no Lanham Act claims, including false advertising, allowed over cannabis

Shulman v. Kaplan, 2020 WL 7094063, No. 2:19-CV-05413-AB
(FFMx) (C.D. Cal. Oct. 29, 2020)

The parties compete in the cannabis market, and some
defendants formerly worked with Shulman, but that relationship broke down.
Shulman sued, alleging four federal claims and 21 state law business and/or
contract-related claims.

RICO claims failed because “[a] court order requiring
monetary payment to Plaintiffs for the loss of profits or injury to a business
that produces and markets cannabis would, in essence (1) provide a remedy for
actions that are unequivocally illegal under federal law; and (2) necessitate
that a federal court contravene a federal statute (the CSA) in order to provide
relief under a federal statute (RICO).”

Likewise, Lanham Act claims failed because cannabis is
federally illegal and thus the plaintiff couldn’t have trademark priority. This
reasoning also applied to “derivative” false advertising claims. Note: I don’t
think that conclusion necessarily follows—other courts have held, in other
contexts, that lacking enforceable trademark rights doesn’t preclude either a
§43(a)(1)(A) or (B) claim under appropriate circumstances. If generic terms and
terms in which there are only foreign rights can found a claim when there is
consumer deception, why not terms for cannabis? Note that this is also the issue
obviated by Tam and Brunetti with respect to unregistrable-on-public-policy-grounds
marks.

The court bolstered its conclusion by reasoning that
plaintiffs lacked statutory standing because they weren’t engaged in “lawful”
commerce and thus didn’t come within the zone of interests protected by the statute.

The court declined to exercise supplemental jurisdiction
over the remaining claims.

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