Business
Trademark Infringement Litigation Case Study: Uncle Bud’s
On the heels of our recent intellectual property webinar (a replay is available here!), we received some requests for real world examples of how trademark infringement litigation plays out in the courts. Luckily (or unluckily, depending on how you see things), trademark infringement litigation cases are filed on an almost daily basis throughout the country, and this one filed this week by CBH International, LLC is a great example.
The Parties to CBH’s Trademark Infringement Litigation
Plaintiff CBH International is the owner of the UNCLE BUD’S trademark, which it has federally registered for use in connection with its industrial hemp products like CBD topical, gummies, etc. CBH alleges that its goods do not contain any THC or psychoactive ingredients. THC levels over 0.3% would invalidate the federal trademark, as marijuana is still classified as a Schedule 1 drug.
Defendant Uncle Bud’s Grow Shop Corp. operates a retail store in Johnstown, New York that offers cannabis-related goods and services, such as hydroponic systems, fertilizers, and grow lights. In addition to using “Uncle Bud’s as its trade name, it also offers merchandise like hats and beer coozies that are labeled with “Uncle Bud’s.”
The Trademark Infringement Litigation Allegations
There are five elements of a trademark infringement claim:
- First, a valid protectable mark. A valid mark is any distinctive word, name, symbol, or combination of those things, used by a person to identify and distinguish their goods. Here, CBH probably has no problem satisfying this element, especially because its federal registration also creates a presumption that the mark is valid and protectable.
- Second, plaintiff’s ownership. Generally, only the owner of a trademark registration can bring a trademark infringement claim. Check.
- Third, defendant’s infringement of a trademark. I want to specially note that the defendant’s mark doesn’t need to be identical. So, the fact that Uncle Bud’s Grow Shop’s logo is different from CBH’s, etc., is not a total defense.
- Fourth, likelihood of confusion. This fourth factor is what courts like to focus on, because the whole point of this area of law is to prevent consumer confusion. Whether there is a likelihood of confusion is assessed by applying a multi-factor test. That test varies a bit depending on jurisdiction, but these are the general factors that are considered:
- Strength or weakness of plaintiff’s mark – here, I would say CBH is in pretty good shape because its mark is nationally known and its products are sold by various online and brick and mortar retailers and have been highlighted by various media outlets.
- Defendant’s use of the mark as compared to plaintiff’s use – given that both parties use the mark to distinguish their products in the cannabis realm, I would say this factor also probably tips in CBH’s favor.
- Similarity of plaintiff’s and defendant’s marks – both parties label their products as “Uncle Bud’s.”
Some other trademark infringement factors that are typically considered but that CBH does not allege in its complaint are:
- Actual confusion – CBH doesn’t cite any examples of actual consumer confusion, so this factor doesn’t weigh in their favor. I will say that when a plaintiff is able to cite actual examples of consumer confusion, that is almost always the proverbial nail in the coffin – and that makes sense when you consider what the point of trademark law is: to prevent consumer confusion.
- Defendant’s intent – sometimes, defendants unknowingly admit that they “intended” to infringe the trademark when they admit they were aware of the plaintiff’s brand and wanted to be in their likeness.
- Marketing/advertising channels that they’re used in – if both parties use the same online or brick and mortar channels, this will weigh in plaintiff’s favor. This factor has exceedingly become more of a “given” because the wide use of social media channels, etc. have made it so that consumers can be broadly reached no matter what.
- Purchaser’s degree of care – this relates to how careful consumers will be in choosing products in this realm. As an extreme example, someone looking into which vitamins to take will likely be a little more careful and discerning than someone looking into which trash bags to use.
- Potential for product line expansion – where the plaintiff has an intent to go into the defendant’s line of business, this factor will weigh in plaintiff’s favor.
- And fifth, harm or damages. Note that actual injury isn’t necessary, the trademark infringement itself is the harm. But here, CBH can request to recover all damages it sustained in the form of lost profits, dilution of its marketing efforts, etc.
Of course, this analysis is based on CBH’s complaint only, so we’ll report back on when Uncle Bud’s Grow Shop files its response and makes it case.
Source: https://harrisbricken.com/cannalawblog/trademark-infringement-litigation-case-study-uncle-buds/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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