Ninth Circuit Leaves Delta-8 THC Legal Loophole Open in Intellectual Property Litigation | Miller Nash LLP

In the first federal appeals decision on delta-8 THC, the Ninth Circuit Court of Appeals ruled the legal substance – at least for trademark protection purposes – finding that if “Congress inadvertently created a loophole legalizing vaping products containing delta-8 THC, then it’s up to Congress to fix their mistake. AK Futures LLC vs. Boyd St. Distro, LLCno. 21-56133, 2022 WL 1574222 (9th Cir. May 19, 2022).

While the ruling is a victory for those seeking trademark protection for hemp-derived products, the ruling should not be seen as an unlimited license to possess, manufacture or sell delta-8. As we will see below, the limitations of the case are equally important.

It all starts with science

Because the legality of delta-8 is central to the dispute, the court began its analysis with the chemical background of delta-8 THC (tetrahydrocannabinol). Delta-8 is one of hundreds of chemical compounds, or cannabinoids, found in the cannabis sativa L plant. The best-known cannabinoid is delta-9 THC, a psychoactive compound naturally present in the cannabis plant, which produces the “high” commonly associated with cannabis.

Another familiar cannabis compound is CBD (cannabidiol), which has no psychoactive qualities. Under the Farm Bill of 2018 (a/k/a the Agricultural Improvement Act of 2018), cannabis products containing no more than 0.3% delta-9 THC are removed from Federal Controlled Substances Act (CSA). This exemption would include CBD (unless incorporated into a product containing more than 0.3% THC).

Like its cousin delta-9 THC, delta-8 THC can induce a euphoric high when taken in sufficient amounts. But because delta-8 occurs naturally in small amounts, it cannot be economically extracted from the plant alone. Instead, delta-8 is converted from CBD in a lab using solvents and acids. It is then used in vaping and edibles.

In September 2021, the DEA issued a non-binding opinion letter on delta-8 to the Alabama Board of Pharmacy, finding that synthetically produced tetrahydrocannabinols are illegal and not exempt under the Farm Bill. The dilemma with this guidance is that “synthetic” is not defined, so it invites the question facing the Ninth Circuit: whether delta-8 converted from CBD extracted from hemp is considered synthetic (and illegal) or a hemp-derived (and legal) substance.

The Ninth Circuit says?

The plaintiff, AK Futures, is a manufacturer and distributor of delta-8 vaping products under the trademark “CAKE”, a form of logo which AK Futures has registered with the US Copyright Office as a work of art. AK Futures also has pending federal trademark applications on various CAKE and related word and design marks for a variety of goods and services. AK Futures filed federal lawsuits for copyright infringement under the Copyright Act, as well as unfair competition and misrepresentation under Lanham Act Section 1125 against Boyd Street, a retail tobacco store. AK Futures alleged that Boyd Street was not an authorized retailer and was selling counterfeit versions of its delta-8 CAKE products, in violation of AK Futures’ federal common law trademark rights to its CAKE trademarks and trademark rights. registered author.

After AK Futures sought a preliminary injunction restraining the reproduction or sale of delta-8 products, the district court granted the injunction on the basis that AK Futures had demonstrated a likelihood of success for its copyright claims. author and brand. The Ninth Circuit confirmed.

The Ninth Circuit’s analysis began with federal trademark law. One of the benefits of federal trademark protection is the presumption that a registered trademark is valid and protectable. This presumption, however, is not available for unregistered brands such as the CAKE brands of AK Futures. In the absence of this presumption, AK Futures had to demonstrate that its CAKE marks were valid and protectable in order to prevail.

This requirement led to the “key disagreement” on appeal: Was AK Futures’ use of the CAKE marks on its delta-8 products lawful? Only the lawful use of a trademark in commerce can give rise to trademark priority, which is rooted in practical political considerations: to prevent “the absurd result of the government” extending the benefits of trademark protection to a seller based on actions that the seller has taken in violation of that government’s own laws.

Boyd Street argued that the possession and sale of delta-8 THC is illegal because delta-8 products are often made using a “chemical process” and are therefore “synthetically derived.” Citing the letter from Alabama’s DEA Board of Pharmacy, the Ninth Circuit concluded that delta-8 is “a tetrahydrocannabinol substance contained in the [cannabis] plant” as well as a “material” derived from the cannabis plant. So, based on the record before it, the court concluded that AK Futures’ delta-8 products “fit perfectly” within the legal definition of hemp.

The take-out for cannabis operators

The Ninth Circuit held that the plain meaning of the Farm Bill exempts from the CSA a “wide variety of potential substances and products” derived from the cannabis plant, including “all derivatives, extracts, [and] cannabinoids” with no more than 0.3% delta-9 THC. This ruling could be extrapolated to apply to products made from other cannabinoids derived from the cannabis plant, including the intoxicating molecule delta-10 THC and the non-intoxicating cannabinoids CBG and CBN.

Despite the general conclusion of the Ninth Circuit, other federal courts are free to disagree. Further, the decision does not address the legality of delta-8 products outside of the context of intellectual property. While courts have found that the Lanham Act prevails over conflicting state laws for trademark purposes, state (and local) law still governs the manufacture and sale of cannabis products. Delta-8 is banned in many states, restricted in some, and treated like delta-9 in others. Thus, the reach of the Ninth Circuit’s conclusion may not extend far beyond its federal intellectual property bubble. And although they are exempt from the CSA, both CBD and delta-8 are subject to FDA jurisdiction, and the FDA has issued warning letters to companies for selling both types of products as unapproved food additives, make inappropriate health claims about their effects, or otherwise mislabel products.

Against this backdrop, companies involved with delta-8, CBD, and other minor cannabinoids should continue to invest in protocols and consult with experienced counsel to ensure compliance with the ever-changing patchwork of federal, state laws and regulations. and local.

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