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Branding, Marketing & Sales Pitfalls for CBD & Hemp Businesses


The December 2018 Agricultural Improvement Act (“Farm Bill”) removed industrial hemp from the definition of “marijuana” under the Controlled Substances Act (the “CSA”), making the production and interstate sales of industrial hemp and industrial hemp-derived products (CBD) legal.


To the delight of CBD producers and branding experts everywhere, CBD and hemp companies were now also legally allowed to register their brand names, logos, and slogans with the USPTO.


Developing and manufacturing a product that is compliant with the legal hemp requirements of the Farm Bill is relatively simple, but in a recently saturated market, where new competing products are being developed daily, branding, marketing, and sales strategy is critical to any such product’s success. Unfortunately for CBD and hemp business owners, the FDA (Food & Drug Administration), FTC (Federal Trade Commission), and USPTO (US Patent & Trademark Office) are not making it any easier for seemingly compliant business owners to brand, market, or sell their products, in some cases even threatening them with fines, legal action, and even seizure of business assets.



Problematic Marketing Claims:


Since the approval EPIDIOLEX®, the only FDA-approved highly purified, plant-derived cannabidiol (CBD), the FDA has taken the position that some products containing CBD and hemp oil, though legal under the Farm Bill, are still not legal under the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”) because amongst other things, they are considered “drugs” that have not been FDA-cleared or are mislabeled “dietary supplements”.


Claiming “science-based policy” and “protecting and promoting public health” as a top priority, the FDA recently targeted Rooted Apothecary (“Rooted”), an online distributor of self-branded “full spectrum CBD products” for these very reasons.



“Unapproved Drugs” and Unsubstantiated Advertising Claims


Under Section 201(g)(1) of the FD&C Act, a drug is any substance that is “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals” and a substance “(other than food) intended to affect the structure or any function of the body of man or other animals”. After a thorough review of Rooted’s website and social media the FDA maintains that several products offered for sale (including oils containing CBD, hemp capsules, hemp infused body butter, and hemp oil) are non-FDA-approved drugs, which are being sold in violation of the FD&C Act.


Notably, several of the products that the FDA took issue with are non-ingestible, topical products, which have so far not been subject to much scrutiny; however, it appears that the specific wording used by the company in its marketing and product descriptions was what tipped the scales toward this determination. Amongst other things, the FDA took specific issue with the following statements:


  • “This blend also works great for jaw and TMJ dysfunction pain.”

  • “Lavender . . . Antidepressant properties.”

  • “Pain relief . . ..”

  • “No matter what age, ear aches are a terrible, no good way to live each day! Our main priority was safety, effectiveness . . . as we formulated this for the entire family including our precious little ones. When the pain is bad, this roller goes to work for soothing pain, inflammation, and to battle against the bacterial/viral critters to blame.”

  • “Increasing evidence suggests that CBD oil is a powerful option for pain . . . anxiety . . . and autism . . . It seems like an attractive and safe option for children.”

  • “CBD oil may have neuroprotective properties and may protect against neurological conditions, such as Parkinson’s and Alzheimer’s disease.”

  • “CBD oil may improve depression, anxiety, and PTSD.”

  • “CBD may reduce the risk of cancer or help cancer treatment.”

  • “CBD may reduce the risk of diabetes.”


The FTC also had something to say regarding some of the language used in Rooted’s product descriptions and marketing, specifically the language that referred to the efficacy of CBD products. The FTC Act makes it illegal to advertise that a product can prevent, treat, or cure human disease unless there is competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made.


Rooted’s website and social media marketing materials are replete with claims that CBD products “reduce the risk of” this and “may improve” that, implicit in these claims is that their CBD products yield similar results. Links to clinical lab tests which point to the “Cannabinoid Potency” of their products appear on each product page, yet not a single study is provided or linked which would substantiate their product efficacy claims.



Mislabeled “Dietary Supplements”


The packaging for Rooted’s CBD capsules and oils included the words “dietary supplement”; however the FDA has concluded that, based on available scientific evidence, CBD products are excluded from the definition of “dietary supplement” under the FD&C Act. Furthermore, because the oils are intended for sublingual use (under the tongue), the FDA argues that they are not intended for ingestion (a requirement for dietary supplements under the FD&C Act), and therefore do not qualify as “dietary supplements”.



USPTO Trademark Registration Issues:


General Limits on Registering CBD Goods and Services:


Prior to the enactment of the Farm Bill CBD and hemp products were not considered legal, so marks that were used in connection with CBD and hemp related products and services were not permitted to register with the USPTO, at least not in connection with such products.


After the enactment of the Farm Bill, applications for CBD and hemp marks could no longer be refused on the grounds that they were unlawful under the CSA, provided, of course, that these products contained “less than 0.3% THC” and were not unlawful under any other law or regulation.

The Farm Bill, while paving the way for many products, still left the FDA with authority to regulate ingestible cannabis and cannabis-derived products (think: food, drinks, dietary supplements, and pet treats), so any applications citing these types of goods are still being refused registration on the grounds that they are illegal under the FDCA.


The FDA is currently evaluating its CBD regulations, and is even considering making changes to the existing rules. However, as with most laws, the process is excruciatingly slow and until any legislative action is taken, the USPTO’s hands are tied.


Despite the confusion about what is allowed and what isn’t, there has been a surge in CBD registrations over the past year, even for ingestible products, but this doesn’t come as a total surprise. Given the increasing projected growth of the CBD industry, and the number of competitors coming to market every day, it is becoming more and more imperative to do everything possible to secure your brand name before someone else does.


However, even though the USPTO has provided guidance on examining CBD marks to its Examining Attorneys, CBD applications have proven to be a great source of confusion at the USPTO. Currently only a handful of Examining Attorneys have been trained to review CBD applications, as a result, CBD applicants are waiting more than a year to hear back (compared to two months response time on a non-CBD application).


Of course, in some circumstances these long wait times can interfere with a business’ ability to enforce its rightful trademark rights, but for those businesses – a pending application is better than nothing at all. At the same time, for those businesses who are unsure if their application is even eligible for registration, the wait time can be very beneficial, since it allows them the ability to secure their place in the registration line while the FDA figures out its existing stance on edible CBD products.


That said, regardless of the wait time, and whether you are using your mark in connection with ingestible or non-ingestible goods, securing your CBD brand name should be a top priority for any business considering entering this market and depending on the circumstances, it may be possible to secure a registration even if you sell ingestible products.



Special Limitations for Producers and Cultivators of “Hemp”:


The Farm Bill requires that all “hemp” (as defined in the act) be produced under license or authorization by a state, territory, or tribal government in accordance with a plan approved by the U.S. Department of Agriculture (USDA). On October 29, 2019 the USDA announced the establishment of its U.S. Domestic Hemp Production Program.


Every applicant that attempts to register a mark in connection with “hemp” cultivation or production, will also be subject to additional inquiries and requirements concerning such applicant’s authorization to lawfully produce hemp under the Farm Bill and now the US Domestic Hemp Production Program.



Takeaways:

  1. Don’t make claims about the medicinal qualities of your CBD product.

  2. Don’t make claims about the efficacy of your CBD products if these claims are not backed by hard scientific studies.

  3. Client testimonials are not a replacement for scientific studies.

  4. Using fluffy words like “may” in the absence of such hard evidence is not going to be enough to keep you out of legal hot water.

  5. An FDA Disclaimer on your website is not enough.

  6. Your CBD products are not “dietary supplements”.

  7. Marks used in connection with CBD products that “contain less than 0.3% THC” and are non-ingestible are currently permitted to register with the USPTO.

  8. It may still be worthwhile to apply to register marks used in connection with ingestible CBD products even though they are currently not permitted to register with the USPTO.

  9. Companies selling ingestible CBD products may still be permitted to register their marks.

  10. Producers and cultivators of “hemp” (or CBD) are subject to additional USDA requirements and as such must also demonstrate to the USPTO that they are lawfully permitted to produce “hemp” before their marks are permitted to register.



Questions about branding, marketing, or registering your CBD brand? Contact us.