Just in time for the holidays and during the final countdown to California’s cannabis legalization, Secretary of State Alex Padilla launched Cannabizfile, an online portal that provides information regarding the nuts and bolts for the business side of setting up a canna-business.

Cannabizfile provides links for searching and reserving company names, trademark registration forms, tips for starting a cannabis business, a link to licensing and taxation information and even a FAQ with a checklist of steps to start a canna-business in California.

I previously wrote that as of January 1 (actually January 2), for the first time, California cannabis companies will be able to obtain trademarks and service marks for their goods and services. Now that the recreational cannabis industry is coming into the day light, canna-businesses need to put their ducks in a row, following the same business practices that non-canna-businesses follow.

Entity Creation

Cannabis entities must decide if they want to operate under a fictitious business name, i.e. Bob Smith doing business as Smith’s Olde Weed Shop, or as a limited liability company, a corporation, a cooperative or a limited liability partnership. The Cannabizfile allows businesses to search their potential company name against existing names and to register their names.

But there’s more to creating an entity than picking a name.  Your entity needs bylaws, operating agreements, buy-sell agreements and other documents that spell out who owns what, and how the company will be run.  Taking the time to identify the company owners’ rights and obligations up front will save endless debate, arguments and litigation down the road.

What’s In a (Trade) Name?

The Cannabizfile includes a link to information to how canna-businesses can register their trademark or service mark. Unlike registration with the United States Patent and Trademark Office, the California Secretary of State’s office only grants rights within the State of California.  Given the projected massive size of California’s cannabis industry, obtaining trademark protection within California still confers huge benefits, including the right to prevent others from selling goods or services that are similar to your registered marks and the right to collect damages from those infringing your registered marks. The Cannabizfile provides that beginning January 2 customers may register their cannabis-related trademark or service mark and that in case of a tie (two or more applicants seeking the same or confusingly similar marks) priority will be given to the first filed.  Applications received by mail will be labeled received at 5:00 p.m. on the date received and applications received in person over the counter in Sacramento will be labeled at the actual time and date received.

Just Like Buying Concert Tickets Before the Internet

So if there’s a trademark that is so good you absolutely positively must have it, I suggest that on January 2, you set your alarm clock, drive to Sacramento and get in line for when they open at 8:00 a.m. as there is no mail service January 1 and it’s a state holiday so the Secretary of State’s counter will also be closed.

So get on your bad motor scooter and ride.

[Note: A previous version of this article ran on Wendel Rosen’s cannabis industry blog at www.calcannabislawblog.com on June 8, 2017.]

In June 2017, the California Assembly passed California AB 64, an omnibus bill regarding medical and recreational marijuana, and the bill is currently working its way through the California Senate committee process.

Federal cannabis trademark registration appears unlikely for the foreseeable future. The California cannabis industry and intellectual property lawyers are anticipating a trademark filing frenzy on January 1, 2018, when the California Secretary of State is scheduled to begin accepting trademark applications for cannabis goods and services.

California Currently Follows Federal Lead on Cannabis Trademarks

Under current law, the California Secretary of State will only register marks that are “substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946 (15 U.S.C. §1051 et seq.) as amended.  To that end, the construction given the federal act should be examined as non-binding authority for interpreting and construing this chapter.” Cal. Bus. & Prof. Code §14272.

The United States Patent and Trademark Office (“USPTO”) will only register trademarks relating to commerce “which may lawfully be regulated by Congress.” 15 U.S.C. §1127, and specifically the USPTO requires that “use of a mark in commerce must be lawful use to be the basis for federal registration of the mark.”  Trademark Manual of Examining Procedure §907.

AB 64 Untethers California from the USPTO Limitations

The Legislative Analyst’s Digest for AB 64 identifies the conflict between California and Federal law relating to marijuana’s legality, and clarifies AB 64’s intended effect on marijuana trademarks:

(6) Existing law, the Model State Trademark Law, provides for the registration of trademarks and service marks with the Secretary of State and requires the classification of goods and services for those purposes to conform to the classifications adopted by the United States Patent and Trademark Office.

This bill, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, would, notwithstanding those provisions, authorize the use of specified classifications for marks related to cannabis, including medicinal cannabis goods and services that are lawfully in commerce under state law in the State of California.  (Emphasis added).

Specifically, Section 2(a) of AB 64 adds Section 14235.5 to the Business and Professions Code, which will establish two new cannabis trademark and service mark classifications:

Classification “500 for goods that are cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products;” and

Classification “501 for services related to cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.”

Countdown to January 1, 2018

In plain English, on January 1, 2018, cannabis businesses will finally be able to register trademarks and service marks for cannabis goods and services, including trademarks for specific cannabis strains, assuming the proposed marks satisfy the other registration requirements (i.e. distinctiveness, lack of likelihood of confusion with existing registered marks, etc.)

Given that California is the most populous state, that the California cannabis market is projected to reach $6.5 billion by 2020, and that it is currently impossible to obtain a nationwide trademark for cannabis products, the California Secretary of State should anticipate receiving a tsunami of cannabis related trademark applications on January 2, 2018 (January 1 is an official State holiday).

Unlike the USPTO, which does not require an applicant to have used a mark in order to file an application (though proof of use is eventually needed for registration), California requires proof of actual use in commerce to file and register a trademark.  Cal. Bus. & Prof. Code 14202(h).  While existing cannabis trademarks already used in California may  already have common law trademark protection, registration with the Secretary of State would confer statewide rights and additional remedies.  Therefore, smart cannabusinesses should begin finding and using marks that will ultimately qualify for well in advance of the January registration date.

* A Californian cannabusiness would have zero chance of obtaining Acapulco Gold trademark because it would be geographically misleading and because the strain’s name is already widely used.

Last week the California Assembly passed Assembly Bill 64 (AB 64), an omnibus bill regarding medical and recreational marijuana, sending it to the State Senate for review.

Federal cannabis trademark registration appears unlikely under the current administration. The California cannabis industry and intellectual property lawyers are anticipating a trademark filing frenzy on January 1, 2018, when the California Secretary of State is scheduled to begin accepting trademark applications for cannabis goods and services.

Current Status: California Follows Federal Lead — No Cannabis Trademarks

Currently, the California Secretary of State will only register marks that are “substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946 (15 U.S.C. §1051 et seq.) as amended. To that end, the construction given the federal act should be examined as non-binding authority for interpreting and construing this chapter.” Cal. Bus. & Prof. Code §14272.

The United States Patent and Trademark Office (USPTO) will only register trademarks relating to commerce “which may lawfully be regulated by Congress.” 15 U.S.C. §1127, and specifically the USPTO, requires that “use of a mark in commerce must be lawful use to be the basis for federal registration of the mark.” Trademark Manual of Examining Procedure §907.

AB 64 Untethers California from the USPTO Limitations

The Legislative Analyst’s Digest for AB 64 identifies the conflict between California and Federal law relating to marijuana’s legality and clarifies AB 64’s intended effect on marijuana trademarks:

(6) Existing law, the Model State Trademark Law, provides for the registration of trademarks and service marks with the Secretary of State and requires the classification of goods and services for those purposes to conform to the classifications adopted by the United States Patent and Trademark Office.

This bill, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, would, notwithstanding those provisions, authorize the use of specified classifications for marks related to medical cannabis and nonmedical cannabis goods and services that are lawfully in commerce under state law in the State of California. (Emphasis added).

Specifically, Section 2(a) of AB 64 adds Section 14235.5 to the Business and Professions Code, which will establish two new cannabis trademark and service mark classifications:

Classification “500 for goods that are medical cannabis, medical cannabis products, nonmedical cannabis, or nonmedical cannabis products;” and

Classification “501 for services related to medical cannabis, medical cannabis products, nonmedical cannabis, or nonmedical cannabis products.”

Countdown to January 1, 2018

In plain English, on January 1, 2018, cannabis businesses will finally be able to register trademarks and service marks for cannabis goods and services, including trademarks for specific cannabis strains, assuming the proposed marks satisfy the other registration requirements (i.e., distinctiveness, lack of likelihood of confusion with existing registered marks, etc.).

Given that California is the most populous state, that the California cannabis market is projected to reach $6.5 billion by 2020, and that it is currently impossible to obtain a nationwide trademark for cannabis products, the California Secretary of State may be overwhelmed with cannabis related trademark applications on January 2, 2018 (January 1 is an official  State holiday).

Unlike the USPTO, which does not require an applicant’s prior use of a mark to file an application (though proof of use is eventually needed for registration), California requires proof of actual use in commerce to file and register a trademark. Cal. Bus. & Prof. Code 14202(h). While existing cannabis trademarks already used in California may currently have common law trademark protection, registration with the Secretary of State will confer statewide rights and additional remedies.

Smart cannabusinesses should begin finding and using marks that will ultimately qualify for trademark registration well in advance of the January registration date.

* A Californian cannabusiness would have zero chance of obtaining Acapulco Gold trademark because it would be geographically misleading and because the strain is already widely used.

A lot happened in 2016. The first thing that comes to my mind as the unexpected event of 2016 is Alaska Airlines’ acquisition of Virgin America. At first glance, Alaska and Virgin didn’t seem to  have that much in common. Alaska is the introvert: it’s a well-established airline that likes to stay close to home on the West Coast. Virgin is the fun, upstart newcomer that likes to explore new places around the country. With the acquisition, Alaska will now be able to tap into Virgin’s loyal customer base all throughout the United States.

Although Alaska completed its acquisition of Virgin in December 2016, there were no immediate, significant changes to either of the airlines. However, last week, Alaska Airlines announced that it intended to retire the Virgin America name and logo in 2019. Presumably, the entirety of the Virgin America brand – color schemes, uniforms, in-flight entertainment, frequent flyer program, and everything else, will be phased out as well. Alaska intends to implement new flight attendant uniforms and a redesigned cabin interior would be introduced to all its flights in the next few years.

What’s going to happen to Virgin America’s registered trademarks and servicemarks? Under federal law, a mark is deemed to be abandoned if its use has been discontinued (generally for at least 3 consecutive years) and there is intent not to resume its use. The owner of an abandoned mark won’t be able to protect against use of the mark by others. This means that third parties can use the mark, or even register the mark for themselves.

In Virgin America’s case, Alaska has already publicly expressed its intention to retire the Virgin America name and logo. While the term “retirement” may be thrown around loosely by some (see e.g. Jay-Z, Barbara Streisand and Michael Jordan), in this context, it seems synonymous with abandonment. Alaska’s announcement suggests that it will discontinue all use of the Virgin America marks by 2019 as part of its comprehensive rebranding process. If the Virgin America marks are deemed “abandoned,” it opens up the possibility for other parties (or Virgin America’s founder, Sir Richard Branson) to use and register the Virgin America marks – or maybe even start a new Virgin America airline.¹ While Virgin America, the company, may no longer be around, its marks may live on.

¹ Although third-party use of an abandoned “Virgin America” mark could infringe upon other Virgin marks still owned by Branson or his holding company, Branson himself could potentially revive the Virgin America brand, depending on the terms of the Alaska/Virgin buyout agreement.

Could you write a legal opinion about Jimmy Buffett, Margaritaville and Marijaunaville without displaying any trace of a sense of humor? The United States Patent and Trademark Office (USPTO) did. The USPTO wrote a 30-page opinion about the singer, who’s backed by the Coral Reefer Band and has created “an island escapism lifestyle,” without a single pun, witticism or joke that might elicit even a smirk, much less a smile.

Rachel Bevis, the applicant, sought to register the trademark MARIJUANAVILLE for a variety of types of clothing to be sold in locations that support the legalization of marijuana. Jimmy Buffett’s company Margaritaville Enterprises, LLC filed an opposition, citing its use of the MARGARITAVILLE mark on a number of products, including clothing.

The USPTO applied the 12 DuPont factors, used for determining the likelihood of confusion between the applicant’s mark [MARIJUANAVILLE] and the existing mark [MARGARITAVILLE].

The USPTO reviewed Buffett’s epic career and his widespread “media and popular culture exposure” and concluded, in a gross understatement, that Margaritaville has established that its mark is “famous.”

Margaritaville enlisted an expert lexicographer and linguistic consultant to state the obvious, that “due to the shared linguistic properties of the two terms Margaritaville and Marijuanaville …are similar and may result in consumer confusion.” Apparently Margaritaville’s money was not well spent as the USPTO refused to rely on such testimony noting that “opinion testimony on the questions of likelihood of confusion is admissible, it is entitled to little or no weight.” With all the groove of a blown flip-flop, the USPTO conducted its own comparison and found:

[B]oth marks are similar insofar as they are  comparing the two “single term 14 letter marks comprises of five syllables, each commencing with the same letter string “mar-” and ending with the suffix “-ville.” As to their connotation and commercial impression, the record shows a public association between the two terms as representing a similar “state of mind” induced by either a cocktail or marijuana. According to the record, the suffix “-ville” is a slang term frequently combined with other words to denote a “state of being.”

The USPTO made no mention of the fact that marijuana is a Schedule 1 Controlled Substance and that the USPTO will not register trademarks for actual marijuana use. In fact, the USPTO has registered numerous trademarks for clothing and other goods and services that relate to marijuana or cannabis, so long as the goods and services do not relate directly to the sale of marijuana.

The USPTO sustained Margaritaville’s opposition and denied registration to MARIJUANAVILLE, concluding that “thus, the overall connotation and commercial impression of the marks is highly similar – a chemically induced mental paradise. The public is likely to perceive Applicant’s mark [MARIJAUNAVILLE] as an extension of Opposer’s lifestyle brand [MARGARITAVILLE]”

One can only hope that after this ordeal, Jimmy Buffett, the applicant, and maybe even the USPTO Judge, were able to chill on a beach somewhere, watchin’ the sun bake and get to their own “states of being.”

[Note: This post also appears on Wendel Rosen’s IP Legal Forum blog.]

Today’s topic is “tacking” and why you need to have at least some awareness of this important concept in the law of trademark.

Imagine Company A has been using a distinctive and well-known company logo on its product for years. Company A then decides to “refresh” its marketing, including rolling out a shiny, updated logo. Does Company A lose any trademark rights it may have established in the old company logo simply by updating its branding?

That is where “tacking” comes in. This concept allows a trademark owner to “tack on” the period of use of an earlier mark to the owner’s use of a subsequent mark where the “two marks are so similar that consumers generally would regard them as essentially the same.” Hana Financial, Inc. v. Hana Bank (9th Cir. 2013) 735 F.3d 1158, 1163-1164, cert. granted, 134 S. Ct. 2842 (2014) and aff’d, 135 S. Ct. 907 (2015); Hana Financial, Inc. v. Hana Bank (2015) 135 U.S. Ct. 907, 910 (two marks “may be tacked when the original and revised marks are ‘legal equivalents,’” meaning that the two marks that “‘create the same, continuing commercial impression’ so that consumers ‘consider both as the same mark.’”).

If an owner is allowed to tack on to prior use, updating a trademark (such as a tradename, a product slogan or logo style) does not result in abandonment of or loss of priority in the use of the trademark.

Tacking furthers the policy aims of trademark law because it prevents the loss of valuable trademark rights while still allowing for reasonable innovation in the market. As the Ninth Circuit of Appeals explained in its decision in Hana Financial, Inc. v. Hana Bank, a decision recently affirmed by the United States Supreme Court:

“Tacking” is permitted because “[w]ithout tacking, a trademark owner’s priority in his mark would be reduced each time he made the slightest alteration to the mark, which would discourage him from altering the mark in response to changing consumer preferences, evolving aesthetic developments, or new advertising and marketing styles.” … Moreover, “[g]iving the trademark owner the same rights in the new mark as he has in the old helps to protect source-identifying trademarks from appropriation by competitors and thus furthers the trademark law’s objective of reducing the costs that customers incur in shopping and making purchasing decisions.”

Hana Financial, Inc. v. Hana Bank, supra, 735 F.3d at 1164, quoting Brookfield Communications, Inc. v. West Coast Entertainment Corporation (9th Cir.1999) 174 F.3d 1036, 1048.

However, here is the real lesson for the day—the courts have made it abundantly clear that the doctrine of tacking is “exceptionally narrow” and, therefore, you must tread lightly when you endeavor to alter the look or feel of any existing trademarks, especially things like company logos or product slogans. Brookfield Communications, Inc. v. West Coast Entertainment Corporation, supra, 174 F.3d at 1036, 1047-1048. The standard for tacking has been described as “exceptionally narrow” and “exceedingly strict.” The marks “must create the same, continuing commercial impression” and the later mark should not “materially differ from or alter the character of the mark attempted to be tacked.” Id. at 1048. So when the marketing folks come up with all of those great ideas to jazz up the company branding, make sure to give thought to the impact on trademark rights and confer with trademark counsel if necessary.