Week in Review: Adverse trademark ruling, Ohio’s cannabis diversity plan & MJ at the DNC

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By Omar Sacirbey and John Schroyer

Cannabis trademark issues resurface, questions arise over a plan to increase diversity in the industry, and marijuana makes inroads at the Democratic National Convention.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

Trademark Setback

A federal board has issued a major setback to marijuana businesses seeking federal protection for trademarks and patents, but there are still ways entrepreneurs can defend their brands.

As we wrote about this week, the appeals board of the U.S. Patent and Trademark Office ruled recently that owners of state-licensed medical marijuana dispensaries can’t receive federal trademark protection on marks related to cannabis sales because of the plant’s status as a Schedule 1 controlled substance.

“It’s significant in that it confirms what earlier decisions have held, that you can’t get a registration for anything to do with the sale of cannabis at the U.S. Patent and Trademark Office,” said Thomas Brooke, an intellectual property attorney in Washington DC.

The ruling stems from a trademark application from Morgan Brown, a Washington State resident who owns a recreational marijuana store. Brown applied to register “Herbal Access,” but was denied.

Brown’s mistake was that he admitted on his trademark registration application that he sells cannabis. But plant-touching retailers have gotten federal trademarks by simply omitting in their trademark registration application that they handle marijuana.

“The difference between Herbal Access and some of the other people (who handle cannabis but get trademarks registered) is that they were making clear that they were selling cannabis,” Brooke said. “Others write their applications in a way that doesn’t explicitly say they touch the plant. They’ve found ways to be clever and be clear about what they’re doing without spelling it out.”

Indeed, most marijuana retailers also sell clothes, accessories and other products. So if a marijuana retailer wants to trademark its name at the federal level, it can list everything it sells on its application except cannabis products, and should be OK, Brooke said.

“I’d advise a client to apply for everything they’re doing except for selling the plant. They can get a registration for all these other things and any of their competitors are going to be in the same boat,” Brooke said.

Diversity Dilemmas

New medical marijuana states are increasingly aware that racial diversity is sorely lacking in the industry, and in some cases officials are trying to solve the problem by setting regulations that encourage or even mandate creating opportunities for minorities.

While these efforts may be well-intentioned, some of them may face constitutional or legal challenges.

The latest example comes from Ohio, where the state’s new medical marijuana law includes a provision that requires at least 15% of the state’s medical marijuana licenses to be awarded to one of four economically disadvantaged minority groups – Hispanics, Asians, African Americans or Native Americans.

“It’s not immediately clear whether the proposal is constitutional or not,” said Ohio attorney Tom Haren. “When enacting public policy, legislatures can take race into account to remedy prior discrimination, but to do so the legislature must meet a very stringent test.”

The 15% mandate was modeled after Ohio business enterprise provisions that try to award contracts to minorities living in economically underdeveloped areas.

“If this part of (Ohio’s MMJ law) is challenged, it will be up to the state to convince a court that this law is narrowly tailored to remedy” the lack of diversity in the marijuana industry, Haren said.

While steering contracts to communities in need is generally accepted, awarding licenses according to race is a different matter, lawyers said, because it will inevitably shut out some non-minority applicants.

That said, there are other measures public officials can take to encourage diversity in the cannabis industry.

“Any public outreach and working with minorities in their districts to inform them about the opportunities that will exist in Ohio is helpful,” said Terrence O’Donnell, an attorney with Dickinson Wright in Columbus, Ohio.

Democratic National … Cannabis

At the Democratic National Convention this week in Philadelphia, the cannabis movement had a solid presence.

Cannabis, in fact, was a talking point among delegates and convention-goers, said Michael Bronstein, who co-founded the American Trade Association for Cannabis and Hemp in Philadelphia and is also a longtime marijuana lobbyist.

“It’s been a topic of conversation inside the convention, in the bars and restaurants … they’ve been having discussions about it,” Bronstein said when asked whether marijuana policy was on the minds of those at the DNC. “This may be the first time that the movement has really had an event at a party convention … and that’s a very important thing for cannabis.”

Bronstein said that above all, what the industry needs to do is to reach out to policymakers at the state and national levels to create a dialogue about their work.

There’s still a lot of ignorance about the cannabis trade in general, he said, and that’s the first thing that needs to change if issues such as banking and 280E are ever going to be resolved.

“They want to know, first and foremost, who (cannabis business owners) are. If they’re responsible, and what it is their business actually does. Because there are a lot of misconceptions about the cannabis industry … and what these businesses are going through,” Bronstein said. “We need to have these preliminary conversations, and we need to be doing this outreach as an industry.”

The national discussion, at least on the Democratic side, has moved well past the question of legalization, he said.

That was put to rest in large part by adopting the “reasoned path to future legalization” in the national platform earlier this month, Bronstein added.

What needs to happen next is more nuanced: It’s a question of formulating policy on regulating the industry, and what that may look like across the country.

And that will be a very, very long conversation.

Omar Sacirbey can be reached at omars@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com