Authored by Paula Jill Krasny
This article was originally published in Marijuana Venture, a business magazine for the legal cannabis industry.
Brands are often a company’s most valuable asset and will be key to the developing cannabis industry. For example, in 2018, Interbrand, a global branding consulting firm, valued the Coca-Cola brand at $66.3 billion and the Budweiser brand at $15.6 billion. As the cannabis industry grows, brands will also become household names and valuable corporate assets. Over time, lifestyle brands will start to emerge.
Federal trademark registrations are powerful and invaluable tools for trademark enforcement, brand-building and revenue generation through licensing programs. They give their owners the important legal presumption of the nationwide right to use the mark for the goods and services listed in the registration certificate. However, because most cannabis is still a Schedule I substance under the Controlled Substances Act, and the Food and Drug Administration has not approved hemp products for human and animal consumption, the U.S. Patent and Trademark Office (USPTO) will not issue registrations for most cannabis products.
Nonetheless, there are three important steps cannabis companies can take now to build their brand portfolios.
Brands and the mental associations and meanings tied to them are what distinguishes one product from another. Products — whether a bottle of water or CBD oil — are commodities. It is the brand that differentiates products in a consumer’s mind. For example, San Pellegrino, Dasani and Kirkland are three water brands. Each is positioned differently in the marketplace, evoking different images, connotations and values in consumers’ minds. Each brand also commands a different price. As the cannabis industry grows, its brands will communicate messages and stories to the consumer about values, uses, pricing and more.
The strongest and most valuable brands tend to be distinctive terms, rather than names that describe products. For example, Apple is a strong mark because it does not describe computers. Tech Machine would be a weak computer brand because it describes the product.
As of today, there are nearly 40 pending federal trademark applications and registrations for cannabis-related products and services that contain “KUSH” and 35 that contain “420.” The number of marks increases once state trademark filings are counted. Even though it may seem counterintuitive, it is easier to build a strong brand that has the potential to develop into a valuable corporate asset, like Coca-Cola or Budweiser, by steering clear of terms and symbols (like green marijuana leaves) commonly used in the cannabis industry and/or that describe the product.
Before adopting a brand, conduct a full trademark search that will disclose federal and state trademark applications and registrations, company names and other unregistered uses. All of these uses need to be evaluated, particularly because in the U.S., trademark rights are created through actual use of the mark. This means that a person who is selling branded CBD-infused creams out of her home or online, but never filed a federal or state trademark application, is still building up trademark rights in her brand.
A comprehensive search report will reveal potential unregistered trademarks through corporate names, websites, Twitter feeds, Facebook pages, Instagram posts and so on. Corsearch, a trademark search company, offers a specialized cannabis trademark search that also includes data from industry publications, websites and databases not used in traditional trademark searches (for more information, see www.corsearch.com/features/speciality-searches/).
While conducting a full trademark search and obtaining legal clearance requires an upfront investment, it typically is far less costly than having to defend a trademark infringement suit and/or rebrand because the adopted mark was not available. The trademark search also will indicate if a proposed mark is weak because it will show if others in the field are using similar marks.
Even though the USPTO will not issue federal trademark registrations for most cannabis products, it will issue registrations for certain ancillary products and hemp-derived products (see the May 2, 2019 USPTO cannabis trademark Examination Guide). The USPTO will continue to update its policies for the registration of cannabis marks as federal laws develop.
In the meantime, start registering marks in the states where you do business that allow for the registration of cannabis marks. State trademark filings will appear in trademark searches and put third parties on notice that you are claiming trademark rights in your brands. You also can apply to register marks for ancillary products and certain hemp products. Consider working with a trademark lawyer, so you can start developing your trademark portfolio to strategically lay a foundation for building strong, valuable brands.
Paula Jill Krasny is a partner in the Intellectual Property Group at Levenfeld Pearlstein, LLC in Chicago. She devises and implements strategic, practical and cost-effective solutions for businesses seeking to build, monetize, protect and increase the equity in their brands and other intellectual property assets. She can be reached at firstname.lastname@example.org. This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.
This article was also published in Marijuana Venture, a business magazine for the legal cannabis industry.