Why Cannabis Companies Have Naming Problems

Through a federal lens, marijuana is an illicit drug. As a Schedule I controlled substance, it is regulated by federal authorities. However, recreationally in 23 states and medically in 38, marijuana is legal:

For smaller firms, the policy gap between the federal government and the states has created a big problem.

A Marijuana Trademark

When you’ve selected a name for your business, you like it to be yours. After all, if one, two, or three others used the same identity, your customers would have a tough time finding you. One solution is to trademark your name. (For these reasons, I trademarked econlife.)

However, with a cannabis company, it is not quite that easy. A business selling what the federal government calls a Schedule 1 substance cannot get a federal trademark. As a result, Budega NYC could only get a trademark for the clothing it sold, But for its cannabis operation, the name Budega was not protectable. Consequently, several Southern California dispensaries used that name. In other industries, copycats are subject to trademark infringement enforcement. But not here.

Our Bottom Line: Intellectual Property

Think for a moment about Apple’s logo, the shape of a glass Coca-Cola bottle and McDonald’s Golden Arches. All protected by trademarks, they are a firm’s intellectual property. Similarly, copyrights assure authors that they control the books they write and patents convey ownership to inventors.

Sometimes though intellectual property rights can be tricky. The courts said it was okay for the 2nd Avenue Deli to serve an Instant Heart Attack sandwich even though the Heart Attack Grill of Las Vegas claimed the Heart Attack trademark for its burgers. And while Louboutin could trademark its red soles, it could not claim the exclusive right to produce a red shoe.

Also, it’s tricky when a business needs national recognition of its name, but that protection is unattainable because of a federal state disagreement. Like all businesses in a market economy, the cannabis industry needs secure intellectual property rights.

My sources and more: Thanks to the NY Times for alerting me to the perils of a Cannabis trademark dispute. Furthermore, you might want to see the federal alternatives expressed by the Congressional Research Service and what a law firm suggests to cannabis businesses. In addition, and maybe even more crucially, we’ve seen how the federal state contradiction extends to banking.

Please note that several sentences in today’s “Bottom Line” were in a past econlife.