Do Marijuana Business Lawsuits Legitimize the Cannabis Industry?

The recreational marijuana and hemp industry have been hit with a flurry of lawsuits recently, and many more may be coming. Marijuana business lawsuits for trademark infringement and stealing intellectual property are not terribly surprising for a couple of reasons. The illegal cannabis market names strains carelessly because being sued is not something you worry about when you are working with an illegal substance in the first place. That carelessness has translated into the legal market as well, so companies like Gorilla Glue or the Girl Scouts of America are suing to get their brands back.

The other reason why marijuana businesses lawsuits are not surprising is that it is the way of the United States economy. In fact, it could be argued that lawsuits further legitimatize the industry as it integrates into U.S. capitalism. For recreational weed states to take on the burden of lawsuits means that they are being forced into the trial and error process that will fit legal recreational marijuana into its particular slot in the business world. Do you believe that part of the reason for the lawsuits is that companies see the cannabis industry as vulnerable and ignorant?

A flurry of marijuana and hemp lawsuits are roiling the cannabis industry’s confusing intellectual property landscape, with trademark and trade-secret fights signaling big changes for the business.

The legal disputes – from Ohio to California – show that long-simmering tensions over intellectual property in the cannabis sector are growing as the industry matures.

Despite the fact the federal government still doesn’t consider the marijuana industry eligible for intellectual-property protections, all businesses working in marijuana and hemp could be affected by the outcomes of these disputes.

“It’s going to be the ushering in of a new era,” said Travis Bliss, an attorney in Wilmington, Delaware, who specializes in intellectual property law but isn’t involved in any of the latest cases.

The disputes have been mounting. First, three trademark-infringement lawsuits targeted marijuana and hemp companies using names similar to non-cannabis brands.

From glue to hot sauce to beauty products, mainstream companies suing cannabis operators are signaling that traditional brands are now ready to move beyond nasty letters to stop anyone associating their businesses with hemp or marijuana.

Then there’s a trade-secret dispute between two biotech firms that make CBD oil, in which one company is accusing the other of “brazen theft” of its extraction method.

This lawsuit could be the first in which a federal court weighs the intellectual-property rights of two companies that deal with cannabis.

What’s in a name

This fall, an Ohio glue company changed the game for trademarks in the marijuana industry.

That’s because Gorilla Glue Corp. didn’t just try to get its name removed from a marijuana product through a cease-and-desist letter. Instead, the adhesive maker went a step further and took a Nevada marijuana firm selling the strain Gorilla Glue 4 to court over it.

It’s nothing new that established brands don’t like seeing their names turn up on a cannabis product.

Just ask any of the many marijuana retailers that have gotten cease-and-desist letters from the Girl Scouts of the United States of America over a common strain of marijuana, Girl Scout Cookies.

Gorilla Glue Corp. also sent cease-and-desist letters. But the adhesive maker went farther than the Girl Scouts, filing a federal trademark-infringement lawsuit.

“As time went on, and this strain kept getting more popular, the adhesive company realized that they kind of lost their name,” says Catherine Franklin, interim CEO of GG Strains LLC, the Las Vegas MJ grower targeted in the suit.

Franklin contended that the marijuana strain was more recognized in some Western states than the Ohio glue that inspired its name. (The strain has a reputation for stickiness, sparking the comparison to the heavy-duty glue.)

At first, the Nevada cultivator planned to fight the charge.

“In the beginning we lawyered up,” Franklin said. “They asked us for a percentage of sales. We weren’t going to do that. We were going to fight this to the end.”

But the marijuana company has had its own name issues.

GG Strains started fielding complaints from patients that Gorilla Glue medical marijuana was no longer treating their ailments. Upon investigation, the marijuana grower concluded the patients were mistakenly buying other strains being sold in dispensaries under the name Gorilla Glue 4.

So a new brand name was in order, giving GG Strains an assist in the glue lawsuit and a way to differentiate the brand. The company now calls the strain “GG4” and can sell its products as “formerly known as Gorilla Glue 4” for the next year, Franklin said.

“We didn’t pay (the glue company) any money,” Franklin said. “This settlement is a way for us to protect our growers and protect our brand.”

More than glue

The other trademark cases may not be as advantageous for marijuana and hemp companies. Filed just in the past month, the suits allege trademark violations by:

Gary Nelson, who represents Tapatio, predicted a flood of additional trademark-infringement lawsuits in coming years against marijuana producers.

“I don’t see any reason why someone with a well-established brand wouldn’t go after these people,” Nelson said.

New law, new protections?

A dispute between two CBD extractors presents another development for the marijuana industry. It could well be the first time a federal court wades into a business dispute between two companies dealing with cannabis.

In this case, Illinois-based Orochem Technologies Inc. is suing a Colorado extraction company, Whole Hemp Company LLC. The dispute centers on technology that Orochem used to extract CBD from industrial hemp.

Orochem alleges that Whole Hemp officials pretended to be interested in producing commercial quantities of CBD for Orochem when the company’s true intent was to discover proprietary extraction techniques and then use them. A lawsuit alleging trade-secret violations was filed last month in U.S. District Court in Illinois.

Neither extraction company responded to requests for comment by Marijuana Business Daily.

The trade-secret case could have big impacts on the entire industry, said Bliss, the Delaware attorney.

For one, neither side in the extraction case is likely to argue that marijuana is illegal and therefore ineligible for federal intellectual-property protections.

Also, the plaintiff is using a new law for its claim.

Orochem is not asserting patent protection, for which the marijuana industry is ineligible under federal law. Instead Orochem is citing a 2016 law called the U.S. Defend Trade Secrets Act. The law allows a federal court to intervene when trade secrets have been stolen, but it’s untested as it relates to the marijuana industry.

“The outcome of this case will ultimately determine to what extent you can enforce your intellectual property in federal court while cannabis remains federally illegal,” Bliss said.

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Richard Lowe

Richard Lowe is a 14-year veteran of the financial sector with licenses as a commodity broker (Series 3) and investment advisor representative (IAR Series 65). Along with a focus on raising capital for the firms he was employed with, he also wrote and edited much of the content published by them. He holds a BA in Journalism from the University of Massachusetts. He has been a longtime advocate for marijuana legalization due to the social injustices associated with marijuana prohibition and the strong potential for the medicinal benefits of cannabis.

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