Lex Indicium

Does a trademark applicant’s belief that the cannabis goods specified in its trademark application will become federally lawful in the future provide a sufficient basis upon which to predicate its claimed  “intent to use” the mark in lawful U.S. commerce? This was the question recently presented at the Trademark Trial and Appeal Board (TTAB) – the administrative body tasked with hearing appeals of refusal to register marks by the U.S. Patent and Trademark Office (USPTO).

Overview of Federal Trademark Lawful “Use” Requirement

In general, federal trademark rights provide the owner with national, exclusive rights to use a mark in connection with a specific set of goods and services. Unlike most other countries, the USPTO has a “use based” trademark system, meaning it requires trademark owners to demonstrate actual use of their marks in lawful U.S. commerce in order to register and/or maintain their trademark rights.

A federal trademark application must include a description of goods and services described with sufficient particularity to be understandable to the average person. The application can be based either on current use of the trademark in connection with the claimed goods and services in U.S. commerce or based on its future intent to use. In the latter instance, the registration will not issue until the applicant demonstrates actual use of the mark in commerce; a successful application will be kept in limbo in an “allowance” stage for a time until use is demonstrated.

Importantly for cannabusinesses, regardless of the filing basis, the scope of the USPTO’s jurisdiction is limited by statute to “commerce which may lawfully be regulated by Congress.” As applied to the cannabis industry, the USPTO has interpreted this limitation to restrict it from allowing or registering trademark applications that cover:

• goods that incorporate cannabis, other than federally lawful “hemp” permitted by the 2018 Farm Bill (i.e. containing no more than 0.3% THC on a dry-weight basis), as such substances are no longer federally prohibited under the Controlled Substances Act (CSA);
• anything ingestible and/or goods for medical or health purposes that incorporate federally lawful hemp, unless the applicant has received, or is actively seeking approval from the Food and Drug Administration (FDA), as required under the Federal Food, Drug, and Cosmetic Act (FDCA); and
• any goods or services related to the manufacture, distribution, sale, or delivery of cannabis other than federally lawful hemp.

A trademark examiner will review a trademark application to see whether, among other things, the application complies with federal law and regulation. In particular, the USPTO will refuse marks if the application claims use with goods or services that are not legal under federal law. If a mark is refused registration, the applicant may file an appeal with the TTAB.

Refusal of FOR JOY Trademark Application for CBD-Infused Tea

Joy Tea filed a federal trademark application for the mark FOR JOY covering teas containing CBD. The application was based on Joy Tea’s intent to use the mark in commerce in the future. The USPTO initially refused registration on the basis that the claimed goods were unlawful under both the CSA and FDCA. Joy Tea was able to overcome the CSA refusal by limiting its described goods to teas containing CBD with a THC concentration of no more than 0.3 percent on a dry-weight basis (thereby qualifying as federally lawful hemp). However, the USPTO issued a final refusal of the application on the basis that the goods, even as amended, were still federally unlawful under the FDCA because food/drink that incorporates CBD requires FDA approval. Despite Joy Tea’s attorney’s submission of over 80 pages of arguments and exhibits to persuade the examiner to withdraw the refusal, the refusal was maintained. Joy Tea appealed the refusal to the TTAB on March 19, 2021.

Joy Tea’s position in its appeal is simple: it asks the TTAB to overturn its previous ruling that an application based on intent to use requires the applicant intend to use a trademark in connection with goods and services that are federally lawful at the time the application is filed. Instead, Joy Tea argues that applicants who have a good faith basis to believe the claimed goods and services will become federally lawful in the future based on a change in the law should meet the “intent to use” requirement of a federal trademark application.

In support of its position, Joy Tea put forth several arguments, many of which were largely unsupported by legal decisions that may bind or at least persuade the TTAB. However, one of the strongest arguments Joy Tea raised was that the USPTO regularly allows intent-to-use applications from pharmaceutical companies for drugs that are not yet approved by the FDA. Joy Tea argues that it logically follows that cannabis products that are lawful, other than requiring FDA approval under current laws and regulations, are similarly situated to pharmaceutical products that are not yet FDA approved, and as such, the trademark applications should be treated similarly and intent-to-use applications should be allowed by the USPTO.

In response to Joy Tea’s appeal brief, the examiner’s brief includes a detailed overview of the existing regulations and TTAB decisions that require an examiner to refuse registration based on the claimed goods violating the FDCA. The examiner also responded to Joy Tea’s argument that the cannabis industry should be treated the same as the pharmaceutical industry by noting that pharmaceutical goods pending FDA approval are merely unapproved, but not unlawful. In contrast, a CBD-infused beverage is unlawful without FDA approval.

What’s Next?

Joy Tea filed a reply brief to the examiner’s brief, reiterating its position that the USPTO should overturn its per se rule that intent-to-use applications may only cover goods and services that are lawful at the time of filing. The trademark examiner has the opportunity to withdraw the refusal in light of the arguments put forth in the reply brief, barring which, the TTAB will issue its decision. According to the USPTO’s website, the current timeline for TTAB appeal decisions is about 10 weeks; however, the TTAB is not bound to this timeline. If the TTAB agrees with Joy Tea’s view and finds that intent-to-use applications may be based on an applicant’s belief that its claimed goods and services will become federally lawful in the future based on a change in the law, the TTAB will send Joy Tea’s application back to the examiner for further examination with instructions that the examiner must continue examination of the application with this clarification.

If, on the other hand, the TTAB upholds the refusal, Joy Tea will have the option to either (1) appeal the decision to the U.S. Court of Appeals for the Federal Circuit (a federal court with subject matter jurisdiction and expertise in several topics, including trademark law), or (2) file a lawsuit seeking review of the decision from a U.S. District Court. While the Federal Circuit Court typically issues final decisions faster, the parties are restricted to the record of the TTAB proceeding. Filing a lawsuit with a District Court, on the other hand, allows the parties to introduce new evidence and arguments.

We do not expect the TTAB to issue its decision until at least the fall of 2021. It would be highly unusual for the TTAB to overturn its own precedent, particularly since the decision Joy Tea seeks to overturn was issued only five years ago. Moreover, the TTAB is no doubt conscious of the floodgates that could be opened by issuing a decision that could allow any intent-to-use trademark application to be permitted so long as the applicant “believed” that a law prohibiting the goods and services could change in the future and render the use of the mark with the specified goods and services legal.

A dramatic shift in the USPTO’s use requirement that could provide a meaningful path for cannabusinesses to reserve their trademarks prior to any anticipated federal legalization seems more likely to come from a federal court than the TTAB. Still, Joy Tea’s argument that the USPTO should allow intent-to-use applications for cannabis goods that would be federally lawful but for FDA approval – as it allows for pharmaceutical companies – is sound and may be enough to persuade the TTAB to overturn the examiner’s refusal and its own precedent.