Cannabis Industry Seeks Clarity in Intellectual Property Haze (Corrected)

By Malathi Nayak

U.S. cannabis businesses are racing to lay claim to patent and trademark protections, even though they lack federal intellectual property rights.

The U.S. Patent and Trademark Office doesn’t grant federal trademark registrations on products involving marijuana, which is illegal under federal law. The federal ban doesn’t impact the grant of cannabis-related patents.

The PTO has issued more than 500 cannabis-related patents since 2000, according to Bloomberg Law data. The patents broadly cover marijuana-related plant strains, chemical formulations, medical treatments, and devices to make and consume cannabis products.

The federal illegality of marijuana means the industry lacks clarity over how their intellectual property rights will hold up if challenged in federal court.

Cannabis businesses have creatively sought out state-level trademark protections when possible, and navigated a web of disparate state laws to safeguard their rights, attorneys, industry executives and in-house counsel told Bloomberg Law.

“We believe not only state IP laws but also state competitive fairness and competition laws are very good avenues in the meantime before the federal question gets answered,” James Whitcomb, chief financial officer of Surterra Holdings, which sells cannabis-based medical treatments in Florida and Texas, said.

Legalization Fever Pitch
The cannabis legalization debate could reach a fever pitch in many state elections later this year, Bloomberg Intelligence analyst Kenneth Shea said. Thirty U.S. states and the District of Columbia already allow some form of legal cannabis sales.

Michigan has a ballot vote for legalizing recreational marijuana and Utah has a ballot measure to legalize medical marijuana set for November.

Legal U.S. cannabis sales are expected to reach almost $10 billion in 2018 and hit nearly $23 billion in 2025, according to Bloomberg Intelligence data sourced from cannabis industry intelligence firm New Frontier Data.

Robust federal trademark and patent rights instead of a patchwork of state protections could help the fast-growing industry expand further and fend off global competition, Shea said.

U.S. cannabis businesses should take IP rights at the domestic and global level seriously, Shabnam Malek, a partner at Brand & Branch LLP and co-founder of the National Cannabis Bar Association, said.

They “should have IP enforcement programs and set themselves up for the oncoming decriminalization and possible legalization on a federal level,” she told Bloomberg Law.

Trademark Workarounds
Companies such as Acreage Holdings, which cultivates and sells cannabis products in 12 U.S. states, depends on state trademark protection to operate, Acreage’s general counsel, James Doherty, told Bloomberg Law. Former U.S. House speaker John Boehner (R.-Ohio) is on Acreage’s advisory board.

Medical cannabis business Canndescent has 10 registered federal trademarks, patent and trademark office records show. Those trademarks only cover secondary products, such as smoking accessories and apparel, its chief executive officer Adrian Sedlin said.

Canndescent’s cannabis formulations, which Sedlin says make up the company’s bread-and-butter sales, can’t register U.S. trademarks. He said he worries if someone in Canada, which is on track to legalize marijuana in mid-October, may snag a trademark on “Canndescent.”

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