The commercial litigation landscape for CBD, hemp and marijuana is constantly evolving as federal and state courts issue decisions that impact investors, commercial contracts, employment issues, intellectual property and insolvency. The CannaBizDisputes™ blog regularly tracks and reports on these developments.
California federal court splits the baby in cannabis IP decision
A California federal court recently dismissed trademark infringement counterclaims asserted by a cannabis edibles company based on the federal illegality of cannabis in Kiva Health Brands LLC v. Kiva Brands Inc., 2019 WL 4249075, at *9 (N.D. Cal. Sept. 6, 2019). Kiva is an intellectual property dispute between a health food company and a cannabis edibles company regarding the rights to the “Kiva” mark. After the plaintiff health food company sued the cannabis company for trademark infringement, the cannabis company asserted a counterclaim also for trademark infringement. The court granted then plaintiff’s motion to dismiss the counterclaim, and reasoned that because cannabis is “illegal under federal law, KBI cannot demonstrate that it made use of the mark in commerce prior to KHB.”
But the opinion isn’t all negative for the cannabis industry. The court also denied the plaintiff health food company’s motion for a preliminary injunction, because it found that consumers were unlikely to be confused between similarly-labeled health food and cannabis edibles:
At a high level of abstraction, the goods are related: they are both food items, sold to people looking for food. But upon closer examination, they are quite different. One is candy combined with a recreational drug, the other is health food. While KHB’s products are used for nutrition, KBI’s products are used to ingest cannabis…. This factor weighs heavily against confusion.
HBI’s additional claim….that an injunction would ‘protect the public from purchasing and using marijuana infused products, when they intend to purchase and use GMO free, pure, healthy food products sourced from eco-friendly farmers’ is nonsensical, and actually underscores the difference sin the products. KBI’s products are only available at licensed dispensaries and mobile delivery services; there is no evidence that any reseller sells both KHB and KBI products. It is hard to imagine a customer wanting to order some Omega 3 Fish Oil from KHB and ending up with—and mistakenly ingesting—a cannabis infused confection by mistake.
Also interesting is the court’s finding with respect to the “balance of hardships,” which it determined favored the cannabis company, since “granting an injunction and forcing it to undergo a massive branding of a name it has built up for about nine years would… be much greater than the hardship to KHB in denying an injunction and thereby maintaining the status quo.” In other words, while the federal illegality of cannabis continues to prevent companies from obtaining federal intellectual property protection, it does not necessarily undermine their equitable standing before the court.
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