The rapid but uneven legalization of cannabis-related products in the U.S. and the resulting jurisdictional patchwork where cannabis use may be legal in one state but not another, or on the state but not the federal level, has created confusion for trademark applicants. Some applicants, frustrated by the USPTO’s rejection of trademarks applications for what they consider to be legitimate products (but perhaps not federally legal) are pushing the envelope at the Trademark Trial and Appeal Board (TTAB).

Take for example a recent case filed by Joy Tea, Inc. in the United States Court of Appeals for the Federal Circuit. In this case, Joy Tea, which filed an intent to use trademark application for cannabidiol (CBD) infused tea under the brand of FOR JOY, suffered a similar rejection to that received by AgrotecHemp Corp., for PUREXXXCBD, which you may recall was the subject of an article in last month’s newsletter. In the AgrotecHemp case, the trademark applicant filed an intent to use trademark application for a CBD product to be used for “pharmaceutical purposes.”  The Board rejected AgrotecHemp application because it provided no evidence that its products were or would be approved by the FDA. The TTAB rejected Joy Tea’s application on similar grounds, holding that food products containing CBD have not been approved by the FDA and are, therefore, illegal – trademark application rejected! The law, according to the Board, prohibits trademarks that identify illegal products. So, an applicant cannot have a bona fide intention to use a product that is illegal even though its legality may change in the near future.

Joy Tea appealed the TTAB’s decision and filed its opening brief in the Federal Circuit Court last month. It makes several arguments but importantly it takes issue with the Board’s policy that it is a legal impossibility for a trademark applicant to have a bona fide intention to use a mark for an illegal product. It argued the “Board’s per se rule is without basis in law, logic, or policy – and should be reversed.” Given the overwhelming evidence of Joy Tea’s bona fide intent, it argued that to claim it is legally impossible for it to have such intent is nothing short of a legal fiction that is inconsistent with the TTAB’s flexible standard of review as well as prior case law. Joy Tea also claims it is bad policy. In an interesting argument, Joy Tea contends that – if cannabis companies are foreclosed from filing intent to use trademark applications – the moment that cannabis becomes legalized on the federal level, cannabis companies will rush to the USPTO to apply for federal trademark rights for established brands. This “midnight stampede to the USPTO is liable to cause a morass of priority disputes that would take the USPTO years to untangle and is likely to crash the trademark application submission website.” Lastly, it argues that its “per se rule” is inconsistent with the way pharmaceutical companies are treated, which are permitted to file intent to use trademark applications for marks identifying drugs that have not completed the FDA approval process and, if used in commerce, would be illegal.

What does all this mean? Most importantly, if you plan on selling a CBD-containing food product, which may be perfectly legal under state law, federal trademark rights are not available until the FDA has approved it. To date, the FDA has approved no CBD food products. Whether Joy Tea’s arguments will win the day is, in this writer’s opinion, unlikely. The requirement of “lawful use,” which is embodied in law (15 USC §1127) is not going away. The likelihood of federal cannabis legalization, though possible, may be years away. Asking the courts to pass judgment on likelihood of legislation may be futile. The policy argument, though interesting, is unpersuasive. The trademark system is surprisingly resilient. For example, China has been flooding the USPTO with trademark applications for the last several years. According to the USPTO, over 76,000 trademark applications in 2019 originated from China. That’s nearly 20,000 more applications than the year before. This growth has not broken the USPTO’s trademark filing system so it’s hard to imagine that the “midnight stampede” by cannabis companies predicted by Joy Tea would break the system. Lastly, the inconsistent treatment of pharmaceutical companies on its face appears problematic; however, pharmaceuticals in the FDA approval process are in a legally sanctioned process whereas no such process exists for CBD food additives – they are simply illegal.

If you are interested in marketing CBD products, let us know but in the meantime, we will follow this case and other developments.

— Adam G. Garson, Esq.