Proprietary pot: Cannabis trademarks aren’t legal, but workarounds exist to protect IP – Crain’s Detroit Business

The state’s largest marijuana grower plans to launch a line of edible gummies this fall — without enough tetrahydrocannabinol, or THC, to get you high.

Dimondale-based Green Peak Innovations will launch its branded Jolly Edibles as a CBD-only product, meaning it contains less than 0.3 percent THC. While CBD products are popular, the choice has more to do with protecting its branding than selling gummies.

The U.S. Patent and Trademark Office bars trademarks on illicit products. Marijuana remains a Schedule 1 narcotic at the federal level, despite being legal for use in Michigan. This presents a tricky scenario for the state’s legal marijuana companies seeking to protect their intellectual property.

Green Peak, like many others in the industry, is enforcing its protections in as many „workarounds” as possible, local experts say.

„We’re forced to get somewhat creative,” said Jeff Donahue, general counsel for Green Peak. „We’ve had a few (trademark) denials, so we’re crafting some specific language with the USPTO. We’re taking a look at all of our products that could fall under the legal threshold for trademark and establishing our name everywhere we can.”The plan is to trademark as much of Green Peak’s product line as possible and make new products under brand names that are under the THC limit to appease federal authorities.

Jennifer Hetu, trademark attorney and partner at Honigman LLP in Bloomfield Hills, said cannabis companies should be filing trademarks on everything and anything they can, including branded tchotchkes and non-cannabis merchandise.

„You want to get as many protections as possible as broadly as possible,” Hetu said. „File for ancillary products and services. File applications for clothing, hats, bags, stickers, lighters, rolling papers. Although not squarely in your space, it provides you protection of that brand name.”

Green Peak sells T-shirts and other items with its North Cannabis brand, which is the physical marijuana product distributed to retail locations.

But many sophisticated companies and their attorneys are making bigger bets on cannabis trademarks amid swaying opinion that the drug should be federally legal.

Under USPTO rules, companies can file intent to use trademark applications on a cannabis product without identifying to the federal regulators that it is for cannabis. The USPTO gives applicants three years to provide documentation of the product’s use.

„You can file a real buttoned up application where the mark doesn’t reference anything related to marijuana or cannabis and just wait,” Hetu said. „Effectively, you’re running out the clock on purpose waiting for (federal) legalization.”

Green Peak is employing this strategy as well, Donahue said.

„That’s the strategy for sure,” he said. „Keep things pending for as long as you can through the process. From an application point, it’s a gray area. So if we’re first to market, we’re making sure our brands are visible before it’s legal at the federal level.”

Marijuana companies can also file trademarks at the state level, which holds some water legally, but cannot be used to battle infringement from outstate operators, which is more likely to be the problem, Hetu said.

For this reason, many large marijuana companies are attempting to establish a brand presence in as many legalized states as possible. Green Peak acquired cannabis vaporizer maker Evoxe Laboratories in California earlier this year to expand its operations, but also to expand its branding.

„From a strategic standpoint, we want to be a multi-state operator,” Donahue said. „We’re doing this not specifically for the trademark issue, but clearly you get there by having brands that are defensible in many states.”

Patent protection — the USPTO does not require a product be legal to achieve a patent — is heating up in the cannabis industry as well, said Thomas Southard, partner at Butzel Long PC in Washington D.C.

„We’ve been seeing major companies file for patents related to cannabis in recent years,” Southard said. „Patents are always very valuable but we’re seeing they are very valuable in this space as the industry will likely see lots of (mergers and acquisitions) in the future.”

Biopharmaceutical giant GW Pharmaceutical has filed dozens of cannabis-related patents, mostly tied to CBD products. So has Janssen Pharmaceuticals and even the National Institutes of Health.

Cannabis companies can file patents on growhouse modifications, specialized equipment for transporting cannabis, automation for harvesting marijuana and even the chemical formulas for the strains of marijuana.

„I liken it to the start of the auto industry,” Southard said. „Think of all the streamlining and advancements in manufacturing. The same is going to happen in cannabis. Patents are going to be very powerful assets in the future.”

Patent protections are already going to court. In July 2018, Golden, Colo.-based United Cannabis Corp. sued Conifer, Colo.-based Pure Hemp Collective Inc. for patent infringement over its CBD product formula. The case remains ongoing.

„Lawsuits are coming in now as companies are correctly protecting their investment in intellectual property,” Southard said. „It’s only going to grow as the industry matures.”

Southard said many small independent marijuana businesses don’t protect their patents because it’s costly, but warns that it may be costlier not to.

„At some point, someone might infringe upon your IP,” Southard said. „A lot of small companies have never been involved in patent litigation and it’s costly. But there are options.”

Southard estimates a patent protection suit can cost from $1 million to $3 million in many cases, but that litigation finance companies are often a smart way for smaller companies to combat infringement.

These companies underwrite the litigation for a portion of the recovery if the suit is ruled in the plaintiff’s favor.

„File patents,” Southard said. „Don’t be lazy and let the competition overtake you. Always think of newer and better ways to build the mousetrap. This industry is expanding and more competitive; you’ve got to protect your turf.”

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