Federal trademark registration is typically unavailable for goods and services related to the sale of cannabis. But a combination of federal copyright registration and state trademark registration for these goods and services may provide an opportunity for cannabis companies to protect the substantial investments made in their brands and offerings. A recent case in California, The Holding Company LLC v. Pacific West Distributors et al. 2:24-cv-00986-DDP-JDE, illustrates potential strategies surrounding intellectual property protection for those in the industry to consider. It’s easy to imagine what may happen if a competitor began using your branding in a way that treads on your investment without legal means to stop them. The strategies we discuss below may not be appropriate for all cases. But cannabis companies, along with their counsel, should evaluate the potential costs and benefits of pursuing these strategies to protect their businesses.
The Holding Company, LLC, having the appropriate abbreviation “THC,” alleges ownership of intellectual property in a “lifestyle brand” that has “gained traction with young consumers … in relation to urban music and the hemp/cannabis industry.” Some of THC’s intellectual property include designs of the terms WHOA!, WHAM!, and POW!, in stylized lettering and coloring reminiscent of those seen in comic books (the “Copyrights”) registered with the United States Copyright Office (“Copyright Office”). THC also owns a California state trademark registration for its WHAM! mark covering cannabis flower and concentrates.
THC uses its Copyrights and WHAM! trademark on the packaging of its cannabis products. THC alleges that it engaged in discussions to license its Copyrights and WHAM! mark with Pacific West Distributors, a cannabis goods distributor, and Herbal Solutions, LLC, a dispensary using the name “Jokes Up Ice Kream”. But the negotiations got gummied up and the parties were unable to reach a joint agreement.
THC alleges that after the failed negotiations, Pacific West Distributors and Herbal Solutions began using THC’s intellectual property without authorization. And so, to protect its intellectual property, THC filed a complaint including six claims of federal copyright infringement and one claim of California state trademark infringement in an attempt to snuff their actions.
This case is not only an example of the efforts companies are taking to enforce their intellectual property rights in the cannabis space. It’s also illustrative of the potential benefits concerning creative strategies for protection and enforcement of intellectual property rights in the cannabis industry.
Trademarks are a form of intellectual property that include words or designs, which indicate the source of goods or services. Cannabis companies may register their trademarks at the state level where cannabis is legal. However, the rights afforded are limited to the state in which the mark is registered.
Federal trademark registration provides nationwide rights. But cannabis related trademarks may not be attainable. This is because the United States Patent and Trademark Office (“USPTO”) requires that applicants use or have a bona fide intention to use their marks in lawful U.S. commerce. Because cannabis remains illegal at the federal level, it’s not always possible for cannabis companies to register their marks with the USPTO. We discussed this hazy issue in a previous post.
However, lawful use is not a requirement to register original works of authorship with the Copyright Office. THC’s Copyrights may also function as trademarks. But federal trademark registration for its goods containing cannabis may not have been an option for THC. This is perhaps why THC chose to pursue registration with the Copyright Office instead of the USPTO.
Copyright registration provides several benefits, including the ability to enforce rights nationwide and sue in federal court. Registration also provides for the potential to recover significant damages. A claimant may elect to recover actual or statutory damages. It’s unclear the amount of actual damages THC may have incurred. But statutory damages can be substantial. An award of statutory damages may range from $750 to $30,000 for non-willful infringement and up to $150,000 for willful infringement. Notably, copyright owners may be able to recover damages for each registered work that is infringed. Attorneys’ fees may also be available depending on when a registration issued. The damages in this case may be high because of the six instances of alleged copyright infringement.
Copyright protection typically does not extend to short words and phrases. So, THC may not have been able to obtain copyright protection for WHAM!, POW!, or WHOA! by themselves. But these terms included as part of a larger stylized design may be protectable via copyright. The stylization of these terms in a comic book-esque manner is perhaps what persuaded the Copyright Office to issue registrations for the Copyrights. Conversely, the USPTO may allow registration of these terms, or similar terms, as trademarks irrespective of stylization. This would hinge on, among other things, the goods or services offered in connection with the marks.
It’s worth noting that THC owns several pending applications at the USPTO for, among other marks, WHOA!, POW!, and WHAM! for clothing and business services in the field of cannabis cultivation and product manufacturing. THC may not be able to register these marks in connection with the sale of cannabis goods at the federal level. But obtaining registrations for these ancillary offerings could help enforcement efforts against competitors.
Intellectual property for cannabis companies is not limited to trademarks and copyrights. Design patents may be obtained for the designs of certain products, utility patents may be granted for novel machines, methods of manufacture, or systems for the extraction of cannabinoids, and trade secret protection could apply to a dispensary’s confidential method for recommending products based on their effects and a client’s preference for the same.
Cannabis companies that wish to protect investments in their brands should consider what intellectual property protection regimes may be available to them at both the federal and state level. Because the industry is clouded in smoke, it’s often difficult to determine the suitable type of protection. But cannabis companies may learn from THC. Development of appropriate strategies to protect and enforce intellectual property can make competitors say “whoa!”
