NEW YORK (MainStreet) Owners of small marijuana product or service companies should consider obtaining a trademark for their business to protect their branding, intellectual property attorneys said.
Entrepreneurs can register their product names with the secretary of state to help secure common law trademark protection, said Chris Stanton, an associate at Merchant & Gould, an intellectual property firm in Denver. As long as they sell items other than marijuana or products with marijuana as an ingredient, they can also seek federal trademark registration for the name of that product, which helps protect the brand and prevent other people from copying the name of the product anywhere in the U.S., he said.
Many companies in Colorado have already registered trademarks with the state while several others are considering it to help prevent future businesses within the region from emulating their brands associated with marijuana containing products, Stanton said.
"Since federal registration is out, marijuana containing products are the oddity where a state registration has value," he said. "Trademark rights arise from use in commerce. Registering a mark with the state provides great evidence of that use. People are establishing strong brand names right now, so it is ideal for them to figure out how to protect that. There is a lot of value in that now."
Business owners who sell products such as glass pipes or vaporizers can federally register their legal products for a trademark and seek brand protection, Stanton said. A federal trademark blocks other companies from using the trademark, such as the name of your product or business. Owners can not obtain a federally registered trademark on products containing marijuana until it is federally approved.
Not only do trademarks provide an advantage for business owners, they also protect consumers because they know they are purchasing a particular brand, which ensures the quality of the item.
"Going after a federal trademark registration for non-marijuana containing products helps entrepreneurs hedge a little bit because you are able to stop people from using your trademark, which is valuable for the state market," Stanton said. "Later, if the federal ban lifts, the value of the national trademark registration will increase."
While the market is fairly new and needs time to mature, this allows owners to establish and test their brand with their core customers, he said.
"We are starting to see a lot of market segmentation," Stanton said. "Some businesses are more sophisticated and more brand development will occur during the next in ten years. As the market matures and risks settle down, more companies will develop a solid brand and have a clear vision of their customers and the brand they want."
Few dispensaries and growers of marijuana have sought to register trademarks federally because of the legal issues surrounding it on a federal level. Even in states such as Colorado and Washington where marijuana has been approved by legislators for use by adults 21 and up for recreational purposes, the law is murky.
Protecting a brand for a specific strain of marijuana is problematic, because marijuana is still considered as a Schedule I controlled substance by the federal government, said Charles F. Luce, Jr. chair of Moye White's intellectual property group, a Denver transaction and litigation law firm. The federal Trademark Office will reject any trademark application directly relating to marijuana or drug paraphernalia.
This prohibition does not apply to ancillary products or services not directly related to cannabis or its cultivation. One example is Mistletoke, which has been registered as a novelty Christmas item and does not contain any actual cannabis, while an application to register the Royal Purple Kush has been rejected on a variety of grounds, including that it is "merely descriptive" and "not in lawful use in commerce, he said. The Mellow Pages directory, the Stoner Trivia game and Humboldt Growers Association clothing all have earned the federal trademark seal of approval.
Although business owners can file for state trademark registration, it is essentially "worthless" because Colorado's trademark statute expressly provides that it does not grant any rights an entrepreneur would not already have under common law, he said.
Even a small business can benefit from federally registering a trademark because it gives it the exclusive right to use a name for products and services potentially forever and the filing fee can be as inexpensive as $275.
"It's a great bargain," Luce said. "Don't wait for the industry to glom onto your brand because by then it may be too late to protect. A trademark registration is a nice weapon to have in your arsenal."
Brands can have a large impact on a sector and what products customers gravitate towards and will purchase.
"If you can actually get the public to 'accept no substitutes' for your brand, there is power in that," Luce said. "The power of a brand is that strong. Brand loyalty is an extremely powerful force."
Obtaining a patent for a product made with marijuana, such as a particular strain or a pharmaceutical is also problematic, he said.
"Only the federal government can issue patents and while plant variety patents such as GMOs are commonplace, as long as marijuana remains a controlled substance, any patent involving marijuana or cultivation will be denied," Luce said.
Owners do not have to view this as a negative thing, he said. The trade-off under patent law is that an inventor must disclose the best means of making an invention in exchange for exclusive rights which may only last 20 years. Obtaining a patent is also far more difficult and costly than obtaining a trademark registration. Even if a patent is obtained, the inventor must have the financial resources to defend it.
"Patent litigation starts at $250,000 and goes north quickly," Luce said. "Given the current state of the law, trade secret protection is more practical and may be more effective."
If an owner can obtain a patent for a process or technology and can afford to defend it, it can be a very valuable asset, because under patent law no one else can make, use or sell anything falling within the patent's claims, he said.
Entrepreneurs need to protect their brands and inventions because it is likely that the business of marijuana will only generate more revenue and competition in the future, especially if it becomes legal under federal law, Luce said.
"The tax revenue is going to be irresistible to lawmakers and Washington will likely succumb," he said. "Marijuana's history could be similar to Prohibition. Legalization is an idea whose time has come. Eventually, the U.S. will come around to legalizing it."
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--Written by Ellen Chang for MainStreet