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Trademark Issues Facing Cannabis Brands

October 14, 2021 |by Jim Baudino | 0 Comments | Blog, Industry News | , , ,

October 14, 2021 by Jonathan Purow of Zuber Lawler

Like all other companies, cannabis beverage companies build their brands through blood, sweat and tears.  Unfortunately, one of the many inequities that arises from the federal legal issues tied to cannabis is that cannabis brands cannot obtain the same types of trademark protection that non-cannabis brands have.

Non-Cannabis vs Cannabis Trademark Process

A non-cannabis company can choose a new trademark, search to ensure that it is clear for use and/or registration, and if the coast is clear, they can commence use and apply for and obtain a federal trademark registration.  Amongst other benefits, a federal trademark registration gives the owner “nationwide constructive use” of that trademark for those goods, which is a valuable right when the time comes to enforce against interlopers using a similar trademark for similar products.

Yet things are not so simple for cannabis beverage companies, and so these companies need to be as clever with their trademark strategies as they are with their product development.  If a beverage contains cannabinoids that are not derived from hemp deemed legal by the 2018 Farm Bill, then the United States Patent and Trademark Office (“USPTO”) will reject a federal trademark application for the trademark in that brand.  The USPTO will certainly reject any application for a trademark used in association with beverages that contain THC in any quantities greater than those found in hemp.

Limitation with CBD Trademark Applications

Unfortunately, the situation for trademark applications for brand names of beverages containing CBD derived from hemp is not any more favorable.  As CBD is the active ingredient in the FDA-approved drug Epidiolex, and the FDA has not issued regulations governing the use of CBD in beverages and edible products, the USPTO rejects all trademark applications for marks used with beverages containing CBD in amounts not standard to hemp.  The industry has been waiting for the FDA to issue these CBD regulations for years, and there is no guarantee that they will resolve this trademark obstacle when they do.

While certain applicants try to withhold information about their product containing CBD or THC in their descriptions of their products in their trademark applications, or in the photos of their products they submit with their application, Examining Attorneys at the USPTO conduct online research to sniff out (pun intended) cannabis products. Even if the Examining Attorneys did not find the product’s connection to cannabis and the application proceeded to registration, any such registrations could potentially be canceled on the basis that they were obtained through fraud.

How Can Cannabis Brands Protect Themselves

So what is a cannabis beverage company supposed to do to gain some type of trademark protection for their brand name?  First off, in states where marijuana is legal it is typically possible to obtain a state trademark registration for that mark.  But the protection of that registration extends only so far as the boundaries of that state.  Cannabis beverage companies will therefore try to adopt different strategies to obtain the best possible federal trademark coverage that they can.  Some parties take advantage of the fact that the USPTO permits federal trademark applications on the basis of “intent to use” to file rolling series of applications in their mark, as a bet that progress will be made on CBD regulations or federal legalization before the date that the application would ultimately be abandoned.  Other parties file trademark applications using very specific terms to describe the cannabinoids they contain to avoid trigger words that would earn a rejection from the USPTO, and they can potentially obtain registrations. 

The strategy in filing these applications has to continually shift based on developments with the governmental agencies like the FDA that the USPTO turns to for guidance.  For example, the USPTO now rejects applications for ingestible products that contain Delta-8 THC.

Ultimately, the unfair circumstances that enable non-cannabis beverage companies to protect their trademarks nationwide via a federal trademark registration while a cannabis beverage company cannot do the same, is just another of the MANY reasons why the federal government needs to rehaul its approach to cannabis.  We can only hope for that day in the future when Cannabis Beverage Association members will find it as easy to protect their valuable trademarks as Pepsi does.

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Tasting is Believing: how ingredients are the key to unlocking the potential of Canna Beverages

September 21, 2021 |by Jim Baudino | 0 Comments | Blog, Industry News | , , ,

September 20, 2021 by Sebastian Richard & Dan Marmor of Cann

Stick your arm out fully extended and sweep it back and forth in front of you. Now if you followed that instruction, you are probably cursing my name and questioning why you didn’t ask any questions up front, for there is a high chance you knocked over a beverage. For it is this wet puddle and what it once was that I want us to understand. Beverages, what are they, and why not just water? 

When water is all you need, it is hard to be the only thing you want. And so humankind has put its creativity to it and over the centuries has brought to life a plethora of tastes concocted from both near and far ingredients.

We drink for a myriad of reasons; fun, stress, wake up, go to sleep, socialize, commiserate, celebrate. Though rarely, if ever, do we accept something we do not enjoy. Taste is the live and die metric for beverages.

Whether it’s the roasting temperature or brewing method of coffee, the distillation of botanicals for gin, the aging in oak for wine, the carbonation and sugars for soda, pulp or no pulp, there is a fundamental goal being aimed for – taste great

Few will pick up a beverage and give it a second chance after a distasteful first outing. Food, sure, but a liquid, first impressions count and boy don’t we know it. 

So when the world’s newest industry Cannabis begins to mature, it is of no surprise that beverages are the fastest growing segment within it. Resembling an action and form factor that we know intimately, the door is already open for Cannabis Beverages to take advantage. Though head the warning, tasting is believing and ingredients matter. With the modern consumer being driven by an increasingly strong urge to be familiar with what they are consuming, there is little room to hide. Before the cap is even popped, the ingredients are the first battle ground and are the greatest indicator to taste.

As an ever increasingly CPG driven consumer enters the cannabis space, beverages represent the lowest barrier to trial and the simplest introduction to the plant in general. Though if we want to ensure our new-to-cannabis consumers don’t leave beverage behind as their horizons expand, the ingredient lists must be at the standard of traditional beverages forward thinking brands. Peak at the meteoric rise of Kombucha (hard and soft), and you will see a boundary pushing idea that bacteria can be a tasty option.

Quality ingredients, however they come, that can be counted on one hand, pronounced, and widely regarded as not totally terrible for you, are the gold standard. In the immortal words of Eminem “we have one shot, one opportunity” to make that first step into cannabis beverage, not be the last. Our taste, our ingredients are the backbone of that ongoing journey. 

With a set of taste buds more unique than your fingerprint, it is no wonder that beverages are among the most diverse offerings a grocery store can carry. People want more, they want clean and they want deliciousness. I truly believe that Cannabis Beverages can deliver on those and shake a mighty stick at Big Alcohol’s stranglehold on the social consumption landscape. 

Ingredients will be the key to unlocking the consumer and how that taste profile is delivered will be the key to securing the future of Cannabis Beverages.

Taste is believing and ingredients are the roadmap to that outcome.

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To Drink or Not To Drink? Is Now the Time to Invest in Cannabis Beverages?

August 18, 2021 |by Jim Baudino | 0 Comments | Blog, Industry News | , , , , ,

August 18, 2021 by Evan Eneman and Jim Baudino from Sands Lane

Cannabis beverage is one of the fastest growing verticals in cannabis. Beverages currently represent just over 1% of overall cannabis sales and are poised to grow at a healthy rate over the next several years as the format becomes more ubiquitous and desirable.

The category has had some help recently, backed by the tailwinds of recent success for CANN, a cannabis infused social tonic.  This smart startup has already thought about ways to expand reach beyond just wide reaching PR and celebrity backers like Gwyneth Paltrow, they also have an UN*SPIKED line, to touch on traditional DTC beverage access and success.  Upon her entry into the category, Paltrow called cannabis the ‘hero ingredient of the future’, and many agree with her.

One of the first big names in the space began their cannabis beverage journey through CBD.  Interscope Records recording artist Ryan Tedder, lead singer of the group OneRepublic, launched MAD TASTY, his brand of infused sparkling waters in 2019.  

And it’s not just big named personalities. Pabst Brewing Company recently launched a licensed brand under Pabst Labs, offering a line of cannabis infused seltzers. And before them, former craft brew darling Lagunitas (now owned by Heineken) entered the cannabis space with its Hi-Fi Hops in partnership with CannaCraft. The Boston Beer Company also announced in May that it would set up a subsidiary to begin researching cannabis beverages in Canada.  And lets not forget non-alc brands, like Jones Soda, revealing it’s plans to produce cannabis-infused beverages.

And it’s not just the little guys….

Many major BevAlc brands have made investment into the category directly and indirectly, in the US and Canada. Constellation Brands was one of the first and biggest, with their CA$5.8B investment in Canopy Growth. Molson Coors and Anheuser-Busch  have both made their foray into the space over the past few years as well. With beer sales declining by 2.9% last year, alcohol brands are looking for additional revenue streams including nonalcoholic and cannabis infused alternatives, while looking much further ahead to a full legal framework and the share of buzz that cannabis infused beverages will hold.

The amount of interest and activity clearly indicates that the segment not only has “legs”, but may very well be the dominant consumption format in the future.

So how do you get involved?  You can follow the path of Ayr Wellness who just acquired a Massachusetts only cannabis beverage brand for $20M in stock and cash, or you can look for earlier stage opportunities like what Harmony Craft Beverages provides, allowing investors and operating partners alike to find a diversified portfolio approach as well as a bespoke brand incubation model. If public markets are your preference, many large operators will have some exposure to cannabis beverages, like Canopy Growth as well as GTI.

If you’re a brand, what do the prospects of raising capital for your business look like today? We asked several cannabis beverage brands to share their experience. Most brands have raised one or more rounds of outside funding, mostly from friends and family, angel investors and family offices. Deal structures have followed normal early stage formats using a combination of straight equity, and SAFE or Convertible Notes. 

As you start this process, remember that fundraising can be a long process, between six to eighteen months, sometimes longer; for the operators that start building relationships well before they start to fundraise, that timeline can be much shorter.  Overall investor sentiment for the category ranged from nervous to excited about the space, and all seeing the long term potential.  So when you go out to market, be patient, have your operations in order, and be ready to answer the hard questions about the cannabis beverage sector. In the early stages of fundraising, investors generally invest in people and the “opportunity”, not your net earnings.

So, to answer the question posed in the title of this article…yes.

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