What was hinted at in the fall of 2023 appears to be heading towards reality as reports circulate that the U.S. Drug Enforcement Administration (DEA) has agreed to reschedule marijuana—or cannabis, as most in the industry prefer—from Schedule I to Schedule III status under the Controlled Substances Act (CSA).
The move is a historic one, representing the first major shift in federal cannabis policy in over 50 years. As a Schedule I drug under the CSA, cannabis is currently treated akin to heroin and LSD, considered to have a high potential for abuse and no accepted medical uses. To put it into perspective, fentanyl—an opioid 50 to 100 times more powerful than morphine that is estimated to have killed more Americans in 2020 than car accidents, gun violence, breast cancer, and suicide—is currently a Schedule II drug, considered less dangerous than cannabis. With the move from Schedule I to Schedule III, cannabis will sit alongside drugs like ketamine and Tylenol® with codeine, recognized as having moderate to low potential for physical and psychological dependence and as having potential therapeutic use.
It is important to recognize what rescheduling is not: federal legalization. In general, Schedule III drugs are prescription only and not available over the counter; while this may align with at least some state medical cannabis programs, it does not align with recreational use, meaning that much of the cannabis legally sold under state laws today seemingly will remain federally illegal. Concerns have been raised over how, exactly, the DEA will handle implementing the necessary oversight of dispensaries that will become necessary when cannabis moves to Schedule III, meaning state medical dispensaries will not suddenly and seamlessly be operating in legal, federal commerce either.
The move to Schedule III raises interesting issues for cannabis brand owners. As we’ve previously written, federal trademark registrations are not available for state-legal cannabis goods or services because of cannabis’s federally illegal status. Savvy cannabis brand owners have been preparing for a federal shift in cannabis policy for years now, securing federal registrations for federally legal products like lighters and rolling papers, a practice recently blessed by the Ninth Circuit. To the extent that cannabis brand owners offer cannabis that is compliant with the Schedule III regime, such as cannabis prescribed for medical purposes, those brand owners seemingly will be able to federally register their trademarks for cannabis itself, which would be a first. However, to the extent cannabis brand owners only offer non-compliant cannabis, such as cannabis for recreational purposes, it seems likely federal registration for the cannabis itself will remain elusive, even with rescheduling.
It also remains to be seen how the U.S. Patent & Trademark Office (“USPTO”) will handle a potential influx of applications to register marks for cannabis goods and services following rescheduling. The USPTO will not register trademarks for federally illegal goods or services, the thought process being federal rights should not be extended to illegal activity. A CBD carve-out was created by the 2018 Farm Bill, which exempted “hemp” from the CSA’s definition of “marijuana.” The USPTO has applied the Farm Bill to allow registration of trademarks for CBD goods and services so long as the applicant specifies that its goods and services “contain no more than 0.3% THC on a dry-weight basis” (i.e., are “hemp” under the Farm Bill). However, it took the USPTO time to establish an examination process for Farm Bill-exempt products, and those applications still take longer to process than do non-CBD, non-cannabis-adjacent applications. The potential for an application glut in a land grab for new cannabis registrations following rescheduling could bog the USPTO’s examination process down even further.
In any event, even if we are on the brink of seeing the first federal trademark registrations for actual cannabis goods and services because of rescheduling, careful thought still needs to be given to new applications. Rescheduling is expected to take several more months to complete. While it strategically may seem sound now to use the intent-to-use application process to plant one’s flag on cannabis before rescheduling occurs, from our previous reporting of the Joy Tea decision we know that is not a wise idea. For now, cannabis remains a Schedule I drug; one must have a bona fide intent to use the mark in legal commerce as of the application date, which is not possible where the goods are still illegal on the application date. And of course, as we have previously written, trademarks remain unregistrable for even Farm Bill-exempt CBD products that are ingestible, under the USPTO’s adoption of the Food & Drug Administration’s interpretation of the Federal Food, Drug, & Cosmetic Act. The same analysis would seemingly apply to ingestible, Schedule III cannabis products, too.
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.
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