legalization of industrial hemp production under the 2018 Farm Bill, the FDA has not approved hemp (other than the seeds) for use in any product that will be “introduced into” a human or pet body. That restriction applies to food, dietary supplements, topical products, pet products, tinctures, cosmetics and other products regulated by the FDA. Similarly, the FDA approval of Epidiolex, with CBD as its primary ingredient, as a drug now limits any non-pharmaceutical uses of CBD other than the approved uses — currently limited only to treatment of epilepsy. Going even further than the FDA, the Controlled Substances Act prohibits any products containing more than 0.3% THC by dry weight basis.
These limitations on “lawful commerce,” coupled with the crowded branding environment, severely narrow the availability of trademark registration for cannabis producers and retailers. However, none of these overlapping limitations have been able to slow the economic growth of the industry thus far and do not eliminate every possibility of protecting your trademarks. In fact, the opposite is true — trademark crowding creates urgency, and the heavy limitations create strategic opportunities for creative thinkers.
A major risk that all unregistered cannabis trademarks face is simultaneous use of a trademark in different states by different companies. This situation could grant both companies rights to the same trademark in their respective states and prevent expansion. This risk is especially present for hemp companies that are just establishing their national distribution networks, and for adult-use cannabis companies that are limited to a single state market.
Trademark congestion in the quickly expanding cannabis market means that brands can and should move quickly to register and protect their trademarks throughout the U.S. before competitors claim the same or similar trademarks.
As businesses grow and expand across state and national borders, these trademark conflicts will increase in frequency, size and sophistication. Staying ahead of the crowded branding competition and ensuring your exclusive right to your trademarks is crucial to avoiding those trademark disputes and the high costs of fighting them. The most effective tool to prevent this situation is to register your trademark with both the state and the federal trademark offices.
Ammon Ford is an attorney at Gleam Law, PLLC, a multi-state, cannabis-focused law firm with clients in 40 states and on five continents. He holds a joint JD/MBA degree from Seattle University, where he founded the Cannabis Law Society. He can be reached at email@example.com.