Marijuana Is Legal! But Business Is Not?
How to Build Your Recreational Cannabis Brand Before Your License to Sell Is Issued
Guest Author: Rachel Davey
Last Tuesday, Californians voted YES on Proposition 64 to legalize recreational use of cannabis for adults, ages 21 and over. Massachusetts and Nevada also approved recreational marijuana, and many other states took strides toward complete legalization. While Prop. 64’s passage was a certain victory for prospective non-medical cannabis retailers, they will have to wait to jump into business.
Immediate Changes
- Adults over 21 have new rights. They may possess or transport (up to 1 oz.), grow (up to 6 plants, inside home), and use recreational marijuana (in private).
- There could be a year-long gap before selling non-medical marijuana is legal. State-issued licenses are required to sell and have yet to be issued.
- The Administration. The new “Bureau of Marijuana Control” will usurp the previous “Bureau of Medical Marijuana Regulation.” It will promulgate and enforce planting, licensing, distribution, and sales rules consistent with Prop. 64.
- Regulatory Overload- Tempered. 64 states that rules and regulations should not be “unreasonably impracticable” and they must be “based on best available evidence” and mandate only “commercially feasible procedures.”
- “Gifting” Medical Marijuana to Non-Medical Users. If “gifting” transactions are discovered, responsible medical dispensaries could be shut down, or barred from obtaining a state license to sell non-medical cannabis in the future.
- Selling Marijuana Without a License Can Result in a Misdemeanor Charge with Up to 6 Months in Jail and $500 in Fines.
Changes by January 1, 2018.
- Licenses to Sell Issued; Business Begins. 64 only allows non-medical marijuana to be sold by state licensed businesses. Growing, processing, or transporting marijuana for sale also requires this license. The state must begin issuing sales licenses for recreational retailers no later than January 1, 2018.
- Cannabis Tax. State commercial cultivation and retail excise taxes take effect. Cities and Counties may vote to adopt additional taxes.
The Federal and State Divide: Trademarking Cannabis Goods and Services
There is still a federal and state divide. Federal law continues to designate marijuana as an illegal drug. As an illegal drug, cannabis and its related goods and services are not “trademarkable” subject matter that can form the basis of a federal trademark application in the United States Patent and Trademark Office (USPTO).
However, in California, where recreational marijuana is now legal, applicants may file California trademark applications with the Secretary of State. But there is one caveat: California requires “actual use” of the word mark or logo to file a trademark application, rather than the USPTO requirement of “good faith intention to use [within 6 months]” in commerce.
For prospective recreational cannabis sellers, this might seem like impasse: non-medical marijuana names and logos can’t be trademarked until used in commerce, and they can’t be used in commerce until the state issues a retailer a license to sell—which might begin to happen in January 2018. However, waiting to take action in selecting your mark could be fatal to developing your brand.
Before falling in love with, or investing any start up capital into, a brand name for your non-medical marijuana shop, you should think deeply about your chosen name. Not only must you be the “first to use” the mark in conjunction with some goods or services, but also the name itself must have sufficient trademark strength, to be eligible for protection. There are three different levels of “strength” as to some word mark in conjunction with some goods or services:
- Inherently Distinctive. These words are the strongest, and are automatically eligible for protection. These words are often arbitrary or fanciful. For example: “Fat Cow” computers is arbitrary, but “Fat Cow” ice cream is not, because it is descriptive of the product. And the word “Google” for a search engine is fanciful.
- A descriptive word can only be protected if it becomes distinctive of the Applicant’s goods or services—that is, a substantial segment of the buying population associates the name with its source. The words themselves describe the qualities or characteristics of a good or service (for example, “Park’N Fly” as a service mark for an airport parking and shuttle bus service), describes a geographic location, or is a surname.
- Generic words have no power and are not registerable. These words are the generic words for the goods or services they to which they attach. For example, “Car Wash” for a car wash business is generic. One recently-generic term you might be familiar with is “Xerox” for copy machines. The consuming public referred to copying as “Xeroxing” so uniformly, that the mark lost its power. Consumers no longer identified “Xerox” as the source of the copying machine; the term was used ubiquitously to describe copy machines of all brands.
Potential recreational cannabis retailers should seek out trademark guidance specific to their company’s needs early, in order to select a mark that has not been taken and is eligible for trademark protection, so that they can start building their brands as soon as they are licensed to do so by the state.
If you are in the cannabis industry and are looking to prepare for the effects of Proposition 64, we are happy to help you navigate the new waters. Please give us a call at (415) 633-6841 or email us at info@blgtrademarks.com.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.