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Washington Court of Appeals' definition of trademark rights in Washington

Recently, the Washington Court of Appeals waded into the murky waters of defining trademark use when an out-of-state marijuana business licenses a trademark for the sale of cannabis products in Washington. In Headspace International LLC v. Podworks Corp, the Washington Court of Appeals considered two fundamental trademark principles: (1) to establish trademark rights, the mark owner must lawfully use the mark in commerce in the relevant jurisdiction; and (2) to enforce its trademark rights, a licensor must exercise sufficient control over the goods and services sold under the mark by the licensee. Walking a fine line between these two principles, the Court ultimately held that licensing a trademark to a Washington cannabis business is sufficient to establish “lawful use in commerce” in Washington for the purpose of establishing trademark rights. But such use is not sufficient to constitute doing cannabis business in Washington.

Monitoring and participating in administrative notice-and-comment periods may pave the road to faster access to market for CBD (cannabidiol) and hemp purveyors. While we are all familiar with lawsuits and litigation, not everyone is as familiar with the government’s regulatory administrative procedures, and in particular, the notice-and-comments period that commonly accompanies proposed rules. In order to bring suit to challenge a proposed rule in a court of law, a group must first “exhaust all administrative remedies.” In other words, if you don’t submit questions and arguments to the government during the notice-and-comment period, then a court likely won’t help you change the rule at a later date. 

Hundreds of companies in Washington, Oregon, California and Canada are attracting billions in investments from just about every class of investor.

But the realities of investing in cannabis are far different from those in any other industry. You’ll need to be fingerprinted, undergo a background check, surrender your banking records and be ready to deal with state and federal laws that often seem in open conflict.

Any business can find itself in a cash crunch when big expenses or payroll disbursements come due. When you form an entity to do business in cannabis, how do you finance a big expense that needs to be made right now?

To read the full article, visit Puget Sound Business Journal's website. Subscription is required.

Boiling pointThe shredding of the Cole memo last month leaves the cannabis industry in an uncertain regulatory environment.

Industry-wide anxiety of this sort can sometimes breed business disputes that wind up in litigation.  Besides being expensive, defending a lawsuit from a business partner, investor, supplier, or employee can be a major distraction from your business goals.

If tensions are simmering in your company, maybe it’s time to address any legal loose ends governing your business relationships.  Virtually every lawsuit ever filed could have been avoided had the parties identified sources of conflict early and attempted to resolve their differences.

Here are some key questions to help identify whether legal issues may be bubbling beneath the surface of your cannabis business.

Jeff SessionsU.S. Attorney General Jeff Sessions today rescinded the Cole Memorandum, which had directed the federal justice department to de-prioritize the prosecution of federal marijuana laws in states where the use of marijuana has been legalized under state law if state enforcement procedures were in line with certain specified law enforcement priorities.

Christmas wishlistThe Executive Director of the Oregon Liquor Control Commission is spreading good cheer this holiday season by issuing a “Winter Holiday Checklist” to all recreational marijuana licensees.  The Checklist includes a list of regulatory violations that the OLCC is seeing on a regular basis, and a reminder of the OLCC’s enforcement authority to address these violations.  One might criticize the Director for being a bit of a Scrooge by warning licensees that they are subject to investigation and enforcement action (which can include license revocation) for violations of OLCC rules.  However, the Director is actually providing an early holiday gift with this Checklist, because he is providing all licensees with advance notice of those areas where the OLCC is going to pay particular attention to confirm compliance.  Those areas include the following

dispensary and torn contractA fundamental rule of contract law is that “illegal” contracts are not enforceable. But what constitutes an “illegal contract”? Generally speaking, an illegal contract is one where the performance of the contract results in an illegal act. Illegal contracts are considered “void and unenforceable,” meaning neither party can sue the other party for nonperformance of the contract.

What if a tenant enters into a commercial lease that contemplates illegal activities by the tenant on the property? This is the situation for many tenants who are leasing property for cannabis operations. In many cases, the activity may be properly licensed and permitted under state recreational marijuana laws, but the activity is illegal under federal law (such as the Controlled Substances Act). A recent Arizona Court of Appeals case addressed this issue directly.

All eyes in the medical cannabis industry are watching a December deadline faced by Congress. A short-term funding deal signed into law on September 8 by President Donald Trump not only kept the government running, it also preserved an existing provision known as the Rohrabacher-Blumenauer Amendment that prohibited the Department of Justice from interfering with state medical marijuana laws. That deal will expire on December 8, and Congress will have to approve a new version of the amendment if the protections are to remain in the next spending bill.

The Financial Crimes Enforcement Network (“FinCen”)  issued a Marijuana Related Business update in June with data from the first quarter of 2017. FinCen reports that the number of depository institutions that are actively banking marijuana businesses increased to 368 by the end of March of 2017. This is an approximate 22% increase from the end of March 2016. FinCen has received an increasingly large number of suspicious activity reports (“SARs”) from banking institutions for marijuana businesses.

The Washington State Liquor and Cannabis Board (“WSLCB”) recently issued a declaratory order (Order No. 01-2017) finding that the WSLCB is not required to determine that an applicant for a marijuana license is in compliance with all local zoning and land use ordinances prior to granting a license for a marijuana business. Accordingly, applicants and licensees should continue to check with their local jurisdiction to understand the jurisdiction’s zoning and land use regulations. Absent such confirmation, it is possible that an applicant could receive a marijuana license from WSCLB but not be able to operate in its WSLCB-approved location due to a local jurisdiction’s zoning or land use ordinances.

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Since its founding in 1966, Garvey Schubert Barer has counseled clients across a broad range of industry sectors. Our attorneys have deep bench experience and significant expertise in both complex legal and business matters. We value innovation and entrepreneurship, and closely monitor industry trends. It is with these values in mind that our firm established the cannabis industry group. Read More ›

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