Trademark Laundering, Useless Patents, and Other IP Challenges for the Marijuana Industry

Abstract

Marijuana law is changing rapidly in the United States today – since 1996, 23 states and the District of Columbia have legalized medical marijuana and five jurisdictions have made marijuana legal for all adults. Because marijuana remains a prohibited substance under federal law, however, the states are significantly limited in their ability to control marijuana policy within their borders. For example, because banking is regulated by the federal government, state-licensed marijuana businesses cannot gain full access to banking services; because bankruptcy is a federal benefit, it is unavailable to those involved in the business of violating federal law.

This article examines the implications for marijuana businesses of another area of federal regulation that has heretofore escaped academic commentary: federal intellectual property law. The continuing federal marijuana prohibition means that the most relevant federal intellectual property protections – trademark and patent – are largely unavailable for most marijuana businesses. While they are bound to comply with the dictates of trademark and patent law in their own affairs, marijuana businesses cannot acquire the rights and benefits of those laws or invoke those doctrines against others.

We discuss the ways in which these businesses attempt to circumvent the unavailability of patent and trademark rights, often through reliance on state law doctrines which generally prove insufficient to meet their needs. We also discuss the unexpected natural experiment that the current conflict between state and federal law creates. It is often asserted that intellectual property protections are necessary to foster creativity and investment. Yet the marijuana industry has seen extraordinary innovation and capital formation, even as these ostensibly necessary protections have proven unavailable. We conclude by discussing the implications of this observation for federal intellectual property law and policy more generally.