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Outlook Hazy For Cannabis TMs Under Unlawful Use Doctrine

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Outlook Hazy For Cannabis TMs Under Unlawful Use Doctrine

It is established, for now, that the U.S. Patent and Trademark Office will not register a trademark used for cannabis or cannabis-related goods or services (other than hemp) because, to be registerable under the Lanham Act, a mark must be in lawful use in commerce, and cannabis products remain unlawful under the Controlled Substances Act — even in states where medical and/or recreational marijuana has been legalized.[1]

Left in doubt, however, was how the federal courts would view the impact of the “unlawful use in commerce” doctrine in a trademark infringement case. Recently, two U.S. district courts confronted this precise issue, reaching opposite conclusions.

In Woodstock Ventures LC v. Woodstock Roots LLC,[2] the U.S. District Court for the Southern District of New York addressed the issue in the context of evaluating the likelihood of confusion factors typically used to determine a trademark infringement claim. The owner of a trademark registration for Woodstock for “smokers’ articles” sought to enjoin use of that mark for recreational marijuana and vaping devices in state licensed marijuana dispensaries. The trademark claimant asserted that, although it currently did not use the Woodstock mark in the recreational marijuana market, such use was within its natural zone of expansion.

The court, however, refused to give any weight to that stated intention “because the sale of recreational marijuana is illegal under federal law.”[3] The court went on to hold that the registrant, therefore, was unlikely to succeed on its infringement claim and denied the injunction.[4]

In reaching this decision, the court expanded the USPTO’s interpretation of the unlawful use in commerce doctrine as applied to the cannabis industry well beyond the federal registration administrative process. Specifically referring to that administrative policy, the court held that “the trademark protection afforded to [plaintiff’s mark] cannot be extended to federal unlawful cannabis.”[5]  

Remarkably, this was the court’s position, even though the party making the “unlawful use in commerce” was the accused infringer, not the federal trademark registrant. Carried to its logical extreme, then, the effect of this court’s ruling is to render a trademark owner powerless, at least under federal law, to vindicate its rights as respects any cannabis-related business unlawful under the CSA, regardless of whether such activities are permitted under state or local law.

Two days later, however, the U.S. District Court for the Middle District of Florida in Roor International BV v. Shouk[,6] refused to apply the “unlawful use in commerce” rationale to invalidate the claimant’s trademark rights and registration. The accused infringer claimed that the registered mark was used for unlawful marijuana paraphernalia (water pipes). Pointing out that the U.S. Court of Appeals for the Eleventh Circuit had expressly declined to adopt the unlawful use doctrine in FN Herstal SA v. Clyde Armory Inc.,[7] the court held it was bound by this precedent and denied a motion to dismiss the infringement claim.[8] The court also refused to convert the motion to one for summary judgment to consider matter outside the pleadings (Roor’s Dutch website) to support the unlawful use claim, in view of the Eleventh Circuit’s ruling in FN Herstal.[9]

Moreover, the court noted, even if it were to consider the unlawful use in commerce doctrine in the context of Roor’s trademark infringement claim, it would not be applied in the same manner as the USPTO policy.[10] That policy requires compliance with all federal laws and regulations before a party can claim trademark protection.

However, in the Eleventh Circuit, the court commented, a use in violation of the law “must be of such gravity and significance ... so tainted that, as a matter of law, it could create no trademark rights.”[11] Presumably, under this court’s analysis, even a trademark owner refused registration of its cannabis-related mark by the USPTO nevertheless could maintain a claim for false designation of origin under Section 43(a) of the Lanham Act[12] (frequently referred to as the act’s federal common law infringement provision).

So, ironically, the trademark owner whose own use unquestionably was lawful, but who sought to enjoin a use that is unlawful under the CSA, lost as a result of the application of the unlawful use in commerce doctrine, while a trademark owner whose own use was alleged to be unlawful under the CSA won. Needless to say, taken together, these cases provide little clarity — let alone predictability — as to future application of the unlawful use doctrine in cannabis-related trademark infringement cases in the federal courts.

This article was originally published by Law360.

[1] See, e.g., In re PharmaCann LLC , 123 USPQ2d 1122, 1124 (TTAB 2017); In re JJ206, LLC , 120 USPQ2d 1568, 1569 (TTAB 2016); In re Brown , 119 USPQ2d 1350, 1351 (TTAB 2016). See also 37 C.F.R. §2.69; USPTO Trademark Manual of Examining Procedure §907 (Oct. 2018).

[2] Woodstock Ventures LC v. Woodstock Roots LLC , 18 CV 1840 (SDNY July 29, 2019).

[3] Id. at 16.

[4] Id. at 19.

[5] Id. at 17.

[6] RooR International BV v. Shouk, 3:19-cv-00027 (M.D. Fla. July 31, 2019).

[7] FN Herstal SA v. Clyde Armory Inc. , 838 F.3d 1071, 1087 (11th Cir. 2016).

[8] 3:19-cv-00027, at 4.

[9] Id. at 5.

[10] Id. at 4-5 n.5.

[11] Id., citing FN Herstal SA v. Clyde Armory Inc. , 838 F.3d at 1086-87.

[12] 15 U.S.C. § 1125(a).