The legalization of marijuana has forever changed the legal industry. The majority of Americans are now in favor of its decriminalization, and four states (and Washington D.C., subject to the approval of Congress) now permit recreational use of the drug. In fact, only 22 states prohibit the drug under any circumstances.
Not to mention, billions of dollars are being invested into the marijuana industry, tens of millions of dollars are being raised by states taxing its legal sales, and with all that money comes questions about the best means to protect intellectual property (IP) in marijuana brands and their related products.
Inside Counsel wanted to dig into this developing issue further, so we sat down with Doug Sorocco, director and shareholder of the IP firm Dunlap Codding, to discuss the IP implication of legalizing marijuana.
According to Sorocco, with big change regarding the legalization of marijuana, the impact on the legal world is “unprecedented.”
“We are witnessing the evolution of a surreal legal environment,” he said.
The dichotomy of legalization at the state level and the illegality of marijuana at the federal level have created a circular argument: IP laws and protection are within the domain of federal law; federal law insists that the production, sale, and the use of marijuana are illegal and, therefore, the grant of federal IP protection is limited.
“Our IP laws simply don't work in such situation and it is causes a significant strain on marijuana entrepreneurs and jeopardizing the health and safety of consumers,” he explained.
For example, the purpose of a federal trademark registration is the protection of consumers—a trademark indicates the source or origin of goods or services and allows a consumer to make informed decisions as to the quality, characteristics, and reputation of a product based on the trademark. In order to obtain a trademark registration, however, the owner has to show that the mark has been used in interstate commerce. “In the eyes of the federal government, marijuana cannot be lawfully used in interstate commerce.”
Sorocco and his company are seeing the Trademark Office denying the registration of trademarks by relying on the Controlled Substance Act's definition of marijuana as a Schedule I drug.
“Consumers cannot rely on a name or mark to indicate that a particular strain of marijuana is what it is claiming to be the Charlotte's Web that was bought on Saturday may be a different strain/type than the Charlotte's Web that was purchased on Wednesday,” said Sorocco. “The growers have no regime for enforcing their rights in these names and stopping the infringement. The grower is harmed by the unfair competition but, more importantly, the consumer cannot know with any level of confidence that the product that they are purchasing is the product that they want.”
Any use of marijuana—not simply a recreational one—is pushing the boundaries of IP laws, according to Sorocco. In an attempt to overcome the federal trademark prohibition, companies are looking to the often maligned state trademark systems. This approach is costly as it requires filings in each and every state in which protection is desired and results in a patchwork of protection differing from state to state.
The most obvious form of patent protection would be a plant patent, yet Sorocco is not seeing the growers filing these applications because they require the grower to state that the plant can be asexually reproduced from plant or root cuttings as well as a long list of different plant characteristics. To date, there are only a few plant patent applications pending-all of which appear to have been filed by inventors residing outside the U.S. The disclosure requirement necessary for obtaining plant patents appears, at least in part, to have stifled growers from pursuing this form of protection.
Utility patents could cover the chemical compositions found in a particular strain, for example, but we are not seeing what many assumed would be an explosion in patent application filings. The level of information, experimentation, and disclosure necessary to support such a patent application is quite significant. Unfortunately, the smaller grow operations or distributors do not have access to such research tools.
“Traditional chemical and pharm companies are sitting on the sidelines waiting for marijuana to be legalized at the federal level,” he explained. “Until that time, there will be few players in the industry that will have the financial capital and sophisticated research abilities that are necessary to seek meaningful patent protection.”
With billions of dollars being invested into the marijuana industry and tens of millions of dollars are being raised by states taxing its legal sales, there is no “gold standard” to protect IP in marijuana brands and their related products, according to Sorocco, given the federal prohibition on marijuana. “Our approach has been to counsel clients that it isn't one thing that they need to do to protect their IP and brands; rather, it is an ‘all of the above’ type of situation.”
Filing trademark applications in every state where protection is desired is a time consuming and expensive proposition, but it is currently the only way to secure some form of exclusivity in the name. Alternatively, federal trademark applications should be filed on marks that are incidental to marijuana in order to secure limited rights of exclusivity in the marks.
“For example, an entrepreneur might want to use their mark in conjunction with a greenhouse service or non-marijuana containing food. In this manner, they have obtained some level of federal protection that can be the basis for an expanded trademark filing once marijuana is federally legalized,” he explained.
Additionally, according to Sorocco, marijuana entrepreneurs should consider patent applications for the entrepreneur wishing to protect the unique characteristics of their processes and products. The entrepreneur should begin their operation with an eye toward obtaining the information necessary to support a utility patent application.
“Hopefully we begin to see growers willing to prepare and file plant patent applications for marijuana as well,” he said. “While there is a risk associated with admitting in a federal document that the inventor has been growing and hybridizing marijuana plants, that risk may be overcome by a grower that has found a particular strain that is a commercial success.”