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CBD: Sometimes It Can Be Legal but Still “Unlawful”

In the Agricultural Act of 2014 (“2014 Farm Bill”), Congress exempted “industrial hemp” from the Controlled Substances Act (“CSA”) in certain narrow circumstances. Among other things it authorized institutions of higher education and state agriculture departments to grow hemp under a pilot program if consistent with state law, and defined hemp to include up to 0.3 percent of the psychoactive cannabinoid tetrahydrocannabinol (“THC”) on a dry weight basis. The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) expanded under certain circumstances the legality of hemp, legalizing its production as an agricultural commodity, and removing it from the list of controlled substances along with all derivatives, extracts, and cannabinoids among other compounds with a similarly low amount of THC.

The reversal of the CSA on the legality of hemp and its derivatives has led to an explosion in investment and growth in the industry, particularly for products containing the non-psychoactive cannabidiol (“CBD”), a compound that may effectively serve as a balm for a variety of ailments according to numerous published, peer-reviewed scientific studies. One report forecasts a 34% compound annual growth rate for the hemp industry, estimating that the global market will grow from USD 4.6 billion in 2019 to USD 26.6 billion by 2025. With such explosive growth, companies are making bigger investments and, not surprisingly, taking steps to build and protect their brand equity of which trademarks are an integral component.

One such company is Stanley Brothers Social Enterprises, LLC (“Stanley”), a Colorado-based company that makes, among other things, food products and dietary supplements that contain CBD. Relying on the 2018 Farm Bill’s provisions removing industrial hemp derivatives from the CSA, Stanley sought to register a trademark for its CBD products, sold as food supplements.

The United States Patent and Trademark Office rejected the application, deeming the CBD products “unlawful” under both the CSA and the Food Drug and Cosmetics Act (“FDCA”). Although Stanley appealed, a unanimous panel of three Administrative Trademark Judges sitting on the Trademark Trial and Appeal Board recently affirmed that rejection, creating market confusion and uncertainty given the 2014 and 2018 Farm Bills, which many observers regarded as having effectively legalized the sale of products containing CBD.

Notably, the Board explained its ruling without passing on the referenced Farm Bills’ impact on the legality of CBD products by amending the CSA, except by way of a discussion of the case background. The Board expressed its opinion that Stanley’s use of CBD in food products—tinctures of which droplets are intended to be added to foods or beverages—rendered those goods subject to the FDCA. The Board specifically noted that the FDCA prohibits “[t]he introduction or delivery for introduction into interstate commerce of any food to which has been added . . . a drug or a biological product for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public.” 21 U.S.C. § 331(ll). No other reported case relies on this provision.

The lesson here is that although the sale of CBD derived from industrial hemp is no longer criminalized under the CSA (so long as it complies with the provisions of the 2014 and 2018 farm bills regarding its cultivation), the TTAB at least regards any food product containing CBD to remain unlawful and therefore not subject to the branding protections afforded by a federal trademark. Aside from mustering further challenges to this interpretation of the FDCA, a good trademark strategy should consider marketing of CBD products that do not invoke use in food or other FDCA prohibitions. Perhaps if Stanley had sought to protect a CBD-only product (as opposed to dietary supplements infused with CBD), it may well have obtained a registration. Although the protection would not be as robust as that sought by Stanley, a CBD-only registration would still provide protection against third parties attempting to use a confusingly similar name in the CBD space.

The case is In re: Stanley Brothers Social Enterprises LLC, Case No. 86568478 (TTAB 2020).

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 210
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About this Author

Adam R. Fox Litigation Attorney Squire Patton Boggs Los Angeles, CA
Partner

Adam Fox is a litigation partner with experience handling and trying to verdict high-stakes controversies spanning a wide range of subject matters. The leader of the firm’s False Advertising Litigation & Protection Practice, as well as the Food & Beverage Litigation Practice, Adam also has substantial experience in complex, often cross-border commercial matters and those involving alleged environmental contamination and exposure. Due to the global scope of Adam’s practice, he maintains offices and is admitted to practice in both California and New York, and even handles disputes...

213-689-5166
Joseph Grasser Intellectual Property Attorney Squire Patton Boggs San Francisco, CA & Palo Alto, CA
Partner

Joseph Grasser’s practice focuses on federal and state court litigation with emphasis on intellectual property matters and unfair competition claims. Joseph also advises domestic and international clients on matters relating to trademarks, copyrights and trade secret matters. His experience includes all phases of litigation, from initial motion practice through to jury trial and appeal.

415-954-0243
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