California Rolls Its Own Cannabis Trademark Protection

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By Joyce E. Cutler

California is turning to homegrown trademark protections for the state’s projected $18 billion legal marijuana business in the face of federal prohibitions.

The Patent and Trademark Office doesn’t allow the registration of marijuana-related trademarks because selling marijuana is illegal under federal law. That doesn’t stop cannabis-related trademarks from being registered at the state level, but California will have to tweak its own rules first to make it possible.

A bill pending in the state legislature ( A.B. 64) will allow California businesses to register their marijuana-related trademarks with the secretary of state by adding classes of goods and services covering medical and recreational marijuana. Currently, California law requires applicants to list one of the federal-level classes.

California is set to be the largest of legal marijuana market in the country with voters last fall approving Proposition 64, the Control, Regulate and Tax Cannabis Act of 2016 also known as the Adult Use of Marijuana Act. Recreational marijuana will be legal starting in 2018. Medicinal marijuana use was legalized in 1996.

“We obviously have a huge marketplace for many products and services and certainly cannabis,” said the legislation’s author, Assembly member Rob Bonta, a Democrat. “Because California is so big, it matters to have a cannabis trademark in California,”

Last fall, California joined Colorado, Oregon, Washington, Massachusetts, Nevada, Alaska, Maine and the District of Columbia in legalizing recreational use of cannabis. California expects to see $7 billion flow into the economy from annual marijuana sales and $1 billion in state taxes, which is $250 million more than the state collected in tobacco tax revenues in the 2015-16 fiscal year, California Treasurer John Chiang said last December.

The legal cannabis industry in the U.S. may grow to $50 billion in the next decade, expanding to more than eight times its current size, as lawful marijuana purveyors gain new customers and win over users from the illicit market, Cowen & Co. analysts said.

California Model

Assembly Bill 64, pending in the California Assembly, would authorize a certificate of registration for marks related to medical cannabis and nonmedical cannabis goods and services lawfully in commerce under state law. The legislation creates a new section in the California business and professional code to permit cannabis-related registrations to be issued after Jan. 1, 2018, when recreational marijuana is legal in California.

“We’re in a time of massive transformation for cannabis policy and the cannabis industry and all stakeholders related to cannabis in California,” said Bonta, who co-authored one of a trio of bills that became the Medical Cannabis Regulation and Safety Act enacted in 2015 creating the regulatory framework for medical marijuana.

“Now we have cannabis industries which are lawful and regulated, and more and more are coming out the shadows and into the light and entering the regulated marketplace,” Bonta said.

No Federal Preemption

Federal trademark law doesn’t preempt state common law so states are free to essentially make their own rules, which is why Washington, Oregon and Colorado have allowed for the registration of cannabis-related marks, said Rebeccah Gan, partner at Wenderoth, Lind & Ponack LLP in Washington, D.C.

Businesses have been able to use state unfair competition law to sue for misappropriation of a common law trademark where state registration is not available. However, “state trademarks are not binding outside the confines of the given state,” Gan said.

State Option, Federal Preferred

Businesses trying to protect trademarks of cannabis and cannabis products really only have the option of trademark protection at common law, or through state registrations, said Rachel Gillette, a partner with Greenspoon Marder PA’s Denver office.

“While common law provides some judicially created protections, because it can be geographically limited, national registration and national notice is preferable. Perhaps as more states codify trademark protections and classifications, national law will follow suit,” Gillette said in an e-mail.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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