Trademarks, Branding and Laws—Oh My!

s cannabis businesses compete for customers, communicating their products’ quality and value becomes key. Cannabis companies that understand the need to differentiate their business and products from those of their competitors need to know what they can do to enhance and protect their brands.

To greatly simplify, the goal of branding is to efficiently communicate something about a given product. Maybe a company’s cannabis products or strains are trendy. Maybe they’re highly potent. Maybe they’re cheap as dirt. The point is that these companies want to tell customers that products with their brand name will consistently offer whatever it is that the company is trying to provide. Most cannabis companies want consumers to know what they offer simply by seeing their brand name on retail shelves. In addition to wanting brand recognition, no business wants other businesses using its brand name, especially in a way that could damage its reputation or steal valuable business.

Enter the developing power of cannabis trademarks. Though the United States Patent and Trademark Office (USPTO) will not register cannabis product trademarks due to their federally illegal and “scandalous” nature, many state governments will register them. A state-registered cannabis trademark does two things—it provides notice to others in the state of registration that the mark is being claimed, and it often offers greater protection for cannabis brands in the registered state than the common law.

It is important to note that even certain federal cannabis-related trademarks are sometimes possible. Though you will not be able to register the cannabis strain name of their dried cannabis flower with the USPTO, you could potentially register that strain name for an auxiliary clothing line or for cookies not infused with cannabis.

Just as should be done with non-cannabis trade names, it is critical to do a trademark search before you attempt to register a cannabis trademark with a state trademark office. This search needs to be done to make sure that nobody else has already claimed the trademark you seek and to make sure that the brand name you are contemplating using does not infringe on someone else’s trademark. Cannabis businesses are in no way immune from being sued for trademark infringement merely because of the federal Controlled Substances Act—just ask the Hershey Company which, in 2014, sued at least two medical cannabis companies in Colorado and Washington over the companies’ infringement of its signature Hershey’s candies trademarks.

Once a cannabis business secures its state trademark, it should monitor the mark for infringers and should enforce it sufficiently to maintain its rights. The cannabis business should also educate itself about the complex rules and restrictions on placement and content of advertising, the claims that can be made about a given product and how to target product advertising accordingly.

In addition to state trademark registration, an emerging area in the law is cannabis trademark licensing. In such cases, a business may seek to license its trademarks, know-how, or other proprietary rights to another business in exchange for monetary compensation. This licensing model appeals to many cannabis businesses because it can allow the owner of a trademark, trade secret or other proprietary know-how or information to expand by licensing its brand or proprietary know-how to another company. This model works particularly well in the cannabis industry where local residency is often required to operate and where local knowledge is often nearly as important. 

For example, if a company owns a trade secret, technology, know-how or other proprietary information used to manufacture a particular cannabis product or provide a service to a cannabis business, it can consider licensing this trade secret, technology or know-how via a license agreement, consulting agreement or similar agreement that also addresses the issue of trademark ownership as between the licensor and licensee. Such agreements may, for example, also provide for the licensor to supply the licensee with certain non-controlled goods associated with the licensee. Licensing ultimately allows the licensor to monetize its brand or know-how outside their home state. However, the current state-by-state patchwork of cannabis laws means that these licensing agreements, if and when possible, are usually very complicated and must be tailored to the laws of the relevant states.

The cannabis industry is becoming more legitimate and is made up of an increasing percentage of sophisticated businesses. These businesses thrive when they develop unique and recognizable brands. Great companies have great brands, and this is true for great cannabis businesses, too.