Cannabis Law

New Trademark Litigation Against “Stoney Patch” Cannabis Products Calls Out an Industry Trend of Copycats

We’ve followed and written extensively about trademark litigation in the cannabis space for the last several years, which you can read about here:

The latest case in this string of cannabis trademark litigation was filed in the Central District of California on July 19, 2019 by Mondelez Canada Inc. (“MCI”), the owner of the Sour Patch brand of candy, against Stoney Patch, maker of cannabis-infused candies in California. In the opening sentence of its complaint, Mondelez notes:

There has been a growing trend among makers of cannabis products, including edible products infused with tetrahydrocannabinol (“THC”), to market their products by copying and misappropriating the colors, flavors, names and packaging of popular snacks and candies.”

As evidenced by the list of similar cases above that we have written about, we can’t say that we disagree with this assertion, although we’ve seen these kinds of product imitations since the early days of medical marijuana as well. The only difference is that with the growing legitimacy of regulated cannabis, big companies like MCI are starting to pay attention to what’s happening in the market.

One novel component of the Stoney Patch case is that MCI alleges that Stoney Patch is actually in violation of California state law by selling candies that look like the SOUR PATCH brand of gummy candies because these candies are marketed to be appealing to children, something that is prohibited under the Medicinal and Adult Use Regulation and Safety Act (“MAUCRSA”):

In complete disregard of California’s law, of concerns for public safety, and of MCI’s rights, Defendants intentionally have designed their THC gummy products to copy MCI’s long-established SOUR PATCH brand of gummy candies. Defendants have adopted the confusingly similar brand name STONEY PATCH, have copied the look of MCI’s actual product, and have copied the look of the packaging that has long been associated with MCI’s SOUR PATCH candies. Such actions have the effect of making the THC gummy products sold by Defendants more appealing to children and likely to be mistakenly consumed by children. Further, such actions are antithetical to the business and reputation of Plaintiff.”

Interestingly, it is unclear whether Stoney Patch products are actually manufactured by a licensed California cannabis company. Apparently, MCI has had a tough time tracking down the entity that manufactures the Stoney Patch products, noting that the packaging of the products does not designate a maker, nor do they seem to have a website beyond their Instagram page. By not designating a licensed manufacturer on the packaging, the maker of the Stoney Patch products are in violation of California cannabis manufacturing regulations.

MCI seeks to prevent Stoney Patch from unfairly trading on the goodwill of the SOUR PATCH brand and from tarnishing MCI’s intellectual property rights, and seeks damages and injunctive relief for willful trademark infringement, dilution, and unfair competition under the Lanham Act as well as California state law. The Complaint cites that Sour Patch Kids have come “in a distinct bag that has a yellow center with green dabs at the edges that allow the yellow to peak (sic) through … [with] the words SOUR, PATCH, and KIDS stacked one atop the other in the colors green, orange, and red, respectively … [and] the slogan “Sour then Sweet” … in the top left.” The packaging further shows the appearance of the actual gummy kids around the outside of the packaging. Stoney Patch’s packaging is “virtually identical,” Mondelez alleged. It follows the same color scheme, has the words STONEY and PATCH stacked atop the other in green and orange, and the slogan “Sour & Sweet then Stoned” in the top left. Instead of gummy kids around the outside of the packaging, there are marijuana leaves. The product itself is also identical, except that the humanoid gummies have one eye instead of two. Based on the evidence in the complaint, we think MCI’s claims are strong. The images of the allegedly infringing packaging make this pretty clear:

This is probably a good time for a reminder that parody is not a defense to trademark infringement in this type of commercial context. There is a line between using another’s mark to make political or social commentary and using another’s mark to gain recognition and increase sales of your own product. We’ve written before about cannabis companies that have attempted to spoof well known marks and have paid a price for it. Hershey’s, for example, initiated multiple lawsuits against companies that branded cannabis-infused chocolate products with names such as “Mr. Dankbar,” “Reefer’s Peanut Butter Cups,” “Hasheath,” and “Ganja Joy,” all meant to imitate their non-cannabis Hershey’s counterpart. These cases ultimately settled out of court.

The problem with these types of “parodies” is two-fold. The first concern is over likelihood of confusion, and the second pertains to dilution or tarnishment. If there is sufficient similarity between the parody and the original mark, the court will find infringement based on a likelihood of confusion. This means that the marks are similar enough to cause consumer confusion as to the source of the product (and confusion among children as to which product is candy and which is cannabis), and big brands obviously do not want other companies piggybacking off the success of their trademarks.

The second issue, dilution or tarnishment, is typically a fairly weak means of attacking a trademark parody. However, because of the federally illegal status of marijuana, arguing that a cannabis-infused version of a popular product “tarnishes” a famous brand is not a stretch. MCI, which markets its products to children, does not want consumers thinking of “Stoney Patch” every time they buy SOUR PATCH products.

A First Amendment argument for parody is always easier to make in a non-commercial context, where a parody of a mark is not used in connection with any goods or services. This makes for a stronger argument that the parody is only meant to express an idea, and not to generate profit based on brand recognition. Second, the degree of similarity between a “parody” and the original mark makes a big difference. The more similar the marks, the more likely it is that the court will find infringement based on likelihood of confusion. Third, tarnishment is a much bigger issue in the context of marijuana branding than in most other industries, and may be a way for established companies to attack infringing marks. And finally, even if you think you have a strong argument for defending your mark on the basis of parody or First Amendment grounds, the cost of litigating with corporations like MCI or Hershey’s could very well put you out of business, even on the off chance that you prevail.

Having already defended some of these cases, we can tell you it is just not worth the risk. Take this as another gentle reminder to stay away from using other companies’ branding, even if you think you are doing so as some sort of parody.

Articles from http://cannalawblog.com

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