They say one Bad Apple can spoil the bunch. But what can a Happy Apple do? It depends on which one you buy, but you’ll want to make sure you’ve got the right Happy Apple.

One Happy Apples brand involves fresh apples, apple cider, and caramel apples.  The other Happy Apple is a cannabis infused drink. Sure, the names are nearly identical, but does the candy apple company have a viable trademark infringement claim against the cannabis drink company? A recent ruling from the Western District of Washington involving this dispute suggests that brand owners may have an uphill battle enforcing their rights against the expanding cannabis industry.

For your consideration, a sample of the companies’ respective products is shown below.

         

The Happy Apple Company sued Tarukino, LLC (the producer of cannabis beverage) and requested a preliminary injunction. Notwithstanding the fact that both companies were using the nearly identical HAPPY APPLE wording, the court denied the request in an order issued January 9, 2019. In denying the request, the court’s reasoning, if adopted by other courts, could make it more difficult for brand owners to enforce their trademarks against cannabis products.

The court acknowledged that “both products are apple-related but the similarities end there.” When evaluating a claim of infringement, courts rely on a number of factors to determine whether there is a likelihood of confusion. In Washington (part of the Ninth Circuit), the courts follow the Sleekcraft factors.

As part of the analysis, courts look at how similar the marks are as they appear in the marketplace. This means even though the parties use HAPPY APPLES and HAPPY APPLE, the court looks at all of the packaging, including the font used, design elements, presence of house marks or company names, and other information. These facts seemed significant to the decision, as the judge concluded:

While they both contain the words “happy apple” they look markedly different. The mark used by Plaintiffs uses a different font and includes a cartoon of a caramel apple. The product sold by Defendants includes a picture containing two arrows, an apple, and the words “cannabis infused”, similar to a coat of arms.

Notably, the court appears to have only focused on the packaging for the caramel apple. Neither the cider nor the fresh apples include a carton of a candy apple. If I’m being honest though, the cartoon apple on the packaging looks like it may have had a bottle or two of the other Happy Apple.

The court also relied heavily on the significant regulation of cannabis products under Washington state law, reasoning:

cannabis-containing beverages can only be distributed and sold by retail stores licensed and regulated by the Washington State Liquor and Cannabis Board. These retail stores may only sell marijuana, marijuana concentrates, marijuana-infused products, and marijuana paraphernalia. Defendants’ products and Plaintiffs’ products are not likely to be sold in close proximity to each other, and it is unlikely that a purchaser would mistakenly enter a retail store selling marijuana or marijuana-related products and confuse a cannabis-containing apple beverage with the fresh apples, apple cider, or caramel apples sold by Plaintiffs.

At first glance, it seems that the court may be unfairly narrowing the likelihood of confusion as to whether a consumer might confuse the two products. While such a purchase would certainly qualify as consumer confusion, it is not the only type of consumer confusion. Consumer confusion can also occur if a consumer mistakenly believes that there is some type of connection, sponsorship, or other relationship between the Happy Apple cannabis product and the owner of the HAPPY APPLES brand. For example, whether a consumer might mistakenly believe the apples used to make the cannabis beverage were HAPPY APPLES brand apples.

Perhaps the court concluded the highly regulated nature of the industry and the distinctly different channels of trade were simply enough to avoid a likelihood of confusion, especially when comparing how the marks appear in the marketplace.

However, if the highly regulated nature of cannabis products truly carried the day for the defendant, it does not bode well for other trademark owners. All states that have legalized cannabis in any form have maintained strict regulation on how and where such products can be sold. If other courts adopt this court’s analysis, cannabis company defendants arguably begin any trademark infringement lawsuit with a loaded deck.

Of course, this is only a ruling on a preliminary injunction request, not a ruling of non-infringement. It is also possible the court relied on a number of other factors that simply were not referenced in the order. The HAPPY APPLE mark is not necessarily a strong mark, and certainly not well-known like HERSHEY’S or REESE’S. The term APPLE is either generic or descriptive, depending on the context, and HAPPY may not be entitled to a broad scope of protection.

As the cannabis industry continues to grow, there will undoubtedly be many more lawsuits. This is just one of many data points non-cannabis companies must use to determine where to set their trademark enforcement goal posts, and a data point for cannabis companies to use when evaluating new names and trademarks.

— Jessica Gutierrez Alm, Attorney

Marijuana Leaf

While the Lanham Act bars the federal registration of trademarks related to illegal goods and services, there is no such prohibition against patenting illegal products or processes. However, the value of such patents is debatable.

State Legalization Leads to Increased Patent Applications

Marijuana is now legal, in some form, in 25 states. But under federal law, cannabis remains classified as a “Schedule I” narcotic. In recent years, the USPTO saw an influx of patent applications for marijuana-related inventions. Last year, the first U.S. patent directed to a cannabis plant was allowed. Even the United States Government holds a patent on a medical use for marijuana.

Enforceability Problems

A patent allows the patent holder to exclude others from making, using, selling, offering to sell, or importing the patented invention. This allows the patent holder to obtain licensing or assignment fees from others who make, use, sell, offer to sell, or import the invention. However, if such activities are illegal, the patent’s worth is questionable at best. There is no value in a right to exclude others from performing an act if the performance of that act is already against the law.

Of course, in the case of marijuana, there is no shortage of individuals and businesses willing to disregard the federal law. But it is unclear whether a patent holder could enforce a marijuana-related patent. That is, would a federal court be willing evaluate whether otherwise federally criminal acts constitute patent infringement?

It is equally unclear whether an assignment or license of a marijuana-related patent would be enforceable. Patent assignments and licenses are contracts, and it is a general tenet of contract law that a contract directed toward an illegal purpose is unenforceable.

Hidden Value

While a patent on an illegal product or process may not be valuable in a traditional sense, it may provide an advantage for some inventors. For example, despite questionable enforceability, the patent may provide a deterrent against infringement by competitors. Moreover, if there is a change in federal marijuana laws, those early patent holders will surely have an advantage in the market.

A couple of weeks back, I captured this image from a t-shirt for sale in Starbucks’ backyard — at a shop in the Pike Place Market area of Seattle:

StarbucksCannabisOne of the things it brought to mind for me is the dozen year long trademark dilution case that Starbucks lost, over and over, a few years back, against a New Hampshire coffee roaster, who lawfully continues to sell its Charbucks coffee blend of beans.

It also brings to mind the difficulty of predicting the outcome of a trademark parody defense, especially since the case Tim wrote about earlier this year, highlighting Louis Vuitton’s inability to prevail in the recent My Other Bag case.

Last, at least for now, it also brings to mind the moving target of the legality of marijuana, at least at the state level, especially recognizing that Starbucks’ backyard happens to be a safe haven for doobie lovers.

Back in the day, associating the visual identity of a famous brand owner with an illegal product, was quite helpful in proving up tarnishment type damage, remember the Enjoy Cocaine posters?

Yet, with the ever-changing environment of what is legal and where, at what point will the tarnishment argument become tainted, especially with the apparent growth of First Amendment defense successes in trademark cases?

In the end, given the utter prevalence of Coca-Cola script inspired Enjoy Cocaine t-shirts available for sale online (a substance legal in no state), is the most logical explanation for a famous brand owner’s apparent tolerance best explained by the Wack-a-Mole pest and problem?

Those involved in the cannabis industry — where certain activities are legal in some States, but unlawful under federal law — continue to search for creative strategies and solutions in protecting their trademarks and service marks.

Picking up where Tim left off last Friday, I’ve been giving some thought as to how the Herbal Access business in Washington State might have been able to overcome the “unlawful use” registration refusal recently affirmed by the TTAB.

As you will recall, the mark HERBAL ACCESS was refused registration in connection with “retail store services featuring herbs” because the evidence of record tended to show some of the “herbs” sold included “marijuana”:

“Because the evidence that Applicant’s mark is being used in connection with sales of a specific substance (marijuana) that falls within both the services identification and the prohibitions of the [Federal Controlled Substances Act] is unrebutted, we find that Applicant’s retail store services include sales of a good that is illegal under federal law, and therefore encompasses a use that is unlawful.”

To the extent the In re Morgan Brown decision is appealed, and assuming the TTAB’s ruling withstands scrutiny, what if the Applicant had specifically excluded from the identification of services, the “unlawful” portion of the services being offered, i.e., the sale of marijuana?

In particular, what if the description of services was amended, limited and narrowed to the following with an express exclusion built into the ID: “Retail store services featuring herbs, excluding marijuana”?

It’s hard to argue that the retail store services featuring non-marijuana herbs — provided lawfully under the HERBAL ACCESS mark — could fairly be denied registration, as the applied-for mark and description of services no longer encompass or include unlawful activities.

Obtaining this narrower registration would be better than none, and it might provide some halo effect over activities that might not always be unlawful under federal law.

Better yet, what about these possible descriptions?: “Retail store services featuring herbs, excluding any in violation of federal law” or “Retail store services featuring herbs, excluding any unlawful herbs.”

What I like about these options over specifically excluding “marijuana” from the description is allowing the scope of the ID to flex if federal law changes in the future.

What do you think, how would you attempt to overcome and/or moot the “unlawful use” refusal for cannabis related activities?

Medical marijuana is currently legal in 25 states, including four states that have also legalized recreational use (Alaska, Colorado, Oregon, and Washington). On Nov. 8, California voters will have a chance to make their state the next to legalize recreational use. As a dollar amount, Forbes estimated that Colorado’s marijuana industry was worth $1 billion. In light of these statistics, it is odd that marijuana is still considered a controlled substance and illegal under federal law. However, the Trademark Trial and Appeal Board issued a decision yesterday that reminds us of the odd conundrum that marijuana-related business owners find themselves.

The Lanham Act has long prohibited the registrations of trademarks in connection with illegal goods or services. The Lanham Act requires that that an applicant make “use in commerce” of the trademark in order to be eligible to receive a trademark registration. The Board and courts have interpreted the language to require “lawful use in commerce.” Consequently, if the use of a mark violates the law, the Trademark Office will likely refuse registration of the mark.

The applicant in the Board’s recent decision operates a retail marijuana store called “Herbal Access” in Washington State. As evidence of use, the applicant submitted a screenshot of its website and of its Facebook page, which included an image of the store. The application did not include a reference to marijuana, but instead identified the services as “retail services featuring herbs.” The Examining Attorney refused registration of the mark, concluding that the applicant was using the mark in connection with unlawful activity. The Examining Attorney reasoned that the term “herbs” was broad enough to include marijuana and, in any event, the applicant’s specimen and website confirmed that the applicant did in fact sell marijuana. The applicant appealed to the Board.

The Board affirmed the Examining Attorney’s decision to refuse registration (decision available here). While the “unlawful use” doctrine is not a new phenomenon, the Board addressed in some detail the applicant’s attempt to tiptoe around the use of the marijuana in the identification of services description. The Board first noted that it agreed with the Examining Attorney that “herbs” was broad enough to include marijuana, so the attempt to carve out illegal services failed.

However, the Board’s analysis is equivocal as to what would happen if the identification of services undeniably excluded illegal activities. The Board reaffirmed the principle that it must focus on the goods or services as identified in the application. However, the Board also reasoned that the Board should consider the services or goods that the applicant is actually selling. Yet the reference to this evidence is in the context of assisting the Trademark Office “to ascertain that the word ‘herbs’ in the description of services encompasses marijuana.”

Even if a federal registration is out of reach for marijuana business owners, there are alternatives. Each individual state has its own process for registering trademarks, usually modeled after federal law. Until Congress attempts to clarify the conflicting laws regarding the use of marijuana on a national level, the door to the U.S. Patent and Trademark Office will likely remain shut for marijuana activities.

 

Laurel Sutton, Principal at Catchword Brand Name Development

Colorado is becoming known for being an altered state, and we don’t mean the elevation. No doubt you’ve heard about the craft brewing boom, but these days, it’s all gone to pot. Colorado recently became the first state in the U.S. to finalize regulations for recreational marijuana businesses, effective starting January 2014. It was also one of the first two states (the other was Washington) to legalize recreational marijuana use for adults.

As you can imagine, this deregulation has led to a weeding frenzy, one so strong that the swell in cannabis commerce has been called the “Green Rush.” 204 medical marijuana dispensaries operate in Denver, with many more waiting to light up. That’s more than the number of Starbucks and McDonald’s in Denver combined (but we’re anticipating that these will expand with enhanced appetites).

Weed does breed greed, with many wanting to hash in on this $2-billion market. The branding extravaganja began on a national level when the U.S. Patent and Trademark Office (USPTO) announced a new category within class 5, where pharmaceuticals are registered, back in April 2010. The news goods and services description read, “processed plant matter for medicinal purposes, namely medical marijuana.”

Of course, marks have been registered for pot-related goods and services before, but the new category opened up the trademark torrent. Currently, there are 587 trademarks, in all classes and for all kinds of goods and services, containing the word “marijuana”—not to mention all the possible marks using slang terms for the plant. A few of our personal favorites include Cannabis Couples.Com Find Your Bowl Mate (for when you wanna hook up but don’t want to get off the couch), The Giving Tree of Denver (a dispensary), and Just Say Now (for public advocacy to promote awareness of marijuana legalization).

Traditionally, medical marijuana branding, if existing at all, has been wacky and irreverent. One of Denver’s dispensaries named a strain after Peyton Manning, aimed at treating among other things, muscular sclerosis, headaches, anxiety, and nausea (Peyton is not pleased, by the way). Other strange names of strains include Bubblegum Swamp Kush, Granberry Skunkhound, Pineapple Rhino, Bubonic Chronic, and Plunkbottom Diesel. Clearly, these people are taking this too seriously.

But times are a-changing, and marijuana is budding beyond the pungent underground and reaching for legit light. Those who want to help pot go pro see a real opportunity for savvy, sophisticated branding. The stereotype of the dreadlocked, heavy-lidded stoner kid is going up in smoke. Today’s pot-partaker is likely to come from a wide range of demographics. They might wear cufflinks or handcuffs, but one thing unites them: the might of Mary Jane.

(Sidenote: The boom in the pot market has paved the way for “related” products. Just last month, Jack in the Box announced Jack’s Munchie Meals, available only between 9 pm and 5 am. Each combo features a burger or chicken nuggets, two tacos, seasoned curly fries, and a 20-oz. beverage. That’s enough comfort food to satisfy any toker, especially if eaten slowly over a 3-4 hour period while watching cartoons on TV in the dark with friends.)

Some people are clearly catching on, as evidenced by the gentrification of the medicinal marijuana industry. Instead of blacklit, Marley-lined head shops, the new dispensaries seem more like medi-spas. Gaudy bongs and beads have been replaced with kushy furniture; muted, discreet glass exteriors; and a focus on “health and wellness.” Just take a look at some of Denver’s dispensary names: “The Green Solution,” “Sweet Leaf,” “Lightshade Labs,” “Botanacare,” “Artisanal Medicinals” and “Karmaceuticals.”

Apparently, grass has class now. Another high-end Denver-based company, Dixie Elixirs, makes heady edibles like chocolate truffles and cookies and THC-infused drinks that come in ten different flavors, including “Old-Fashioned Sarsaparilla” and “Sparkling Red Currant.” Wait….is this still pot we’re talking about?

But the boutique nicheness of the industry may be threatened, as Big Brand Marijuana has arrived or at least announced its ambitions. Ex-Microsoft executive Jamen Shively very publicly vowed to raise $10M to build his company, Diego Pellicer, into the premier national and eventually international pot brand. He planned to start with the acquisition of a Colorado dispensary with multiple locations, but hit a few bumps with inevitable government scrutiny. Another aspiring ganjapreneur, Brian Laoruangroch, heads Prohibition Brands, and says he has the intellectual property to produce a mass-produced filtered marijuana cigarette, or “marijuanettes.” (Cute, but hard to pronounce. Maybe there’s an opportunity for a naming company here.)

Of course, none of these spliffy schemes have come to fruition yet, so only time will tell if these sessions blaze or are half-baked.