Federal Trademark Decision Impacts Cannabis Industry

Husch Blackwell LLP

On May 3, 2023, the federal Trademark Trial and Appeal Board (the “TTAB”)—the entity responsible for handling disputes over the issuance of trademarks on a nationwide level—issued a precedential opinion in In re National Concessions Group, Inc. that has significant implications for cannabis companies seeking federal trademark protection.

What Happened in In Re National Concession Group?

In re National Concessions Group, Inc. involved two federal trademark applications by Denver-based National Concessions Group, Inc. (the “Company”), which sought a trademark to cover the use of the brand name “Bakked” and a design-only mark in the sale of an “essential oil dispenser, sold empty, for domestic use.”[1] The Company attached the following image to its applications:[2]

After initially having both applications denied as unlawful drug paraphernalia under the federal Controlled Substance Act (the “CSA”), the Company appealed making the following arguments:[3]

  1. The TTAB’s characterization of the product was incorrect because they simply dispense essential oil; and
  2. Even if TTAB’s characterization of the product was correct, exemptions to the CSA for state-level legality and traditional tobacco use applied.

The TTAB denied both of the Company’s arguments.

First, although the TTAB agreed that the product was “not unlawful as identified in the application,”[4] it stated that the inquiry did not end there. Instead, the TTAB asserted that “extrinsic evidence may be used to show a [CSA] violation.”[5] This allowed the TTAB to rely upon articles from third-party websites, such as a High Times article titled “The Official Dab Dictionary,” to provide it with an understanding of “dabbing.”[6] It also allowed the TTAB to rely on the Company’s website, its marketing materials, and even product listings on third-party websites, which all promoted the product through reference to dabbing.[7] Based on this extrinsic information, the TTAB concluded that “there is no evidence to support a finding that [the Company’s] goods are primarily intended or designed for any use other than as a dabbing tool.”[8]

Next, the TTAB found that there was no plausible exception to the CSA that the Company could claim to circumvent its prohibition on drug paraphernalia. The CSA’s exception for products that are legal under state law was inapplicable to federal trademarks because trademarks provide nationwide protection.[9] In other words, while the exemption may allow a company to manufacture paraphernalia within a legal-cannabis-state’s borders, that logic could not be applied to a federal trademark which would offer protection even in states where the underlying exemption was inappropriate. Nor was the TTAB persuaded by the Company’s arguments that its product was subject to the traditional tobacco use exemption, which it attempted to support with product postings from DHGate.com and AliBaba.com.[10] Finding that neither of these exemptions to the CSA applied, the TTAB concluded that the product was drug paraphernalia and refused to register the Company’s trademarks.

What This Means for Cannabis Companies

This precedential opinion encourages United States Patent and Trademark Office Examining Attorneys to step outside of the four corners of a trademark application during the examination process and authorizes the TTAB to rely on such extrinsic evidence to conclude that a product is unlawful drug paraphernalia under the CSA. Practically, this means that cannabis companies will need to monitor not only their own messaging but also how third parties are marketing a given product. It is important, however, not to overstate the implications of this ruling.

Although the TTAB looked exclusively to third parties to develop its understanding of what dabbing is, it relied heavily on the Company’s own representations when determining what it felt the product’s primary intended use was. For example, it’s quite likely that the Company’s use of the phrase “The Dabaratus” on the side of its “essential oil dispenser, sold empty, for domestic use” colored the TTAB’s interpretation. This is particularly true in light of the Company’s own website’s description of the product as “the all-in-one tool for dabbing,” and its explanation that the product provides “a consistent dose of Bakked’s purest Cannabis oil.”[11]

While the TTAB’s unsurprising dismissal of the Company’s state-level legalization argument is likely applicable to many items classified as “drug paraphernalia,” the same cannot be said about the TTAB’s traditional tobacco analysis. In fact, the opinion explicitly cites to cases identifying “rolling papers, rolling trays, cigarette tubes, rolling machines, and shredders and grinders for tobacco and other smokable herbs” as exempt.[12] Perhaps if the Company had also invested time and money in marketing, and providing in interstate commerce, alternative legal uses for the apparatus, such as dosing out tobacco oil or essential oils for use in aromatherapy, the TTAB would not have been so convinced that goods were unquestionably drug paraphernalia. What is clear, however, is that dab-related and oil-based products will face a steeper climb toward federal trademark protection than products that can effectively argue that they have a traditional basis in tobacco.

In essence, this ruling has forced cannabis companies to take a larger role in the messaging surrounding their products if they intend to seek federal trademark protection. A well written application will not pass muster if conflicting materials are easily identifiable by the Examining Attorney reviewing the application, especially as this broadened approach has now been essentially codified by the TTAB as the preferred method for reviewing applications containing potentially prohibited goods and services. This is not a death nell, but it is a wakeup call for cannabis providers to step back and seriously consider how their goods and services are marketed, exactly what uses the products they provide have and could have, and how these products are displayed online by third-party retailers.

[1] In Re Nat’l Concessions Grp., Inc., No. 87168058, 2023 WL 3244416, at 2 (May 3, 2023).

[2] See id.

[3] Id. at 6-7.

[4] Id. at 7.

[5] Id.

[6] Id. at 8.

[7] See id at 8-13.

[8] Id. at 14.

[9] Id. at 18 (“First, the rights the [Company] seeks are not limited to Colorado. A federal registration would give Applicant presumptive exclusive rights to nationwide use of its mark in association with the identified goods… Second, even accepting the [Company’s] argument as to the meaning of the Section 863(f)(1) exemption, any authorization by Colorado of [Company’s] manufacture, possession or distribution of the goods cannot override the laws of the other states or federal law outside Colorado.”).

[10] Id. at 20 (“As support, [the Company] submitted some evidence indicating that tobacco oils have been used in the past for medicinal reasons, and printouts from third-party online sellers DHGATE.COM and ALIBABA.COM offering a handful of items identified as bottles for tobacco oil or tobacco tar.”).

[11] Id. at 10 (showing a screenshot from the Company’s website).

[12] Id. at 20 (citing BBK Tobacco & Foods LLP v. Central Coast Agri. Inc., ___ F.Supp.3d ___, 118 Fed. R. Evid. Serv. 1980, Slip Op., 2022 WL 2820144, at *29-30 (D. Az. 2022)).

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