Trademarks and CBD: How Can Nutraceutical Companies Protect Trademarks Used on Products Containing CBD?
Discussion of the current policy of the U.S. Patent and Trademark Office, recent legal decisions and strategies for obtaining protection for marks used in connection with products containing CBD.
The legalization of hemp-based cannabis products by the United States Congress in 2018 was a major step forward in the development of the cannabis industry. Unfortunately, it remains extremely difficult for nutraceutical companies to federally register trademarks for goods that contain hemp-derived CBD. This is a problem because trademark rights can be critical for businesses to function in the marketplace, particularly in the increasing market for hemp-derived CBD products. By some estimates, this market is expected to reach $47 billion globally by 2028.1
Trademarks identify a company and its goods and distinguish them from those of others. As customers begin to associate the trademarks with the company’s products, the marks become valuable assets that can generate a tremendous amount of goodwill for a company. The value of the goodwill generated by famous brands can often exceed the value of a company’s hard assets.
Companies begin to develop protectible “common law” rights in their trademarks as soon as they start using them in connection with goods. There are significant advantages, however, to obtaining federal and state registrations for trademarks. State registration gives the registrant trademark rights within that state, and federal registration provides the registrant trademark rights throughout the United States. Trademark registrations are tangible assets of the company, making it more valuable and attractive to investors.
Federal registrations also confer several important benefits, including providing prima facia evidence that the company owns a valid trademark, and establishing nationwide priority over other companies that adopt confusingly similar marks. This priority usually stems from the filing date of the application but is contingent upon the issuance of the trademark registration. Registration will not occur until 1) the application has been examined and approved by the U.S. Patent and Trademark Office (PTO), and 2) the company has used its mark in legal commerce on the goods in the application.
The requirement that a trademark be used in “legal” commerce has posed the most significant hurdle faced by nutraceutical companies attempting to obtain federal registrations for marks used on products containing hemp-derived CBD. There is ongoing debate as to what constitutes legal commerce in connection with such products, and the PTO has demonstrated extreme reluctance to issue registrations for trademarks used on these goods.
Federal Registrations for CBD Products—The Backdrop
Prior to the passage of the federal Farm Bill in 2018, it was clear that all cannabis-related products were categorically prohibited under federal law. Because it was not possible to legally sell those products in U.S. commerce, it was not possible to obtain a federal registration for the trademarks used in connection with them. This was true even though several states had legalized some types of cannabis usage, either for medical use alone or for both medical and recreational use.
The 2018 Farm Bill removed hemp-derived CBD products from being classified as a Schedule I controlled substance under the Controlled Substances Act (CSA). One might assume that this declassification meant that it is now fully legal to sell these products, and that it is now also possible to federally register trademarks used in connection with these products. In practice, however, the PTO routinely refuses to register these marks.
After the passage of the Farm Bill, the PTO issued Examination Guide 1-19 to clarify the procedure for examining marks for cannabis and cannabis-derived goods, such as hemp-derived CBD and related services. These guidelines contemplated that trademark applicants could obtain registrations for hemp-based CBD products so long as the description of the product specified that they contain “CBD solely derived from hemp with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis.”
More importantly, though, the guidelines stated that these applications would still be denied registration if the goods could not be sold lawfully pursuant to any other law or regulation, including the Federal Food Drug and Cosmetic Act (FDCA) administered by the U.S. Food and Drug Administration (FDA) and the CSA. In the same paragraph, the guidelines state that the PTO will refuse registration of marks for foods, beverages, dietary supplements or pet treats containing CBD, because CBD is an active ingredient in FDA-approved drugs which are still undergoing clinical investigations. From the outset, it was clear that the PTO did not intend to register trademarks for consumables containing CBD, even if they contained less than 0.3 percent delta-9 THC. This policy is currently being challenged in the courts.
Consumable CBD Products
The ability of nutraceutical companies to obtain federal registrations for consumable hemp-derived CBD products may be determined by a case presently pending before a federal appellate court. In In re: Joy Tea, Inc., a California company named Joy Tea is appealing the PTO’s refusal to allow Joy Tea’s application for the mark FOR JOY in connection with CBD tea that contains less than .3 percent delta-9 THC. The PTO’s position is that the sale of such tea is in violation of the FDCA, and is unlawful because the FDA has not regulated CBD consumable products. Joy Tea has argued that its application should be treated the same as applications filed by big pharma for drugs that are still undergoing the regulatory approval process. The owners of both CBD consumables and pharmaceutical drugs have a bona fide intent to use their marks, and both have a reasonable expectation that their not-yet-legal products will result in FDA approval at some point in the future. Despite this, the PTO routinely approves pharmaceutical trademark applications, while simultaneously refusing applications filed for CBD consumables. Joy Tea argues that the different treatment of the applications by the PTO is unfair, and that Joy Tea’s application should be approved.
The case is being followed with great interest, and cannabis and CBD industry organizations have filed an amicus brief in support of Joy Tea’s position.
Topical CBD Products
Companies selling consumable CBD products have known from the outset that the PTO had erected serious obstacles to obtaining federal registrations for their marks. They hoped, however, that the PTO would adopt less stringent examination hurdles for topical CBD products. This has not proven to be the case.
When examining applications for topical products that contain CBD, the PTO will refuse registration if the examiner determines that the goods described in the application could have any therapeutic or medical use, or if the examiner learns that the company is advertising any therapeutic or medical use of the product. Under the FDCA, all such products are classified as “drugs,” and must be approved by the FDA before they may be lawfully sold in commerce. The PTO examiner will look at the materials submitted by the applicant to demonstrate that it is using the mark in commerce. The examiner may also do independent research and review the applicant’s website and social media sites to see if it is making claims about the therapeutic or medical benefits of using its products.
The advertising for many nutraceutical products that contain CBD often includes words like “relief,” “aromatherapy,” “anti-inflammatory,” “therapeutic” and “pain relief.” All of these have been interpreted by the PTO as referring to therapeutic or medical benefits, and therefore refer to drugs within the meaning of the FDA. Under current PTO guidelines, topical CBD products that are advertised as possessing these beneficial effects cannot be used in lawful commerce until they have been approval by the FDA. Until that happens, the PTO will refuse to register trademarks used in connection with products utilizing such advertising.
CBD Trademark Protection Strategies
As discussed above, it remains difficult for nutraceutical companies to obtain federal registrations for consumable and topical products containing CBD. As of the date of this article, there are approximately 3,500 pending federal trademark applications for marks used on goods that contain “no more than 0.3 percent tetrahydrocannabinol.” There are almost 2,000 abandoned applications for these products. Approximately 1,400 registrations have issued for trademarks used in connection with CBD products or related services.
The ability to obtain federal registrations for consumable CBD products may depend on the decision issued in the Joy Tea case. If Joy Tea is successful in overcoming the PTO’s refusal to register its mark in connection with consumable CBD products, it may open the gate for other companies to also obtain registrations for their marks. Even if that happens, though, we can expect that the examination of these applications will be as rigorous as it is for applications for other CBD products.
Federal registration for topical CBD products and related non-consumable goods and services may be possible if companies work closely with their trademark attorney to develop marks and advertising that do not suggest there is a therapeutic or medical benefit to their goods or services, or otherwise run afoul of federal or state statutes, regulations and guidelines. They will also need to work with their attorney to describe the goods and services in the application to minimize the risk that they will be rejected as having therapeutic or medical benefits.
Many nutraceutical companies may also be able to obtain state registrations for their marks in those states that have legalized some or all cannabis and hemp-derived CBD products. The laws vary widely from state to state, and companies will also need to consult with their trademark attorney to determine where registration might be possible. In addition, the company will need to be selling products or services in that state before it files an application to register its trademarks there.
Even without a trademark registration, however, a company has traditionally been able to rely on its common law rights to stop others from using trademarks that are confusingly similar to its trademarks. These rights are enforceable only in the geographic area in which a company has been selling its products bearing the mark.
A 2019 decision in the Northern District of California, however, called into doubt if companies selling cannabis products can rely on their common law rights. In Kiva Health Brands, KBI, a California company, was engaged in a cannabis business that was legal in the state of California. KBI was sued for trademark infringement by another company that owned a federal registration for the same mark. KBI filed a petition to cancel the federal registration and a motion to dismiss the lawsuit, on the ground that KBI was the senior user of the mark in the state of California. The District Court held that KBI was not able to assert its California common law rights as a defense to federal trademark claim. The court reasoned that KBI’s use of the mark was illegal under federal law, and that it therefore could not assert such use as a defense to the infringement claim or a basis for cancelling the federal registration owned by the other party.
In the Kiva decision, the Court noted that it could not find any relevant precedent for navigating the interplay of state and federal cannabis laws. It is very possible that other courts could come to different result, and that companies selling CBD products would be able to enforce their trademarks using common law rights. For example, the Ninth Circuit Court of Appeals held that a California e-cigarette company, AK Futures, could assert trademark claims against an alleged counterfeiter even though the smoking products at issue contained delta-8 THC, which is a psychoactive substance that can also make users feel “high,” because such products technically comply with the requirements of the Farm Bill (i.e., the products do not contain more than .3 percent delta-9 THC).
Nutraceutical companies may also want to consider protecting their logos, design marks and packaging through copyright registration. Copyrights protect artistic or visually creative content. In some instances, a logo may qualify for both copyright protection because of its visual creativity, and for trademark protection because it functions as a source identifier. Unlike the PTO, the Copyright Office will issue registrations without requiring that a logo be used in commerce.
Legal counsel can assist nutraceutical companies in determining if it is possible to obtain copyright registrations for various aspects of their business, including logos, artistic packaging, websites and other collateral materials.
Conclusion
Nutraceutical companies selling products that contain CBD must work closely with their legal counsel to develop a strategy to protect their trademarks. There is no “one size fits all” solution, as the protection afforded by federal, state and common law varies widely depending upon the products being sold and the state in which they are being sold. A change in the PTO guidelines that allows federal registration of trademarks used in connection with hemp-derived CBD goods and related services would greatly benefit the nutraceutical industry and consumers generally. Nutraceutical companies could develop strong brands for their products and stop the use of confusingly similar brands by competitors. Consumers would not be confused as to the source of goods in the market and could rely on the quality of the goods sold in connection with the brand.
A nutraceutical company should consider both trademarks and copyrights as it develops its brand protection strategy. Each provide an important and complementary layer of protection. This is especially true in view of the intense challenges that nutraceutical companies face when trying to protect their trademarks on a national level for products containing hemp-derived CBD. NIE
References:
1 www.globenewswire.com/en/news-release/2022/02/08/2380516/0/en/CBD-Cannabidiol-Market-Size-to-Reach-USD-47-22-Billion-by-2028-Increased-Demand-for-CBD-Cannabidiol-for-Health-and-Wellness-Purposes-to-Drive-Market-Vantage-Market-Research.html.
Catherine Holland is a partner of Knobbe Martens. She represents a diverse clientele in all aspects of intellectual property acquisition, protection and enforcement across the U.S. and abroad. Hollands’s experience spans the full range of trademark protection and enforcement in many fields, including nutritional supplements, aesthetic and medical laser therapies, skin care products, educational publishing, biomedical devices and software. Contact: catherine.holland@knobbe.com.
