Use in commerce when a product’s legality differs under state and federal law

Canna federal registration beat a prior common law trademark right?

Canna federal registration beat a prior common law trademark right?

Common law trademark rights are generally acquired by the earliest user of a mark with particular goods or services. Use, not registration, is a prerequisite. The federal trademark rights that come with registration of a mark through the US Patent and Trademark Office are more powerful. But federal rights are conditioned not only on priority but on quality of use.

“Priority ordinarily comes with earlier use of a mark in commerce.” Grupo Gigante SA De CV v. Dallo & Co., Inc., 391 F.3d 1088, 1093 (9th Cir. 2004). Specifically, the kind of commerce that Congress has authority to regulate: interstate commerce. And even further, interstate commerce that is not illegal under federal law.

In Kiva Health Brands LLC v. Kiva Brands, Inc., No. 19-cv-03459-CRB (N.D. Cal., Sept. 6, 2019), the Northern District of California considered whether a trademark owner could claim first use based on prior sales of such a branded product: cannabis-infused chocolate and other “edibles.” Illegal under federal law but allowed to be manufactured under state and local licenses in California. Relying on that California legality, defendant Kiva Brands (“KBI”) opposed a motion to dismiss counterclaims in a trademark infringement action brought by Kiva Health Brands (“KHB”). KHB sued KBI for infringement of its federally-registered KIVA mark.

Conceding that marijuana is illegal under federal law, KBI nevertheless argued that illegality was irrelevant. After all, the company was not seeking federal registration of the KIVA mark. Rather, it argued that use of the mark on the state level before KHB gained it California common law rights. “Common law” trademark rights are developed through actual use of a mark, such as with a product sold under a brand name. They are limited to the geographic area in which the mark is used. In KBI’s case, it asserted that because it had a legal right to use the KIVA mark in California, such use could not infringe KHB’s federal trademark.

Normally, such prior use in California would have been sufficient to challenge the federal trademark. But the District Court reasoned that asserting prior use rights based on common law as a defense to a federal claim required that the use be lawful under federal as well as California law. “KBI’s prior use was illegal under federal law” because all of its products contain cannabis, a Schedule I controlled substance. The court therefore concluded that since KBI did not make lawful prior use of KIVA, it had no basis for claiming the mark. KHB’s federal registration established national ownership.

The court went on to find that despite KBI’s failure to prove prior use, the likelihood of confusion between the two marks was insufficient to enjoin KBI’s further use of KIVA. We will be following this interesting case as it proceeds.

Dane Johnson
djohnson@iss.law