(An earlier version of this story that included comments from Karen Freese incorrectly identified her as a co-founder and principal of Bud Marketers. Freese is a principal at Bud Marketer and KLF Consulting.)
By John Schroyer
A year ago, Dixie Elixirs and Medical Marijuana Inc. reached an “amicable resolution” on a year-long legal dispute over a partnership that went sour.
Part of the settlement created a novel business situation in which Dixie Elixirs agreed to sell its non-psychoactive hemp-based CBD product line called Dixie Botanicals to Medical Marijuana Inc.
That means there are two separate product lines, owned by different businesses, that have the same first name – Dixie – and the exact same logo.
“What you have is one corporate entity owns Coke and one corporate entity owns Diet Coke,” said Andrew Hard, a spokesman for Medical Marijuana Inc.
The setup is highly unusual, not just in the cannabis industry but also in the corporate world in general. Companies often fiercely protect their brands and logos, which can become some of the most valuable assets of a business.
It’s also a potentially risky scenario for both companies, as a misstep by one brand could harm the other. If, for instance, one of the product lines suffers a recall or makes people sick, consumers might associate the two brands as being the same.
So far, Dixie Elixirs and Medical Marijuana Inc. say they’re not worried about serious brand confusion – either now or in the future.
The companies have a different footprint: Dixie Elixirs sells its popular THC-infused drinks and edibles of the same name only in Colorado as of now, while Medical Marijuana Inc. recently moved production of the Dixie Botanicals line to its home base in California and sells the products online and nationwide.
Still, the potential that patients and consumers could confuse the brands will rise if Dixie Elixirs expands to other states – a goal it is currently working toward. Dixie Elixirs has spent a fair share of time and money building its name with cannabis patients and consumers as it looks to become a national player. So it arguably faces a bigger downside tied to brand issues.
Even if the two companies aren’t competing, the situation could wind up creating a worst-case scenario for both firms, said attorney Mary Shapiro, who specializes in trademark law.
“I just don’t think they thought through to nationalization, when both of their products could be sold at the same dispensaries, under the same mark and the same logo,” Shapiro said. “Dixie Elixirs could be planning to go into Oregon and Washington or wherever, and they’re going to be sold at the same (shops), and it’s going to be nearly impossible for the average consumer to figure out which is which.”
“We set certain parameters in place. Everything from a non-compete period…but also things like the brand mark can never be outside botanicals,” Hodas said.
On top of that, Dixie Elixirs isn’t prohibited by the agreement from getting back into CBD products. And it fully intends to do so, Hodas said.
Regardless, the Dixie brand has substantial value: It’s one of the primary reasons Medical Marijuana Inc. wanted Dixie Botanicals, Hard said.
“Medical Marijuana Inc. has literally taken over all the credibility of the biggest brand in cannabis, and moved it home to San Diego. That was something we really, really, really wanted to do,” Hard said. “We wanted this. We wanted to take over all of Dixie’s CBD line…To us, it’s a huge benefit, a huge asset.”
Still, Shapiro cautioned that both companies are taking on long-term risks.
“That only works while they’re successful. If one goes downhill suddenly, that changes,” Shapiro said.
Another interesting point when it comes to marijuana and branding is that the U.S. Patent and Trademark Office doesn’t issue legal trademarks for marijuana products, but they do for hemp products. Consequently, Medical Marijuana Inc. is pursuing a federal trademark for Dixie Botanicals (the company already has several other federally protected products).
But Dixie Elixirs – and other cannabis companies – can’t get that same legal protection. The best such companies can do is get state-by-state protections wherever they operate. That’s probably going to lead to some court battles down the road, Shapiro suggested, as some marijuana businesses become more recognizable and popular.
John Schroyer can be reached at email@example.com