Colorado’s Veritas Fine Cannabis Sues Nevada Cannabis Company for Trademark Infringement

Over the last couple of years, our firm has seen a massive uptick in cannabis-related trademark litigation, and have handled many of these disputes on behalf of our clients, both as stand-alone matters and in conjunction with partnership disputes. Here are a few of the trademark disputes we’ve covered recently (our blog archives are full of these posts, if you’re interested):
The Harvest Trademark is an Ongoing Point of Contention in the U.S. Cannabis Market
Toys “R” Us Succeeds in Trademark Lawsuit for “Depreciation of Goodwill” Against Canadian Dispensary Herbs “R” Us
Hemp Trademark Litigation Update: National Grange Sues Oregon-Based Hemp Grange
Another Cannabis Trademark Dispute, Another Settlement
The latest lawsuit was filed on July 10, 2020 by Colorado-based Carrick-Harvest, LLC d/b/a Veritas Fine Cannabis (“Veritas Fine Cannabis”) against defendants Veritas Farms, Inc. and 271 Lake Davis Holdings, LLC d/b/a Veritas Farms (“Veritas Farms”), which is based in Nevada. The lawsuit alleges trademark infringement, false designation of origin, unfair competition, cybersquatting, and declaratory relieve stemming from Veritas Farms’ use of the VERITAS mark in conjunction with its cannabis products.
What makes this lawsuit interesting, and also tricky, is that it involves a licensed cannabis business in one state (Colorado) claiming trademark infringement by another licensed cannabis business in a different state (Nevada). For those who have been following our blog, you likely know that obtaining federal trademark protection is a difficult proposition for cannabis companies, due to “lawful use in commerce” being a requirement for registration with the USPTO.
In light of this difficulty, cannabis businesses have employed a two-part strategy to protect their brand assets that includes obtaining federal trademark protection for ancillary goods and services that do not run afoul of the federal Controlled Substances Act (“CSA”), as well as state trademark protection covering cannabis, cannabis goods, and any other items that are lawful under state law, but federally illegal. So, best case scenario for a state-legal cannabis business is the following:
It possesses state trademark registrations in each state in which it legally operates, which provide protection for cannabis goods only within the borders of that state; and
It possesses federal trademark registrations for ancillary goods and services which provide protection nationwide, but do not cover cannabis goods.
So, when a cannabis operator in one state wants to sue a cannabis operator in another state for using the same or a confusingly similar trademark, as in this case, the plaintiff must rely on federal trademark registrations that don’t cover cannabis, and state trademark registrations that don’t apply in the state in which defendant operates. It’s a difficult situation.
In this case, plaintiff has a number of active federal trademark applications (not registrations), that cover things like “providing a website containing current events news and information about cannabis, cannabis infused products and smoker’s articles,” “providing agricultural information about cannabis and cannabis strains; providing a website featuring information relating to the therapeutic benefits of cannabis; providing a website containing agricultural news and information about cannabis and cannabis,” “lighters for smokers, ashtrays,” and “providing a website containing consumer product news and information about cannabis, cannabis infused products, and smoker’s articles,” all of which are federally legal, but none of which are cannabis. (As a side note, one thing that is unclear is why these applications were filed on an intent-to-use basis when the plaintiff claims to have been using its mark in commerce since 2016.)
The plaintiff here is alleging trademark infringement by defendant based on defendant’s provision of the goods/services listed above, and also based on the contention that defendant’s cannabis goods fall within the plaintiff’s “zone of natural expansion.” This means that based on the goods and services for which plaintiff currently has federal trademark protection, it would be natural to assume that plaintiff would expand its product offerings, and therefore its trademark protection, into the same (cannabis) goods that defendant is offering.
The concept of the “zone of natural expansion” is one that virtually every cannabis company with federal trademark protection hopes to be able to rely on, but the argument is not a clear winner. Cases like this illustrate how critical it is for the industry to have access to a functioning means to protect intellectual property. Lack of access to federal trademark protection is a huge liability, and we’ll be watching to see if a decision on these issues is ultimately rendered.
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