Cannabis, Consumers, and the Trademark Laundering Trap

Abstract

At the moment, cannabis companies cannot get trademark protection for their marijuana and marijuana-related products because the “lawful use” doctrine limits federal trademark protection to goods lawfully sold in commerce. Given that the drug remains illegal under federal law, this may not sound like much of a problem, but it has serious consequences for consumers of marijuana. Without trademark rights, a cannabis company in one state can simply use the brand name of a prominent company in another state and consumers will assume that they are getting the products they have come to rely on, with potentially dangerous results. As the cannabis industry has grown, this issue has only become more acute; the current approach of the United States Patent & Trademark Office (PTO) and the federal courts undermines trademark law’s consumer protection and fair competition goals. Several years ago, we proposed a solution to the unavailability of trademark protection during federal prohibition, one we suggested would help cannabis companies and cannabis consumers bridge the gap from the current period of legal ambiguity through full marijuana legalization. We coined the phrase “trademark laundering” to describe the practice of applying for federal trademark protection for a mark placed on legal products and then using that mark on both legal and illegal goods – on both t-shirts and marijuana, for example. As we anticipated, the practice has indeed taken off, but it has been a success only on the surface. This article examines how the PTO and the courts have mishandled marijuana marks and identifies how they have interpreted and deployed the lawful use doctrine in ways that undermine and conflict with trademark’s stated goals. Given that the PTO is unlikely to abandon the lawful use doctrine any time soon, we propose changes to the way the PTO applies that doctrine in the trademark registration process, as well as changes to the courts’ consideration of trademark disputes involving cannabis companies. These changes will ensure that both consumers and marijuana businesses are protected as the United States transitions from marijuana prohibition to a post-prohibition federal regulatory regime.