Hello, my name is Larry Sandell and I am presenting on Cannabis Industry Intellectual Property: Trademark and Patent Practice in an Era of Federal Prohibition. And by way of a little background of myself, I am a patent attorney and a litigator. I advise in the cannabis space, as well as consumer electronics, medical devices, software, food technologies, and a whole bunch of others. I advise clients with IP strategies, litigate in federal district court, as well as the ITC. And I've argued more than a handful of appeals before the federal circuit. And relevant to this presentation, in a former life, I worked for the Marijuana Policy Project. And I like to think that I helped bring cannabis at least towards where it is as far as legalization is concerned. So starting off, since a lot of you may not be familiar with cannabis, I wanna start off with the basics, at least enough to understand the legal framework. The plant's scientific name is Cannabis Sativa. And there are two main cannabinoids that most people are familiar with. THC, delta-9-tetrahydrocannabinol, is generally the most famous one. That is the cannabinoid that gets people high, for lack of a better word. And then there's CBD, cannabidiol. And CBD has become pretty well known. It helps a lot of people with pain relief, with relaxation, with other ailments, maybe effectively, maybe not, certainly depending on what the FDA has to say about it. But these are the two kind of main famous ones that you'll hear. But there are 142 others that have been isolated so far and are being studied. And don't be surprised if you hear additional abbreviations with cannabis coming down in the next months or years. When it comes to US law, cannabis is split into two camps. There is hemp, which has negligible levels of THC. It's mostly used for industry in textiles, food, paper, biofuel. Until fairly recently, you couldn't actually grow it in the United States. But that has since changed. It's also now used a lot for medical purposes to extract cannabinoids, most notably CBD. And then there's also marijuana, which has levels of THC that are non-negligible, and also CBD in a lot of instances. And in states that have medical marijuana, or adult use slash recreational use marijuana, this is generally what we're talking about here. So cannabis is a huge, and it's a very rapidly growing industry. In 2019, it was over $13 billion in "legal" cannabis. And legal is here in quotes because it refers to state legal and as we'll see in a few slides, pretty much everything here is still federally illegal, but about $13 billion in 2019, up to 20 billion in 2020. And that's all projected to double by 2025. And that's only for legal states as of 2020. And there are quite a few more that have happened since these calculations were made. So the increase in the size of this industry is quite large, especially now on the recreational and the adult use front. When we're talking about the legal aspects of cannabis, it's also important to split the industry up into two parts, the plant-touching businesses and the ancillary businesses. The plant-touching businesses are exactly what they sound like. These are businesses that grow, process, distribute or sell cannabis. This includes cannabis flower, which is effectively the raw product. It's what's directly smoked. It's also where a lot of the extraction will take place. The flower has the highest concentration of THC, CBD and the other cannabinoids generally. Plant-touching businesses include businesses that manufacture edibles, which would be basically food products that contain cannabinoids, vape cartridges, various forms of cosmetics, oils, tinctures, the list can go on and on, and strange things, including bath bombs, and all the way. But if your business or your client's business is selling something that is extracted from the cannabis plant, that's generally considered a plant-touching business. The next chunk of businesses are ancillary businesses. And these businesses have done well, and they're generally in a much safer legal standing. And they include selling products and technologies to the plant-touching businesses in the industry, agricultural products, smoking products, you know, things like rolling papers, substance agnostic vaping products. So that would include vape batteries that can also be used for tobacco or other herbs. Products that are used for trimming or processing cannabis flowers, or various chemical extraction technologies. And in fact, there are a lot of large laboratory and medical processing companies that have sort of created their own small little cannabis businesses, often under another name, so they can at least appear separate to the public, but they've just sort of adapted their existing technologies to the cannabis industry. Other things are containers for cannabis, childproof, smell-proof, growing equipment or chemical laboratory equipment. And then where a lot of us fall in here, in service industries that serve the cannabis industry, accounting, banking, legal, regulatory, licensing, security, software and data analytics. That list can also go on and on. But in general, these are ancillary businesses and they have a lot less legal risk and a lot more options for IP protection within the cannabis space. So as most people are aware, cannabis is still federally illegal. And this is a quote from a recent denial of certiorari from the Supreme Court. I don't quote Justice Thomas often, but in this case it seemed quite appropriate, because there is a lot of tension between state laws and federal laws. "Once comprehensive, the Federal Government's current "approach is a half-in, half-out regime "that simultaneously tolerates and forbids "local use of marijuana. "This contradictory and unstable state of affairs "strains basic principles of federalism "and conceals traps for the unwary. "And the disjuncture between the Government's "recent laissez-faire policy on marijuana "and the actual operation of specific laws "is not limited to the tax context. "Many marijuana-related businesses operate entirely in cash "because federal law prohibits "certain financial institutions from knowingly "accepting deposits from or providing other bank services "to businesses that violate federal law. "A prohibition on interstate use or cultivation of marijuana "may no longer be necessary or proper "to support the Federal Government's piecemeal approach." Now, this denial of cert certainly was not in the IP context, it was in a tax context. And I'll touch on that a little bit forward, but it really does highlight the real strange times the industry is, it's both legal and illegal. And those are strange bedfellows. So as a quick overview of federal law, marijuana is a Schedule 1 drug. By legal definition, it has no medical value and a very high potential for abuse. As a factual matter, that is not really the case, but here we are talking about marijuana as in those plants having non-negligible amounts of THC. The only part of a marijuana plant that is excised from this definition is the fibrous stalk. So the flowers are illegal under the Controlled Substances Act, under Schedule 1, but the fibrous stalk, which much can't be extracted from, is not considered marijuana. And just for a little more context, cocaine is a Schedule 2 drug. I believe LSD is schedule 1. Even for those who believe that marijuana needs to maintain regulation under the Controlled Substances Act, most people should be able to agree that Schedule 1 is the wrong place for it. At any rate, as a Schedule 1, it is federally prohibited. And the penalties are extreme and severe. And they are felonies. Less than 50 plants can land you in jail and a quarter million dollar fine. And once you're talking about a thousand or more plants, you have between 10 years and life, and up to a $10 million fine. And federal law obviously applies in states where it is legal as well. And larger cannabis distribution entities may certainly run afoul of these prohibitions. So in addition to the Controlled Substances Act, there is actually some, at least implicit, recognition of medical marijuana. There's what's called the Rohrabacher-Farr budget rider that has been in the federal budgets since the mid 2010s. And it bars federal expenditures on prosecutions and appeals, as well as appeals, for violations of the Controlled Substances Act regarding marijuana, but only if the person is closely abiding by state medical marijuana laws. And so this actually has been tested in court. It's been approved by the 9th Circuit in US V McIntosh. Some individuals were charged with marijuana distribution. They were closely following California law. But pursuant to this budget rider, their indictment was dismissed. And then on the flip side, in US V Kleinman, there was an individual who was not following California law. He was selling marijuana, as he saw fit. And it was held that the Rohrabacher-Farr budget rider did not apply. The 2018 Farm Bill was quite a sea change for the legality of cannabis under federal law. Effectively, it permitted growing hemp, certainly under some circumstances, but it permitted growing hemp, and it legalized both CBD as well as those other cannabinoids that are extracted from hemp. It did not legalize CBD and other cannabinoids extracted from marijuana. But it's actually indistinguishable once they're extracted. But the Farm Bill made a big difference. And it basically created the CBD industry that a lot of people have probably witnessed over the last few years. Also, as referred to by Justice Thomas, there are some big issues with cannabis and banking. As we discussed before, cannabis is still federally prohibited. It is a drug. And banks do not want to be hit with the severe penalties for money laundering that they may be liable for if they work with cannabis businesses. And even today, many larger banks will not work with cannabis businesses or even those businesses who work with cannabis businesses. In 2013, the Department of Justice issued what's known as the "Cole Memo." And that memorialized the DOJ's tolerance of the cannabis industry for states with robust regulatory schemes, mostly focused on medical marijuana, certainly at that time. And that was extended to financial institutions in 2014. And this enabled people in the cannabis industry to get away from processing and running their whole business in cash. And the larger banks, again, avoided it, still avoided it, but it really opened the door for some smaller players to come in and fill that void. In January, 2018, Attorney General Jeff Sessions rescinded the Cole Memo, and now cannabis banking is essentially in limbo. There's a bill currently before Congress and has been in several other sessions that is called SAFE. And that would essentially legalize cannabis banking. There is a lot of hope that I'll be passed during the current 2022 lame duck session of Congress, but I will believe it when I see it. It seems to be perpetually there and then it never has really gotten passed yet, but we will see going forward. Other important things in federal law with respect to the cannabis industry is 26 USC 280E. And this is a provision of the tax code, and it prevents certain federal tax deductions relating to illegal goods. Basically, if cannabis industry members aren't careful, especially for plant-touching ones, they might not be able to take off a lot of their costs on their taxes. And companies, including the one who's cert was denied that we discussed earlier, they can actually have taxes that end up exceeding their profits, and they are in the red as a result. So if you have cannabis industry clients, or if you get them, it's very important that they meet with tax professionals who understand 280E and how to structure their businesses to avoid this predicament. The FDA also has some important cannabis regulations, notably, CBD is a drug that's under the FDA's purview. The drug is called Epidiolex. It's sold by GW Pharmaceuticals, it's approved for epilepsy. But because the FDA considers CBD to be a drug, it is not legally permitted in food, beverages or other pharmaceuticals. Currently, the FDA's enforcement is really limited to warning letters to companies who make product effectiveness claims, saying, you know, my CBD mix, or my CBD foods will help treat your anxiety. That is a big, big no-no. But the FDA isn't cracking down on CBD sales generally, even though they'd be able to do so, given that they consider CBD a drug. The FDA has a pretty big Q&A on CBD at their website that is also worth visiting that I have listed here. So when it comes to state law, it's really a hodgepodge here. I have a map here that's current as of November 22nd, 2022. In the most recent elections put forth by the National Conference of State Legislatures, it shows the states where both adult use and medical use is permitted. This is mostly out west and the northeast. And the northeast has certainly grown in this capacity over the last few years. Virginia, Maryland, New Jersey, have come online very recently. There's still a number of states that have a comprehensive medical cannabis program, includes Florida, even Utah here, Pennsylvania. And then they're also a handful of states that are referred to as having a CBD or a low THC program, that includes Texas, the Carolinas and Georgia. Generally speaking, these programs are not considered effective. But this map seems to change in every election cycle, in every legislative cycle. But it really illustrates how strange it is that the federal government still considers cannabis to have, or marijuana to have, no medically acceptable use, whereas a majority of US states beg to differ. So switching gears here, I want to give a little IP 101 for those of you who are not as familiar. I'm gonna touch on the various forms of intellectual property, or at least most of them, and I'll be diving in a bit deeper with respect to cannabis as we go forward. So first off, trademarks are used to protect the words, protect words or symbols that are used to designate the origin of a product or service. These are your brand names, these are your logos. These are your brand slogans. Copyrights, protect writings, illustrations, other works of authorship. Design patents protect ornamental designs for manufactured items. Utility patents, which are patents as most people hear about them, it's usually utility patents, they protect technology, machines, formulas, compositions and processes. Trade secrets protect secrets that can give your client a competitive advantage, and that can be technology, that can be protocols, that can be their client lists. The important thing about trade secrets is that reasonable measures must be taken to protect those secrets. And finally, there are plant patents, which protect asexually reproduced plants. Asexual reproduced plants are those that are not grown from seed, but rather a branch can be cut off an apple tree and cloned into a new apple tree. That's essentially how plant patents work. And then they're also plant variety protection certificates, and those are used to protect seeds and seed-propagated plants. Of course, there on those, I won't really be diving deeper in this presentation, but it's important to note that A, it's the USDA that is in charge of the plant variety protection certificates, PVPCs, not the US Patent and Trademark Office. And hemp protections have been available for seeds since 2019. As you might expect, marijuana is not yet protectable by PVPCs. So I'm gonna start off with utility patents. And I'm showing one of the earlier patents that we have here. And I want to just basically call, look at the date here, the date of this patent, it was issued in 2003. It's based on a provisional application that was filed in 1998. So this goes way back, when there were very, very few states that even had medical marijuana allowed. CBD wasn't really a thing that people were talking about. But the important thing that I want to note here is that this, the USPTO did issue this cannabis patent way back when. And the assignee of this patent is the US Department of Health and Human Services. And sometimes this helps put attorneys at ease to realize that IP protection for a, at least federally illegal substance, is legal. And so this was a claim here, it was a method about treating diseases using cannabinoids, which if you go through this patent, of course may be extracted from cannabis. And this patent went right through. You could also argue that it's probably evidence that the federal government does understand that there is a medical use for cannabis. But that is a discussion for another day. There also have been cannabis plant patents that have issued. These give a pretty nice botanical description of the cannabis plant, and generally a number of pictures. I'll note part of the MPEP, the Manual of Patent Examining Procedure, that a deposit is not necessary to get a plant patent granted. That's especially important for cannabis. If you're practicing in this area, it is not advisable to bring a federally illegal substance and try and deposit it with the federal government. At least 26 of these have been issued though, and the numbers keep going up. So patent prosecution is the process of filing a patent with the US Patent and Trademark Office, and the negotiation between the patent attorney and the patent examiner to get it allowed. There is what's called a "duty of disclosure" that all patent practitioners are aware of and must abide by, as well as inventors and other people involved with the prosecuting of a patent. And the key part of the duty of disclosure is that the patent attorney needs to submit any prior art that is relevant to the materiality of the claims that they're seeking to get. In most industries, prior art is heavily searched for by the USPTO. It largely consists of prior patents, academic publications. But in the cannabis industry it's a little bit different because there are fewer old cannabis patents and there are not too many academic publications. So it's almost more important that the patent attorney impress upon their client that they need to really reveal everything that they know about that would potentially read on the patent claims we're trying to get. And in particular, this includes all known public sales and use. And that of course would even include federally illegal public sales and use. So if a device was used and sold illegally, and your client knows about it, it's important that it be disclosed to the patent office. A lot of this prior art may be hidden. And it's important to note here that medical marijuana became legal in California in 1996. So there's a lot of stuff that may have been around for a long time, and it's not advisable to try and patent any of this stuff. So one problem that has sort of reared its ugly head in cannabis patents is really as a result of the difficulty the USPTO has had, and it it has gotten better, to find relevant prior art. And so this was a patent here that was issued in 2017, and I've just highlighted two of the claims here. I'll read Claim 20, is that, "A liquid cannabinoid formulation, wherein at least 95% "of the total cannabinoids are THC and CBD." And as we discussed earlier, as we discussed earlier, THC and CBD are by far the most well-known cannabinoids and they have been around for quite a while and known for quite a while. Basically, this claim is incredibly broad. It's hard to imagine a liquid cannabinoid formulation that doesn't meet this. And as a result, this is an incredibly broad patent. It would probably read on all vape cartridges in the cannabis space at all. But it's validity is certainly questionable. And this patent actually was the subject of the first, the first cannabis patent litigation in the US. The results of this litigation were that the defendant, Pure Hemp Collective, challenged the patent on the grounds of inequitable conduct, basically saying that you tried to get a claim, but you knew this already existed. There was also a claim, there was also a counterclaim made that the patent should be invalidated under section 101, largely on the grounds that cannabinoids are natural. That challenge was defeated. There was also some claim construction where basically the court determined and assessed what the various terms of the patent claims actually meant. Ultimately, this case ended not for any direct patent reason, but because the plaintiff, the United Cannabis Corporation, stipulated to dismissal as it was going out of business. Currently the United Cannabis Corporation is in bankruptcy. But again, bankruptcy is governed by federal law. So there's a whole nother headache and bag of worms there that they've been having to deal with. And Pure Hemp is trying to appeal the denial of its attorney fees in this case. Another case that's gotten a bit more press and is much bigger is Canopy versus GW Pharmaceuticals. GW Pharmaceuticals, as I mentioned earlier, is the manufacturer and seller of Epidiolex, the CBD-based FDA-approved epilepsy drug. And this is a patent that is focused on a method of extracting CBD. Canopy Growth Corporation acquired, acquired a patent after allowance and essentially immediately turned around and asserted it against GW Pharmaceuticals. These are pretty big boys in the industry. GW Pharmaceuticals has about a 7 billion market cap. Canopy Growth Corporation has about a 3 billion market cap. But I'll note here that in previous iterations of the present presentation, that number used to be a lot bigger. And I'll go quickly through this claim here, that was the subject here, was that it's a process for producing an extract containing THC or CBD. And it involves subjecting the cannabis plant, or primary extract, to CO2 in liquified form under subcritical pressure and temperature conditions to extract cannabinoid contents and then reducing the pressure temperature to separate the THC or CBD, as well as some carboxylic acids. And so this procedure is, it's generally called the CO2 extraction method. It's been practiced by a large chunk of the industry to extract CBD and THC. So Canopy probably went after GW Pharmaceuticals because they're a big player and they have, I guess, very legitimate legal sales at the federal level as well, and a lot of them. But this case was sort of a threat across the board to a large swath of the industry. The case really turned on a claim construction dispute about this phrase: "CO2 in liquified form under subcritical pressure "and temperature conditions." And the question was really, did it have to be subcritical pressure and subcritical temperature, separately or together? GW as the defendants went for the more narrow claim construction, as is typically the case in patent suits. And that would essentially say that the area that's outside the striped area of the diagram is outside of the patent scope, and as a result, they would not infringe the claims. Canopy essentially agreed that under the claim construction that the judge gave, they couldn't win. So the case was dismissed and it has now gone up to the federal circuit. It has been briefed and it's awaiting oral argument on this claim construction issue. I think it's probably safe to say that the bulk of the industry is rooting for success by GW because it keeps them a bit safer on this. But we will see how this shakes out. Another thing to look as the cannabis industry matures and probably after federal legalization occurs is the threat of NPEs, or non-practicing entities. There are some patents out there that are big, that may be a bit scary, and may even potentially encompass large, large swaths of the industry. This is one example. It's quite a hefty claim here. It's also a little bit difficult to understand exactly what is going to be within the scope of the claim. Looking at the last phrase there, "Wherein a representative sample of the seed producing "said plants has been deposited under NCIMB numbers" There's a lot in this claim. Many botanists and many experts would have trouble telling whether or not their cannabis plants would fall inside or outside the claim scope. And as a result, this NPE might be able to just extract licensing fees, 'cause people just do not want to litigate this, especially when they're smaller. This was a patent from the Biotech Institute. They have three issued patents. There are probably some more NPEs out there. It is a very dense patent. It has 230 columns of disclosure. So there is a lot in there. And the priority goes a little ways back to 2013. GQ wrote a very interesting story about this. And I think it is a worthwhile read if you look up "The Great Pot Monopoly Mystery." But ultimately we will see if there is an NPE patent war similar to the so-called patent troll wars with software that ended about a decade ago or so. So when it comes to enforcing cannabis patents, you know, it's very important to look at the likely validity of the claims, based on prior art that was missed by the patent office, or whether or not the patents are even enforceable as a result of the patent owner not revealing material prior art that they were aware of. They're also gonna be a couple of, couple of interesting things coming down the pike as well, yeah, I believe, in future patent litigations on cannabis. One is with respect to the hearsay exception and statements against interest. A lot of cannabis sales and growing may have been federally illegal, so at the time that it occurred, so I think there's a pretty good question as to whether or not admission of those would be a statement of interest and get around the hearsay exception. And then there are also 5th Amendment-based offenses maybe involving discovery, where one litigant would wanna see sales of the other, and perhaps those discovery requests can be confused given that they are evidence. At any rate, there may be an entitlement to adverse inferences there. There are also some interesting damages considerations. You know, in patent suits, the damages are at least a reasonable royalty and the lost profits that can be proven. But if those lost profits were federally illegal, can they be recovered? Similarly, can a reasonable royalty be recovered if the sales were illegal? No court has answered these questions, and it's still very much out there. When it comes to cannabis trade secrets, it appears that enforcement is viable. This question was directly addressed in Silva Enterprises versus Ott by the Central District of California. The defendant moved to dismiss trade secret misappropriation and they argued that there's no trade secret protection for the illegal activities. But the court rejected this argument, holding that the CSA does not immunize defendants from federal law. So that is good news for people in the industry unless they are trying to misappropriate trade secrets. Another case that is pending is Lavvan V Amyris. It's a dispute between former business partners. There's a lawsuit filed for trademark misappropriation, sorry, trade secret misappropriation, as well as patent infringement. And currently one of the parties moved to compel, and that was denied. And that denial of compelling arbitration is currently on appeal to the Second Circuit. So when it comes to trademarks, things get a bit different. There are really three sort of types of trademark protections. There are federally registered trademarks, and these give exclusive rights in registered classes. It prevents others from using confusingly similar marks. It gives nationwide protection. The priority goes back to the first legal use, which will of course become important here. And distinctiveness of the mark is presumed if you have a federal trademark registration. And there are two types of federal trademark applications. There's the use-based application, and that's where the applicant has already used the mark legally in commerce. And then there are intent to use application, where the applicant intends to use the mark legally in commerce. There are common law protections that protect uses of branding just by virtue of the fact of using them. But it can be an uphill battle to enforce because distinctiveness is not presumed in common law trademark lawsuits. There are other headaches that are involved as well. And finally, there are state registered trademarks, and those would be trademarks that are effective just within the state. But of course, under state law, cannabis is often legal. So this can confer advantages to a lot of cannabis businesses. So when it comes to ancillary products and services, i.e., those not touching the plant, federal trademarks are a little bit easier. And I'll just note that I'm focusing on federal trademarks here because those are generally sort of the gold standard for your trademark and brand protection. The legal use in commerce requirement is of course kind of first and foremost here, but there are many legal products that support the cannabis industry: processing machinery, lab equipment, software, software as a service, containers, substance agnostic devices, clothing, other legal brand building items, and consulting service, including legal. These are all legal uses. When it comes to the substance agnostic devices, those can be a little bit more complicated. Pipes and vaping devices and the like arguably can be paraphernalia. It really comes down, I think, to how they are being marketed. If they're being marketed for purely legal herbs, tobacco, it's much more likely that they'll be able to pass the legal use in commerce requirement. But if they're being marketed directly for the use of marijuana, there are likely to be problems. And of course for intent to use applications, those are also out there, and those are a bit easier to come by. When it comes to plant-touching businesses, the legal use in commerce requirement obviously becomes a bit of an impediment. The first thing to look at, of course, is whether or not there is CSA compliance. Is what is being sold derived from marijuana or is being derived from legal hemp, that is cannabis with negligible amounts of THC? If it's legal hemp, the CSA is not going to be a problem. And as far as the CSA is concerned, it is legal use in commerce. The next large hurdle that a lot will come across is whether or not there's compliance with the Food, Drug and Cosmetics Act. If CBD is being used as a drug, or sold as a drug, or it's being offered in a food or a beverage, this becomes a bit of a problem, because the FDA considers CBD to be a drug, as it's sold for epilepsy by GW Pharmaceuticals, it does not allow this. Hemp seed oil, hemp seed protein powder, hulled seeds, these are all permitted. But if CBD is pulled out and used separately, there's likely a problem with FDCA compliance. And the USPTO is just deferring directly to what the FDA says is allowed and what is not allowed. What plant-touching businesses can do, provided they're doing it in a bona fide way, is they can get trademarks for legal products or services that may be confused with the cannabis products. So a company might sell THC cookies, as well as normal cookies without cannabis products in them. They can get the trademark for the normal cookies. They'll probably have to excise all cannabis-related goods from their description of goods, but there's still a possibility of likelihood of confusion and there's still some protection they can get. But again, it is important to give fair descriptions of scope of the goods and services that the registration is for. For plant-touching products and services, it's also important to see if there are federally legal aspects of businesses that are branded. Clothing, consulting services, even cigarette papers, getting federal registration around the edges here can be worthwhile for cannabis or plant-touching companies. And as I discussed before, their companies and their attorneys should ask themselves if they can also sell non-cannabis goods that fall into the same category, or may be confusingly similar. When it comes to plant-touching brands, there are other dangers as well. And the strongest and best example of this is the Kiva versus Kiva case. That case involved a defendant, Kiva Brands Incorporated. And they were the leading provider of cannabis-infused edibles. They're based in California. They've been selling cannabis chocolates since 2010. And they sell cannabis chocolates in the millions. The plaintiff was Kiva Health Brands, KHB, and they sell legal health foods. They have nothing to do with cannabis. They have had legal commercial use. And their first trademark application was filed in 2013, and they acquired a federal trademark registration in 2014. And what happened in this case was the Kiva health company sued the Kiva cannabis company for infringing its trademark, the trademark "KIVA", even though the cannabis company was using the mark earlier. Now, Kiva Health was able to do this because they had a federal registration for it. And normally what happens in cases like this is that the person who used the device, used the brand earlier, has what's called a prior use defense, which essentially says we were here first, we're entitled to keep using it, you can't sue us for continuing to use the name that we have long been using. But on summary judgment, in this case, the Northern District of California held that Kiva's federally illegal sales cannot support their prior use defense. And they also held that the Lanham Act, which is the federal trademark act, preempted any California common law rights that Kiva the cannabis company may have had. So this ruling is a bit scary. It basically means that goodwill and branding built up for any federally illegal product is not gonna help you against a federally legal product, even if they just take the branding that you're already using. When the Northern District of California rejected the Kiva cannabis company's prior use defense, there were also cross summary judgment motions on laches. And essentially the laches defense was that in addition, in addition to us being here first, the Kiva cannabis company said that you knew about us for a long time and you decided not to sue us, and you just basically, you know, sat on your rights. These were rejected in cross motions for summary judgment. But as the case proceeded, during discovery, Kiva, the cannabis company, discovered that KHB knew about their mark for more than four years and they moved for the court to reconsider the rejection of its laches defense on summary judgment. Once this was filed, the parties got together and there is a stipulation to dismiss the case, one that was filed at the end of August of 2022. There was a confidential settlement agreement. The upshot here, though, for everyone else is that the cannabis company, Kiva the cannabis company, no longer has any basis to appeal its loss on the prior use defense. And that prior use rejection remains a bit of a scary thing for others in the industry who may have somebody else decide to use their trademark as well. So, for non-THC brands, after the Farm Bill, the USPTO added some new cannabis and cannabis-related examination guidelines. There were a number of CBD-related trademark applications that were on the books at that time. And essentially the USPTO said, anybody who had filed CBD marks before this time, we'll give you the date of the Farm Bill as your priority date, as the day you effectively filed the application. So this was good news in large part for a lot of these CBD companies. They were able to move forward with their application. But as time goes on, there's gonna be probably some strange litigation happening. 'Cause normally the person who files first, or who has first priority, is going to win the right to use the mark. Here, everybody essentially has been deemed to have filed the mark at the exact same day at the exact same time. So we may be in store for some fights on this. The other thing that's notable about the examination guideline is with respect to intent to use. For applications filed before the Farm Bill that identified goods encompassing CBD or other cannabis products, registration will be refused due to unlawful use or lack of bona fide intent to use in lawful commerce, under the CSA. The examining attorney will advise the applicant that it may request to amend the filing date to the date of the Farm Bill. And then finally, applicants should be aware that even if the identified goods are legal under the CSA, not all goods for CBD or hemp-derived products are lawful following the 2018 Farm Bill. So that last part, it becomes a little, a bit more important here where it comes to intent to use applications. So for intent to use applications, cannabis-based products and services must be lawful and there must be bona fide intent to sell them in lawful commerce. So there is a question of law here as to whether a person or a company can have bona fide intent to legally sell a product in the future, even as that product is not necessarily legal today. The way that the USPTO currently answers this question is no. According to the USPTO, in order to file an ITU, you must have bona fide intent to sell the product and the product must be actually legal at the time of filing. Now this is a rule that I had challenged on behalf of a CBD iced tea client. The case was In re Joy Tea. The TTAB followed JJ206, which had this rule, essentially a per se rule, that stated, if it's not legal today, there's no possible way that you can have bona fide intent to sell it legally in the future. Not unsurprisingly, I disagree with that. In our opening brief, we argued that there is no basis in law, logic or policy for that rule. We also argued as a matter of policy that maintaining this rule is gonna create what we called a "midnight stampede" on the day of cannabis legalization, where basically all sophisticated cannabis brands will try to be first in line when it comes to priority, whether it's for their trademarks, or perhaps even trademarks of their competitors. And as a result, it may jam up the USPTO website and then there may be years and years of priority disputes to come. Another argument that got a lot of play was the fact that CBD and cannabis companies, like my client Joy Tea, are treated different than mainstream pharmaceutical companies. It's a common practice for pharmaceutical companies to file trademarks for their drugs that have not yet been approved by the FDA. And effectively we were in that same position. My client's product did not have any CSA issues. There was no THC. We were just trying to sell a product that had not yet been approved for sale by the FDA. But pharmaceutical companies also try to lock down names for products that they intend to sell, but could not sell on the day of their trademark filing because they were not yet approved by the FDA. And I see a very, very strong parallel there. And finally, we put forward a lot of objective evidence of our client's bona fide intent, and it was entirely undisputed on the record, that include the FDA's own statements of records saying that they were looking into how they could make a pathway for beverages and foods including CBD. Public opinion polling regarding how many people want cannabis to be legal, as well as stock market evidence showing the skyrocketing market for publicly traded cannabis-related stocks. Basically we wanted to show that my client's bona fide belief that cannabis and CBD in food and beverages would be legal in the near future was very, very reasonable and that they could back it up with objective evidence. There was also an amicus brief filed by the International Cannabis Bar Association and Americans for Safe Access. And the USPTO filed their opposition brief. The ending here, unfortunately, is not quite as sweet. The client went under, largely due to the pandemic. And we were forced to let go of this appeal. But the issues remain. And we're on the lookout for another case that will present them as squarely and as nicely as For Joy did. There was an impact on trademark examination procedures, however. As we moved forward with this, we noticed that some other applications, specifically shown on this slide are basically the questions that the USPTO will ask applicants if they suspect or know that cannabis is involved. As a result of the FDA and disparate treatment argument, questions 8, 9, and 10 have been added. These are somewhat in line with the USPTO's argument that, you know, well, we've not, did not actually file for FDA approval, as some of the pharmaceutical companies had. I see this as a distinction without a difference, but of course I'm sure they beg to differ there. And that's it. If you have any questions, please reach out to me by email. My email address is here, [email protected]. This is a very interesting area of the law and I've not been able to find another one where there's such a dichotomy between state law and federal law. And it is both fun, interesting, as well as challenging, to try and figure out how to represent clients in this gray area. Thank you very much and I hope you enjoyed the presentation.