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Cannabis products will be the next source of IP disputes in the US

15.04.2020
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April 15, 2020

Branding of cannabis products and registering a scent as a trademark. Those are some of the distinctive characteristics of the unique IP field in the United States. Jordan Garner, Partner at the IP firm Leason Ellis, talks about how the country’s market will be changing in the near future. 

In the US, bringing actions for infringement of IP rights is relatively easy and cost-effective, and the threshold for doing so is low. In addition to the nuances in legislation and the court system, the country also has two other unique IP characteristics: the legalisation of cannabis and registering scents as a trademark. 

“Cannabis-related businesses have so far been limited to operating in single states in the US, there is no opportunity to build a national brand due to federal criminalization of cannabis. However, a number of the current presidential candidates have asked for either the decriminalisation of cannabis or its legalisation”, Garner says.   

The consequences are far-reaching. Both options mean that companies will be able to make their cannabis operations nationwide.  

“Building a national cannabis brand will be the next step in this industry. That, in turn, will likely result in more direct competition between producers and distributors”, Garner says.  

National marketing, brands and trademarks related to cannabis are likely to become major sources of IP conflict in the future, with litigation increasing accordingly. 

“Once the national presence of cannabis has been established, the technology will begin to advance. This also includes plant patents. Both patent filings and licensing strategies will need to become more sophisticated as the industry matures.” 

A unique scent can be protected

Another distinctive characteristic of the IP field in the US is the possibility of registering a scent as a trademark. However, the threshold for registration is high due to the laborious process. Proving distinctiveness and lack of functionality is challenging.

“The applicant must prove that the scent is not functional. For example, the scent of an air freshener is functional in nature and therefore not registrable. In addition, the scent must be distinctive and stand out from others. This requires voluminous documentation regarding, for example, volume of sales, advertising figures, and documentation of unsolicited reviews and declarations from consumers”, Garner says. 

So far, there has not been enough case law for examiners to consider how to satisfy the non-functionality and distinctiveness requirements.

“Registering a scent is an uphill battle, which deters many trademark applicants. However, if the scent is unique and consumers associate it with the company’s goods, as with any asset, it seems reasonable to protect it.”

The location of your business matters

Foreign companies should be careful in determining where in the US to establish their operations. The recent TC Heartland case in the Supreme Court changed the rules of where a defendant can be sued in the US for patent infringement cases.

If a company does not have a physical place of business in the United States, it can be sued in any court district. However, an office or subsidiary changes the situation.

“Following the TC Heartland case, a patent infringement case can only be brought in the jurisdiction where the company’s place of business is located or where the defendant has committed acts of infringement”, Garner says.

“Furthermore, the courts in some districts are more favourable to plaintiffs than defendants. This may be overlooked by many foreign companies when starting their business in the United States.”

Ignoring local expertise is a mistake

It is a good idea to focus time and resources on expanding your IP portfolio with, for example, design rights. Many automotive, telecom and software companies use design patents to protect the innovative features associated with the appearance and shape of industrial designs.

“Finnish companies routinely file for utility patents in various technological fields, but protection of the design of components, graphical user interfaces and replacement parts, for example, are areas where design patents help to create and maintain competitive positions in the US market”, Garner says.

In addition to focusing solely on patents, a common misstep made by foreign companies is ignoring the viewpoint of a US attorney when applying for a patent.

“Often there is an assumption that because the US is party to a number of international treaties, foreign attorneys can prepare patents for PCT filings and have the US attorney function mostly as a receiving office for communications”, Garner says.

However, there are particular nuances in the US patent law that require the special expertise of a local attorney. Especially software and medical diagnostic patents require a carefully tailored patent application.

“The patent office and legal decisions require a sophisticated approach that can harmonize a European patent filing for the state of US law. Kolster‘s attorneys do not hesitate to seek the assistance of a local attorney when the application requires knowledge of the nuances of local legislation.”

 

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