Blog

By Michael S. Dorsi

This morning, the U.S. Supreme Court announced its decision in Icanu v. Brunetti, holding that the First Amendment compels invalidation of the provision of the Lanham Act that instructed the United States Patent and Trademark Office to deny registration of any “immoral” or “scandalous” marks. As a result, Brunetti can register his trademark: FUCT. This was not a surprise. When the U.S. Supreme Court grants certiorari on a free speech question, the speaker usually wins, and the government usually loses. Two terms ago, the Court struck down a similar provision of the Lanham Act concerning disparaging marks, compelling the PTO to register the mark for the applicant’s band’s name, THE SLANTS. During oral argument for that case, multiple justices were critical of the PTO’s inconsistent application of the rule against immoral or scandalous trademarks.

If the PTO must register the mark for the name of a rock band despite a potentially disparaging name and a potentially vulgar mark suggestive of a sex act, must it also issue marks for federally illegal drugs? I wondered if that would be the next case. But Justice Kagan, perhaps thinking a step ahead, explained the following in the Opinion of the Court:

• • • • The PTO rejected marks conveying approval of drug use (YOU CAN’T SPELL HEALTHCARE WITHOUT THC for pain-relief medication, MARIJUANA COLA and KO KANE for beverages) because it is scandalous to “inappropriately glamoriz[e] drug abuse.” [citations]. But at the same time, the PTO registered marks with such sayings as D.A.R.E. TO RESIST DRUGS AND VIOLENCE and SAY NO TO DRUGS—REALITY IS THE BEST TRIP IN LIFE. [citations]. Similarly, the PTO disapproved registration for the mark BONG HITS 4 JESUS because it “suggests that people should engage in an illegal activity [in connection with]worship” and because “Christians would be morally out-raged by a statement that connects Jesus Christ with illegal drug use.” [citation].

Iancu v. Brunetti, No. 18-302 (U.S. Jun. 24, 2019), Slip. Op. at pp. 6–7.

That’s cute, but it avoids commenting on the more pressing question for drug-related trademarks: can the PTO deny registration because the applicant’s use in commerce was not lawful. This is not just a question for underground market sales. Many cannabis industry businesses are eager to know the answer. Marijuana and cannabinoids are legal, at least for medical use, in 33 states, 4 of the 5 populated U.S. territories, and the District of Columbia. Although the Controlled Substances Act still lists marijuana and cannabinoids as Schedule I drugs, the Rohrabacher–Farr amendment prohibits the Justice Department from spending appropriated funds prosecuting medical marijuana activity consistent with state law.

Presently, this industry cannot obtain trademarks because the PTO follows a rule refusing to register marks when the use in commerce is unlawful. See, e.g., In Re Pharmacann LLC, 123 U.S.P.Q.2d 1122 (T.T.A.B. 2017 (rejecting application for retail cannabis store), In Re JJ206, LLC, DBA Juju Joints, 120 U.S.P.Q.2d 1568 (T.T.A.B. 2016) (rejecting application for single-use cannabis vape devices), In Re Morgan Brown, 119 U.S.P.Q.2d 1350, *4 (T.T.A.B. 2016 (rejecting application when applicant contemplated selling marijuana and other herbs); see also General Mills, Inc. v. Health Valley Foods, 24 U.S.P.Q.2d 1270, 1274 (T.T.A.B. 1992 (“some unlawful uses are of such a nature (e.g., use of a mark in connection with an illegal drug) that it would be unthinkable to register a mark”).

With the PTO reversed twice in its last two trips to the Supreme Court, one might wonder if success for applicants seeking disparaging or scandalous marks is a good sign for applicants seeking trademark registrations related to the sale of cannabis. As a matter of doctrine, Tam and Brunetti do not lend much support. But two broader trends in Federal Circuit and U.S. Supreme Court cases may help cannabis business applicants.

First, as was evident in the oral argument and written opinion in Brunetti, the Justices are not happy with the PTO’s inconsistent application of restrictions on trademarks. Even if the case turns on a different question of law, skepticism toward the government is an advantage for the challenger.

Second, the trend in statutory interpretation over the past few decades has been to focus on text over purpose, and the PTO’s position is vulnerable to a challenge based on the text of the statute. The relevant section of the Lanham Act permits registration of marks based on “use in commerce,” which the PTO interprets to mean “lawful use in commerce.” But the term lawful does not appear in that section, and other sections do specifically include and refer to “lawful use in commerce.” If Congress meant to constrain registrations to lawful use in commerce, it could have done so. Instead it referred just to use in commerce. The relevant statute, 15 U.S.C. § 1127 says that “commerce” means what may lawfully be regulated by Congress. There is no doubt that Congress can regulate marijuana. Gonzales v. Raich, 545 U.S. 1 (2005) (concluding that marijuana is subject to federal regulation).

Wait — could Congress have really meant for the Lanham Act to allow registration for marks used unlawfully in commerce like illegal drugs? If that sounds like a tough sell, then it might be time for a challenger to look for a better vehicle. How about a more ordinary legal drug or dietary supplement?

That case came before the Ninth Circuit Court of Appeals in the case of CreAgri, Inc. v. USANA Health Sciences, Inc., 474 F.3d 626 (9th Cir. 2007). The District Court had cancelled CreAgri’s mark OLIVENOL on the grounds that because of improper labeling of the dietary supplement, CreAgri had not used the mark lawfully in commerce. The Ninth Circuit affirmed, and CredAgri did not seek review by the Supreme Court. Perhaps it should have. The result seems harsh: cancellation of a trademark based on a labeling violation requiring no wrongful intent.

Taking a commercial cannabis trademark case to the Supreme Court may seem unreasonably risky. But finding a case like CreAgri and making it into a test case — that might give the Supreme Court the opportunity to reverse the PTO for a third time after THE SLANTS and FUCT, checking the boxes for all three of sex, drugs, and rock ‘n’ roll.

By Hannah Stitt

California’s cannabis industry leapt further into the realm of legitimacy via the recent enactment of Section 1550.5(b) of the Civil Code and Section 956(b) of the Evidence Code: “commercial activity relating to medicinal . . . or adult-use cannabis conducted in compliance with California law . . . shall be deemed . . . [the] lawful object of a contract” (Cal. Civ. Code § 1550.5(b)), and the “exception to [attorney-client privilege] . . . shall not apply to legal services rendered in compliance with state and local laws on medicinal cannabis or adult-use cannabis . . . provided the lawyer also advises the client on conflicts with respect to federal law” (Cal. Evid. Code § 956(b)).

Received quietly by both the industry and the media, the passage of these laws means big changes for California’s cannabis industry: suddenly all contracts, including those for insurance policies, money lending, commercial leases and attorney services, are enforceable in California state courts! While leaders must continue to push the envelope for greater legal protections for the burgeoning cannabis industry in other states, California’s industries may now utilize legal services in the same manner as has traditionally benefited business people in other American industries.

“But, how does an entrepreneur with new access to the legal services industry know who to rely on?”

It can be very difficult to find high quality and cost-effective legal services — and people rarely have heaps of time to spend calling all their loose connections for a stellar legal referral, or assessing the validity of each and every review posted by a stranger with an internet connection. No matter whether your legal predicament demands immediate attention and you need to select a lawyer quickly, or if you have the luxury of thoroughly searching for the perfect representative, follow these practical steps to find a capable attorney to work for you.

DESCRIBE YOUR LEGAL ISSUE

First, write down the key aspects of your legal dilemma. Have you been charged with a crime, or do you anticipate that you will be? Do you require analysis of a demand letter that your business received from a landlord, or competitor? Are you looking to incorporate your business, or obtain corporate governance documents like an intellectual property assignment from an employee, or internal data privacy policy for handling client’s personal, financial or medical information? Making a list of the important facts of your situation, and any next-steps that you think may be required or recommended, will help you identify which general category of legal services you require. Armed with this information, it will be easier to select the right attorney for you.

Legal services fall into three broad categories: criminal defense, civil litigation, and transactions. Attorneys practicing criminal defense will be able to help you fight charges or cleanup a criminal record. Civil litigators assist individuals and businesses in dispute resolution, and may represent either the plaintiff or defendant in court. Unlike criminal defense attorneys and civil litigators, transactional attorneys do not spend much, if any, time in the courtroom. Transactional attorneys, sometimes called corporate attorneys, are often called upon to incorporate entities, facilitate investment or mergers & acquisitions, and create corporate governance documents such as bylaws, operating agreements, intellectual property licensing agreements and data privacy policies. Many attorneys have experience or expertise in multiple categories, but generally, will only offer services in one.

CONSULT YOUR NETWORK OR CONDUCT ONLINE RESEARCH

Contacting an attorney referred through your personal or professional network is the best way to ensure that you select a trustworthy, knowledgeable and zealous legal advocate. This is because someone that you already know (and hopefully trust and respect) has already done the leg-work of vetting the legal advocate for their skill, customer service, and overall value. However, our networks may be limited to certain industry spheres or experiences making reliance on our existing contacts a fruitless endeavor. When that is the case, online research frequently generates good candidates.

SELECT AN ATTORNEY WITH THE APPROPRIATE EXPERTISE

Many firms have websites showcasing accomplishments and describing their services. Some even publish blogs regarding important news about the industries they serve, and describing how to troubleshoot issues that frequently arise for their clients. Once you have narrowed down options based on practice area, assess whether the attorney or firm is local, shares your values, and has experience working on your issue and with clients in your industry.

“It is best to select an attorney working in the same geographic region where your business is located because laws and regulations, including the rules of civil litigation, may be geographically specific.”

Working with a local attorney also provides you with increased physical access to your attorney, facilitating effective communication and a better experience for you. Next, read through the website to get a feel for whether the firm shares your values. Many law firms share their mission, business philosophy and story on their website. This information should help you determine whether you will work well with the firm. For example: If your cannabis business has been sued by a former employee for being passed over on promotion, then its probably not a good idea to hire a firm that exclusively represents plaintiffs (i.e., disgruntled employees) or whose largest clients have interests adverse to yours.

Also pay attention to the types of services prominently featured, and the firm’s clients. Oftentimes, work history and specializations are contained in an attorney’s biography.

“Be critical: if a firm advertises that it litigates product liability matters but all of its advertised “successes” from the last five years relate to forming wills & trusts or prosecuting trademark infringement, then it may not be the appropriate firm for your needs.”

Last, if your industry is heavily regulated or subject to constraints like a lack of access to banking, then select an attorney who has provided services to others like you.

For example, an attorney who has been providing transactional services for decades to technology startups and businesses in San Francisco, California may automatically advise all clients to incorporate their businesses in Delaware. They may even include a choice of forum clause, requiring disputes to be resolved in Delaware. This attorney would likely provide you with excellent corporate governance documents, but if the attorney relied on the norm for incorporating a technology business (i.e., in Delaware), that would subject your California recreational cannabis business to jurisdiction in Delaware (a state without a legal recreational cannabis market). Even worse, incorporating in Delaware would likely prevent you and your California recreational cannabis business from asserting a compliance defense to any federal investigators should the come knocking.

Ultimately, this last step may be the most important factor to consider when selecting an attorney and may even motivate you to choose a firm that is not local to you.

USE SOCIAL MEDIA TO CROSS-REFERENCE THE FIRM’S REPUTATION

Search for the firm’s profile on your preferred crowd-sourcing website to learn about prior customers’ experiences (ex: Google Reviews, Angie’s List or Yelp). Their profile may also contain information about the costs of securing the firm’s services, and how efficient they are with client funds. If the company has high ratings after hundreds of testimonials, then it’s likely that you will also be satisfied.

After narrowing down the list of potential firms based on practice area, location, values, customer reviews and experience with your industry, call to request a consultation. It’s common practice for a paralegal to screen any potential clients. Use your written description of the issue to provide the firm with an idea of your needs. From there, the next step is usually a 30-minute free consultation with an attorney who will then decide whether the firm is capable of helping you.

FINAL THOUGHTS

Not all attorneys will take on a cannabis industry client due to a variety of practical, professional, and personal reasons. Cannabis industry business people are well advised to seek out an attorney or law firm with a demonstrated history of representing cannabis industry clients, and with subject area expertise related to the specific legal dispute or question you identified.

 

Author: Sean B. Gentry

Yes, as the media widely reported, the U.S. Supreme Court sided with the baker in the case about a Colorado cake maker turning away business from a same-sex couple after he told them that he did not design custom cakes for gay couples.  However, rather than making a significant nation-wide ruling, the Court simply held that the Colorado Civil Rights Commission’s consideration of the baker’s case was “compromised” and it had treated him unfairly.  Thus, the ruling in no way opened the door to discrimination for businesses against any persons with protected, immutable characteristics.

In fact, Justice Kennedy wrote that it is “unexceptional” that Colorado law “can protect gay persons in acquiring products and services on the same terms and conditions that are offered to other members of the public.”  The problem was that the Commission did not apply the law “in a manner that is neutral toward religion.”Read More >

Author: Sean B. Gentry

The U.S. Supreme Court recently ruled that employers can use arbitration clauses in employment contracts to limit their employees’ right to file or participate in class actions lawsuits on wage and hour claims. Employers can require their employees to pursue most types of employment claims in arbitration instead of court and can prevent employees from banding together to more efficiently litigate their claims as a group. For employers that have been waiting to see how the law settled on this matter, or that have been wondering about the validity of arbitration agreements already in place with their employees, it is now clear that these agreements will be enforced as long as they meet certain standards of fairness.

This case, entitled Epic Systems Corp. v. Lewis, resolved a number of conflicting Circuit Court opinions on this issue that stemmed from the National Labor Relations Board decision 2012 in D.R. Horton, Inc., which found that individual employment arbitration agreements were incompatible with the collection rights of employee under the National Labor Relations Act and that the NLRA was not preempted by the Federal Arbitration Act. However, a 5-4 majority of the Supreme Court disagreed with that finding and instead held that the FAA preempted the NLRA.

Read More >

Author: Wendy Hillger

Proposition 65 requires the State of California to maintain a list of chemicals that can cause cancer, birth defects or other reproductive harm.   These warnings apply to landlords, business owners, bars/restaurants, and other retailers.  Businesses with 10 or more employees that expose individuals to listed chemicals through their products or operations generally must provide warnings.  At present, approximately 900 chemicals are required to be disclosed, such as additives or ingredients in pesticides, common household products, food, drugs, dyes, or solvents. Additionally, listed chemicals may also be used in manufacturing and construction, or they may be byproducts of chemical processes, such as motor vehicle exhaust.  These chemicals can be in the products that Californians purchase, in their homes or workplaces, or that are released into the environment.Read More >