Article – “Industry Leaders”: Cannabis Entrepreneurs Exploit Legal Loopholes for IP Protection

The revolutionary trend in the cannabis industry backed by legal escalation, distribution, and commercial sales is handing emerging cannabis entrepreneurs a golden opportunity to thrive.


Researchers are expecting the Cannabidiol (CBD) industry to reach $22 billion in valuation by 2022, due to increased interest in cannabis for cosmetic, recreational and medicinal use. Recreational cannabis controls the largest sales quota, holding 67%, followed by medical cannabis which has about 33% of all cannabis sales. In 2017, California, which is not surprisingly the juggernaut cannabis marketplace, had over $2.75 billion in cannabis sales, trailed by Washington with $1 billion sales, according to Forbes report.

The green movement is being capitalized by innovators, with many top cannabis companies engineering their products and delivery techniques to win the largest consumers quota. However, cannabis entrepreneurs must procure intellectual property rights – a fundamental prerequisite – to monetize their cannabis-related services, products or ideas. Without saving words, the cannabis industry is where a few trademarks, copyrights and patents have been issued. And that makes early IP protection strategy beneficial and reduces the risk of potential infringements. But there are challenges in acquiring patent, license, and trademark for cannabis-related goods and services despite the growing legitimacy of cannabis.

States like Washington, Colorado, Nevada, and Oregon accept cannabis-related trademark registrations. Entrepreneurs turn to these states for IP considerations instead of combating lawful use rules for a federal trademark.

Conflicting state and federal laws

The federal might and apathy in the states’ decision to decriminalize cannabis is the heartbeat of all complications surrounding cannabis entrepreneurs’ position. The federal law prohibits the possession of marijuana and that creates a principal roadblock in IP rights acquisition in the cannabis market. Cannabis is illegal under federal law, though many U.S. states have legalized the use of marijuana for medical and recreational use. Twenty-nine (29) states in the US and the District of Colombia have endorsed medical cannabis, while eight (8) states have legalized recreational cannabis.

Trademark acquisition hurdles

The discrepancy in the laws surrounding cannabis creates complications in securing a trademark for IP protection. Green entrepreneurs vying to register a trademark with the US Patent and Trademark Office to protect their brands must use utilize a commercial approach that’s consistent with applicable laws. The challenge becomes how to prove legal applicability and lawful use of cannabis required before federal registration can issue a trademark. The friction lies in reconciling Food, Drug and Cosmetic Act (FDCA) and the Controlled Substances Act (CSA).

Legal loopholes cannabis entrepreneurs take advantage of

Cannabis entrepreneurs have found that inventions primarily designed for marijuana products or services face the most challenges in securing trademark, whereas goods and services related to cannabis stand better chances of gaining patents. Eaze – one of the most innovative companies in the cannabis industry, for instance, will gain intellectual property protection easier because it offers dispensary service.

Another loophole is for cannabis entrepreneurs to focus on states that offer trademark protection to cannabis-related goods and services other than seeking for a federal patent. States like Washington, Colorado, Nevada, and Oregon accept cannabis-related trademark registrations. Entrepreneurs turn to these states for IP considerations instead of combating lawful use rules for a federal trademark.

In addition, cannabis entrepreneurs also use common law to protect their goods and services. They activate this protection by using their product in commerce with a distinctive mark. The nonexistence of lawful use conditions under common law to protect a mark eliminates challenges facing entrepreneurs that wish to join the cannabis industry.

While it is possible to secure intellectual protection rights for cannabis-related goods and services, there are many factors and complexities prospective green entrepreneurs must also consider. Patent right for cannabis growers offers a different challenge due to the plant’s nature of production – it is sexually produced. Growers must prove that their plant is asexual or doesn’t require another plant to grow, which is quite difficult. However, genetically modified cannabis seed can be patented.

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