The creative defense that failed
A trademark infringement defendant argued it couldn’t be sued in federal court because its cannabis business was engaged in illegal activity under federal law. This seemingly clever strategy fell flat in Colorado federal court, representing the latest decision in a growing trend of federal judges retaining cannabis-related litigation despite the centuries-old principle that courts lack jurisdiction over civil disputes involving illegal conduct.
The decision confirms that companies obtaining federal trademark registrations in “cannabis-adjacent” businesses are likely to succeed in protecting those marks against competitors operating without registrations—most often because they’re directly involved in cannabis commerce rather than merely adjacent to it.
The illegality doctrine and cannabis commerce
The illegality doctrine prohibits courts from providing a forum or granting remedies to parties who are breaking the law. The earliest reported application of the doctrine ex turpi causa is the 1725 case of Everett v. Williams, better known as The Highwayman’s Case, in which an English court dismissed a dispute between two thieves over division of robbery proceeds—and then turned both litigants over to the sheriff.
In the cannabis context, this doctrine has created significant barriers. Federal courts have historically dismissed cannabis-related commercial disputes, forcing litigants into state court systems. The challenge is compounded by federal trademark policy: the Patent and Trademark Office refuses trademark registrations for federally illegal goods and services, effectively excluding cannabis businesses from federal trademark protection for products with psychoactive amounts of THC.
Despite these barriers, federal judges are increasingly willing to retain cannabis-related cases, representing a pragmatic recognition of the complex legal landscape where state legalization conflicts with federal prohibition.
Case analysis: BBK Tobacco & Foods v. J&C Corp.
In BBK Tobacco & Foods LLP v. J&C Corp., U.S. Dist. Ct. Colo. Case No. 24-cv-01466 (Aug. 26, 2025), the defendant operated a cannabis business using the marks “Juicy” and “Raw” for THC-containing products. The plaintiff held federal trademark registrations for identical marks used on hemp rolling papers.
The defendant’s strategy
The defendant’s argument was creative: since federal law prohibits trademark protection for illegal business activities, and since the plaintiff couldn’t obtain registered trademark protection for THC-related goods, any infringement claim must fail as a matter of law. The defendant essentially argued that allowing the claim would improperly expand the plaintiff’s rights beyond what federal trademark law permits.
The court’s response
The federal judge made quick work of this defense, focusing on traditional trademark infringement analysis. First, the court noted that many of defendant’s products using the contested marks weren’t federally prohibited: smoking paraphernalia remains legal regardless of intended use.
More importantly, the court applied standard “likelihood of confusion” analysis. The judge emphasized: “Both companies here sell and market products on the smoking fringe between marijuana and tobacco and products which could easily and probably do cross over and back.” This overlap creates substantial likelihood of consumer confusion, particularly because consumers wouldn’t exercise great care when purchasing these products.
Strategic implications
This decision has significant implications for businesses in the cannabis ecosystem. Companies with federal trademark registrations for cannabis-adjacent products—hemp goods, smoking accessories, lifestyle brands—now have stronger grounds to protect those marks against direct cannabis competitors.
The decision suggests federal courts will look beyond strict illegality and focus on traditional trademark principles when marks and markets overlap substantially. This provides valuable protection for businesses that have invested in building federally protected brands in markets adjacent to federally illegal cannabis, such as hemp products.
Looking forward
This decision represents another step in the evolving landscape of cannabis-related federal litigation. Although the BBK decision is at the district court level, and does not bind other federal courts, it reflects a trend where judges are not reflexively dismissing civil claims involving cannabis—even where the remedy sought by the plaintiff involves recovery of money damages derived from federally illegal conduct.
Federal judges have acknowledged in a number of recent decisions the practical reality that medicinal or recreational marijuana is now allowed under state law in 34 states, and that the federal government is not actively enforcing the Controlled Substances Act (“CSA”) relating to cannabis. But the courts remain constrained by the CSA’s absolute prohibition on possession, manufacturing and distribution of high-THC cannabis, and the Act’s declaration that there is no property right to money given in “exchange for a controlled substance.” This has caused federal bankruptcy judges to deny many petitioners in the cannabis industry protection under the Bankruptcy Act. But if some aspect of a civil dispute involves federally legal conduct, or insolvency includes at least some funds or assets that are arguably untainted by violation of the CSA, the doors to the federal courthouse are more likely to be unlocked today than just a few years ago.
Timothy L. Alger is a litigator and of counsel at Harris Sliwoski LLP, and serves as an arbitrator and mediator through his ADR practice, Alger Resolutions. https://algeradr.com/
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