Week in Review: Marijuana industry trademarks, cannabis banking & Oregon rec sales

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By Omar Sacirbey, John Schroyer and Bart Schaneman 

A prominent marijuana pipe maker sues to defend its trademark, another state seeks Trump’s guidance on MJ banking, and adult-use cannabis sales continue to drop in Oregon.

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

Trademark rights

Roor might be the Gucci of marijuana paraphernalia.

Both the German glass pipe maker and the iconic Italian handbag label purvey high-end products, are counterfeited ruthlessly and have sought aggressively to protect their trademarks in court.

But some of the businesses targeted by Roor lawsuits in this country argue the company’s trademark is invalid because its products are used to violate federal laws prohibiting cannabis consumption.

Not so, said Kieran Doyle, a partner with Cowan, Liebowitz & Latman in New York City whose clients include High Times owner Trans-High Corporation.

In fact, for non-plant-touching companies, including bong makers, trademarks are easy to get and enforce, Doyle said.

“To the extent that a product is not prohibited in the federal Controlled Substances Act, it should be eligible for federal trademark protection,” he said.

Plant-touching businesses like dispensaries and growers will have a harder time getting trademarks, but it can be done, Doyle said.

For example, if you’re an infused products company that wants to trademark your brand name, you should create a non-infused product and register the trademark for that.

While such a trademark can prevent a competitor from using your company’s name on non-marijuana products, can it stop the competitor from using your company’s name on products that are infused with THC?

“It should,” Doyle said, noting two key questions in trademark cases: How similar are the parties’ marks, and how similar are the goods and services in connection to how those marks are used.

“In that situation, the marks would be identical and the service, while not identical, would be quite similar,” Doyle said. “And that should be sufficient to allow you to invoke that registration.”

Marijuana banking guidance

Illinois is the latest state to formally request some clarity from President Donald Trump and his administration.

Specifically, Illinois Treasurer Michael Frerichs is seeking guidance on the administration’s stand on banking regulations regarding the state’s medical cannabis industry.

Illinois is the second state to publicly request clarification on federal marijuana policy, and it almost certainly won’t be the last, said  two New York-based cannabis businessmen who monitor financial markets.

Matt Karnes, managing partner of GreenWave Advisors, and Jerome Dewald, managing member of Two Worlds Consulting, believe more states will likely submit formal requests to Trump for guidance to ensure their cannabis programs either won’t be interfered with or might even receive federal support.

And as more states submit such requests, it could trigger an eventual pro- or anti-cannabis policy from Trump, Karnes predicted.

In the interim, with the ongoing uncertainty of whether Trump will prove to be an industry ally or opponent, Karnes said banks in particular will likely remain in “a holding pattern.”

That means it likely won’t get any easier for MJ companies to find bank accounts until the new president issues some formal policy position.

Dewald said there’s one reason for state officials – and the industry overall – to be hopeful Trump will be either supportive or hands-off when it comes to cannabis markets.

“What Trump values more than anything else is popularity,” Dewald said. “If you want to pick something that will make you popular with more than 50% of the people, (marijuana) would be a good one.”

Chin up, Oregon

Oregon’s marijuana sales declines, due largely to supply chain issues and hiccups in lab testing, isn’t likely to continue for the long term, one cannabis consultant predicted.

“We’ve seen some warts that have caused supply-chain-related issues and impacted people in terrifying ways,” said Ford Pearson, founder of Green Rush Advisory Group, a marijuana consultancy in Portland. “But overall I think it’s a very strong program and we’re starting to see progress in better issuances of licenses and the lab issues being worked out.”

Last month, Oregon’s embattled recreational marijuana industry posted its second straight monthly sales drop.

Pearson characterized 2016 as a mixture of tragic and challenging. Southern Oregon growers were forced to destroy large amounts of their crop after heavy rains in the fall caused mold problems, and the lab testing bottleneck nearly stalled the entire industry.

Also, a significant amount of cannabis failed to pass stringent state testing standards.

“It’s just like every other recreational marijuana program,” Pearson said. “It was a brilliant job, and even with a brilliant job there are characteristics you simply cannot anticipate. The lab issue is a good example of that.”

Firms that haven’t chosen to vertically integrate are the most vulnerable to volatility in the market.

“That is the characteristic in Oregon to exploit and pay attention to,” Pearson said. “If you’re running a vertically integrated enterprise in Oregon and you’ve got multiple retail locations, you can feed your inventory into that.”

If you can’t do that, you need to be savvy about creating networks, he added. For example, a few small, craft cannabis producers can join together with a few strains each and suddenly represent a broad menu to retail buyers.

Pearson is bullish about the new year: “I think 2017 will be a potent chapter (for the state).”

Omar Sacirbey can be reached at omars@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com

Bart Schaneman can be reached at barts@mjbizdaily.com