Trademark Eligibility of Cannabis and CBD-Based Products Remain Hazy in 2023

July 11, 2023
Publications

As business owners continue to wonder when all CBD products will be eligible for trademarks, the primary obstacle stems from conflicting federal regulations—including those related to food and drugs and the Farm Bill—and state rules regarding cannabis products. One such area involves federal banking regulations and the cannabis industry.

Last month, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing to re-introduce a crucial piece of legislation designed to address banking challenges faced by state-legalized cannabis businesses. Despite its name, the Banking Act (also known as the Secure and Fair Enforcement (SAFE) Banking Act) could be a significant step toward federal legalization of cannabis, which is expected to harmonize federal laws and bring consistency with state laws pertaining to cannabis.

Because marijuana, in particular, is classified as an illegal substance at the federal level, related goods and services are not currently eligible for federal trademark protection. Whereas, for products containing CBD (or cannabidiol), which is derived from hemp and does not have psychoactive properties, continues to be a more complex issue when it comes to trademark protection.

Marijuana and CBD: Disjointed Trademark Treatment

Trademarks are essential intellectual property intangible assets that provide businesses with presumptive rights to use their names, logos or slogans in commerce exclusively. Registering a trademark with the U.S. Patent and Trademark Office (USPTO) grants the benefits of nationwide protection and thus more effective deterrence and enforcement ability. Having a registered mark also puts all others on constructive notice of your rights and, generally, will cause the USPTO to reject later applications for registration of highly similar marks or related services. Having a federal registration is of great importance for any brand owner, and cannabis products of all types rely heavily on distinctive branding.

To be eligible for federal trademark protection, the use of the mark must be lawful. The USPTO operates under federal law, and as marijuana is classified as a Schedule I controlled substance, it is considered illegal and has no lawful use under the federal Controlled Substances Act (CSA). In fact, since marijuana remains illegal at the federal level, the USPTO also refuses registration for marks related goods or services that involve the production, distribution or use of marijuana. Thus, related goods also cannot be registered, such as bud trimming machines (Ultra Trimmer, L.L.C., No. 86479070 (T.T.A.B. Nov. 29, 2016)) and marijuana vaporizers (JJ206, LLC, No. 86532274 (T.T.A.B. Nov. 7, 2016)).

On the other hand, CBD’s legal status in the United States adds complexity to trademark eligibility because federal law distinguishes between marijuana and CBD even though CBD can be derived from both marijuana and hemp plants. In contrast to the CSA, the Agriculture Improvement Act of 2018 (also known as the Farm Bill) legalized hemp and its derivatives, including CBD, provided they contain less than 0.3% THC (tetrahydrocannabinol). The presumption, therefore, is that CBD products, being legal under the Farm Bill, should also be eligible for trademark registration.

The CBD industry has experienced tremendous growth in recent years, and with that comes the desire for companies to protect their brands. It seemed as though the USPTO was initially inconsistent by granting trademark protection for CBD products due to their association with marijuana, as many cannabis companies have products that contain high amounts of THC (legal under some states’ laws but illegal under federal law) and non (or low) THC products, which are legal at least under the Farm Bill. Businesses seeking trademarks for CBD-related goods or services face rejections based on the grounds that the applied-for marks involve illegal substances.

To further complicate the issue of trademark eligibility for CBD-related goods, the rules are different for food and beverage products. The U.S. Food and Drug Administration (FDA) does not currently permit CBD to be marketed as a dietary supplement or added to food or beverages, such products still undergoing clinical trials, even if the product contains zero THC. The use in foods or dietary supplements of any drug or substance undergoing clinical investigations without approval of the FDA violates the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. Chapter 9.

The 2018 Farm Bill did not change this because it explicitly preserved the FDA’s authority to regulate dietary products containing cannabis or cannabis-derived compounds. The USPTO is free to follow the guidance of the FDA despite the legality of CBD under the Farm Bill. This means that because the FDA does not currently permit CBD to be marketed as a dietary supplement or added to food or beverages, the USPTO does not permit the registration of products that contain CBD if such are ingestible.

As such, challenges for trademark protection remain for CBD products which are ingestible, and many are marketed as dietary supplements or food-related goods, so a vast amount of CBD products remain ineligible for trademark registration. For example, in Stanley Brothers Social Enterprises, 86568478 (T.T.A.B. June 16, 2020), The Trademark Trial and Appeal Board (TTAB) held that hemp oil extracts sold as an integral component of dietary and nutritional supplements that feature CBD constitute a per se violation of the FDCA and do not support lawful use of the mark in commerce.

Change May be Budding

If marijuana is legalized at the federal level, undoubtedly the smoke clears on trademark eligibility. A necessary step to legalization is decriminalizing the financial transactions related to cannabis goods—this is where the SAFE Banking Act plays a crucial role. The recently re-introduced legislation aims to provide relief to cannabis-related enterprises with provisions aimed to protect financial institutions from federal prosecution or penalties when providing services to cannabis-related businesses operating in compliance with state laws. Under current U.S. law, banks are subject to anti-money laundering regulations and are required to follow strict compliance measures. Financial institutions must conduct due diligence on their customers, including CBD businesses, to ensure compliance with federal and state laws as well as to mitigate the risk of money laundering or illicit activities. By protecting financial institutions from federal prosecution or penalties for serving state-compliant cannabis businesses, the SAFE Banking Act encourages banks to provide services to CBD businesses as well.

Congress came close to passing this law. In 2022, the U.S. House approved the multibillion-dollar America COMPETES (Creating Opportunities to Meaningfully Promote Excellence in Technology) Act, which included the adoption of the SAFE Banking Act as an amendment. However, the amendment was stripped from the bill by the Senate, thereby un-paving the way for banks to assuredly provide cannabis-related activities. With legislation related to banking back on the table, there is hope for broader legalization within the cannabis businesses and thus hope for broader protection of cannabis-related intellectual property.

Takeaways for Business Owners to Blaze Ahead

Navigating the trademark eligibility of cannabis and CBD-based products remains a complex and evolving process, the future of which will depend on the interplay between federal legislation, regulatory agencies and industry trends. As this issue continues to develop, cannabis businesses and their attorneys should continue to monitor changes to federal marijuana laws potentially opening the door for all marijuana-related trademarks. Also, keep an eye on developments in FDA regulations, as they may impact the eligibility of trademarks for CBD products. Even if they also offer high THC products, cannabis companies should still seek trademark protection for a store name, logo or other identifying marks which relate to noncannabis products or low-containing THC, noningestible goods. If and when trademark eligibility of cannabis and CBD-based projects opens up, companies and their attorneys should be on standby to take advantage of the opportunity to protect their brands on a broader range of goods.

Donald J. McKay is an intellectual property attorney and registered patent attorney at McNees Wallace & Nurick and serves clients from Pittsburgh, Pennsylvania. He has more than 20 years of experience prosecuting patents and has prosecuted hundreds of trademark applications. He can be reached at dmckay@mcneeslaw.com or 412-227-2504.