IP Law Daily Lanham Act preempts state law for marks relating to cannabis products
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Tuesday, February 18, 2020

Lanham Act preempts state law for marks relating to cannabis products

By Cheryl Beise, J.D.

Prior use of a trademark for cannabis-related products recognized as legal under California law cannot thwart a junior user’s federal trademark rights.

A California-based provider of cannabis-infused chocolates and confections under the mark KIVA was precluded as a matter of law from asserting a prior use defense to an infringement claim brought by the owner of a federal trademark registration for the mark KIVA in connection with health products and food products, the federal district court in San Francisco has ruled. The court explained that the Lanham Act preempts state law where application of the state law infringes federal trademark rights. In this case, the defendant’s mark was invalid under federal law because it was used in connection with cannabis products, which remain illegal under federal law. The court declined to rule on the defendant’s other affirmative defenses of laches, acquiescence, waiver, and estoppel (Kiva Health Brands LLC v. Kiva Brands Inc., February 14, 2020, Breyer, C.).

Kiva Health Brands LLC ("KHB"), a Hawaii-based seller of health and wellness products, has operated under the name KIVA since 2009. Kiva is a Pueblo word for underground rooms used for religious ceremonies. In March 2010, KHB developed its KIVA logo for use on its KIVA Maqui Berry Powder. KHB’s first online sales for KIVA Maqui Berry Power were via Amazon.com in June 2013. In April 2014, KHB obtained a federal trademark registration for the mark KIVA in connection with health products and food products. In 2015 and 2016, KHB obtained additional trademark registrations for marks with the word KIVA on additional food and cosmetic products.

Defendant Kiva Brands Inc. ("KBI") is a California-based provider of cannabis-infused chocolates and confections formed in 2014 by Scott Palmer and his wife, Kristi Knoblich. KBI allegedly started operating in November 2010 as a California not-for-profit mutual benefit corporation (CNMBC) named Indica. In 2018, Palmer and Knoblich entered into a trademark license agreement with KBI for use the mark KIVA. Indica made its first sales of cannabis-infused chocolate in December 2010. The license purported to memorialize an "agreement that had existed since November 2010." There was a Kiva Confections website as early as March 2011. On January 20, 2018, KBI obtained a California trademark registration for the KIVA mark for "Chocolate and confections, all of the foregoing containing cannabis" The registration states a first use date of December 1, 2010. KBI later obtained other state-based registrations.

KBI learned of Kiva confections while at a food industry trade show in California around June 2015. In late 2016 or early 2017, KHB’s customers began expressing confusion about KHB and "Kiva Confections." On May 5, 2018, KHB’s counsel sent a cease and desist letter to KBI about the rise in customer confusion and demanded that KBI cease infringing the KIVA mark.

KHB brought suit against KBI in September 2018 for trademark infringement, unfair competition in violation of the Lanham Act, declaratory relief, and unfair and deceptive trade practices under California law. Presently before the court was KHB’s motion for partial summary judgment on KBI’s affirmative defenses of laches, prior use, acquiescence, waiver, and estoppel, and KBI’s motion for partial summary judgment on its laches defense.

Laches. Determining whether a plaintiff delayed unreasonably consists of (1) assessing the length of the delay and then (2) determining whether the delay was reasonable. The most analogous California law applicable to KHB’s Lanham Act claims was California’s trademark infringement statute, which carries with it a four-year limitations period.

The court said it was aware of no evidence of consumer confusion until mid-2015, when a trade show participant spoke with a representative of KHB. KHB argued that a cease and desist letter sent to KBI in May 2015 "stopped the laches period." However, the Ninth Circuit has held that a cease and desist letter does not end the laches period; only the filing of suit does. The court found that there was a dispute of fact as to when KHB knew or should have known about the threat from KBI. When the delay period began was an issue for the jury to decide. The court accordingly denied both motions.

Prior use. KBI argued that it was the senior user of the KIVA and KIVA CONFECTIONS trademarks. KHB countered that KBI had no cognizable claim of senior use because KBI’s cannabis products are illegal under federal law and because KBI, could not show continuous use of the KIVA mark before KHB filed its 2013 federal trademark application.

Addressing the "relatively novel legal question" of illegal first use, the court reached the same conclusion it had reached in a prior order, namely, that "while KBI’s product is legal under California law, its illegality under federal law means that KBI cannot have trademark priority." The court also rejected KBI’s argument that "KHB’s trademark does not trump the valid rights KBI acquired under state law." Although KBI was only asserting California common law rights to the KIVA mark, it was doing so as a defense to a federal trademark claim, the court noted.

KBI acknowledged the court’s previous ruling on this issue, but insisted that it was making a different argument, relying on 15 U.S.C. § 1065, which expressly applies where "the use of a mark registered on the principal register infringes a valid right acquired under the law of any State." The court rejected this argument as inapposite, stating that Section 1065 pertains only to incontestable marks.

The court further held that the Lanham Act preempts California trademark law concerning marks used in connection with activities that are illegal under federal law. Cannabis remains a Schedule I controlled substance under federal law. The court acknowledged that in Golden Door, Inc. v. Odisho, 646 F.2d 347, 352 (9th Cir. 1980), the Ninth Circuit held that the Lanham Act does not preempt the field of trademark law. However, Golden Door also explained that the Lanham Act can preempt state law in certain circumstances, the court observed. One such circumstance warranting preemption is where application of the state law infringes federal trademark rights. "Because the state law that allows KBI a common law right in the KIVA mark would encroach on KHB’s federal trademark rights (thereby permitting a confusing trademark to operate and ‘infringing on the guarantee of exclusive use’ to the federal trademark holder), the Lanham Act preempts the state law," the court said. The court granted KHB’s motion for summary judgment on KBI’s prior use defense.

Other defenses. The court denied KHB’s motion for summary judgment on KBI’s acquiescence, waiver, and estoppel defenses as premature because there were facts in dispute and discovery had not yet been conducted.

This case is No. 3:19-cv-03459-CRB.

Attorneys: Kathryn J. Fritz (Fenwick & West LLP) for Kiva Health Brands LLC. Brett Michael Schuman (Goodwin Procter LLP) for Kiva Brands Inc.

Companies: Kiva Health Brands LLC; Kiva Brands Inc.

MainStory: TopStory Trademark CaliforniaNews

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