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Could Federally Legalizing Cannabis Help Trademark Confusion?

Written By: Natalie Del Cid

In markets involving technology, intellectual property protections are crucial. Once an invention is created, it is patented. [1] In the cannabis industry, the idea of patents are far removed. [2] The idea of creating and protecting intellectual property is still evolving. [3] Intellectual property protections are thus necessary to create a distinction between companies and the product they offer.

The cannabis industry has encountered barricades when it comes to this particular area of the law. A company can patent a strain of cannabis or hemp in California, but meanwhile that same strain can simultaneously be patented in Washington. [4]

Why is this an issue?

It is difficult for companies to secure a patent at the federal due to cannabis’ illegal status under U.S. federal law. [5] Even though a strain of cannabis or hemp may be patented on a state level, on a federal level it is not. It would be impossible for a federal court to determine a patent lawsuit that would involve two competing cannabis companies in different states. [6]

In regard to federal trademark registration, the biggest hurdle is the fact that cannabis is still listed as a Schedule I drug under the Controlled Substances Act. [7] Since federal law only allows for a trademark to be registered for goods that are “lawfully sold or transported in commerce,” cannabis is not include. [8] A violation of trademark law can therefore arise if a company in State A tries to expand its specific strain of cannabis into State B, but the cannabis strain of the State A company is already patented by another company in State B.

The first cannabis-related patent infringement lawsuit is currently taking place in the

United States District Court of Colorado. [9] In United Corporation v. Pure Hemp Collective, Inc., the petitioner, United Cannabis, is suing Pure Hemp Collective for infringement on safer cannabis extractions. [10] United Cannabis Corporation has an extraction method that “provide[s] unique active compounds that are useful to treat pain in various medical conditions.” [11] Pure Hemp Collective responded by filing an early motion for partial summary judgment arguing that the claims asserted were invalid and requesting a ruling that would “substantially reduce the number of issues before the court.” [12] The Colorado District Court rejected Pure Hemp’s invalidity argument and denied its motion. [13] The cannabis industry is closely monitoring the outcome of this case in order to speculate what the future in cannabis intellectual property matters. [14]

If the federal government were to legalize cannabis, it would allow for national trademark protections and eliminate the patent complications companies currently face. [15] For example, allowing cannabis to receive national trademark protections will implement judicial efficiency by not overburdening the courts with patent cases regarding the confusion of who owns the patent rights to their product. [16] With this issue being fairly new, the government has an opportunity to implement laws to prevent confusion among the federal courts.

[1] Kevin Murphy, Why Building Intellectual Property in The Cannabis Industry is So Difficult (September 26, 2019), https://www.forbes.com/sites/kevinmurphy/2019/09/26/why-building-intellectual-property-in-the-cannabis-industry-is-so-difficult/#34600a7c1fdc.

[2] Id.

[3] Id.

[4] Id.

[5] 21 C.F.R. § 1308.11 (2019).

[6] Murphy, supra note 1.

[7] Id.

[8] Id.

[9] Id.

[10] United Corporation v. Pure Hemp Collective, Inc., No. 18-cv-1922-WJM-NYW, 2019 WL 1651846 at 1 (D. Colo. April 17, 2019).

[11] Id.

[12] Donald Zuhn, United Cannabis Corp. v. Pure Hemp Collective Inc. (October 23, 2019), https://www.patentdocs.org/2019/04/united-cannabis-corp-v-pure-hemp-collective-inc-d-colo-2019.html.

[13] Id.

[14] United Corporation v. Pure Hemp Collective, Inc., No. 18-cv-1922-WJM-NYW, 2019 WL 1651846 at 1 (D. Colo. April 17, 2019).

[15] Murphy, supra note 1.

[16] Id.

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How an Indie Band Outsmarted Spotify

Written By: Nick Lavkulik

What if I could give you an unlimited supply of any coffee in the world at a rate of one coffee per hour for $10 per month? Next, what if I told you all of the coffee you were drinking was made by full-time baristas earning only $2.50 per hour at most?

This is the relationship between Spotify and artists. Here is how it translates.

Spotify pays roughly $0.006 to $0.0084 per stream to each track’s music rights-holder(s). [1] The holder can be split between many parties, including the record label, producers, songwriters, and performing artists. [2] A 5-minute song streamed twelve times within an hour amounts to approximately 10 cents.

A barista can make a maximum of 25 cups of coffee an hour. [3] Now, what if I told you four of these baristas figured out a way to make more coffee? An avant-garde flavoured coffee.

That’s Vulfpeck.

Vulfpeck, an independent funk band, uploaded an album receiving 3.72 million streams, amounting to approximately $18,000. [4] The album was complete silence. This album is very similar to John Cage’s completely silent piece, 4’33”, which can currently be found on Spotify. [5]

Why did people listen to this album? Vulfpeck told their fans to listen to their album, Sleepify, on repeat as they slept to fund an admission-free tour for their fans. [6] Each track lasted about 30 seconds and was titled with varying amounts of the letter “Z”. [7] Vulfpeck accompanied its release with promotional materials, including tweets, such as, “please don’t ‘shuffle’ sleepify. i know this might come of snobbish, but we spent a lot of time on track order.” [8]

Initially, Spotify thought Vulfpeck’s actions were nothing more than a “clever stunt.” [9] However, after the album generated revenue, Spotify requested its removal for violating the terms and conditions [10] as “artificially increasing play counts.” [11]

After the album was pulled from Spotify, Jack Stratton, one of the members of Vulfpeck, made a recommendation for Spotify’s payment model. [12] Instead of splitting up the revenue based on the percentage of total streams on the platform, it should be per subscriber. [13] Each subscriber pays the same fee, despite how one subscriber may stream more than the next. This technically means each stream from subscribers who stream more, is worth less.

Do you think Vulpeck should have had Sleepify removed from Spotify, and applying the   barista hypothetical, go back to making its equivalent of only $2.50 an hour? Should recorded music only exist as a promotional tool? Should Spotify’s ability to cut out the intermediate hoops to access music be considered? Is Spotify’s role even what we should be concerned about, since Spotify pays music holders 70% of the revenue it generates from the platform’s streams? [14] If not, is there something more fundamental but still practical to change for ensuring artists are properly compensated?

 

[1] Kabir Sehgal, Spotify and Apple Music should become record labels so musicians can make a fair living, CNBC (Jan. 26, 2018, 11:04 AM), https://www.cnbc.com/2018/01/26/how-spotify-apple-music-can-pay-musicians-more-commentary.html#targetText=Here’s%20the%20math%3A%20Spotify%20pays,producers%2C%20artists%2C%20and%20songwriters.

[2] Id.

[3] Peter Holley, Baristas beware: A robot that makes gourmet cups of coffee has arrived, WASH. POST (Nov, 11, 2019), https://www.washingtonpost.com/technology/2019/03/22/baristas-beware-robot-that-makes-gourmet-cups-coffee-has-arrived/#targetText=The%20machine%20can%20make%20100,four%20baristas%2C%20the%20company%20says.

[4] Harley Brown, Spotify Removes Vulfpeck’s ‘Sleepify’, BILBOARD (April 26, 2014), https://www.billboard.com/articles/business/6070030/spotify-removes-vulfpecks-sleepify.

[5] John Cage, 4’33” (The Sound Corporation 1991).

[6] Brown, supra note 4.

[7] Steve Knopper, ‘Silent Spotify Album’ Creator Talks Strategy Behind Unique Plan, ROLLINGSTONE (Mar. 21, 2014 2:45 PM), https://www.rollingstone.com/music/music-news/silent-spotify-album-creator-talks-strategy-behind-unique-plan-244404/.

[8] Vulfpeck (@vulfpeck), TWITTER (Mar. 13, 2014, 1:00 PM), https://twitter.com/vulfpeck/status/443838924587155456.

[9] Brown, supra note 4.

[10] Id.

[11] Jack Stratton, Why Spotify Pays So Little, LIT.VULF (Mar. 15, 2015), http://lit.vulf.de/spotify-so-little/.

[12] Spotify Terms & Conditions of Use, SPOTIFY https://www.spotify.com/us/legal/end-user-agreement/#s8 (last visited Oct. 10, 2019).

[13] Stratton, supra note 11.

[14] Id.

 

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China’s New Trademark Law Amendment: Could discouraging squatters detrimentally affect foreign tech firms?

Written by: Brendan Everton

There appears to be good news coming from China for brand owners. The 10th Session of the Standing Committee of the 13th National People’s Congress in China (NPC) has amended the Chinese Trademark Law and will go into effect on November 1, 2019. [1] The changes are meant to help prevent trademark squatting in China, which has long been a problem. [2]

Trademark squatting or trademark piracy is “the registration or use of a generally well-known foreign trademark that is not registered in the country or is invalid as a result of non-use…”. [3] The intent is to “sell the trademark back to the real owner; … distribute products labeling the trademark to consumers who believe the products are real; … exclude the real owner from the market by establishing a claim of trademark infringement; or … use the trademark to market products which are different from those sold by the real owner.” [4]

The Chinese Trademark system is a first-to-file system. [5] First-to-file systems give an exclusive right to the trademark filed first. [6] Consequently, this system results in a race to file, which encourages bad faith filers to take advantage of the system. There are some safeguards in the Chinese regime to fight against trademark squatting. [7] The courts in China have thus far interpreted these protections narrowly making it difficult for foreign companies to protect their trademarks. [8] This is in contrast to the first-to-use system, which gives exclusive rights to the person who uses the mark first. [9] Through the use of this system, countries largely are able to avoid the problem of bad faith filings. [10]

Hoping to resolve this problem, the new amendment moves ever so slightly towards a first-to-use system. Article 4 of the Trademark Law has been amended to clearly state that “applications filed in bad faith without intention to use should be rejected.” [11] This is a significant change which allows the China Trademark Office to weed out bad faith applications during the examination process. [12] Anyone is now empowered to challenge bad faith applications during the examination process at relatively low cost. [13] This will benefit start-up companies who currently do not have the deep pockets needed to challenge the legitimacy of trademarks.  Additionally, trademark agencies are no longer able to represent an applicant if they know the individual is applying for the trademark in bad faith and has no intent to use the trademark. [14] Penalties are applied to both the trademark applicant and agency for violations. [15]

The new system appears to be an excellent start to tackling a problem that has long plagued China. However, some analysts worry the lack of a definition for bad faith may limit the effect that the law could have. [16] Too broad of a definition may harm foreign companies looking to take advantage of the Chinese markets. [17] Including the phrase “no intent to use” has worried some individuals. If this phrase is applied to include foreign firms filing defensive trademarks, it would deny trademarks to companies with legitimate business interests. [18] Unfortunately, the courts in China have been known to side with domestic companies when disputes over trademarks have occurred with American companies. [19]

There is a reason to be optimistic. This is not the only major change that China has made in the last year concerning intellectual property abuse. [20] This suggests that the Chinese government is attempting to improve the climate for foreign firms. There is hope it will attract more foreign companies to the Chinese market, suggesting the courts may start to change course.

While many of the components of the new amendment are encouraging, successfully attracting foreign companies by improving the trademark conditions will require the Chinese government to toe a thin line, allowing international firms to file patents for strategic defensive purposes and preventing bad faith filers from driving foreign business away.

[1] Benny Yip and Catherine Zheng, Good news about bad faith: China amends its Trademark Law, LEXOCOLOGY (June 21, 2019), https://www.lexology.com/library/detail.aspx?g=1add3fb0-713c-4637-9f48-02ffe23be3c3 [https://perma.cc/C9HU-SQ65].

[2] Yip, supra note 1.

[3] WIPO Intellectual Property Handbook: Policy, Law and Use, WORLD INTELLECTUAL PROPERTY ORGANIZATION 90 (2008).

[4] Kitson Sangsuvan, Trademark Squatting, 31 Wis. Int’l L.J. 252, 259 (2013).

[5] WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 2, at 90.

[6] Sangsuvan, supra note 3, at 263.

[7] Yip, supra note 1.

[8] Id.

[9] Sangsuvan, supra note 3 at 262.

[10] Id.

[11] Yip, supra note 1.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] See Frank Ready, China’s Move Against Trademark Trolls Isn’t Sure Bet with U.S. Tech Companies, LAW.COM (July 30, 2019 at 9:30 AM), https://www.law.com/legaltechnews/2019/07/30/chinas-move-against-trademark-trolls-isnt-sure-bet-with-u-s-tech-companies/?slreturn=20190913133554.

[17] Yip, supra note 1.

[18] See Robert Burrell and Michael Handler, Dilution and Trademark Registration, 17 Transnat’l L. & Contemp. Probs. 713, 729 (2008).

[19] Id.

[20] Id.

 

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When Inspiration Becomes Imitation: A Look at Copyright and Trademark Use in Harry Potter-Themed Cafes

Written By: Justine Levy

Sitting in a local cafe in Las Vegas called Bad Owl, I found myself wondering if they acquired licensing rights to one of the biggest franchises in history – Harry Potter. Although the shop was noticeably busy, I could not help but think how pricey that license would cost.

This themed café has distinctive features that anyone familiar with the Harry Potter universe would immediately recognize. Their décor is of owls and magical ornamentation and their tagline is “Serious Coffee with a Hint of Magic.” Those acquainted with Harry Potter will recognize “serious” as an homage to Sirius Black, a significant character in the franchise. Bad Owl also serves a beverage initially entitled “butter beer lattes” but re-branded to “butterbrew” within a year of opening. [1]

When the first location opened, Bad Owl was a sensation, and a media frenzy followed. Their website highlights that they have been featured on Zagat, Cosmopolitan, Fox News, Sprudge, Eater, Thrillist, and PopSugar. [2] I recall seeing videos about the store shared on Facebook by friends and family far from Las Vegas. It is hard to believe that they have avoided the diligent legal watchdogs at Warner Bros. with that level of publicity, unlike the owners of 9 ¾ Café.

9 ¾ Café opened in 2017 in Mong Kok, Hong Kong and differs drastically from the Bad Owl locations in Las Vegas. 9 ¾ Café is less a whimsically inspired coffee shop and more of a literal interpretation of the Harry Potter films. The café is adorned with props from the movie, such as the Gryffindor coat of arms, broomsticks, and wands. There is half of a trolley sticking out from the wall almost identical to the one found at King’s Cross Station in London. And, they sell food and drink items named Professor McGonagall’s Magical Salad, Polyjuice Potion, and Muggle Drink (of which Warner Bros. have trademark registrations on). [3]

Although the restaurant opened in 2017, Warner Bros. only filed suit against the café in January 2019, citing copyright and trademark infringement. [4] It is reported that Warner Bros. is requesting the café change its name and remove the infringing items, damages for use of the copyrights and trademarks, and several injunctions. [5] This is, understandably, not the first time Warner Bros. has pursued legal action against alleged would-be Harry Potter infringers.

For example, in 2009 Warner Bros. shut down a Harry Potter-themed Halloween dinner that was to be held in West London for alleged copyright infringement. [6] Many articles on the story fail to mention the key issue Warner Bros. had with the event – the host Ms. Marmite Lover was selling tickets and charging for the dinner. [7] This means that Ms. Marmite would have been commercializing on the Harry Potter trademark and copyright.

Themed cafes (and dinners) raise many questions about the scope of trademark and copyright protection. How much use of the original material is too much? When does inspiration become imitation? Would a fair use analysis be proper or sufficient for determining boundaries of these cafes?

So, how has Bad Owl avoided a similar fate than that of 9 ¾ Café or Ms. Marmite Lover? It may be because Bad Owl is merely an inspired expression of Harry Potter instead of a literal interpretation.

 

[1] Bradley Martin, Harry Potter-Inspired Bad Owl Coffee Flies to the Southwest, EATER LAS VEGAS (Aug. 7, 2017, 12:00 PM), https://vegas.eater.com/2017/8/7/16104850/bad-owl-coffee-expands-southwest.

[2] BAD OWL COFFEE (Sept. 15, 2019), https://www.badowlcoffee.com.

[3] Coconuts Hong Kong, ‘Harry Potter and the Lawyers of Admiralty’: Wizard-Themed Café Sued for Copyright Infringement, COCONUTS HONG KONG (Jan. 16, 2019, 4:10 PM), https://coconuts.co/hongkong/food-drink/warner-bros-sues-harry-potter-themed-cafe-for-trademark-infringement.

[4] Lianne Tan, Copyright, Trade Marks and Character Themed Cafes, LEGALVISION (Jun. 8, 2016), https://legalvision.com.au/copyright-trade-marks-and-character-themed-cafes.

[5] Hong Kong Harry Potter-Themed Café Sued for infringement, THE COPYRIGHT LAWYER (Jan. 16, 2019), https://copyrightlawyermagazine.com/hong-kong-harry-potter-themed-cafe-sued-for-infringement.

[6] Emma Rowley, Harry Potter and the dinner party of doom, LONDON EVENING STANDARD (Oct. 26, 2009, 11:19 AM), https://www.standard.co.uk/news/harry-potter-and-the-dinner-party-of-doom-6761727.html.

[7] Thom Geier, Harry Potter and the Deathly Lawyers: Warner Bros. blocks a fan’s Potter-themed dinner party, ENTERTAINMENT WEEKLY (Oct. 27, 2009, 3:12 PM), https://ew.com/article/2009/10/27/harry-potter-lawyer-dinner-party.