As usual, we’ve been monitoring both brewing and active trademark disputes in the cannabis space, and the most recent example involves the institution that is the Girl Scouts. For background, here are some of the other disputes we’ve covered in the past:

• Kiva Lawsuit Highlights the Cannabis Industry’s Ongoing Trademark Troubles
• Cannabis Trademark Litigation: Web Platform Liability (Mr. T v. Leafly)
• Cannabis Trademark Litigation: Woodstock Case Shows Limits of Federal Trademark Protection
• New Trademark Litigation Against “Stoney Patch” Cannabis Products Calls Out an Industry Trend of Copycats
• UPS Sues Multiple Cannabis Delivery Companies for Trademark Infringement
• The “Tiger Hemp Beer” Case: Clear Your Cannabis Trademarks Before Filing
• Yet ANOTHER Cannabis Trademark Infringement Case: Tapatio Foods Files Suit
• What NOT to do with your Cannabis Brand: The Gorilla Glue Trademark Infringement Dispute

According to a recent article in Forbes, California cannabis-edibles company Kaneh Co. was promoting its cannabis-infused cookies as similar to several of the Girl Scouts’ cookie brands. According to the article, Kaneh was comparing its “Toasted Coconut Caramels (‘flecked with vanilla and sea salt’) to the Scouts’ Samoas; its Lemon Sugar Cookies to the Scouts’ Lemonades; and its Salted Toffee Blondies (‘a brown sugar blondie swirled with toffee chips and a generous dose of sea salt’) to the Scouts’ Toffee-tastic cookies.” All of these descriptions were included in an emailed advertisement for Kaneh’s goods, and a representative from Kaneh stated that the Girl Scouts comparison would not appear in any print or online advertisements.

The Girl Scouts, however, were not amused by Kaneh’s likening of its products to the Girls Scouts’ cookies, particularly given the connection to cannabis. A statement from the Girl Scouts said, “We consider … such use of our [cookie names] trademarks to be misappropriation, which we take seriously and, when applicable, [we] will send a cease and desist request.”

This is not the first time the Girl Scouts have gone to bat against a cannabis company, previously having clamped down on the use of the strain name “Girl Scout Cookies.” See: How an LA Weed Dispensary Pissed Off the Girl Scouts.

Quite frankly, it’s understandable that a youth organization would object to the use of its intellectual property in conjunction with a Schedule I controlled substance. But what is interesting about the Girl Scouts’ current beef with Kaneh’s use of its intellectual property (IP) is that the Girl Scouts representative didn’t argue that Kaneh was infringing the Girl Scouts’ trademarks (as was the case in the disputes we’ve covered in the past and linked to above). The representative instead asserted that such use of the Girl Scouts’ cookie names was “misappropriation,” and this is an important distinction.

As we’ve covered before, a trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. And trademark infringement is the “unauthorized use of a trademark or service mark on or in connection with goods and/or services in a manner that is likely to cause confusion, deception, or mistake about the source of the goods and/or services.” In the case at hand, the Girl Scouts would be hard pressed to show that Kaneh’s use of the names of its cookies (which are protected by trademark registrations), was likely to cause consumer confusion or mistake about the source of the goods, since Kaneh was only referencing the cookies in a comparative manner, to explain to customers what its cookies tasted like. In fact, this comparative manner of use would make it very clear to customers that Kaneh’s cookies were not Girl Scout cookies.

But are companies allowed to make these kinds of comparative statements? And what is “misappropriation” in the context of trademarks? The theory of misappropriation in a trademark context is tenuous, but there are three basic elements (J. THOMAS MCCARTHY, 2 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 10.72 (4th ed. 2006)):

1. Plaintiff has made a substantial investment of time, effort and money into creating the thing misappropriated such that the court can characterize that “thing” as a kind of property right [the creation element].
2. Defendant had appropriated the “thing” at little or no cost, such that the court can characterize defendant’s action as “reaping where it has not sown” [the appropriation element].
3. Defendant has injured plaintiff by the misappropriation [the injury element].

The idea here would be that Kaneh was free-riding on the goodwill that the Girl Scouts have worked to establish over the years. But there are also “fair use” exceptions to trademark infringement, including for comparative advertising. It is unclear whether such comparative advertising principles would apply in this case, since traditional girl scout cookies fall within a completely different product category from cannabis-infused cookies. Still, this is something that all cannabis business owners should be mindful of. Use of another company’s trademark in comparative advertising may be allowed under certain circumstances, but businesses must be very careful to avoid advertisements that could be deemed false and misleading.

Even if you think that your use of another’s trademark does not constitute trademark infringement, or that your use falls within a fair use exception like comparative advertising, it is important to consider claims that could be made against you like misappropriation, or false and misleading advertising, and it is important to run these types of advertisements by your IP lawyer.

At this point, it probably feels to most people like the federal government is standing down when it comes to state-legal cannabis and cannabis businesses. It started back in 2013 with the Cole Memo when U.S. Deputy Attorney General James M. Cole opined in a memorandum that U.S. attorneys shouldn’t really prioritize federally illegal cannabis activities in states that robustly regulated cannabis and cannabis businesses (so long as eight main enforcement priorities were honored by the states).

This hands off approach was amplified by the 2014 FinCEN guidelines, which opened the doors on cannabis banking, a huge, positive development for the industry at the time. Then there was a bit of a downturn in January 2018 when then acting U.S. Attorney General rescinded all Department of Justice (DOJ) guidance (including the 2013 Cole Memo) regarding any federal enforcement position on state legal cannabis, fully returning to all U.S. Attorneys to go after state-legal cannabis according to the resources and priorities in their own jurisdictions.

Notably, none of the foregoing had any impact on actual federal law–enforcement memos do not represent changes in law and don’t do anything to amend the law. However, way back in 2014, Congress passed on omnibus budget bill that contained hard-fought-for language around protections for state medical cannabis laws. Section 538 of this budget bill contained the following language:

None of the funds made available in this Act to the Department of Justice may be used, with respect to the States of Alabama, Alaska, Arizona, California, [every other medical marijuana state], to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.

Many legal experts and scholars speculated that Section 538 wouldn’t have too much of an impact on state legal medical cannabis businesses since the exact language, on its face, really only stops the DOJ from spending money on “interfering” with the enumerated states’ ability to implement their medical cannabis programs (notably, the law ignores adult-use cannabis programs and businesses).

Nonetheless, Section 538 proved to be hugely important in the Ninth Circuit courts of the United States (which make up a large portion of the medical cannabis states in America). The impact of the United States v. McIntosh cannot be overstated.  The Ninth Circuit Court of Appeals interpreted Section 538 to mean that the DOJ could not prosecute the individual principals of state law-compliant medical cannabis businesses. And the effect of that case produced the result in the MAMM case, the notorious Kettle Falls Five case, and was very likely responsible for the DOJ’s dismissal of the Harborside forfeiture case. The bottom line? Section 538 has real power to protect medical cannabis businesses from enforcement actions by the federal government.

Congress has consistently renewed Section 538 in some form in its annual budget bills (it’s changed names a couple of times from the Rohrabacher-Farr Amendment to the Rohrbacher-Blumenauer Amendment, named for the Congressional leaders who championed it and continued to keep it alive). Now though, Section 538 faces a new threat of elimination by President Trump, indicating that maybe the Feds aren’t really done with state-legal cannabis enforcement.

Notably, Trump has tried to delete Section 538 before (and so did Obama) but he’s been routinely ignored by Congress. In his 2021 budget proposal, Trump is at it again–section 538 is omitted from the white houses’s budget proposal. Only time will tell if members of Congress will fight against the proposed deletion. We imagine that they will, given the number of Americans that are now in favor of cannabis legalization generally and where hundreds of jobs and robust state revenue has been created on the back of cannabis legalization– including for medical applications.

The other positive boon here is the fact that the sitting U.S. Attorney, Bill Barr, made clear when testifying before Congress that spending time, money, and resources going after state-legal cannabis businesses isn’t really within the DOJ’s current interests, and that the DOJ would continue to adhere to the principles contained in the 2013 Cole Memo (so far, that seems to have held true).

It’s troublesome to see Trump go back and forth on medical cannabis (and legalization) and to watch him try to end the only real federal protection that exists for any form of cannabis business in the country. What’s clear to us though is that cannabis enforcement isn’t necessarily a priority one way or the other for this administration, and we can’t know yet if that’s ultimately a good or a bad thing. So, stay tuned.

A few weeks back, Twitter was abuzz about the fact that the United State Patent and Trademark Office (“USPTO”) granted a federal trademark registration for the word PSILOCYBIN. The mark was registered by the company Black Pandas LLC and applies to the following services in Class 041:

“Development and dissemination of education materials of others regarding psychoactive plants, psychoactive fungi, and chemicals and related topics in the field of spirituality, religion, politics, art and science; Publication of articles, books, pamphlets and newsletters regarding psychoactive plants, psychoactive fungi, and chemicals and related topics in the field of spirituality, religion, politics, art and science.”

First, it is important to note that the registration does NOT provide the registrant with exclusive rights to use the word “psilocybin” on all goods and services, and particularly not on goods that could be described as “psilocybin.” One of the requirements for federal trademark protection in the U.S. is that a mark is “distinctive.” Simply put, this means that a mark cannot be “merely descriptive” of the goods or services on which it is applied. So, for example, no one would be eligible to protect the word “psilocybin” for use on mushrooms, because this would be merely descriptive. It would be against public policy to limit the ability of other businesses and individuals to describe the goods they are selling (note that I’m setting aside the legality issues that come into play here, which are nearly identical to those faced by cannabis businesses attempting to procure federal trademark protection).

So, what happened here with the PSILOCYBIN registration? Initially, the examining attorney assigned to the file rejected the application under Section 2(e)(1) of the Trademark Act, meaning that she deemed the mark merely descriptive of the applicant’s services stating:

“Here, the term PSILOCYBIN is a naturally occurring psychedelic compound produced by various mushrooms.  Applicant’s services feature materials regarding “psychoactive plants” and related topics; thus, the term PSILOCYBIN is descriptive of the subject matter of applicant’s services.  Consumers encountering this mark – in the context of those services – will immediately understand the descriptive significance of the mark.”

However, in this case, the mark was only refused registration on the Principal Register. The examining attorney gave the applicant the opportunity to amend their application to seek registration on the Supplemental Register, so long as they could amend their application to show use in commerce.

Many trademark applicants are unaware of the existence of the Supplemental Register, let alone what it is. The Supplemental Register is “a second trademark register where trademarks can be registered that are not yet eligible for registration on the Principal Register, but may, over time, become an indicator of source. Marks registered on the Supplemental Register, like those registered on the Principal Register, are protected against conflicting marks in later-filed USPTO applications. However, Supplemental Register registrations do not receive the same legal advantages and presumptions of Principal Register registrations.”

What this means is that in a trademark dispute, the owner of a mark on the Supplemental Register does not enjoy a presumption of federal ownership. It’s much harder to win an infringement lawsuit with a Supplemental Register registration.

After five years of continuous use, an applicant for a mark that would otherwise be rejected for being merely descriptive can apply to register its mark on the Principal Register if it has additional proof of “acquired distinctiveness,” which can include evidence of notoriety, extensive advertisement of the mark, and declarations from third parties. A good example of a mark that made it onto the Principal Register through this process is SKATEBOARDER, which is a skateboard magazine. The mark would have been deemed merely descriptive and rejected, but the applicant was able to show sufficient notoriety over time to prove acquired distinctiveness.

It remains to be seen whether or not the PSILOCYBIN trademark will ever make it to the Principal Register. The more companies that begin to use the word “psilocybin” in conjunction with their online publications and services, the less likely it will be that the owner of this mark will be able to prove acquired distinctiveness five years from now.