Proposition 64 and Trademarks: The Effect of California’s Vote to Legalize Marijuana on Brand Protection

Proposition 64

Californians will officially vote to legalize marijuana this November.  Proposition 64, which has been coined as the Adult Use of Marijuana Act, is on the ballot and would allow adults ages 21 and older to possess up to one ounce of marijuana, cultivate up to six pants and establish regulations for the manufacture and sale of marijuana.

Early polls show a likelihood that the initiative will pass, and campaign funding is strongly in favor of supporting the proposition.

The initiative will tax marijuana sales, creating revenue for the state in a newly formed market that some experts estimate will be worth $4 billion by 2020.  A provision of the initiative is designed to prevent large-scale marijuana businesses from entering the marketplace for five years to prevent monopoly and encourage competition, which will in turn allow small businesses to benefit most from the initial boom.

The legalization of marijuana in California will allow for the emergence of cannabis based businesses, including cultivators and dispensaries, but its effects will also extend to professionals such as accountants, lawyers, software developers, and insurance companies.

Legalization's Effect on Trademark Law

An entire infrastructure will be created for a product that has been prohibited to the general public for years.  The potential for profit will attract a variety of new business owners, and they will look to protect their brands through trademark law.

However, the United States Patent and Trademark Office (USPTO) does not allow the marijuana companies to register their trademarks because the substance is still illegal under federal law.  Businesses will need to look to alternate avenues to protect their marks.

But there is hope.  Trademark rights in the United States are based on use in commerce, not federal registration.  This means that cannabis companies can obtain common law trademark protection simply by being in business. 

Cannabis businesses should not rely simply on use in commerce, instead they should look to register with the State of California’s trademark office.  State registration does not provide the breadth of protection gained by federal registration, but it is practical safeguard to achieve protection under California state trademark law.  The price is lower than federal registration and a successful application puts other businesses on notice that the trademark is being used, thereby deterring similar use.  It can also be used as evidence in establishing prior use in trademark infringement cases.  Establishing use in commerce at the state level will be beneficial if marijuana is ever legalized nationwide and the USPTO begins allowing registration.

There still is the risk that California will not allow state trademark registration for marijuana companies, but groups have already begun to advocate for state registrations if applications are rejected after Proposition 64 goes into effect.

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 (650) 271-9395 or email us at info@blgtrademarks.com.

Written By: Vivek Vaidya

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.