By Max Hass

Earlier this year, President Biden’s administration requested that the Department of Health and Human Services (“HHS”) and the Department of Justice (“DOJ”) undertake an independent review of the status of marijuana (cannabis) in the Controlled Substances Act (“CSA”). On August 30, 2023, HHS made the recommendation that cannabis be re-schedule from Schedule I to Schedule III of the CSA. This announcement does not mean that cannabis has been re-scheduled yet — but it’s a sign that the change could be coming soon. And this change may have a big impact on cannabis companies’ ability to register federal trademarks for their products.

For brief background, the CSA is a law that establishes which drugs are illegal in the United States, and includes five categories, called “Schedules” that are maintained and administered by the Drug Enforcement Agency (“DEA”), a division of the DOJ. At the highest level of prohibition is Schedule I, for substances that:

(1) have no currently accepted medical use in the United States,

(2) have not been shown to be safe for use even under medical supervision, and

(3) have a high potential for abuse.[1]

At the other end of the spectrum is Schedule V, for substances that have a “low potential for abuse relative to substances listed in Schedule IV,” and contain limited quantities of certain narcotics. Anything with an even lower potential for abuse, and aren’t made with narcotics as an ingredient, are generally left out of the CSA and are not typically treated as “illegal” (even if they are still regulated by the FDA and/or other agencies). Examples of Schedule I substances are heroin and ecstasy; Schedule II includes cocaine, methamphetamine, oxycodone, and fentanyl. Schedule III, where HHS recommends cannabis should be re-scheduled, is for substances that have a potential for abuse less than substances in Schedules I or II, and where abuse may lead to moderate or low physical dependence or high psychological dependence.

Examples of Schedule III narcotics include: products containing not more than 90 milligrams of codeine per dosage unit (e.g. Tylenol with Codeine®), and buprenorphine (Suboxone®).

Examples of Schedule IIIN non-narcotics include: benzphetamine (Didrex®), phendimetrazine, ketamine, and anabolic steroids such as Depo®-Testosterone.

Much to the frustration of the cannabis industry and cannabis consumers, marijuana has been classified as Schedule I substance since 1970. Two of the biggest ramifications of this federally illegal status are (1) the prohibition on deductions of certain business (thanks to the much-despised Section 280E of the Internal Revenue Code) and (2) the prohibition on federal trademarks for cannabis companies, products, and services.

The United States Patent and Trademark Office (“USPTO”), housed within the Department of Commerce, must comply with the restrictions of the CSA when determining a trademark’s eligibility for federal registration. Trademarks are used in the marketplace to distinguish brands from each other, and to provide customers with reliable information as to the source of the products or services they purchase. For USPTO to register a trademark, the products and services sold under that mark cannot be illegal under, and must comply with, federal law. Compliance with federal law extends to regulations of the Food and Drug Administration (“FDA”): USPTO cannot register a trademark for a product that requires FDA approval, until the FDA has in fact approved that product.

Due to the DEA’s placement of cannabis in Schedule I of the CSA, many cannabis-related trademarks are currently ineligible for federal registration. The closest that cannabis companies have come so far is to register trademarks for educational services related to the benefits of cannabis, and for brand-reinforcing clothing and other merchandise items. While these are useful for establishing and building a brand at a national or regional level, it does not actually provide trademark protection for the product itself, which serves as the foundation for the brand.

Upon review of the USPTO database, one can find a number of federally registered trademarks for products that contain Schedule II and III substances. The trademark registrations for the products mentioned above do not actually mention the controlled substances by name, but instead describe the relief or treatment provided by the product. For example, the registered trademarks for OxyContin® cover “preparation for the relief of pain” and “analgesic preparation.” No doubt these products (containing Schedule II or III substances) received FDA approval before USPTO was able to grant registration.

This is where HHS’s re-scheduling recommendation becomes so important: if and when cannabis is moved to Schedule III, then certain cannabis-containing products may become eligible for trademark protection, perhaps in a similar fashion to pharmaceutical products. Cannabis companies are already making many products for pain relief, sleep aid, mental focus, and more.

This is a very complex and nuanced issue, and the floodgates to trademark registration will not just be thrown open to anyone and everyone selling cannabis. Companies will not simply be able to register trademarks that list “cannabis flower,” for instance, as the goods sold in connection with the trademark. Those operators selling products that contain Schedule III cannabis would likely need to go through FDA approval just like pharmaceutical products. But the important takeaway here is that re-scheduling will likely enable operators, for the first time, to register trademarks directly in connection with cannabis-containing products. Of course, we cannot say for certain what DEA and USPTO will do if and when re-scheduling occurs, but existing examples and precedent suggest that there will be options available for cannabis trademark owners.

[1] https://www.deadiversion.usdoj.gov/schedules/