Leveraging the Law

Winners in this emerging industry will be those with the best intellectual property

With annual revenues projected to break $50 billion in the coming years, the cannabis market has transitioned from a hobby to big business. We hope and expect that the federal prohibition against cannabis will end before too long, and in the months and years that follow, cannabis companies will duke it out in federal court over trademark and patent rights. Other things being equal, the companies that survive those wars will dominate the post-prohibition cannabis industry. To put a finer point on it, post-prohibition, most of the value of the most valuable cannabis companies in the world will correspond to intellectual property (IP).

As the cannabis industry continues to mature, the number of product alternatives will continue to grow. Consumers will increasingly rely on branding to distinguish quality products from lesser products. In an increasingly globalized economy, maximizing the value of cannabis companies starts and ends with protecting cannabis brands federally and internationally. And, yes, it is possible to protect your cannabis brand at the federal level, as well as internationally, and I’m not just talking about federal protection for hats and T-shirts, which is essentially worthless if material revenues do not correspond to clothing.

Moreover, the cannabis industry is a technology industry, much like the pharmaceutical industry is also a technology industry. Most of the cannabis industry just hasn’t realized it yet. And like other large technology industries, the winners and losers in the post-prohibition cannabis industry will be determined in large part by the quality of their respective arsenals, meaning patent portfolios.

In other words, if you’d like to play a leading role in the post-prohibition cannabis industry, it’s all about the IP, baby.

IP essentially comprises patents, trademarks, trade secrets and copyrights. In this article, I’ll focus on plant patents, utility patents and trademarks.

– Plant Patents: Plant patents protect a cannabis variety by giving the owner of the plant patent the right to prevent others from reproducing, using, importing or selling the cannabis variety or any of its parts in the U.S. The plant patent application is a fairly complex document that provides the necessary details to show: a) that the variety is new; b) is asexually reproduced; c) is the product of plant breeding or was discovered on cultivated land; and d) is stable and distinctive. So, if you develop a new cannabis strain that treats insomnia or improves one’s ability to play guitar, a plant patent will protect your ability to profit from your contribution to the marketplace.

– Utility Patents: Utility patents are the most common types of patents. They protect the functionality and use of an invention, giving the patent owner exclusive rights to their respective inventions. These patents protect inventions such as manufacturing equipment, design improvements, extraction processes and many other types of products and processes used and sold by cannabis companies. If you develop new lighting that improves plant growth or if you create a vape pen that delivers a better experience, a utility patent may afford you ownership rights to your innovation.

– Trademarks: A trademark is a symbol or word(s) that identify the source of goods or services. A trademark captures the goodwill created by the quality of your goods and services as experienced by consumers. Trademarks can be protected under state common law (meaning without even registering the trademarks), by state trademark registration and by federal trademark registration. Trademarks can also be protected in other countries. Under the Madrid Protocol and the Paris Convention, foreign trademark applications can benefit from the filing dates of corresponding U.S. trademark applications.

Pervasive misconception holds that it is impossible to obtain meaningful federal trademark protection for cannabis brands. We’ll address this in a future installment of this column.

There are few industries that are more exciting than cannabis, and even fewer with similar global-commerce-changing potential. The legal cannabis industry is moving beyond its infancy into its toddler phase. By the time this industry grows up, the leading companies will wear the fanciest IP. These leading companies of the future are shopping for patents and trademarks to place in their closets now — or they’ve already started designing their own clothes.

 

Tom Zuber is the managing partner of Zuber Lawler & Del Duca LLP, a firm of 40 attorneys with offices in California, Illinois and New York. He holds a law degree from Columbia Law School, a master’s degree in public policy from Harvard University and a biomedical engineering degree from Rutgers University, where he graduated with highest honors. He can be reached at tzuber@zuberlaw.com.

 

Each month the experts at Zuber Lawler & Del Duca will tackle a new topic that is relevant to the marijuana industry, providing valuable information to help cannabis business owners build and grow their business. Zuber Lawler & Del Duca helps cannabis clients with mergers and acquisitions, intellectual property, regulatory compliance and litigation. These articles are not legal advice.

The October issue of Marijuana Venture will dive deeper into the subject of patents in the legal cannabis industry.

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