Canna Law Blog ™

Canna Law Blog

LEGAL SUPPORT FOR THE CANNABIS BUSINESS COMMUNITY SINCE 2010

Illinois Medical Cannabis Pilot Program: A Little More Clarity

Posted in General, Illinois, Legal Issues, Licensing, Medical Cannabis

 

We won’t see these types of marijuana jars in Illinois dispensaries, as all products must be packaged at cultivation centers.

Two of our lawyers from our Chicago office attended the Illinois Medical Cannabis Pilot Program Town Hall Meeting in Chicago yesterday. This is a report from that Town Hall meeting.

More than 500 people were in attendance and many questions were asked of government officials from the Illinois state agencies relevant to Illinois’s pilot medical marijuana program. The meeting lasted over three hours, and the state officials had to limit the number of questions they fielded due to time constraints. The Town Hall brought clarity to some issues, but it also highlighted those areas that remain rife with confusion.

Packaging. Cannabis stakeholders are both unclear and dissatisfied with what is going on regarding Illinois’ cannabis packaging requirements, as revealed by the large number of questions asked about it. In terms of answers, the panel stated that dispensaries are not allowed to re-package a product they receive from a cultivation center. In other words, every package sold to a patient must be packaged by the cultivation center. The cultivation center must leave room on the package for the dispensary to be able to affix a label with the dispensary’s name on it as well. It is up to the cultivation center to figure out the appropriate package size for a product, and to package it accordingly.

If a dispensary wishes to inspect a sample of a cultivation center’s product, the dispensary may open the package of that product to inspect it, but it then must dispose of that sample within one week — because it will no longer have the cultivation center’s packaging.

The cultivation center is not permitted to put a photo of the product on the outside of the packaging.

Someone at the Town Hall asked about the requirement that “medical cannabis-infused products shall not bear a reasonable resemblance to any product available for consumption as a commercially available candy.” In particular, this individual wanted to ensure that cannabis-infused chocolate would not be considered to violate this clause simply because it is chocolate. The response from Ray Watson of the Illinois Department of Agriculture was that a product would not be disallowed simply because it consists of chocolate, but that it would be disallowed if it resembled an existing candy product’s packaging. Since the product will need to be inside secure packaging (that cannot on its packaging have a photograph of the product) until it is purchased by a patient, the state is not as concerned with what the product looks like once opened. The takeaway here is that if your edible product attempts to mimic an actual candy product, you probably will not be able to get your product registered by the state in the first place.

Physician Certification Form & Bona-Fide Physician-Patient Relationship. Many attendees expressed concerns about obtaining a Physician Written Certification Form from their doctors. In cases where one is unable to obtain this form from one’s primary physician (one individual talked about how his doctor at the US Department of Veterans Affairs would be unable to execute the form), patients will need to find a new physician. The Illinois State officials reiterated that patients can and may need to seek a new doctor, but that the physician should not be advertising a cannabis certification, that the physician-patient relationship must consist of more than one visit, and that the physician must review the patient’s previous 12 months of medical records.

Application Allocation. Many attendees sought answers regarding the strategy of submitting multiple applications for cultivation centers, dispensaries, or both. A single entity can own up to five dispensaries and three cultivation centers, but many questions were asked about submitting a number of applications that, if all successful, would exceed the maximum allowed. The gist of the answers was that it would be a “negative” to any application to need to remove an officer from the application because that officer was successful in more than the maximum number of registrations. The state officials kept stressing the importance of submitting your best plan in your application(s) and that “spreading your resources too thin” could have negative repercussions. Specifically, if you list a Principal Officer on several applications and then need to remove that Principal Officer from a successful application the application from which you remove the Principal Officer “may be subject to discipline or revocation.”  We were actually happy to hear this as this is how we have handled the application process in the other states in which we operate.

Advertising. Cultivation centers cannot advertise to the public, but they are permitted to advertise to dispensaries via direct advertisements (direct mail, email, phone, etc.).

Cannabis Banking.  One of our lawyers asked whether the Illinois Department of Health or any other Illinois governmental body was aware of any banks that would open a bank account for a dispensary or cultivation center and whether there would be any list of such banks. The answer was that they were not aware of any such banks and that dispensaries and cultivation centers are on their own with respect to banking.

Working in a Cultivation Center or Dispensary. To work in a cultivation center or a dispensary, you must first be registered as an agent. The agent registration process will be initiated by the Principal Officer on becago yesterday. This is a report from that Town Hall meeting.

More than 500 people were in attendance and many questions were asked of government officials from the Illinois state agencies relevant to Illinois’s pilot medical marijuana program. The meeting lasted over three hours, and the state officials had to limit the number of questions they fielded due to time constraints. The Town Hall brought clarity to some issues, but it also highlighted those areas that remain rife with confusion.

Packaging. Cannabis stakeholders are both unclear and dissatisfied with what is going on regarding Illinois’ cannabis packaging requirements, as revealed by the large number of questions asked about it. In terms of answers, the panel stated that dispensaries are not allowed to re-package a product they receive from a cultivation center. In other words, every package sold to a patient must be packaged by the cultivation center. The cultivation center must leave room on the package for the dispensary to be able to affix a label with the dispensary’s name on it as well. It is up to the cultivation center to figure out the appropriate package size for a product, and to package it accordingly.

If a dispensary wishes to inspect a sample of a cultivation center’s product, the dispensary may open the package of that product to inspect it, but it then must dispose of that sample within one week — because it will no longer have the cultivation center’s packaging.

The cultivation center is not permitted to put a photo of the product on the outside of the packaging.

Someone at the Town Hall asked about the requirement that “medical cannabis-infused products shall not bear a reasonable resemblance to any product available for consumption as a commercially available candy.” In particular, this individual wanted to ensure that cannabis-infused chocolate would not be considered to violate this clause simply because it is chocolate. The response from Ray Watson of the Illinois Department of Agriculture was that a product would not be disallowed simply because it consists of chocolate, but that it would be disallowed if it resembled an existing candy product’s packaging. Since the product will need to be inside secure packaging (that cannot on its packaging have a photograph of the product) until it is purchased by a patient, the state is not as concerned with what the product looks like once opened. The takeaway here is that if your edible product attempts to mimic an actual candy product, you probably will not be able to get your product registered by the state in the first place.

Physician Certification Form & Bona-Fide Physician-Patient Relationship. Many attendees expressed concerns about obtaining a Physician Written Certification Form from their doctors. In cases where one is unable to obtain this form from one’s primary physician (one individual talked about how his doctor at the US Department of Veterans Affairs would be unable to execute the form), patients will need to find a new physician. The Illinois State officials reiterated that patients can and may need to seek a new doctor, but that the physician should not be advertising a cannabis certification, that the physician-patient relationship must consist of more than one visit, and that the physician must review the patient’s previous 12 months of medical records.

Application Allocation. Many attendees sought answers regarding the strategy of submitting multiple applications for cultivation centers, dispensaries, or both. A single entity can own up to five dispensaries and three cultivation centers, but many questions were asked about submitting a number of applications that, if all successful, would exceed the maximum allowed. The gist of the answers was that it would be a “negative” to any application to need to remove an officer from the application because that officer was successful in more than the maximum number of registrations. The state officials kept stressing the importance of submitting your best plan in your application(s) and that “spreading your resources too thin” could have negative repercussions. Specifically, if you list a Principal Officer on several applications and then need to remove that Principal Officer from a successful application the application from which you remove the Principal Officer “may be subject to discipline or revocation.”  We were actually happy to hear this as this is how we have handled the application process in the other states in which we operate.

Advertising. Cultivation centers cannot advertise to the public, but they are permitted to advertise to dispensaries via direct advertisements (direct mail, email, phone, etc.).

Cannabis Banking.  One of our lawyers asked whether the Illinois Department of Health or any other Illinois governmental body was aware of any banks that would open a bank account for a dispensary or cultivation center and whether there would be any list of such banks. The answer was that they were not aware of any such banks and that dispensaries and cultivation centers are on their own with respect to banking.

Working in a Cultivation Center or Dispensary. To work in a cultivation center or a dispensary, you must first be registered as an agent. The agent registration process will be initiated by the Principal Officer on behalf of the employees.

The Number of Cultivation Centers. HB0001 initially enumerated that the Illinois Department of Agriculture would grant 22 cultivation center registrations — one for each Illinois State Police District, with Chicago counting as two districts. The Department of Agriculture rules released in July also mention 22 cultivation centers. But at the Town Hall, the Department of Agriculture stated that it was not aware any land in District 15 (the Illinois Tollway System) that could be used for a cultivation center so we probably are talking about having only 21 cultivation centers for the entire state of Illinois. But it was mentioned that if anyone can “come up” with land within the Illinois Tollway System that could be used for a cultivation center, you can let the Department know about it. So though the State can officially have 22 cultivahalf of the employees.

partment of Agriculture would grant 22 cultivation center registrations — one for each Illinois State Police District, with Chicago counting as two districts. The Department of Agriculture rules released in July also mention 22 cultivation centers. But at the Town Hall, the Department of Agriculture stated that it was not aware any land in District 15 (the Illinois Tollway System) that could be used for a cultivation center so we probably are talking about having only 21 cultivation centers for the entire state of Illinois. But it was mentioned that if anyone can “come up” with land within the Illinois Tollway System that could be used for a cultivation center, you can let the Department know about it. So though the State can officially have 22 cultivation centers, it is quite likely there will only be 21.

For more on what is happening with Illinois marijuana, check out the following:

Ten Things to Avoid To Succeed with Your Marijuana Business

Posted in Business Basics, Intellectual Property/Branding, Legal Issues, Licensing

Our cannabis business lawyers have been on the front lines of representing marijuana businesses since 2010 and that has enabled us to see a lot of both good and bad things in this industry. And though the good has overwhelmingly exceeded the bad, we would be remiss if we did not do what we can to protect you from the bad. So with that in mind, we provide you with the following ten things of which you should be wary in this industry.

1. Marijuana real estate agents. Truly successful real estate agents generally do not have the extra time to spend dealing with cannabis properties. This means that many real estate agents who claim marijuana expertise know very little about the state and local marijuana laws relevant to using a property for cannabis. On top of this, many cannabis realtors that claim to side with marijuana businesses are really doing so only to convince them to pay more. In determining who to bring on as your realtor, make sure that he or she has at least a rudimentary understanding of state laws as they relate to real estate and any local land use and zoning regulations. It also oftentimes makes sense to require your realtor to sign a non-disclosure agreement (NDA) so that you don’t clue your realtor in on a great property for marijuana and then have him or her tell your competitors about it. For more on some of the peculiar legal issues related to marijuana real estate, check out Marijuana Commercial Leaseholds: Any Resemblance to Regular Leaseholds is Purely Coincidental.

2. Anyone who uses statistics to convince you to hire them for licensing. You need to be wary of anyone who guarantees that they can get you a marijuana license. You need to be even more wary of those who use statistics to back this up. In some states it is fairly easy to get a marijuana license and in others it is extremely difficult. More importantly, in some states, who gets a marijuana license is pretty much random. Arizona and Washington, for example, granted their licenses based on a lottery system, which means the big factor determining who got a license was based mostly on pure luck. Despite this, we are hearing of “licensing experts” going around touting that they had a 100% success rate (apparently they were one for one) in one of these two states and using that boast to troll for licensing clients in states where luck is hardly even a factor. You would also be better off not using anyone who wants you to pay them premium prices even before the licensing process has become clear, and those who insist on getting a share of YOUR business for helping you secure your license.

Use those who have a wealth of licensing experience, especially when that experience includes states where securing a license requires more than getting your number drawn.

3. Holding companies. We know how tough it is to get a bank account, but because we represent a number of banks and credit unions either involved in marijuana banking or looking to do marijuana banking, we also know that things are slowly getting better on this front. In the meantime though, it does not make good sense for you to run your cannabis money through a holding company and use that holding company to get a bank account. Using a holding company to set up your bank account can attract unwanted federal law enforcement attention and lead to federal charges for lying to a bank or laundering “drug money.” Do not waste your money or relinquish your freedom on a holding company and do not work with those who suggest that you do so.

Be honest with your bank and be patient.

4. Ragged and rampant trade organizations. With legalization come all sorts of new marijuana trade organizations, many with names that sound like they are the state arm of reputable national organizations, but actually are not. Most of these new organizations are worthless at best. Many of these groups are scams, formed to leech fees from members or to pitch them on legal or other services. Trade organizations can be great tools for advancing marijuana policy, progress, and protection, but far too many marijuana trade groups are incapable of doing anything but wasting people’s money.Before you join a marijuana organization you should, at minimum, get satisfactory answers to the following questions:

  • Who is in charge?
  • What are its goals?
  • What will you get for your membership dues?
  • What’s the group’s track record on achieving its goals?
  • How loud will your voice be in the group?

5. Publicly traded marijuana companies. We are constantly blogging about the risks of buying stock in publicly traded marijuana companies. See Publicly Traded Cannabis Stocks. Watch OutPublicly Traded Cannabis Stocks. Be Careful Out There and Publicly Traded Pot Stocks. Watch Out. We do so because hardly any publicly traded companies are anywhere near to being profitable, and it seems like there are always new revelations coming out about the sordid background of this or that company founder. Marijuana is likely going to make a lot of money for a lot of people, but that does not mean that you do not need to be careful about investing in a particular marijuana business. You should be doubly careful about investing in any publicly traded company that provides licensing or any other sort of marijuana consulting.

6. Marijuana seminars, consultants, and “colleges/institutes.” If the people running these were really so knowledgeable about the marijuana business, don’t you think that they would be out making money in the marijuana business rather than by popping into town to put on a cheesy seminar at an airport Hilton? We wrote about pot colleges in Buyer Beware: Pot College and Canna Consultants and we mention them again because they are proliferating out of control, especially in those states that recently went legal or are soon to go that way. Florida and Nevada seem particularly prone to these.

We constantly hear horror stories from people who attend these and we have a hard time respecting any lawyer connected to one. We refuse to speak at any of these because we do not have time to vet them and because we suspect about 90 percent of them are a joke at best, thieves at worst. We are aware of some that are run by convicted con artists and others that are run by frustrated actors, but we are not aware of any that are run by influential or highly respected marijuana businesspeople.

Our cannabis lawyers spend (and bill) massive amounts of time with new clients cleaning up the messes these companies were told to create by these colleges and consultants, and dispelling the out and out falsehoods that they propagate. Please trust us when we tell you that having run a pot delivery service in California or having worked at a dispensary in Colorado does NOT make you an expert in anything or everything related to pot in Florida or in Oregon. Please think twice before hiring an allegedly “expert” consultant or acquiring a “degree” from xyz Marijuana “University.”

7. Anyone who claims they can get you a “regional trademark.” We have been fighting against this one for a long time. Your brand could well be your company’s most valuable asset and the best way to protect it will usually be by securing a trademark for it. But because the federal government does not generally allow federal trademarks for marijuana related products, getting the right trademark or trademarks for marijuana is a complicated process.

There are two ways to get around this federal prohibition. One is to secure a federal trademark for something other than cannabis, which works well in some circumstances and horribly in others. The other is to secure a state law trademark, which works well in some circumstances and horribly in others.

We leave trademarks to one of our attorneys who has been handling trademarks for more than a decade, but far too many former criminal lawyers, lobbyists and consultants are pitching “regional trademarks” or wrongly claiming that a trademark in one state will protect you in other states in the same region, when neither are correct.

If you want a real trademark that suits your brand and your business, you really should be using a real trademark lawyer, preferably one with substantial experience securing trademarks for marijuana business.

For more on the importance of protecting your cannabis brand by doing your cannabis trademark correctly check out the following:

8. Law firms that claim a sudden expertise with marijuana business law. Would you have your business lawyer argue your DUI case? Of course not, which is why our law firm does not handle criminal cases. Using a criminal defense lawyer to do your marijuana business work is equally off base. Criminal lawyers and business lawyers have very different skill sets. Criminal lawyers work in court using criminal laws and procedures and business lawyers work in an office using business laws.

Good criminal lawyers are still valuable in this industry (unfortunately) but as criminal lawyers, not as newly minted business lawyers who are joining the green rush to stem income losses as marijuana arrests decline with legalization. Call a criminal lawyer if you are raided by the feds, but for your company formations, your trademarks, your real estate transactions, your employee contracts, or your safety compliance, you should be using a business lawyer.

You should also be very careful about hiring lawyers who engage in lobbying. First off, lobbying and legal work are very different things and your antennae should be up when someone claims expertise in both. Second, communications related to lobbying are not protected by the attorney-client privilege so if you retain a lawyer that does both, all of your communications with that lawyer may be subject to review.

9. Attorneys who seek an equity stake in YOUR marijuana business. Unfortunately, we are seeing far too many lawyers seeking to take advantage of the “green rush” mentality by pressuring their potential and actual clients to give them an equity interest in their client’s cannabis business. We are of the view that you should never use a lawyer who even talks of representing you in return for a share of your cannabis business. Even if you ignore the ethical issues involved (and the fact that so many lawyers ask for payment in equity without requiring that their potential/actual clients secure separate, independent legal counsel to determine whether doing that would be in the client’s best interest), you should question the stability of a lawyer or law firm willing to put themselves and their clients at such risk.

Our law firm will never ask for, nor ever take an equity stake in a client’s cannabis business because a cannabis business with its outside lawyer as a stakeholder is at greater risk of federal prosecution than one without such a lawyer. As such, we believe that we would be violating our ethical duties to zealously represent our clients — without conflict — were we to take an ownership stake in one of our client’s cannabis businesses. We just are not

10. The federal government. Marijuana remains a federal crime and you should avoid those who tell you not to worry about federal laws because the Feds are inactive or unwilling to enforce, as this is just flat out wrong. Marijuana remains a Schedule I drug, and possessing or selling it is still a federal crime. Failing to comply with all state and local laws will increase your risk of being raided, arrested, and convicted in a federal court. It pays to remain ever mindful of this.

Las Vegas Cannabusiness Symposium on August 23

Posted in Business Basics, Events, Legal Issues

The National Cannabis Industry Association (by far the biggest, most professional, most powerful and most reputable national industry organization) will be putting on a business symposium on August 23 at the Plaza Hotel & Casino in Las Vegas, starting at 10:00 a.m. and running until 6:30 p.m. Go here to register. Canna Law Group’s own Hilary Bricken will be leading the panel discussing “effective messaging.” How do you get the word out about your cannabis business/brand within the confines of the law?

To quote the NCIA:

This day-long educational program will provide a unique opportunity to glean information from cannabis professionals and experts with decades of combined experience in the fields of regulatory models, operations, and ancillary businesses plus feature special presentations by industry leaders addressing trends in cannabusiness and emerging products or services. The symposium also includes lunch and an evening networking reception for all attendees.

In addition to Hilary, US Representative Dina Titus and Nevada State Senator Tick Segerblom will be giving keynote addresses and the following are also on the agenda:

  • Infused Products and Extraction - 10:45 a.m.-12:15 p.m.
  • Responsible and Profitable Business Practices - 1:30-3:00 p.m.
  • Federal Policy Update – 3:00-3:30 p.m.
  • Networking Break – 3:30-4:00 p.m.
  • Effective Messaging – 4:00-5:00 p.m.
  • Networking Reception – 5:00-6:30 p.m.
If you have a marijuana business or are contemplating getting into the marijuana business (this is doubly true for those in the Nevada marijuana industry) we cannot urge you strongly enough to attend. Again, click here to register. We look forward to seeing you there.

 

Top Ten FAQs Regarding Nevada Medical Marijuana

Posted in Licensing, Medical Cannabis, Nevada

Given that today is the final day on which individuals can apply to the State of Nevada for a registration certificate to own and operate a medical cannabis business (what the state calls a “Medical Marijuana Establishment” or “MME”), it is only fitting that we share with you the top ten questions our Nevada cannabis lawyers get about Nevada’s MMJ regime.

1. From where will Nevada growers get their plants for their first harvest? Unlike most other states, Nevada’s Division of Public and Behavioral Health (“Division”) will not turn a blind eye regarding from where cultivation facilities obtain their genetics and plants for growing their initial crop. Instead, it fully expects cultivators to obtain their starting plants only from Nevada patients with a valid patient registration card (see NRS 453A.352 (5)). Nevada patients can currently possess up to twelve plants.

2. Does Nevada limit the number of plants per cultivation MME?  No, at least not so far, but the Division has made clear that it has the power to cap the number of plants (depending on patient demand for medicine) and that it will revisit this issue regularly as the market develops.

3. Does Nevada limit the total number of cultivation and production centers in the State? It does not, but it has the power to do so and it might at some point, depending on patient demand for medical marijuana. Cities and counties also have the power to limit the number of production and cultivation (and dispensary) MMEs in their own jurisdictions and it is important to know that if a city or county prohibits MMEs in its jurisdiction the applicant can still apply to the State for an MME registration in that city or county and the State will review it. But if the State forwards that application to the city or county and the city or county denies it based on its ban or MME limitations, the State will then deny it also.

4. Can we sell our MME registration certificates? No. There is no legal mechanism under LCB File No. R004-14 or NRS 453A that allows for this.

5. Can an MME bring in new owners after the State grants it a certificate of registration? No. Even after an MME receives a registration certificate its owners cannot sell their ownership interests to persons looking to buy into the business.

6. Can MME owners change their ownership percentages? The Division has indicated that it will determine this on a case-by-case basis. This means that you should first secure this approval before you engage in an ownership transfer between existing owners.

7. Can registered MMEs sell marijuana and marijuana infused/edible products to each other? Yes and no. MME producers and cultivators can sell marijuana and marijuana products to each other and to MME dispensaries. However, MME dispensaries cannot sell marijuana or marijuana products to each other.

8. Will prior city or county approval for your MME help secure approval from the State? No. Even though Nevada has embraced a local control model, where cities and counties must approve your MME facility (in addition to the State doing the same), you do not increase your chances of securing state approval for your MME facility by first securing that approval from your city or county.

9. Does Nevada have any “anti-monopoly” regulations specifically prohibiting unfair competition amongst MMEs? It does not. It has however said that it will look for potential monopolies in the applications it receives, but it has not said how it will deal with that sort of situation.

10. Can an MME dispensary obtain medical marijuana from MME cultivators and producers located outside of the dispensary’s county? The State says yes, but at least one county says no. In its local medical marijuana ordinance, Clark County mandates that “Medical Marijuana shall be obtained from a Cultivation Facility or Production Facility within Clark County if an adequate supply is available.” The County defines “adequate supply” as “the immediate availability of a sufficient quantity and quality of medical marijuana at a reasonable price of any specific strain of marijuana.”

This Clark County ordinance raises all kinds of issues if a Clark County MME dispensary obtains marijuana from production and cultivation facilities outside of unincorporated Clark County. The County states that “reasonable price” means “the price a purchaser, willing but not obliged to buy, would pay to a seller, willing but not obliged to sell, taking into consideration the average price on the open market for a specific strain of marijuana at the time of purchase” but has yet to define what constitutes “a sufficient quantity and quality” of marijuana, leaving the term “adequate supply” ambiguous.

Any other questions regarding Nevada Medical Marijuana?

Normalizing Recreational Marijuana: These Are Interesting Times.

Posted in Legal Issues, Recreational Marijuana

Marijuana is a burgeoning industry and over the next couple months, we expect to see recreational marijuana legalized in Oregon, Alaska, and then probably Washington D.C.

We’ve written about Oregon’s new approach to legalization and how our country needs something similar. Both Oregon and Alaska will vote on recreational marijuana in November and we expect them both to pass. It is time for recreational marijuana to be a normal part of conversation. It’s the hot topic for investment and business, why not also in every day life? Rand Corporation recently posted an article about legalization, telling its readers that “marijuana is in the news and you should get used to it.” States are not only in the news because of legalization, but also for the methods they are employing to accomplish that task.

Colorado and Washington have presented their own slightly different routes to legalizing and regulating recreational marijuana. Oregon’s New Approach initiative has a different philosophy and plan than either Colorado or Washington regarding how to handle driving under the influence of intoxicants. Oregon’s initiative acknowledges the difference between having THC in one’s blood and being “affected to a noticeable degree.” In Washington, I-502 establishes that any driver whose blood contains five or more nanograms of THC per milliliter is guilty of DUID.

Alaska’s legalization initiative presents a tax structure very different from either Colorado or Washington. Alaska plans on taxing marijuana growers $50 per ounce, similar to the way alcohol is taxed based on volume. However the tax does not change based upon the strength of weed, unlike the alcohol tax which is different for hard liquor versus beer. Forbes points out that by creating a flat fee tax, growers will be incentivized to increase the potency of cannabis so as to reduce its volume.

As the legalization of recreational marijuana moves forward, policy makers will need to make all sorts of complicated decisions regarding marijuana regulations and tax structures. Rand Corp’s article serves as a good reminder to state leaders: “Recognize that the Colorado and Washington approach of ‘regulating marijuana like alcohol’ is only one alternative to marijuana prohibition. There is a lot of policy space between the extremes of prohibition and a commercialized industry.” Just as it has on so many issues, our federalized system will likely lead to continuing innovation and experimentation regarding marijuana regulation, with an eventual coalescing around the regulations that work best.

These are interesting times.

They Said It On Marijuana, Quotable Saturday, Part XXV

Posted in General, Legal Issues

This is part 25 of our Saturday quote series and it will be the first time the quote comes from someone who is not the least bit famous. A number of people told us that they just assumed we would use a Robin Williams quote on marijuana and a number of others even suggested the quotes. But due to the problems from which he suffered, we did not think it appropriate (at least so soon after his death) to essentially reduce him to a pot quote.

We have instead pulled the following quote from, of all places, a letter to the editor of the Los Angeles Times. The letter is from Mary Gafner, from Tustin, California, and it is in response to the recent spate of kids dying from synthetic marijuana and it is just so straight on, so sensible, and so important that we could not resist citing to its money quote below:

But, first, let me get one thing straight: Marijuana grown in the ground is illegal in almost every state, and yet it is not known to kill people. But this synthetic copycat is legal in many states and almost anyone, anywhere, can purchase the drug and die from using it, and the makers cannot be held responsible?

Does anyone disagree?

Marijuana Advertising: Bigger (and Better?) Than Ever

Posted in Business Basics, Intellectual Property/Branding, Legal Issues

I was recently interviewed by KPLU regarding a new series of billboards and banners around Seattle paid for by an I-502 production and processing company. This interview came on the heels of the historic full-page Leafly ad in the New York Times.

Without a doubt, marijuana advertising is taking off and many marijuana entrepreneurs and ancillary businesses are looking to put a new, fresh face on marijuana through high-end, professional branding. But because marijuana is still prohibited under federal law, and because many view marijuana usage unfavorably (especially use by those under 21), it is important that we talk about first amendment rights and their connection to marijuana advertising.

Not all speech is protected speech. In fact, advertising is commercial speech that can be strictly regulated by the government. In Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, the U.S. Supreme Court set out a four-part test to determine whether government regulation of advertising speech is valid: (1) Does the advertisement involve lawful activity? (2) Does the government have a substantial interest in the content of the ad? (3) Does regulating the advertisement advance a substantial government interest? (4) Is the regulation the least restrictive means of advancing the substantial government interest?

Note the first prong of that test asks whether the advertisement is for lawful activity. Technically, advertisements for illegal activity are not protected speech and can be altogether eliminated by government authorities. Advertisements for marijuana consumption, production, retailing, cultivation, and even tourism could all be considered illegal activity as far as the feds are concerned. In fact, back in October 2011, the feds threatened to pursue medical marijuana advertisers for encouraging federally illegal activity, though as far as we know nothing ever came from these federal ultimatums. Despite previous inaction by the feds, marijuana advertisers should at least be mindful that their commercial speech probably is not protected and may even be viewed as illegal activity by some government entities with the power to enforce the laws.

Almost all marijuana states have laws or regulations that address how and where and what marijuana businesses can advertise. But just because you can advertise, does not mean that you should.  Even if you seek to portray a stolid corporate, professional image when singing your product’s praises, you should realize that many will still condemn you and your ads. A recent GrassIsNotGreener.com ad in the New York Times (GrassIsNotGreener.com is an affiliate of the non-profit organization Project SAM, or Smart Approaches to Marijuana, an anti-marijuana policy group) proves this point. That ad shows the face of a friendly-looking hippie on top of a Wall Street power suit, and its content essentially alleges that, though marijuana may have a “flower child” image stemming (pun intended) from its past, corporate America has now taken over and the emerging marijuana industry will be creating the same evils previously caused by Big Pharma, Big Tobacco, and the alcohol industry.

All marijuana entrepreneurs need to be on alert regarding the imaging they are conveying and the repercussions their marketing may entail. ‘Cause a reputation is a terrible thing to waste.

Cannabis Producers: You Need To Brand Your Cannabis Product

Posted in Business Basics, Intellectual Property/Branding

Now is the time to strengthen your brand to make it a top contender in what is likely to be a $35 to $45 billion industry. Many cannabis companies/brands are right now fighting for market recognition and dominance. Those without a recognizable and protected brand name will not stand a chance.

Sellers of unprocessed marijuana are behind the branding curve. Cannabis is being sold primarily as a commodity. Though there is differentiation among plant varieties, few brand names have emerged like they have for edibles and other processed cannabis products. This presents a unique opportunity for producers to be the first to market with well-branded cannabis.

Cannabis consumers are not really thinking much in terms of brands yet, but that is largely because the industry is so new and because so few companies have done what they need to do to create real brand awareness. With legalization looming large in multiple states across the country, the way consumers make decisions about their cannabis purchases will no doubt shift. Consumers will be faced with choices about what cannabis to consume, and just as with alcohol and tobacco, branding and marketing will influence their choices.

How will you differentiate your product from the similar looking product next to it in the display case? What will lead consumers to buy your Brand A instead of your competitor’s Brand B? Will your marijuana be a commodity sold at commodity prices or will it be a brand consumers seek out and are willing to pay more to have?

The cannabis industry does not yet have any Wal-Marts or Anheuser-Busch Inbevs. This means that small scale producers have an opportunity now to build their brand so that they will have a head start with a loyal customer base and consumer recognition as legalization spreads across the country.

Accomplishing brand recognition and protection is uniquely difficult for marijuana products, however, because it is not possible to register a federal trademark due to the illegality of cannabis on the federal level. However, there are workarounds. For instance, many states will allow you to register a state trademark for both your brand names and your strain names. Note though that contrary to what some lawyers are claiming, there is no such thing as a regional trademark, and it is not possible to register these marks at the federal level. See example #8 in Top Ten Marijuana Industry Red Flags.

For more on the importance of building and protecting your cannabis brand, check out the following:

New York’s Compassionate Care Act and The Road Ahead

Posted in Legal Issues, Licensing, Medical Cannabis, New York

I attended the National Cannabis Industry Association luncheon in New York City last week on the state of New York State’s recently enacted Compassionate Care Act. The highlights of this altogether excellent event were speeches by New York State Assemblyman Steve Katz and New York State Senator Diane Savino. Both speeches were thoughtful and both provided insight into the future of the Compassionate Care Act.

Assemblyman Katz detailed the shortcomings of the law’s five license limit and expressed his concerns about the process for awarding this limited number of licenses. The current version of the Compassionate Care Act allows for five cannabis licenses to be granted for the entire state of New York. Each license will be for a completely vertically integrated seed through sale model that allows for a grow and manufacturing facility and four associated dispensaries. Assemblyman Katz talked of how a total of twenty dispensaries for a state as large and populous as New York will be woefully inadequate and will not come close to satisfying market demands.

Assemblyman Katz also expressed concerns about the process for awarding these five licenses, essentially saying that if the there are more than five legitimately qualified applicants seeking a license (and there no doubt will be), any selection process other than a pure and unweighted lottery will be unavoidably corrupt.

We agree with Assemblyman Katz on both counts. Five licenses and twenty dispensaries is not going to be nearly enough to serve New York patients and the only fair and legitimate system for awarding licenses will be through a pure lottery. The problem with lotteries, however, is that they are certain to cut out many experienced, sophisticated and well-funded applicants. In other words, the exact sort of applicants that will help cannabis in New York succeed.

Senator Savino’s speech was more optimistic. Though Senator Savino agreed that the Compassionate Care Act was less than what supporters of the bill had sought, she saw it as a foot in the door and she believes that there will be a number of substantial amendments to the Act during the next eighteen months before its enactment.

We too view enactment of the Compassionate Care Act, in any form, as a positive, but we also think it needs to see considerable expansion. Moving forward, the conversation will be about what the Compassionate Care Act should look like, not whether it should be enacted at all. That in itself is a victory.

Changes are going to need to be made to the Compassionate Care Act in order for New York to create and maintain a medical marijuana system, and the sooner the legislature accepts that, the better.

Illinois Medical Marijuana Applications Now Available

Posted in Illinois, Legal Issues, Licensing

Illinois just released online its applications for medical marijuana patients and caregivers. Those patients with last names beginning with A through L will be able to submit their applications starting September 2nd, while prospective patients with last names beginning with M through Z may apply beginning on November 1st. It is important to note that the state will disregard any applications sent before the appropriate date. Illinois has also released the Physician Written Certification Form that must be mailed by each physician to the Illinois Department of Public Health.

The state also released draft applications for medical marijuana dispensaries and cultivation centers. Illinois anticipates the application period for dispensaries and cultivation centers to run from Monday, September 8 through Monday, September 22. The Illinois Department of Financial and Professional Regulation has determined the application requirements and instituted a point system to evaluate applicant eligibility for the sixty dispensary licenses that will be available, as per the following:

  • Suitability of Proposed Dispensary (150 points)
  • Business and Operations Plan (200 points)
  • Security Plan (200 points)
  • Record-keeping and Inventory Plan (200 points)
  • Financial Disclosures (150 points)
  • Bonus Section (100 points and optional), includes:
    • Labor & Employment Practices
    • Research Plan
    • Community Benefits Plan
    • Substance Abuse Prevention Plan
    • Local Community/Neighborhood Report
    • Environmental Plan
    • Verification of Minority-Owned, Female-Owned, Veteran-Owned, or Disabled Person-Owned
    • Illinois Based Applicants

The Illinois Department of Agriculture has developed a similar point system for granting up to twenty-two cultivation center permits, based on the following:

  • Suitability of Proposed Facility (150 points)
  • Staffing and Operations Plan (100 points)
  • Security Plan (200 points)
  • Cultivation Plan (300 points)
  • Product Safety and Labeling Plan (150 points)
  • Business Plan (100 points)
  • Bonus Section (optional), awarding 20 points for each of the following:
    • Labor and Employment Practices
    • Research Plan
    • Community Benefits Plan
    • Substance Abuse Prevention Plan
    • Local Community/Neighborhood Report
    • Environmental Plan
    • Verification of Minority Owned, Female Owned, Veteran Owned, or Disabled Person Owned Business
    • Verification that the Applicant’s Principal Place of Business is Headquartered in Illinois and Plan for Creating Illinois Based Jobs

The state has scheduled three town hall meetings to discuss the application process for patients, caregivers, cultivation centers, and dispensaries, as per the following:

  • Southern Illinois: Metro East, Thursday August 14th, 9:30 a.m.
    Kenneth Hall State Regional Office Building
    1102 Eastport Plaza Drive
    Collinsville, IL 62234
  • Central Illinois: Monday, August 18th, 11a.m.
    Peoria Public Library
    107 NE Monroe Street
    Peoria, IL 61602
  • Northern Illinois: Wednesday, August 20th, 10a.m.
    Northeastern Illinois University, Alumni Hall (North), Student Union Building
    5500 N. St. Louis Avenue
    Chicago, IL 60625

Illinois’ application process for both dispensaries and cultivation centers is going to be both complicated and labor intensive. In other words, if you have not already begun preparing your applications and you are planning to do so, our advice is not to delay. Illinois’ application process and selection criteria remind us of Nevada. We have handled a number of Nevada cannabis applications and we wrote about that process in How To Get A Nevada Marijuana License. It Ain’t Easy and Nevada MMJ Licenses. What It Takes, Every Single Step Of The Way.

For more on Illinois requirements and Chicago’s additional requirements, check out  Illinois Medical Marijuana Rules Finalized, Applications Begin in September and BREAKING NEWS: Chicago Enacts Marijuana Rules.