On January 1, 2020, the recreational use of marijuana will be legal under Illinois law. With the formal enactment of the Cannabis Regulation and Tax Act, it is expected that numerous new companies will be gearing up to enter the Prairie State’s burgeoning cannabis market. As with any new business, one of the first things for owners to consider is the company’s brand, what it will be called and how best to protect it from would-be infringers.
From an intellectual property standpoint, brand names are typically classified as either trademarks or service marks. These generally refer to any word, design, or combination thereof used in connection with the sale of goods or services.
In choosing a new mark, it is generally advisable to conduct a trademark clearance search. These searches, typically performed by trademark attorneys, can help to reveal identical or confusingly similar marks already in use by third-parties. If another business is already using the mark the new business seeks to use (or one very similar thereto), the newcomer is advised to pick a different mark. This is because, under U.S. law, trademark rights are based on priority of use.
Once a mark is selected and cleared, the next step is to use it in connection with the sale of goods or services. This is often accomplished by placing the mark on product packaging, store signage, advertising materials, and/or e-commerce websites.
The good news for new Illinois businesses is that, as in other states, state law automatically confers trademark rights once a mark is in use in connection with the sale of goods or services. These rights are known as common law trademark rights, and they exist even for unregistered marks. The scope of these rights, however, is limited to the geographic area in which the mark is used. Thus, if a dispensary in Chicago started selling under the mark CITY LIGHTS, and an unrelated dispensary in Peoria later started selling similar products under the same mark, the Chicago dispensary would not necessarily be able to stop the Peoria dispensary from using the mark. The Chicago company would have to show that it had actually sold the products at issue to customers in Peoria (either online or via traditional brick and mortar store) prior to the Peoria company’s use of the mark.
To enhance the scope of, and ability to enforce, a company’s trademark rights, companies should consider registration of their marks. Trademarks can be registered with the Illinois Secretary of State for the reasonably low cost of $10 per application. While state registration does not give statewide rights to the trademark owner, it does provide for an award of treble monetary damages in the case of willful trademark infringement. 765 ILCS 1036/70.
Federal trademark registration is another option, and usually preferable over state registration, because it creates a presumption of exclusive rights throughout the U.S. However, because the sale, distribution, dissemination, and possession of marijuana remains illegal under federal law, the U.S. Patent and Trademark Office (USPTO) will refuse any application to register a mark if the claimed goods or services include marijuana and/or related paraphernalia. TMEP § 907 (citing 21 U.S.C. § 801 et seq.). That said, cannabis companies have had varying levels of success obtaining federal registrations when applying to register their marks in connection with legal products which the companies also sell (in addition to cannabis products). However, the USPTO typically subjects such applications to heightened scrutiny and often denies registration when the marks are used in connection with both legal and illegal products.