Charlotte's Web Strain Battle Heats Up

The Stanley Brothers in Colorado made their name by targeting a strain called Charlotte’s Web that had greater amounts of CBD than THC in order to treat a young girl with a rare form of epilepsy. The girl, Charlotte Figi, suffered from Dravet Syndrome that caused her to have multiple seizures in a single day. This strain of cannabis seemed to quell the seizures and allowed her to live a better life. Sadly, Figi recently passed away.

The company called the strain Charlotte’s Web in her honor and even changed its name to Charlotte’s Web Holding Inc. (OTC:CWBHF). Then the company attempted to trademark the name Charlotte’s Web, but was rejected. In October 2019, the United States Patent & Trademark Office rejected the trademark application for “Charlotte’s Web” in a nonfinal Office Action.  The USPTO specifically found that the name “Charlotte’s Web identifies a particular strain of low THC, high CBD content Cannabis sativa plants” does not function as a trademark.

CBD company AAXLL contends that anyone can use the name Charlotte’s Web since it isn’t trademarked. The company believes that CWI made “a serious mistake in adopting the generic name of a strain as its corporate and brand name since everyone has the right to use the name of a strain.”

The logic here is that no company can trademark a specific strain of cannabis. No one company can own the Jack Herer or Purple Kush or Girl Scout Cookies. However, master growers often apply for patents on strains they create as intellectual property. GW Pharmaceuticals (GWPH) has numerous patent applications for various cannabis drug combinations. Since the federal government is loathe to trademark anything related to marijuana, states stepped in to protect various brand names.

AAXALL Fights Back

AAXLL disputes CWI’s central allegation that Charlotte’s Web is not the name of a strain of hemp.  AAXLL CEO Joseph Maskell notes that CWI itself referred to “the Charlotte’s Web strain” in its own 2019 public offering documents.

Maskell also states, “U.S. federal trademark law already dictates that cultivar or strain names are generic from the get-go, so the Charlotte’s Web name of the strain was never protected as a trademark. CWI cannot prevent the rest of the world from referring to Charlotte’s Web as a strain of hemp any more than a French winery could prevent the world from referring to Chardonnay as a varietal name of grapes.”

AAXLL’s Maskell comments that USPTO’s rejection of CWI’s trademark application would demonstrate Maskell concludes, “the family-run Balance CBD brand will not be bullied by CWI.  It’s shameful that a large publicly traded corporation uses such tactics to intimidate competition to try to cover up their past mistakes”

Charlotte’s Web Fights To Protect Name

Like any large company, Charlotte’s Web is fighting to protect its name. In a company filing it wrote, “CW currently has a portfolio of pending U.S. plant, utility and design patent applications directed to CW’s most promising plant genetics, proprietary extraction technology, cannabinoid isolation methods and cannabinoid conversion processes and industrial designs. CW also has pending U.S. and Canadian trademark applications.”

While AAXALL points to the government trademark rejection as a reason it should get to use the name, Charlotte’s Web says that the rejection was due to the product falling under the Controlled Substances Act and FD & C Act. Not because of a strain argument. It said it, “May rely on common law theories of trademark protection and enforcement in cases of actual or suspected trademark infringement of the trademarks it wishes to protect.” The company also noted that such battles to protect its name and trade secrets could be expensive.

Litigation Lineup

Any large company is always seen as a litigation target. There is the assumption that a big company has the money to settle a case rather than fight. Charlotte’s Web market share in the CBD industry is the largest and has at times been as much as a third, although competition has caused that number to decline.

The company faces a class-action lawsuit that its CBD products contain more hemp than the label says. The company contends the products are accurately labeled. Another lawsuit is being fought with AgriMed, who had the license to sell CW products in the state of Illinois. AgriMed says CW competed against it by selling CW products in the state as well. CW says that AriMed didn’t pay the royalties it said it would. That trial had been planned for May 2020.

 

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


5 comments

  • Avatar
    Steve B

    June 12, 2020 at 10:09 am

    This is big news, did you see the video released of all the Stanley brothers from Charlotte’s Web explicitly saying it is a strain. It’s pretty clear isn’t it?

    The press release that went out yesterday by AAXLL has the links.

    Thanks for sharing

    Reply

    • Debra Borchardt
      Debra Borchardt

      June 12, 2020 at 10:44 am

      Yes, we saw it. But what does that mean for all the master growers that create their own special strain? Does that mean they can’t protect their IP? It’s a question for the courts to decide. Did Charlotte’s Web exist before The Stanley Brothers created it? I don’t think so, so there could be some IP protection. Hard to say. We’re not legal experts. No one owns Jack Herer or Bubba Kush, so there’s that too. Will be interesting to see play out.

      Reply

      • Avatar
        Michael Spangler

        June 12, 2020 at 5:25 pm

        Yes, that cultivar existed before the Stanley Brothers got it and same with the CBD cultivars used in Epidiolex; when the dust settles we will see that most of those cultivars came from California 🙂

        Reply

        • Debra Borchardt
          Debra Borchardt

          June 15, 2020 at 8:19 am

          Definitely a case to follow. Despite the patent battles, the company helped to push forward huge advances in the cannabis industry and I hope that doesn’t get lost in the criticism. IP in cannabis is certainly going to be a hot button issue.

          Reply

  • Avatar
    Steve B

    June 12, 2020 at 3:46 pm

    Yes, it definitely opens up things for a much bigger conversation.

    I found something interesting, an origin of how CBD genetics came into the market:
    https://www.nytimes.com/2020/05/23/sunday-review/coronavirus-cbd-oil.html

    Quoting the article:

    “On his deathbed in 2014, Mr. Ringo insisted to friends and family that the Stanleys used his seeds to develop their famous strain Charlotte’s Web. Joel Stanley told me the genetics for Charlotte’s Web were a “cross of wild hemp with an industry genetic.” Critics of the Stanley brothers in the cannabis industry have grown annoyed by their prominence and push for patents. Their company has been valued at over half a billion dollars.”

    Reply

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