In a published decision issued April 1, 2024 (no fooling), the Ninth Circuit in BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc. weighed in on somewhat esoteric topics concerning whether federal courts have jurisdiction to hear challenges to pending federal trademark applications. While the Ninth Circuit’s decision there has caught the eye of many commentators, perhaps more interesting (and practical) for cannabusinesses looking to protect federal trademark rights was the Ninth Circuit’s co-issued unpublished memorandum opinion concerning what has become a standard practice for cannabusinesses to federally register their core marks for legal goods, including smoker’s articles like lighters, rolling papers, and the like.
Despite legalization of some sort in 41 states as well as the District of Columbia and Puerto Rico, cannabis remains federally illegal. As we’ve written elsewhere, only lawful use in commerce can give rise to trademark rights under the Lanham Act. This means that state-legal cannabusinesses cannot secure federal trademark registrations for cannabis itself or for cannabis-related services. Indeed, the United States Patent & Trademark Office (USPTO) refuses applications to register marks for cannabis goods and services because of their federally illegal nature.
A strategy that cannabusinesses have utilized to obtain federal registrations for their key brands is to register those brands for legal goods, including smoker’s articles. That is exactly what the plaintiff in BBK Tobacco did, securing federal registration for its mark RAW for, among other things, cigarette rolling papers, tobacco shredders, tobacco grinders, and cigarette or cigar rolling trays.
Relying on these registrations, BBK sued defendant CCA for federal trademark infringement based on CCA’s sales of RAW GARDEN-branded concentrate and pre-rolled cannabis products. CCA counterclaimed on various grounds, including challenging BBK’s federal registration for smoker’s articles on the theory that the goods, being offered by a cannabusiness that sells cannabis, were illegal “drug paraphernalia” under the Controlled Substances Act (CSA). If the goods were indeed illegal “drug paraphernalia,” they could not form the basis for a federal trademark registration, rendering BBK’s asserted registrations void.
The problem with CCA’s argument was that the CSA exempts from the definition of “drug paraphernalia” “any item that, in the normal lawful course of business, is . . . traditionally intended for use with tobacco products, including any pipe, paper, or accessory.” This is commonly called the “tobacco exemption.” An item’s “traditional” use under the exemption is not based on the particular defendant’s subjective intent; the question is, objectively, is the item traditionally intended for use with tobacco?
The smoker’s articles in BBK’s registrations are goods used with tobacco products. Undeterred, CCA argued BBK’s smoker’s articles were really “drug paraphernalia” rather than “tobacco products” because BBK advertised its products for use with cannabis. But that goes to the defendant’s intent, which is not the inquiry when determining whether the tobacco exemption applies—as the district court held and the Ninth Circuit affirmed, holding “BBK’s intent is irrelevant to the applicability of the exception.” While lower courts have so held, this appears to be the first time the Ninth Circuit has explicitly found the tobacco exemption applies in a cannabis trademark case. By issuing its decision in an unpublished memorandum decision, the opinion is not precedential authority (i.e., not binding on district courts and other Ninth Circuit panels). Nonetheless, this unpublished opinion does support continued reliance on the tobacco exemption for smoker’s articles, even those sold by cannabusinesses.
In its published decision that has been the subject of most commentary, the Ninth Circuit held that district courts can consider challenges to a party’s pending trademark application in suits involving a registered trademark, and that a lack of bona fide intent to use the mark in commerce is a ground on which party may oppose a trademark application in federal court. These holdings are interesting and useful for practitioners, but the Ninth Circuit’s quiet blessing of registering marks for CSA-exempt “tobacco products” is the more useful takeaway for cannabusiness, lending credibility to a branding strategy that has been used by the industry for years.
As always, cannabis and hemp businesses should continue to invest in protocols, and consult with experienced counsel, to explore alternative paths to promote and protect their brands and ensure compliance with the ever-changing patchwork of federal, state, and local laws and regulations. Knowledgeable Miller Nash trademark attorneys can work with you to ensure your company and brand are protected in any industry, including cannabis.
[View source.]
