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NEWSFEED: The Business of Owning Ideas

Jun 05, 2017 02:57PM ● Published by Randy Robinson

Photo by Dawid Zawiła, Courtesy Unsplash 

Right now, the US cannabis industry is worth $7 billion. In less than a decade, it’s estimated to be worth $50 billion. According to ArcView and BDS Analytics, two data firms tracking the sales of cannabis products, the pot industry will grow another 27 percent over the next year alone, even if the Trump Administration decides to crack down on recreational cannabis.

The cannabis industry is no longer the Wild West it once was. Twenty-nine states have laws on the books legalizing recreational or medical use, but the federal government still has the one that says cannabis is illegal, period. Because it remains federally illegal, the companies driving this multibillion-dollar industry’s growth face a unique set of business challenges in terms of banking, advertising, taxes, distribution, insurance, and a whole lot more. The US government won’t issue a federal trademark to cannabis companies or for products containing cannabis. But that same government does hold a patent on the use of the cannabinoids—chemical compounds found in the Cannabis sativa plant species—for certain medical conditions. Intellectual property law is complicated.

WHAT’S IN A NAME? EDUCATION FOR ELEVATED ENTRÉES

Intellectual property (IP) is, for lack of a better term, a government-granted monopoly of sorts. The World Intellectual Property Organization defines it as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.” Intellectual property is ultimately protected by trademark, copyright, and patent laws. There’s a lot of confusion regarding intellectual property and cannabis. Yes, cannabis is federally outlawed. But depending on what kind of IP protection a company is applying for, there are ways around this. According to the US Patent and Trademark Office, a trademark is “a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others.” Trademark laws exist to help prevent consumer confusion. Trademarks allow businesses to establish and protect their brand from copycats and imitators, and the protections extend from brand names and logos to tag lines and catch phrases. But the US federal government doesn’t recognize trademarks for cannabis.

That’s due to the Lanham Act of 1946, which is also known as the Trademark Act. It states that federal trademarks may only be issued for products that have already been sold, but because the federal government considers all sales of cannabis to be illegitimate, any trademarks specifically for cannabis products or licensed cannabis businesses are automatically denied.

Long story short, there are no federal trademarks for licensed cannabis companies, per se.

Frank Robison, an intellectual property attorney with the Denver-based marijuana law firm Vicente Sederberg, says that some cannabis companies can find workarounds, as individual states can craft their own rules for statewide trademarks. “Cannabis companies may only register their marks for marijuana products in states that allow marks to be registered,” Robison explains in an e-mail. States can craft their own rules for statewide trademarks, and Washington and Colorado have given the green light for pot shops and cannabis companies to receive state trademarks. However, those trademarks may not be enforceable in other states. To guarantee protection in another state, the trademark owner may have to do business there and register for a trademark there as well.

There are ways for businesses to register trademarks while sidestepping the cannabis issue. Let’s say I’m a licensed cannabis seller, and my company is called Leafy Leaf. I could register the Leafy Leaf trademark with the US Patent and Trademark Office under some product besides cannabis. I could register for branded Leafy Leaf “tobacco” pipes, clothing lines, even coffee mugs—just not for Leafy Leaf cannabis products. This means I may have a hard time taking someone to federal court for using the Leafy Leaf trademark for cannabis products, but at least I’ve registered the trademark and have some legal foundation for a suit.

The Lanham Act only applies to trademarks, not to other types of intellectual property. Cannabis companies may find copyrights offer better protection of their intellectual property than trademarks. A copyright is “a form of protection provided by the laws of the United States for ‘original works of authorship,’ including literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual creations,” as defined by the US Patent and Trademark Office.

Copyright protections extend to product descriptions, logo design, packaging, website and app design and wording, and more, which can give cannabis companies without trademarks some legal recourse against copycats.

“An often-overlooked form of protection are copyrights,” Robison explains. “Cannabis businesses generally have copyrights. These rights give rise to creative ways to protect intellectual property and may provide a cannabis business with additional remedies against infringers.”

The copyright laws work both ways, too, and cannabis companies can find themselves in violation. One recent example involves a popular strain found at many dispensaries known as Girl Scout Cookies. That strain name has been around since before the dawn of legalization, but it’s not like Girl Scouts of America could sue black-market pot dealers for violating copyright laws. Today’s legal dispensaries, however, are fair game. Recently, the organization threatened legal action against dispensaries selling the strain, most of which rebranded it as simply “Cookies.”

PATENTS: THE BREWING, BILLION-DOLLAR STORM

Get this: despite marijuana being federally illegal, patented cannabis strains exist, issued and approved by the federal US Patent and Copyright Office.

Patents also have been filed and approved for inventions that extract or infuse cannabis oils. Patents protect product inventors, and patents are issued “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States,” as defined by the US government.

Theoretically, anyone can file a patent for practically any invention, even if it’s for contraband or to manufacture an “illegal” substance such as cannabis extracts.

Andrew Jones, founder of Oregon’s Connoisseur Concentrates, is living proof that Americans can receive patents for cannabis products. Late last year, he received patent approval for his Mr. Extractor product, an all-in-one, closed-loop system for making hydrocarbon-extracted hash.

In the patent filing, Jones’s invention specifically outlines its use for cannabis extraction and cannabis extraction only. He says, despite his invention’s transparency, he’s never been contacted by federal law enforcement like the DEA or FBI.

“There’s no problem patenting illegal items,” he says. “I could patent a nuclear reactor. I couldn’t build one or own one, but I could own the patent on one.”

For Jones, patenting cannabis products isn’t just a sound business move. It’s necessary to protect the spirit of the cannabis legalization movement. He thinks that legalization was only possible because underground growers shared strain genetics and growing techniques freely with one another. Their goal was to proliferate cannabis growing and manufacturing to such a wide extent that there was no feasible way any government could shut it all down.

The problem with that free exchange of products and methods is those budding entrepreneurs have no financial protections once their products enter a regulated and taxed market Jones believes cannabis legalization has moved from a “physical” War on Drugs to a “financial” war for profit control, and most people are unaware that the financial war is currently well under way.

“One of the tools necessary to fight a financial war is to retain the intellectual property that everybody fought for,” Jones explains. “That way, the people in the cannabis movement can continue to use that and stop these other entities that didn’t put in the years of hard work from gaining financial access.”

According to Jones, patent protections aren’t just needed to keep domestic businesses from muscling in. He’s concerned about foreign powers trying to corner the market on cannabis—and that fear has some eerily solid grounding.

Patents can be internationally protected according to transnational treaties. And the nation with the most cannabis patents isn’t the United States. It isn’t the medical marijuana haven of Israel, nor is it any country in the European Union.

It’s China. Over half of all cannabis patents registered internationally belong to Chinese firms, even though China enforces some of the harshest anti-cannabis laws on the planet. Many of these patents, filed in China and from China, may conflict with patents held elsewhere, such as in the United States. These include patents for carbon dioxide extraction, dairy infusions, and a whole slew of inventions for manufacturing and packaging CBD products.

However, these patent battles have just started. Only a handful are quietly being fought over in US courts. As cannabis legalization gains traction not just in America, but around the world, these patent issues will be put to the test in international and federal courts.

“It’s pretty much done with patents in cannabis,” says Jones. “Most patents for everything you can think of were already filed years ago. The ramifications are huge: a patent holder can reclaim profits and damages all the way back to the time they filed the patent. There are tons of companies making millions of dollars a year off technology someone already owns the patent on.”

His prediction: “We’re entering the litigation phase of these patents. It’s just getting started.”
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