Reprinted with permission from The Franchise Lawyer, Winter 2017 (20:1), at 13–14. Copyright © 2017 American Bar Association. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
A franchise system’s ability to protect its trademarks can be critical to the success of that franchise system. The simplest, most powerful way to protect trademarks in the United States is to register them with the United States Patent and Trademark Office. While a number of states—Washington, Colorado, Oregon, and Alaska in the past and California, Maine, Massachusetts and Nevada in November 2016 ballot initiates—have legalized both medical and recreational usage of cannabis, cannabis remains a Schedule I drug under the Controlled Substances Act (“CSA”). And while federal law enforcement officials have generally refrained from prosecution of those in the cannabis industry so long as industry participants strictly comply with state law under the Cole Memo (available here), other federal agencies are not so accommodating, as a recent decision from the Trademark Trial and Appeal Board (“TTAB”) demonstrates.
In an October 27, 2016 opinion, the TTAB refused registration to federal trademark applications for the proposed marks “POWERED BY JUJU” and “JUJU JOINTS” for use in connection with smokeless cannabis vaporizing apparatus and vaporizing cannabis delivery devices, namely oral vaporizers for smoking purposes. In re JJ206, LLC, dba Juju Joints, Serial Nos. 86474701 and 86236122. The basis for the refusal was founded upon the premise that the Applicant, JJ206, LLC, could not lawfully use the marks in commerce as required under the Trademark Act. Since the Applicant’s marks were used (or intended to be used) in connection with goods that are illegal under the CSA, the actual lawful use of the marks in association with the vaporizers was impossible. The TTAB reasoned that the Applicant’s reference to cannabis in its description of goods was a reference to marijuana (as defined under the CSA) and the CSA provides that equipment primary intended to introduce cannabis into the human body is unlawful drug paraphernalia. Therefore, the Applicant’s goods violate federal law and the Applicant would be unable to meet the applicable use threshold required for federal trademark rights.
The Applicant attempted to argue that since it only markets its goods in states that allow for the sale and distribution of marijuana, its current and intended use is lawful use in commerce. The TTAB disagreed and noted that “the fact that the provision of a product or service may be lawful within a state is irrelevant to the questions of federal registration when it is unlawful under federal law.” Id., at 7. The Applicant next attempted to argue that since the Applicant markets its vaporizers in states that comply with the Cole Memo, which sets forth federal enforcement policy guidance in response to the enactment of medical marijuana laws in certain states, that its goods should be considered lawful. Again, the TTAB disagreed and noted that the Cole Memo is intended only as a guide and doesn’t override the CSA. In short, under the TTAB’s ruling, state marijuana laws do not provide support for a federal trademark registration for goods and/or services related to marijuana which may violate the CSA.
Of course, it is likely no coincidence that the TTAB issued this decision just weeks before California, Maine, Massachusetts, and Nevada voted on whether to join four others in legalizing cannabis for both medicinal and recreational use under state law. With both recreational and medicinal cannabis usage now legal in eight states and some form of legalization in place in more than half the states and the District of Columbia, it will be interesting to see where continued state legalization efforts impact the TTAB’s rationale or a federal court’s decision as to whether lawful use in commerce can be achieved in light of state-sanctioned cannabis businesses.
For now at least, it appears that there will be no federal trademark registrations for products or services associated with state-sanctioned businesses if those products or services may violate the CSA. Although the lack of a federally registered trademark is not an absolute impediment to franchising businesses nationally, the lack of federal trademark protection is likely to inhibit large-scale, national franchising of cannabis brands for the foreseeable future. Franchisors interested in pursuing franchising in states permitting it may still want to consider seeking state trademark registrations in “cannabis friendly” states in order to preserve trademark rights in those jurisdictions. And, common law trademark rights may exist, although the protection is far less extensive than that offered by federal law. Of course, time will tell if the TTAB (and courts, when they reach this issue) will continue to maintain this position or if the growing tide of public opinion in favor of legalized marijuana for recreational use will impact this issue. Stay tuned.