How Conflict Between State and Federal Law Creates Challenges for Michigan Cannabis Businesses Seeking Trade Mark Protection

The legalisation of recreational cannabis/marijuana in the State of Michigan has blossomed into an evolving and ever-growing competitive marketplace. In 2018, Michigan passed the Michigan Regulation and Taxation of Marihuana Act, which legalised the recreational use of cannabis throughout the state. Prior to enactment of the Michigan Regulation and Taxation of Marihuana Act, possession of cannabis was a misdemeanour criminal offence whereas the sale and cultivation of cannabis was a felony punishable by up to 15 years’ imprisonment and monetary fines dependent on the number of plants grown and the amount of usable cannabis sold.

Since state-licensed sales of recreational cannabis products began in Michigan in December 2019, the cannabis industry has exploded. According to the Michigan Cannabis Regulatory Agency’s monthly report for December 2024, more than 800 licences have been granted for cannabis dispensary shops and sales of legal cannabis products have exceeded USD10 billion. With a crowded field of operators in the cannabis space, obtaining trade mark protection has become vitally important to avoid consumer confusion in the marketplace. However, cannabis businesses in Michigan face a unique set of challenges when it comes to protecting their cannabis-related trade marks, due to the complex relationship between state and federal regulations.

Registration of trade marks in Michigan

The registration of trade marks in Michigan is governed by the Michigan Trademark and Service Marks Act 1969, which was modelled after the US federal trade mark law, the Lanham Act (15 US Code (USC) Section 1051 et seq). The Lanham Act governs trade mark registration and protection. Michigan law defines a trade mark as any word, name, symbol or device (or any combination thereof) ‒ other than a trade name in its entirety ‒ adopted and used by a person to identify their goods and distinguish them from similar goods made or sold by others. Michigan’s trade mark law contains no prohibitions against the registration of trade marks for goods and services directly related to marijuana.

A State of Michigan trade mark registration grants the owner an exclusive right to use the trade mark in Michigan, protects against infringement under Michigan law, allows businesses to bring legal action against infringers in Michigan courts, and establishes a public record of the mark’s use in Michigan. To file for registration of a State of Michigan trade mark, the applicant must be the owner of the mark used in Michigan. The owner may be an individual, firm, partnership, corporation, limited liability company, or other organisation. The term of a Michigan trade mark registration is ten years, with ten-year renewal terms.

Securing a Michigan trade mark registration is an important step for cannabis businesses to protect their IP, brand identity, and market position. With state-level trade mark protection, businesses can guard against infringement, build consumer trust, and safeguard their reputation in a competitive market within the state. These benefits at the state level are particularly important because of the prohibitions against trade mark registration for marijuana goods under US federal law.

Prohibitions at federal level

“Cannabis” refers to all products that are derived from cannabis plants. “Marijuana” refers to products from cannabis plants that contain more than 0.3% tetrahydrocannabinol (THC), which is the primary ingredient that produces a psychoactive effect. Marijuana is illegal at the US federal level because the US Drug Enforcement Administration previously determined marijuana has no accepted medical use and a high potential for abuse. It is, therefore, classified as a Schedule I substance under the Controlled Substances Act (CSA) (21 USC Section 812). As a Schedule I substance, marijuana is strictly regulated and is effectively illegal under federal law for any purpose other than research. Although there is much talk of re-scheduling marijuana to make it legal at the federal level, no actions have been taken and marijuana remains illegal under federal law.

To obtain a federal trade mark registration from the United States Patent and Trademark Office (USPTO), the goods and services identified in the trade mark application must claim “use in commerce”. “Use in commerce” is defined as commerce that can be lawfully regulated and controlled by Congress (CreAgri, Inc v USANA Health Sciences, Inc, 474 F.3d 626, 81 USPQ2d 1592 (9th Cir 2007)).

If the goods or services are illegal under federal law, the USPTO will refuse to register the mark. The federal courts have reasoned that to hold otherwise “would put the government in an anomalous position of extending benefits of trade mark protection to a seller based upon actions the seller took in violation of the government’s own laws” (Id). As the CSA prohibits the manufacture, distribution, possession and sale of marijuana, any such use is considered unlawful use in commerce and federal trade mark priority rights cannot be established at the federal level. Therefore, as long as marijuana is federally recognised as a Schedule I substance, the USPTO will not issue trade mark registrations for goods and services directly related to marijuana.

Exceptions under federal law

Notably, hemp is excluded from the federal definition of marijuana. In 2018, the US Congress passed the Agricultural Improvement Act, also known as the 2018 Farm Bill, which removed hemp ‒ defined as cannabis and derivatives of cannabis with concentrations of delta-9-tetrahydrocannabinol (THC) of no more than 0.3% THC ‒ on a dry-weight basis from the definition of marijuana in the CSA (see Pub L No 115‒334 (2018)). As a result of the 2018 Farm Bill’s passage, the USPTO may issue trade mark registrations for goods derived from hemp and derivatives of cannabis, as long as the goods do not contain more than 0.3% THC on a dry-weight basis and meet other applicable federal regulations, such as those set by the US Food and Drug Administration.

To benefit from the lawful use requirement at the USPTO, hemp products (such as cannabidiol (CBD) goods) must be naturally occurring and extracted from hemp plants. Consequently, cannabis businesses can seek federal trade mark registration for hemp goods that are compliant with the 2018 Farm Bill and for non-marijuana products such as clothing and hats. Federal registration is also available for goods that ‒ in normal lawful business ‒ have been traditionally intended to be used with smoking tobacco, such as pipes, lighters, and rolling papers.

Confusion over scope of trade mark rights for Michigan cannabis businesses

The lack of federal trade mark protection for marijuana goods complicates matters and sometimes causes uncertainty about the scope of trade mark rights. A cannabis business can seek registration for its trade mark in Michigan but, if an infringing business operates in another state or seeks federal protection for non-marijuana-related goods and services, a cannabis business may not have a simple, unified solution for trade mark enforcement.

Furthermore, without the ability to secure federal registration and the lack of a collective, publicly accessible state-based trade mark database, trade mark disputes commonly arise in instances where businesses are using similar names or logos to capitalise on popular cannabis-related terms such as “leaf”, “green”, “bud”, “high,” “chronic” and others. These terms are commonly used and often lead to overlap in branding. As Michigan’s cannabis market grows, so too do the number of trade mark disputes and instances of infringement.

Michigan cannabis companies are increasingly finding themselves embroiled in legal battles over brand names, logos, and product packaging, leading to concerns about the protection of IP in an industry still navigating complex legal terrain. Many cannabis businesses, particularly smaller start-ups, are still learning about the importance of IP protections, including trade marks. In an industry still heavily regulated by state and federal laws, there is often uncertainty about how to effectively protect a cannabis brand. Consequently, many businesses fail to register their trade marks, exposing themselves to infringement by competitors who might not be aware of the potential conflict.

Although Michigan offers state-level trade mark registration, the lack of federal protection affords cannabis brands with limited enforcement options outside of Michigan. By way of example, a business in Michigan may register a state-level trade mark, but that protection does not extend to other states nor does it offer the same legal leverage in federal courts. This creates a complex, fragmented system in which infringement issues can be harder to resolve, particularly when cannabis companies operate across state lines or do business with out-of-state competitors.

In some cases, companies may choose not to pursue infringement claims, owing to the complexity or cost of legal action or because they believe it is difficult to prove infringement in the cannabis space ‒ especially given the lack of federal trade mark protection for marijuana-related goods. This creates an environment in which trade mark infringement can flourish without effective deterrents.

Additionally, in an effort to stand out in Michigan’s crowded cannabis market, many cannabis businesses are adopting names, logos and packaging that inadvertently or intentionally mimic other successful cannabis and non-cannabis brands. Whether it is for short-term profits, market positioning, or a misguided strategy to capitalise on an established brand’s goodwill, intentional trade mark infringement in the cannabis industry has become an immediate concern. Examples of some non-cannabis brands that have sought trade mark infringement actions against cannabis companies include Skittles, Starbucks, Sour Patch Kids, and Better Made.

Outlook

Trade mark infringement is a rapidly pressing issue in Michigan’s cannabis industry as the market expands and competition intensifies. However, as state-level trade mark protection offers some legal recourse, cannabis businesses face significant challenges in protecting their IP from infringement. To mitigate risks and safeguard their brands, cannabis companies must prioritise trade mark registration, conduct thorough searches, monitor the marketplace, and be prepared to take legal action when necessary. As the industry continues to mature, clear IP protections will be essential for ensuring the long-term success and sustainability of cannabis brands in Michigan.

Michigan’s trade mark law presents both opportunities and challenges for businesses in the cannabis industry. Although businesses cannot obtain federal trade mark protection, they can secure trade mark rights within the state, providing a vital layer of protection in a progressively more competitive market. By understanding the nuances of state and federal law and working with experienced attorneys, cannabis businesses can protect their IP and build strong, recognisable brands in Michigan’s growing cannabis industry. As the cannabis legal landscape continues to evolve, Michigan’s cannabis businesses should remain vigilant and proactive to stay ahead of legal issues and protect their most valuable assets ‒ their trade marks.