Key Takeaways
- AK Futures sued several companies in June 2021 for selling counterfeit versions of its Cake-branded delta-8 THC vapes.
- Smoke Tokes was among the original companies identified, and the judge ruled against them in November 2021.
- In November 2022, the judge authorized U.S. Marshals to execute the writ against Smoke Tokes.
- Two days before the Marshals were to execute the writ, AK Futures submitted a memorandum claiming around $400k in post-judgment costs related to the case.
- On December 9th, the Marshals and AK Futures arrived to serve Smoke Tokes papers and seize their inventory. Despite protesting the new amount, Smoke Tokes’ attorney paid the new fees in order to retain their inventory.
- In January 2023, AK Futures attorneys made several attempts to file requests for the post-judgment fees, even attempting after being told these must be approved by a judge.
- The judge ruled that AK couldn’t be found in contempt of court, but explicitly rejected the extra costs and ordered AK to pay the additional money back to Smoke Tokes.
- For at least a year after the ruling, Smoke Tokes was still selling counterfeit Cake products.
Things are heating up in the legal battle between AK Futures and what it describes as a “network of counterfeiters” aiming to make money by imitating its famous Cake brand.
Despite winning most of the cases related to the counterfeiting, the strategy of aggressive litigation seems to be wearing on the patience of U.S. District Judge James V. Selna, who recently refused to hold Smoke Tokes in contempt for continuing to sell counterfeit products. The judge just barely cleared AK Futures’ attorneys of acting in “bad faith” when they attempted to tack on over $400k in fees to an existing judgment.
But there is much more to the story than this, from the initial claims of counterfeiting to the continuing efforts to bring down every single node in the supposed “network of counterfeiters.” If a hemp company can get 11 U.S. Marshals and 15 hired professionals to raid multiple warehouses, something serious is obviously going on.
The Initial Case and Victory
AK Futures’ basic case is pretty cut and dry. Several companies sold counterfeit versions of its Cake-branded delta-8 THC vapes, and the judge ruled in their favor.
Back in June 2021, AK Futures sued Boyd Street Distro, Green Buddha and Smoke Tokes for selling counterfeit versions of its Cake-branded vapes. In May, they’d hired a private investigator, who purchased fake Cake products from stores across Los Angeles, including three “Cake Lookah” devices bought at Smoke Tokes in downtown Los Angeles.
Green Buddha didn’t respond, so they basically lost by default. Smoke Tokes essentially had the same thing happen, receiving a ruling against them in November 2021 that noted that – among other factors – “Smoke Tokes was properly served but chose not to participate in this litigation.” Judge Selna awarded $150,000 in damages, and would later add $92,656 in attorney’s fees.
Even if Smoke Tokes had challenged the copyright infringement claims, it seems unlikely they would have succeeded, since the judgment also states: “Smoke Tokes’s inauthentic products featured the same color scheme as AK Futures uses in many of its products and the similarities between the authentic and counterfeit products were ‘striking.’”
AK Futures’ Attempts to Claim the Money
The most recent chapter of the story gets started when AK Futures – after spending some time on other legal actions – started trying to claim the money from Smoke Tokes. On July 14th, 2022, they requested a writ of execution for the $244,152, with ex parte relief. Four months later, on November 16th, 2022, Judge Selna granted the relief, ordering the U.S. Marshals Service to enforce it.
This is where things get a little strange. On December 7th, 2022, AK Futures filed a Memorandum of Costs After Judgment – essentially, a statement about related costs they incurred after the case concluded – which included around $400k, made up of unspecified “third party costs,” attorneys fees and more. Using this, the Frost Firm, acting on behalf of AK, made a Notice of Levy which claimed a total amount of over $658,739, which is $414,586 higher than the amount in the original judgment.
Two days later, the U.S. Marshals were ready to go, and AK Futures’ legal counsel gave them the memo and Notice of Levy they’d prepared before. Smoke Tokes’ lawyers were told in clear terms that all of their inventory would be seized, and indeed by the afternoon there were four moving trucks’ worth of products. To stop the seizure, Smoke Tokes’ lawyer offered to pay off the fees.
The only problem was that he knew that the amount was wrong – the judge had awarded about $400k less, after all. When he asked about this, he was reportedly told to “read the papers” and given no further explanation. Out of options, he paid and the trucks were unloaded.
AK Futures Goes All Better Call Saul on the Court
January 2023 was marked by a flurry of activity, since AK Futures had now collected more than the court even awarded them. In the first week of the year, the Frost Firm attempted to file papers on at least two occasions, but in both cases the clerk rejected the paperwork as incorrectly prepared. On January 12th, 2023, the clerk explicitly said that the amount does “not coincide with the amount(s) in the judgment/order,” and added that post-judgment costs must be approved by the judge.
The next day, the court posted a tentative order online, stating that AK Futures cannot add over $400k to the judgment without permission from the court. The supposed costs, at the very least, have to be proven and justified. The order also stated that it could be viewed as the Frost Firm attempting to “enrich itself through a windfall opportunity.”
Just an hour and a half after this happened, and undoubtedly with the denial of the previous day still fresh in memory, the Frost Firm filed another request for around $400k in post-judgment fees. This was rejected again. However, finally, a clerk issued a writ of execution for the increased sum four days later, after yet another attempt to file the papers.
Judge Selna Rejects the Post-Judgment Fees, But AK Isn’t in Contempt
On January 23rd, Judge Selna presided over a hearing, at which AK Futures’ attorney argued that his actions were justified under California Civil Procedure 699.40. However, the court ruled that the clerk didn’t have the authority to award the post-judgment fees, and only the original $244,152.40 was owed. AK Futures had to pay Smoke Tokes back for the remaining $414,586.
Judge Selna was clear in his order, stating that while it couldn’t legally find that the action was in bad faith or grant Smoke Tokes’ motion for contempt, “it could be said that the Frost Firm believed it could circumvent federal court proceedings to collect nearly half a million dollars in attorney’s fees and third-party costs.”
…But Counterfeits Remained on the Shelves
All the while, despite a court order against them from late 2021, it appears that Smoke Tokes continued to sell counterfeit Cake products. AK Futures alleges that investigators were able to purchase counterfeit Cake products in May and July 2022, as well as some being recovered during the December raid. For this, AK Futures’ attorneys requested that Smoke Tokes be held in contempt of court.
However, this motion was denied because the judge argued that AK Futures and Smoke Tokes had not met a requirement that parties should “discuss thoroughly, preferably in person, the substance of the contemplated motion and any potential resolution.” While they’d had a small meeting, they did not discuss any specific violations of the court’s orders, so the case was thrown out.
There Are No “Good Guys”: The Mothership Technologies Case
You might be reading this story and wondering who exactly we should be rooting for here, but the answer is nobody. Nobody wins here. There are no “good guys.” It’s true that AK Futures had their copyright infringed, but their litigation strategy leaves a bad taste in the mouth, to say the least.
Aside from the above attempts to almost triple the original awarded amount, AK Futures hasn’t only being pursuing companies like Smoke Tokes. In fact, as part of their effort to take down this “network of counterfeiters,” they even attempted to sue a company only tangentially involved in the counterfeit products.
Back in December 2021, AK Futures brought another similar suit against LCF Labs and Homesun Co., for selling counterfeits and being the heads of a counterfeiting operation. In May 2022 they added some companies to this suit, including Mothership Technologies, essentially a transportation middleman that works a little like Uber in that it connects something needing to be moved with someone willing to move it. If Mothership was involved with the fake Cake products, their only role would be matching some pallets of products up with an appropriate company.
Judge Selna agreed, stating that “If transportation is insufficient to state a claim for direct copyright infringement, then the Court does not see how the arranging for transportation would suffice.” In other words, since Mothership didn’t sell, distribute or even simply transport the goods, there is no way this alone is enough to constitute copyright infringement.
More so, some other companies added to the complaint in May 2022 didn’t even operate in California, and so these cases were also thrown out.
With Legitimacy Comes Litigation: The Future of Delta-8 THC
The point of these stories isn’t to claim that AK Futures is “just as bad” or even “in the wrong” in this case, but to show that they are more than happy to sue anybody even tangentially related to what they see as a counterfeiting network. They barely avoided a ruling against them after attempting to inflate the amount Smoke Tokes owed, and were only able to collect the money at all because they gave misleading paperwork to the U.S. Marshals charged with executing the writ.
But overall, AK was protecting its trademark in a way that will get more common as the industry grows. We spoke to Neil Willner, co-chair of the cannabis group at Royer Cooper Cohen Braunfeld (RCCB), who commented to us that, “Many hemp companies haven’t established enough consumer good will and aren’t famous enough to be worth infringing upon but as the industry grows, I suspect we’ll see an uptick in trademark infringement actions.”
It’s great that the court essentially ruled that delta-8 THC is legal at the federal level in a related case (again AK Futures fighting unauthorized Cake products) and so AK’s trademarks are legitimate. It adds an air of legitimacy to the whole industry, but simultaneously reminds us what that means: any company with enough money and dogged enough lawyers can make life hell for you, even if all you did was match a package up with a truck.
And maybe not just for matching up a package with a truck, but if you’re protecting your legitimate trademark, AK’s overall approach isn’t so bad. Neil Willner comments: “Companies should absolutely be taking an aggressive approach to trademark infringement, like AK Futures, because if you fail to enforce your rights under a trademark, a court can deem it “abandoned.”
Conclusion: Copyright Matters, But Keep the Fight Clean
It goes without saying that Smoke Tokes is completely in the wrong for showing no respect for AK Futures’ intellectual property, reflecting an unfortunate reality of working in these “gray area”-but-legal spaces. See how many “Rice Krispies” edibles you can find and how little anyone seems to care about essentially profiting from another brand’s product except with THC in it.
Neil adds, “The bigger issue is hemp companies and illicit marijuana companies infringing on the trademarks of well-known CPG companies, especially candy brands like Nerds and Skittles. Not only do these illicit companies tarnish the marks of well-known brands but they also put consumers at risk, young consumers, by using famous marks for infused, intoxicating products.”
Any action taken to stop that should be applauded – maybe we don’t want to see the industry go so “corporate” but it’s a reality of the world we live in and is ultimately fair.
But let’s not pretend that AK Futures actions have been moral in this case. Adding $400k to a judgment by trying multiple clerks on multiple days and then demanding this un-justified figure as you’re having U.S. Marshals seize four trucks’ worth of products has an air of quasi-legal mob justice. And did anyone really think Mothership was responsible for fake vapes it never even touched and had no realistic way of knowing were fakes?
The reality is that both parties just want to maximize their profits. Smoke Tokes doesn’t care whose reputation they leech off and AK Futures doesn’t care who they sue, they’re both just desperately clawing at whatever cash they can get before more regulation slams the delta-8 loophole closed.