In the current make-or-break era of cannabis regulation a good URL, brand name, or piece of intellectual property (IP) can be what makes a brand known and gives them lasting power in the dire regulatory straits the industry finds itself in.
The cannabis industry is not new to major trademark lawsuits, perhaps the most well-known being the Gorilla Glue Company vs. GG Strains LLC suit from 2017, which resulted in an iconic cannabis company spending an estimated $250,000 to rebrand. Now, a new lawsuit is rocking California’s cannabis industry, between a major local dispensary chain in the Bay Area, Harvest on Geary (HoG), and one of the largest publicly traded, multi-state cannabis operators in the country, Harvest Health and Recreation Inc. (HHR).
The History of Harvest on Geary
HoG is a well-known local chain in the Bay Area catering to a high-end clientele. The dispensary opened its first location on Geary Blvd in San Francisco, California, in 2015. HoG got its start at the former location of The Hemp Collective (THC), another dispensary whose building and permit to operate were bought by Marty Higgins for $3.5 million. By buying the permit in this manner, Higgins was able to open HoG without the normally-required planning commission hearing. The circumstances around the opening of HoG resulted in a lawsuit between the manager of THC and Higgins, which has since been dropped.
The Founding of a Global Giant
HHR was founded in Arizona in 2011, and has since grown to be one of the largest vertically-integrated, multi-state operators in the U.S. HHR is publicly traded on the Canadian Securities Exchange and holds over 140 licenses for a wide variety of cannabis businesses. It recently reached an $850 million agreement to buy Verano Holdings (Verano), the largest deal in the history of the cannabis industry.
“Harvest will hold licenses that will allow it to operate up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries,” the company said through a release.
That includes, “over 70 dispensaries, 13 cultivation facilities and 13 manufacturing facilities in operation,” about half their total number of licenses, by the end of this year. Steve White, the CEO of HHR, told investors on a conference call that “the acquisition is the next step in Harvest becoming the largest cannabis company in the world.”
The Complexities of Cannabis Trademarks
The current case goes back to 2014, before the founding of HoG, when White was introduced to Higgins through their mutual friend, Kris Krane, the president and co-founder of 4Front Ventures. White told Cannabis Now that he “took a Saturday night and delayed the team’s clean up of the store so Marty could go in and see how the store was set up. Then we sat in the suite adjacent to the store and we talked for a while about my vision, my thoughts on cannabis, on working in other states.” As White tells it, that was when Higgins “went back to California and copied us.”
There are two sides to every story, and Higgins’ declaration tells a very different one. While White says they spoke at length about a number of topics, Higgins says through court documents that their “discussion was roughly 15 minutes” and that White “did not share details of his operation.” His declaration goes on to state the obvious, that he was “aware of [HHR] and affiliated entities using the Harvest name in Arizona when I made the decision to do business as Harvest in California.”
HoG’s preliminary injunction states that Higgins “did not expect any confusion because [HHR] operated in other states in an industry that is siloed by state.” While it is true that cannabis products cannot cross state lines, it is fallacious to believe that there have not been multi-state operators in business for many years, including HHR, who have had stores in states other than Arizona since at least 2017.
State or Federal?
The conflict over the Harvest name has come to a head now that HHR has opened their first store in California, Harvest of Napa. As a result, HoG sued HHR to try and prevent HHR from using the Harvest name or branding in California. The judge denied HoG’s preliminary injunction because they failed to show that the “balance of harms favors them.” To the same point, the judge said that HHR’s “showing of interim harm is thin too” and that “little evidence is offered.”
Two related issues in the preliminary injunction are which company did commerce in California first and whether federal or state-level trademarks should win out in this case. HoG has been using the Harvest name and branding in California since 2015. HHR obtained their first state mark in Arizona in 2013, and has since gotten both federal marks from the U.S. Patent and Trademark Office as well as state-level marks in Ohio. Michael Dorsi, HoG’s attorney, has taken the position that, in absence of federal legality, “state law trademarks are the controlling legal authority.”
California state law does not recognize out of state trademarks as having any claim in California, so HHR’s trademarks in Arizona and Ohio do not mean anything to the California Secretary of State. While normally the federal mark would give HHR a claim in California, due to the perilous legality of cannabis-related trademarks, it may not help them in this case. There is such a thing as “first use in commerce,” which can help in trademark disputes.
When Cannabis Now spoke to White, he said “our commerce in California predates their mark,” which should give them a claim to the Harvest branding in California. Dorsi was critical of HHR’s “prior use” in California during his supplemental reply to HoG’s preliminary injunction, saying HHR’s “only alleged use in California… are visits to their website that Google Analytics say originated in California from 2013 to 2015.” By that logic, anyone with a website with readers from multiple places could get trademark claims on their website wherever readers live.
In his supplemental reply, Dorsi outlines the existing law as it relates to trademarking cannabis companies. According to Dorsi, “When the word mark is the name of a cannabis dispensary, it cannot be a valid federal trademark.” Dorsi told Cannabis Now that their argument “relied on established law that anyone involved in this case presumably knew at the time or at least could have known.”
White said Higgins “has attempted to get our federal trademark canceled because we are a federally illegal business.” White added that the lawsuit “doesn’t help [Higgins], it doesn’t put him in a better position to get a trademark it just harms us and that is not something we will take kindly to.”
What It Means to the Industry
In an industry with countless companies named canna-something or using cannabis leaves for logos, with very similar branding, it is important to know where the line is in regards to infringing on an established brand’s trademark. It is critical that business owners do research on their potential business names to make sure they are not actively in use, and since IP can be what makes or breaks a company, part of that research should include looking up federal and state-level trademarks. It is also worth recognizing the value of state-level trademarks in lieu of, or in addition to, getting a federal trademark as an additional way to protect your brand.
TELL US, have you ever thought about getting a cannabis trademark? What would it be for?