Cease and desist (C&D) orders are relatively common in business. The nascent cannabis market is no exception.
As the weed space steps into the legal mainstream market, its operators contend with various C&D orders from companies and regulators.
Primarily Trademark Infringement Claims
Justin Brandt, founding partner of cannabis law firm Bianchi & Brandt, said most industry C&Ds come from other businesses, with most orders from non-cannabis companies alleging trademark infringement by a cannabis brand. Though, orders from states, like New York, have been filed as well.
"The claims usually allege trademark infringement related to using the name, design, or logo from a non-cannabis product in a manner that either causes confusion about the products or harms the reputation of the non-cannabis business," he said.
For years, such cases have included well-known brands issuing C&Ds to various cultivators, retailers and others for using similar names, imagery or IP.
Hearing pleas from several major American food producers, the US Food and Drug Administration issued a consumer warning in June 2022.
The FDA letter highlighted cannabis products similar to various popular kids' products. Examples included edibles resembling PepsiCo, Inc. PEP Cap'n Crunch Crunch Berries cereal and Nestle ADR NSRGY Nerds Rope candies.
Intra-industry C&Ds happen as well. "But those occurrences are typically isolated to situations where the competing companies operate in the same state, and one of them has obtained state-law protection for their intellectual property," Brandt explained. He cited a lack of federal protections as the stem of the issue.
Jessica Gonzalez, associate and cannabis attorney at Hiller, PC, also highlighted the dearth of federal protections as a source of the problem, saying pot brands cannot obtain federal trademark protection.
"Cannabis brands must then rely on their state or common law trademarks, making it difficult for cannabis companies to enforce their trademark rights across state lines," Gonzalez said.
She added, "Cannabis companies are vulnerable due to the lack of federal trademark protection and the fact that many non-cannabis companies are terrified of potentially being confused with a cannabis brand."
Tracee McAfee, CEO of drying and curing tech Cryo Cure, said that after spending upwards of six figures to obtain patents, her company strives to maintain its IP from other cannabis companies.
"We don't think it's fair that people just walk right in and take advantage of our efforts."
McAfee said the company had spent tens of thousands of dollars to file C&Ds against companies claiming to use Cryo Cure's tech and processes.
Ultimately, she said the company hopes to get infringers to pay a licensing fee. At the same time, preserving the company's name against false actors is equally important.
“There's a huge difference between Cryo cured flower and freeze-dried flower," she added.
Jennifer Cabrera, counsel at Vicente Sederberg LLP said industry trademark infringement includes dispensaries with similar names. The issue can entangle two non-competing cannabis brands.
Olivia Alexander, CEO and founder of California brand Kush Queen said she received an out-of-court settlement from Ignite International Brands Ltd BILZF and their use of the Ignite name in California, where Kush Queen claimed to have exclusive rights to the name for its THC lube brand.
Alexander said the brand suffered despite a sales boost, with consumers confused and some assuming the two brands were collaborating. "Dispensaries were picking up the lube, and even though it said Kush Queen, were putting his logo on our product in the display."
After contacting the company through a mutual connection, Alexander said the issue was settled, allowing Kush Queen to cover the costs of repackaging their product. The news was not made public.
In some cases, the effects of a C&D can create an impact regardless of the legal outcome.
Hazey Taughtme, founder and editor-in-chief of Black Cannabis Magazine said he was issued a C&D in 2020 alleging the publication's name conflicted with a pending trademark for Black Cannabis. While legal counsel assured Hazey the matter wasn't a concern, he said the ramifications impacted his industry standing.
"It made certain people in the industry pass judgment because they believed that I stole [Black Cannabis] intellectual property from these individuals," said Hazey, who has since trademarked the name.
Are C&Ds Effective?
A C&D's efficacy is disputable, but they seem to keep cases out of court more often than not.
Vicente Sederberg's Cabrera said that C&D recipients often find it more economical to change the company's name or other trademarks in question before going to court.
Hiller, PC attorney Gonzalez said she typically sees clients settle matters by either giving up trademarks, altering trademarks or entering into co-existence agreements with geographical boundaries sometimes included.
"This is not to say that cannabis trademark litigation does not exist as multiple well-known and famous brands have brought lawsuits against 'punny' cannabis brands after issuing C&D letters," she said.
In May 2022, Ferrara Candy Co., the holder of the Nerds trademark, sued Florida's Top Five Wholesale, alleging its infused line was identical to Nerds. Still, some question the effect of C&Ds issued.
"Many view C&Ds as nothing more than a warning letter and therefore don't give much credence to receiving one from another business," said Brandt.
He added that orders from regulators are the exception.
"A competing business is limited to seeking remedies through the court, whereas a regulator generally has its own enforcement rights and can take other actions against the recipient of C&D," said Brandt.
Photo by Yash Lucid
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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