First Amendment May Help Cannabis Companies Beat Trademark Infringement Claims

By Fred Rocafort, Attorney at Harris Bricken

The U.S. Constitution’s free speech protections, found in the First Amendment, may present a legal recourse for cannabis brands in trouble for using marks that are similar to famous trademarks.

To be clear, a free speech argument will not be of help to those who simply copy a famous trademark, making no effort to differentiate between their mark and the famous one.

In the case of trademarks that simply evoke famous ones, however, the First Amendment could help preclude infringement claims.

Famous trademarks are a not-uncommon source of inspiration for brand creators. At times, brands take that inspiration too far, effectively appropriating a famous trademark.

For example, candymaker Ferrara Candy Co. sued a company called Akimov LLC in the U.S. District Court for the Southern District of Florida in May, alleging that it was selling THC-containing products bearing some of Ferrara’s registered trademarks, including those for its Nerds and Trolli candies.

Assuming the allegations are true, Akimov was not using marks inspired by Ferrara’s, but rather using Ferrara trademarks without authorization.

The harm presented to Ferrara and the public by the presence in the market of Nerds and Trolli products not made by Ferrara should be self-evident. Consumers could be misled into buying Nerds and Trolli products of unclear provenance, possibly of lower quality than the genuine products made by Ferrara.

That is without even taking into account the risks posed by the alleged presence of cannabis in Akimov’s products. For Ferrara, its reputation could suffer in case of any problems with Akimov’s products, as the problems could be associated with Ferrara’s trademarks, even if they were not in fact produced by Ferrara.

Moreover, sales of unauthorized Nerds and Trolli products to misled consumers, who in fact wanted the genuine article, would represent a loss of revenue to Ferrara.

In other cases, the inspiration drawn from a famous trademark might be obvious, but the potential for harm minimal or inexistent. For instance, last year Wm. Wrigley Jr. Co. sued a company, Terphogz LLC, that sells Zkittlez products in the U.S. District Court for the Northern District of Illinois, alleging infringement of Wrigley’s Skittles trademarks.

It is hard to argue that the Zkittlez name is not a play on Skittles, but whether the use of Zkittlez trademarks infringes on Wrigley’s Skittles marks is another matter.

In fact, the U.S. Patent and Trademark Office allowed the registration of two marks incorporating the word “Zkittlez,” not finding a likelihood of confusion between these marks and the Skittles ones.

In cases where their mark is not identical to the famous trademark, brand creators can argue that there is no likelihood of confusion. At the same time, the Constitution and its free speech protections might constitute another arrow in the quiver of brands that seek inspiration from famous trademarks, and find themselves as defendants in a trademark action.

In relevant part, the First Amendment to the Constitution provides that “Congress shall make no law … abridging the freedom of speech.” There is tension between the First Amendment’s mandate against abridgments of freedom of speech, on the one hand, and federal trademark rights provided for under laws made by Congress, on the other.

In particular, the Lanham Act prohibits the registration of a trademark that so closely resembles a registered mark or a mark that was previously used by another “as to be likely, when used on or in connection with the goods of the application, to cause confusion, or to cause mistake, or to deceive.”

Strictly speaking, brand owners’ freedom of speech is limited by this prohibition, as it means they cannot use certain words, phrases and logos in connection with their products.

Recognizing this tension between trademark rights and freedom of speech, courts look to strike a balance. In Iancu v. Brunetti, the U.S. Supreme Court in 2019 held that a provision of the Lanham Act prohibiting the registration of immoral or scandalous trademarks infringed on the First Amendment.

Previously, in Matal v. Tam, the Supreme Court in 2017 reached a similar conclusion regarding a prohibition on disparaging trademarks.

By contrast, courts have generally considered that the curtailment of First Amendment protections is acceptable when denying protection to a trademark that is likely to be confused with one previously used in commerce.

In its 1987 San Francisco Arts & Athletics Inc. v. U.S. Olympic Committee decision, the Supreme Court recognized that the suppression of certain words in the interest of trademark protection can have the unfortunate effect of also suppressing the expression of ideas.

At the same time, the court considered that this risk had to be weighed against the importance of protecting the value added to words through the efforts of parties who use these words as trademarks.

This calculus changes where artistic expression is implicated. In Rogers v. Grimaldi, the U.S. Court of Appeals for the Second Circuit in 1989 adopted a test under which, if free speech interests are implicated, a plaintiff claiming trademark infringement will only prevail under two circumstances. One is where the infringing trademark has “no artistic relevance” as used. The other is where the infringing trademark is explicitly misleading as to source or content.

It may seem like a stretch to view punny names like Zkittlez as artistic expressions. Yet in 2020, the U.S. Court of Appeals for the Ninth Circuit had no problem determining that a dog toy was an artistic expression in VIP Products LLC v. Jack Daniel’s Properties Inc. The “Bad Spaniels Silly Squeaker” toy resembled a bottle of Jack Daniel’s whiskey, and bears the phrase “the Old No. 2, on your Tennessee Carpet” instead of “Old No. 7 Brand Tennessee Sour Mash Whiskey,” as on actual bottles.

In its reasoning, the Ninth Circuit made clear that an expressive work need not be the sort of work to be exhibited in a gallery. Rather, the key is whether the use of the famous mark serves to express a point of view or communicate an idea. In the Ninth Circuit’s view, the use of elements associated with Jack Daniel’s brand image on a dog toy conveyed a humorous message entitled to free speech protections.

The Ninth Circuit’s reasoning above could be applied to some of the trademarks used by some cannabis brands that parody, or are inspired by, more famous trademarks. While not everyone will find trademarks such as Zkittlez to be amusing, it is reasonable to speculate that at least some people will be amused.

To be sure, not all cannabis trademarks being challenged by the owners of famous trademarks will cross the threshold of artistic expression, but arguably some do. This in turn means that, under the Rogers test, the use of these cannabis trademarks will only constitute infringement of more established brands under very limited circumstances.

Applying the Rogers test to the Zkittlez marks, its use has artistic relevance — there is no joke otherwise. Meanwhile, it is hard to argue that these explicitly mislead as to the source or content of the work.

The letter substitutions that differentiate the Zkittlez trademarks from the Skittles ones are significant. As such, they send an immediate signal to consumers, to the effect that these trademarks are not identifying the Skittles candies well known to the public. If anything, it can be argued that the Zkittlez trademarks seek to lead consumers away from confusion.

Contrast this to the facts in a lawsuit filed earlier this year in the U.S. District Court for the Southern District of New York by Hermes against Mason Rothschild, the creator of a nonfungible token collection named MetaBirkins.

Hermes has registered the BIRKIN trademark in connection with handbags. As Hermes alleges in the lawsuit, with many established brands entering the metaverse, consumers would expect that NFTs bearing famous trademarks would in fact be affiliated with the owners of said trademarks.

On the other hand, it would be far harder to make that argument if the chosen name for the collection was MetaVirkins, for example.

While decisions such as the one in Bad Spaniels provide legal inspiration for some cannabis brands in infringement hot water, it is critical to keep in mind that cannabis products are not chew toys. Courts might view free speech issues differently in cases where the allegedly infringed trademarks are used on products that are unlawful at the federal level, such as marijuana, as defined in the Controlled Substances Act, or CBD products whose introduction into interstate commerce violates the Federal Food, Drug and Cosmetic Act.

Owners of famous trademarks could argue that parodical or other similar marks should not enjoy trademark protection if they are used on unlawful products. The logical counterargument would be that the word, phrase or logo at hand is a First Amendment-protected expression first, and a trademark second.

For our purposes, however, it suffices to highlight this potential opening for a court looking for a legal distinction upon which to base a decision favorable to the famous trademark’s owner.

It is also worth noting that VIP Products applies only to the Ninth Circuit; other circuits may take different approaches.

Finally, it is worth stressing that the First Amendment will not come to the rescue of those cannabis brands that cannot register their trademarks at the USPTO because they are used in connection with products that are unlawful. For a brand facing a trademark infringement or dilution action, though, the Constitution might offer deliverance.

Re-published with the permission of Harris Bricken and The Canna Law Blog