By: Egle Arena, Esq.
Imagine you have spent months, maybe even years, developing a brand for your cannabis business. You have a great name, a fantastic logo, and now you are ready to stake your claim in this corner of the industry. You put forth your application to register your trademark… and it gets denied.
Why? Because at the federal level in the United States, your business isn’t legal.
The conundrum with cannabis trademarks at a federal level lies in the fact that, despite growing acceptance and legalization of cannabis at the state level (Minnesota has recently made history as the 23rd state to legalize recreational cannabis ), cannabis is still a Schedule I drug under the Controlled Substances Act (CSA). This creates a paradox where state-legal cannabis businesses cannot secure the same protections for their brand as businesses in other industries.
The Trademark Trial and Appeal Board (TTAB) made this quite clear in a recent precedential decision: In re National Concessions Group, Inc. “essential oil dispenser, sold empty, for domestic use ” in class 21. The trademark examining attorney rejected the applications arguing that the product constituted illegal drug paraphernalia because it was primarily used for “dabbing” cannabis-based oils. NCG appealed and filed requests for reconsideration for each application. These were denied, and the TTAB agreed with the examining attorney.
The threshold question is whether an oil dispenser should be classified as drug paraphernalia. Drug paraphernalia is defined as “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under [the CSA].”
Here, to support its conclusion that the oil dispenser squarely fell within the definition of “drug paraphernalia,” the TTAB cited several extrinsic pieces of evidence, including a press release by NCG, which advertised itself as “The Largest Cannabis Company in the US” as well as advertising and news articles linking the oil dispenser device at issue to dabbing cannabis.
Having been deemed “drug paraphernalia,” the TTAB analyzed whether the device fell under any exemptions under the CSA. The TTAB specifically examined Section 863(f)(1) (which exempts “any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items “); and 863(f)(2) (which exempts “any item that, in the normal lawful course of business is imported, exported, transported, or sold through the mail or by any other means, and traditionally intended for use with tobacco products, including any pipe, paper, or accessory “).
The TTAB rejected NCG’s argument that Section 863(f)(1) applies and that it was authorized under Colorado state law to manufacture this product. The Board concluded that even if such state authorization was in place (and it did not even examine whether indeed NCG was appropriately authorized at the state level), it does not extend beyond Colorado’s borders, and therefore would not render the device eligible for federal trademark protection under this exemption. The TTAB reasoned that since a federal registration would give the applicant presumptive exclusive rights to nationwide use of its mark in association with the identified goods under Section 7(b) of the Trademark Act, 15 U.S.C. § 1057(b), it would basically circumvent the ban of drug paraphernalia on those States that did not legalize cannabis.
Notably, the Board’s opinion does not address the fact that allowing federal registration of a trademark is not the equivalent of granting a license to manufacture/sell/offer such a product in jurisdictions where it is illegal. The basic function of a trademark is to prevent business operators from using identical or confusingly similar trademarks to distinguish related products or services and to safeguard consumers by allowing them to make informed choices as to the quality of the products or services chosen. Denying federal trademark protection means depriving licensed and reputed business operators of effective trademark protection.
With respect to Section 863(f)(2), NCG argued that the oil dispenser is and can be used for tobacco oil consumption, particularly in the medical context. The TTAB, however, rejected this point and concluded that the product does not meet the requirements for the second exemption, which applies to items traditionally intended for use with tobacco products. In reaching this conclusion, the Board again focused on extrinsic evidence, including (1) seven articles explaining the “dabbing” process as a means or method of inhaling superheated cannabis concentrates to produce a quicker “high” and (2) content from various websites (both the applicant’s own sites and third-party sites) that heavily promote NCG’s essential oil dispenser as a “dabbing” tool.
While the conclusions of the Board as to the applicability of the exemptions to the CSA are not particularly surprising, the same cannot be said regarding the cursory analysis of whether the product should be considered drug paraphernalia under the CSA. The TTAB opens the door to broad usage of extrinsic evidence to establish a “drug paraphernalia” designation while skirting NCG’s arguments that “the Office has previously registered many marks for goods that are traditionally intended for use with tobacco products that may also be used with cannabis products ,” and that “it is not the practice of the Office to inquire as to the legal use of goods that are empty containers sold for use by others ” by stating that “[m]ost of the registrations are distinguishable from Applicant’s goods because they specifically identify tobacco, traditional tobacco products (tobacco jars, tobacco grinders, rolling paper) or e-cigarettes, none of which are unlawful under the CSA or require additional inquiry. ”
By this logic, listing tobacco jars, tobacco grinders, rolling paper, and other smokers’ articles of class 34 (which in the majority of cases have a natural and immediate application to marijuana products) in a trademark application, means the registrant would enjoy a kind of “safe harbor” that would shield it from further inquiries as to the real core of its business. The same protection would seemingly not occur for legal and completely unrelated products, which are subject to close scrutiny of marketing and promotional materials (including those published by third parties, not in the registrant’s control).
The disparity between state and federal laws continues to create significant challenges for cannabis-related businesses seeking to protect their brands and intellectual property, and the need for an intervention at a federal level to prevent brand dilution and customer confusion is undeniable and more pressing every day.
