WARNING: this can get technical so put aside those brownies!
Let's start with one of the bedrocks of franchising: the Trademark. So important is this piece that the Franchise Disclosure Document devotes Item 13 to it. And, if a franchisor has not secured federal registration for its mark, a disclaimer must appear in FDD Item 13: "We do not have a federal registration for our principal trademark. Therefore, our trademark does not have as many legal benefits and rights as a federally registered trademark. If our right to use the trademark is challenged, you may have to change to an alternative trademark, which may increase your expenses."
As we learned in Part Two, however, federal trademark registration is not available for "illegal" products. And, under federal law, 21 USC Secs. 801-971 (Controlled Substances Act), marijuana is illegal; thus, a federal agency like the USPTO is not able to register a mark related to illegal products. So what to do? (what follows assumes that the mark will meet the general requirements to register any mark)
- If pot is legal in a state (say Colorado), the franchise system can likely register the mark with the Secretary of State of the state where it is legal and perhaps in other states where it is legal too (although some use (of the mark, not the weed) in that state may be required)
- Even though federal registration is preferred and state registration may be available, trademark rights are primarily gained through first use - so using a mark and keeping records of the use may gain "common law" rights to the mark. And "common law" rights are derived under state law;
- Consider whether there is a mark that is related to the "franchise system" and not the illegal product. (This is based on some commentators' suggestions that you should seek registration for related, non-cannabis products but be careful not to use those marks in relation to cannabis-related items) Now, I am not suggesting you try this alone or without the professional assistance of a trademark lawyer. Assuming that the goal is to secure a federal registration of the mark by attempting this, you will likely have an uphill battle at the USPTO and need a good lawyer.
Any other suggestions out there?
Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. Jim is a co-author of “Starting a Franchise System: Practical Considerations, Planning and Development” and author of How to Buy a Franchise.