Retailers generally appreciate that their brands are among their most valuable assets. But it can be challenging for them to know how current trademark law will affect their selection, registration, and enforcement of those brands. The following are some recent developments in U.S. trademark law that brand owners should understand.
Certain Cannabis and Cannabis-Related Trademarks Are Registrable It has long been held that obtaining a federal trademark registration requires use of a mark in commerce that is lawful under federal law. For this reason, the U.S. Patent and Trademark Office (USPTO) has traditionally refused registration of trademarks for cannabis and cannabis-related goods or services. In light of the enactment of the 2018 Agricultural Improvement Bill (aka the Farm Bill), on May 2, 2019, the USPTO released a new examination guide concerning marks for cannabis and cannabis-related goods and services. In sum, for trademark applications filed after December 20, 2018, the USPTO clarified that registration is available only for marks covering hemp-derived goods with less than 0.3% THC and for services associated with such goods. Consequently, applications for goods derived from hemp or services related to such goods must explicitly state that the goods contain less than 0.3% THC. Applications for goods containing hemp for human or animal consumption, however, will be refused because such hemp-based products have not been approved by the FDA.
Supreme Court Finds “Immoral or Scandalous” Marks Registrable In 2017, the U.S. Supreme Court held in Metal v. Tam that the provision of the federal trademark act (the Lanham Act) prohibiting the registration of “disparaging” marks violates the First Amendment’s protection of free speech. In that case, the members of a rock band were refused registration of a mark for the name “the Slants” for their “all Asian-American band.” It thus came as no surprise when, on June 24, 2019, the Supreme Court found a similar provision of the Lanham Act prohibiting the registration of “immoral or scandalous” marks was likewise unconstitutional. In Iancu v. Brunetti, the owner of the FUCT brand of hats was denied registration of the mark FUCT on the grounds that it was “immoral or scandalous.” Citing its 2017 “Slants” case, the Court held the prohibition discriminates on the basis of viewpoint. Retailers with creative brand names may consider filing trademark applications that previously may have been rejected.
Licensees Retain Trademark Rights in Bankruptcy In a previous post, we discussed the split among federal courts concerning whether a trademark licensor in bankruptcy may reject the license and deprive the licensee of the use of the brands. On May 25, 2019, the U.S. Supreme Court issued its decision in Mission Product Holdings, Inc. v. Tempnology LLC, which is likely to impact valuations of distressed brands. Specifically, the Court held that a trademark licensee may continue to use a licensed trademark despite the bankrupt debtor-licensor’s rejection of the related trademark license. Since the purchaser of a debtor’s licensed brand can no longer expect to use the threat of termination as leverage to renegotiate licenses that are unfavorable to the brand owner, this ruling is likely to result in lower valuations of trademark portfolios that are encumbered by such below market licenses (i.e., licenses that are unusually favorable to the licensee).
By keeping informed of developments such as those highlighted above, owners of retail brands can put themselves in the best position to maximize the value of those brands.