Harvest Trademark Dispute Highlights Challenges Faced by Cannabis MSOs
Last year, I wrote about an uptick in trademark litigation between cannabis companies. This type of litigation differs from much of the cannabis-related trademark litigation we’d seen to date, where non-cannabis companies with established brands have sued cannabis companies for trademark infringement.
In particular, I highlighted the litigation between Harvest Dispensaries Cultivation & Production Facilities, LLC, based out of Arizona (referred to as “Harvest of Arizona”), and Harvest on Geary, Inc. / Harvest Off Mission, Inc., based here in San Francisco (referred to as “Harvest of California”), wherein Harvest of Arizona sued Harvest of California in Arizona alleging that Harvest of California stole the HARVEST name and logo.
The portion of the lawsuit filed in 2017 alleged trademark infringement, intentional interference with contract and with business relations, conversion, unfair competition and misappropriation of trade secrets, fraud, violation of Arizona’s Racketeering Act, violation of Arizona’s Consumer Fraud Act and unjust enrichment. In its complaint, Harvest of Arizona, which was established in 2011 and began using the HARVEST mark in 2012, claimed to own retail dispensaries and cultivation/production facilities in Arizona, Nevada, Illinois, Maryland, Massachusetts, Michigan, and Florida. It had no presence in California.
In 2018, when Harvest of Arizona announced its plans to expand into California, Harvest of California, which owns California state trademarks for the HARVEST name, sued Harvest of Arizona in California Superior Court for trademark infringement and unfair competition in California. Harvest of California noted in its complaint that this is a simple case of trademark infringement but that because the parties are in the cannabis industry, only state law applies. Federal trademark law is not applicable.
This dispute ended up settling, but earlier this year, yet another trademark lawsuit involving Harvest of Arizona and the HARVEST mark was ruled on by a judge in in the Faulkner County Circuit Court in Arkansas, and Harvest of Arizona lost.
In the Arkansas case, Harvest Cannabis Dispensary (“Harvest of Arkansas”), a small, locally-owned business operating in Conway, Arkansas, won a preliminary injunction prohibiting two facilities, a dispensary in Little Rock and a cultivation facility in Newport, managed by Harvest of Arizona from using the HARVEST mark. Harvest of Arkansas conceived of its “Harvest” name in September 2017 as it was seeking licensure from the state. And although Harvest of Arizona had used the “Harvest” name prior to that date, it had not done so in Arkansas, giving Harvest of Arkansas priority rights in the mark within the state of Arkansas.
This case highlights one of the biggest challenges faced by cannabis companies – the inability to obtain federal trademark protection to cover cannabis goods (or any goods that violate federal law). As cannabis MSOs expand into multiple states, their lack of federal trademark protection leaves them vulnerable to situations like this, where companies beat them to a particular geographic area and begin using the mark first.
In the U.S., common law trademark rights begin accruing upon use of the mark in commerce, and are often geographically limited. The result of this lack of federal trademark protection coupled with the ability to obtain state trademark rights and/or geographically-limited common law rights is that cannabis operators are left with a patchwork of trademark protection that is dependent on where they are licensed to operate.
While there are strategies these companies can and should be using to protect their trademark and IP rights to the greatest extent possible (this is something I spend a great deal of time advising my clients on), there is and will be no perfect solution until the legal status of marijuana under federal law changes (or unless the USPTO changes the rules).