While the cannabis industry continues to open up in many U.S. states, it faces a unique and significant legal obstacle: the lack of federal trademark protection. Due to the federal illegality of cannabis, businesses operating within this industry are left vulnerable to brand imitation and product counterfeiting.
Budder had the privilege of working with Ethos on their Headliners brand earlier this year which has quickly became the top selling preroll brand in their dispensaries. With that success has come the challenge of having to fight against an invisible enemy as copycat packaging has proliferated the market. It was even recently featured on this segment "Mass Cannabis companies fighting for trademark protections" on NBC Boston. The primary challenge here is the lack of federal trademark protection for cannabis brands. Trademark laws in the United States are mainly governed at the federal level by the U.S. Patent and Trademark Office (USPTO).
Since cannabis remains classified as a Schedule I substance under the Controlled Substances Act, the USPTO generally refuses to register trademarks for cannabis products. This becomes a loophole for counterfeiters, leaving cannabis businesses vulnerable to intellectual property theft and diluties brand equity. Furthermore, the lack of trademark protection exacerbates the proliferation of counterfeit cannabis products, often of questionable quality and safety.
The Problem is Wide Spread.
Another budder client, Loudpack, has had similar issues for years in CA where IP infringement has been even more prevalent, as expected in more mature markets. One of their most popular brands, Kingpen has been plagued by counterfeit product for years. Convincing copycat packaging seen below (on the right) is sold primarily on the black market. This not only harms the brand's reputation but also poses potential health risks to consumers due to unregulated production standards.
What Can Cannabis Brands Do?
To navigate these murky waters, many cannabis businesses are turning to state-level trademark registrations. While this approach does offer some protection, it is not only costly but it's limited to the borders of the state in which the brand is registered. As more states come online markets are becoming increasingly interconnected, this local protection is simply inadequate. While the cannabis industry's trademark issues may seem daunting, they are far from insurmountable. As the sector matures and lawmakers reconsider federal cannabis policy, it's likely we will see more robust legal mechanisms put in place to protect cannabis brands.
Another mechanism for protection is thru service marks. Much like product trademarks, service trademarks are a form of protection offered by the U.S. Patent and Trademark Office (USPTO), but they are specifically for brands that are associated with services instead of goods or products. The process to obtain a service mark involves submitting an application to the USPTO and providing proof that the mark is being used to identify and distinguish the services. Once approved, the service mark offers federal protection against competitors using a similar name for their services. However, to maintain this protection, the service mark must be actively used in commerce and periodically renewed with the USPTO.
Other measures brands can take is to try to make packaging more challenging to replicate with the use of customized & unique seals, foils, embossing, etc. or creating more dynamic displays can deter would be counterfeiters that may not be willing to invest to convincingly replicate.
In the meantime, it's crucial for companies to explore all possible avenues of protection, including trademark registration at the state level, vigilant enforcement of their rights, and public education campaigns to help consumers identify and avoid counterfeit products. In the end, cannabis brands must not only stay ahead in their market but also lead the charge in advocating for fair legal protections. The journey is challenging, but the rewards – safer products, secure brand value, and a more mature industry – are well worth the effort.