California Cannabis lawsSince Proposition 64 passed last November, there has been a spike in reports of California dispensaries advertising their willingness to sell recreational cannabis to anyone 21 years and older “with only a valid ID” (i.e. physician’s recommendation not required). However, Prop 64 requires dispensaries apply for and obtain a state retailer license to sell recreational cannabis or face criminal and civil penalties for each day of illegal operations. Since the State of California has yet to issue such a license, any dispensary currently selling recreational cannabis in California is doing so illegally.

For marijuana consumers, your options are simple: (1) obtain a valid physician’s recommendation and purchase medical marijuana from a dispensary; (2) grow your own recreational marijuana at home by following local regulations; or (3) get home grown marijuana from other adults in California through a free, sharing economy.

For dispensaries, your options are even simpler: (1) sell medical marijuana legally by following local laws and securing any necessary permits or licenses; or (2) operate illegally and face severe penalties, raids, and criminal prosecution.

Dispensaries in California have been making illegal sales long before Prop 64 passed. But local law enforcement believe dispensaries have become “more emboldened” now that recreational cannabis is legal in the state. Some dispensaries might wrongly believe that any and all sales are allowed under a Prop 64 regime, but others clearly choose to operate outside of the law. This angers legal dispensary owners who pay the high costs of operating a legal business (including taxes, licensing fees, and security costs) while also waiting to profit on recreational sales after state licenses are issued.

Though Prop 64 makes clear that anyone making retail sales or deliveries of recreational cannabis must have a California state license, the challenge faced by local (and soon state) prosecutors is how to go about shutting down illegal businesses. Often when a city or county attempts to shut down an illegal dispensary, the dispensary owner just relocates the business and changes the name, resulting in an endless game of “whack-a-mole” for local authorities. But now that cannabis businesses are beginning to set their sights on state licenses, is it more important than ever to play nice with your local city and county officials as local authorization is a requirement for state licensing. Businesses caught operating illegally can be disqualified from receiving a local permit, and even if state and local authorities cannot prohibit these business from applying for a California cannabis license, past troubles with following the law will likely be a negative mark on your cannabis license application.

We also expect state and federal enforcement to pick up over the next few years. California state agencies do not currently have jurisdiction over illegal cannabis businesses, but once state licenses are issued they plan to work with local authorities to enforce the cannabis laws. Even worse, If illegal businesses continue to thrive in California, the federal government could challenge California’s entire regulatory system under the guidance of the Cole Memo. With a new federal administration coming in, and the possibility of an anti-marijuana Jeff Sessions as Attorney General, California could face even greater scrutiny. So by operating an illegal business not only do you risk your own chances at the legal market, you also risk undermining the legalization effort California strived so long to achieve.

As California transitions into a regulated legal market, the grey areas we have long been dealing with will soon shrink. In a post-Prop 64 world you can either follow the laws and obtain a license to make legal recreational sales or you can risk fines, jail time, and the loss of the chance to ever operate again.

Oregon Cannabis lawsThe 2017 Oregon legislative session begins two weeks from tomorrow, on Wednesday, February 1. Already, there are many proposed bills, measures and resolutions posted on the legislature’s website, ranging from marquee bills to tackle the state budget shortfall and its gun registry loopholes, to resolutions naming an official state horse (the Kiger Mustang) and a dog (the Border Collie). For our faithful readers, there is also a generous helping of cannabis bills. We count 28 of them.

Back in October, we wrote that issues surrounding public consumption, like cannabis cafés and special event (temporary) licenses, would be up for discussion. As shown below, that has proven to be true. We have also written time and again (and again and again) about the need to merge Oregon’s medical and recreational marijuana programs. That appears to be up for serious consideration as well. Finally, we have written about the state’s burgeoning industrial hemp program, which is also addressed.

Below is a compilation of the 28 introduced cannabis bills, sourced from the Oregon legislature’s website. Each bill is linked to its summary page, and you can click through to the text of any proposal of interest. When reading a bill, it’s important to understand that any text in bold letters would be new, while language in [italics and brackets] would be removed from existing law. It’s also important to note that each proposed bill has a specific enactment date: some are “emergency” laws, effective on passage, while others would take effect at a future date. Finally, some of these bills would sunset after a certain period; others are proffered as evergreen.

As in the 2016 short session, many of the bills listed below will fall by the wayside as the senate and house convene and begin to knock heads. Others will be revised, consolidated or otherwise modified, but it is altogether certain that we will see some changes in Oregon cannabis law this session. Altogether, the index below seems to support the sentiment that Oregon is committed to getting it right with cannabis.

Draft Senate Bills

SB 56. Authorizes Oregon Liquor Control Commission to require cannabis-related licensees, certificate holders and applicants for licenses and certificates to submit information related to persons who hold financial interest in business operating or to be operated under license or certificate.

SB 108. Modifies certain definitions for purposes of regulating cannabis. Imposes tax on retail sale of marijuana seeds. Conforms terms throughout statutes governing regulation of cannabis.

SB 130. Waives fees for obtaining a medical marijuana card for veterans who have total disability rating of at least 50 percent as result of injury or illness incurred or aggravated during active military service, and who received discharge or release under other than dishonorable conditions.

SB 300. Establishes Oregon Cannabis Commission to fulfill duties, functions and powers relating to medical use of marijuana. Directs Oregon Health Authority to transfer duties, functions and powers relating to Oregon Medical Marijuana Act to commission. Makes commission operative January 1, 2018.

SB 302. Removes provisions related to marijuana offenses from Uniform Controlled Substances Act. Moves crimes, penalties, defenses to crimes and procedural provisions in Uniform Controlled Substances Act that apply to marijuana offenses to Control and Regulation of Marijuana Act. Adjusts penalties for certain crimes. Makes corresponding changes to statutes referencing controlled substances to clarify applicability to cannabis and cannabis-derived products.

SB 303. Amends, clarifies and creates consistency in statutes setting forth prohibitions and procedures related to minors possessing, purchasing, attempting to purchase or acquiring alcoholic beverages or marijuana items.

SB 304. For purposes of laws regulating cannabis-related businesses, standardizes language with respect to issuing, renewing, suspending, revoking or refusing to issue or renew licenses.

SB 305. Clarifies law requiring notice to Oregon Liquor Control Commission when person licensed by commission to engage in cannabis business is convicted of violation of state law or local ordinance of which possession, delivery or manufacture of marijuana item is element.

SB 306. Repeals provisions regulating marijuana grow sites, marijuana processing sites and medical marijuana dispensaries on June 30, 2018. Updates and creates provisions providing for licensing of marijuana grow sites, marijuana processing sites and medical marijuana dispensaries by Oregon Liquor Control Commission.

SB 307. Provides for regulation by Oregon Liquor Control Commission of consumption and sale of marijuana items at temporary events, including licensure of premises on which temporary events are held. Provides for regulation by commission of consumption of marijuana items at cannabis lounges, including licensure of premises where cannabis lounges are located. Prohibits licensing temporary events or cannabis lounges in cities or counties that have not adopted ordinances allowing for the consumption of marijuana items at temporary events or cannabis lounges. Excepts from prohibitions on public use, including restrictions set forth in Oregon Indoor Clean Air Act, consumption of marijuana items in designated areas of premises for which temporary event or cannabis lounge license has been issued. Applies current law regulating licensed marijuana producers, processors, wholesalers and retailers to new types of licensees. Makes certain exceptions.

SB 308. Establishes Task Force on Social Consumption of Cannabis.

SB 319. Authorizes local governments to allow medical marijuana dispensaries and marijuana retailers licensed by Oregon Liquor Control Commission to be located within certain distance [500 feet] of schools.

SB 342. Clarifies total number of mature marijuana plants and immature marijuana plants and total amount of usable marijuana, medical cannabinoid products, cannabinoid concentrates and cannabinoid extracts that patients and caregivers registered under Oregon Medical Marijuana Act may possess.

SB 570. Creates crime of intentionally administering marijuana item to body of person who is under 18 years of age. Punishes by maximum of 20 years’ imprisonment, $375,000 fine, or both. Creates crime of knowingly administering marijuana item to body of person who is under 18 years of age. Punishes by maximum of 1 year’s imprisonment, $6,250 fine, or both.

Draft House Bills

HB 2151. Allows property tax exemption for food processing machinery and equipment newly acquired by persons engaged in business of producing cannabinoid edibles, alcoholic beverages and alcoholic liquors.

HB 2197. Directs Oregon Liquor Control Commission to enter into agreement with nongovernmental entity that conducts or funds research on cannabis and cannabis-derived products. Specifies terms of agreement. Requires public dissemination of data, information, analysis and findings procured pursuant to research.

HB 2198. Changes name of Oregon Liquor Control Commission to Oregon Liquor and Cannabis Commission. Changes composition of Oregon Liquor and Cannabis Commission by adding commissioners from cannabis retail industry. Specifies that Oregon Health Authority may not register marijuana grow sites, marijuana processing sites and medical marijuana dispensaries. Creates within authority, for purposes of administering Oregon Medical Marijuana Act, Medical Use of Cannabis Board. Becomes operative June 30, 2018. Repeals provisions regulating marijuana grow sites, marijuana processing sites and medical marijuana dispensaries on June 30, 2018. Updates and creates provisions providing for licensing of marijuana grow sites, marijuana processing sites and medical marijuana dispensaries by Oregon Liquor Control Commission. Makes other technical changes to laws regulating cannabis. Creates alternate registry system administered by State Department of Agriculture for growers that produce marijuana for registry identification cardholders. Directs Oregon Liquor and Cannabis Commission to coordinate with department for purpose of regulating marijuana producers.

HB 2199. Eliminates provision indicating that cannabis-related business licenses may be for term other than one year. Qualifies provision providing that cannabis-related business license expires upon death of licensee.

HB 2200. Changes name of Oregon Liquor Control Commission to Oregon Liquor and Cannabis Commission. Changes composition of Oregon Liquor and Cannabis Commission by adding commissioners from cannabis retail industry. Directs commission to coordinate with State Department of Agriculture for purpose of regulating marijuana producers. Makes other technical changes to laws regulating cannabis. Specifies that Oregon Health Authority may not register marijuana grow sites, marijuana processing sites and medical marijuana dispensaries. Repeals provisions regulating marijuana grow sites, marijuana processing sites and medical marijuana dispensaries on June 30, 2018. Updates and creates provisions providing for licensing of marijuana grow sites, marijuana processing sites and medical marijuana dispensaries by Oregon Liquor and Cannabis Commission.

HB 2201. Corrects and conforms definitions for “cannabinoid concentrate” and “cannabinoid extract” in laws regulating cannabis.

HB 2202. Modifies statute under which lien may be imposed against building or premises used to illegally produce, process, sell or use marijuana items.

HB 2203. Changes distribution of moneys collected by Department of Revenue as tax imposed on retail sale of marijuana items.

HB 2204. Changes statutory limitation on local government’s authority to impose local tax or fee on retail sale of marijuana items. Specifies that if electors of city or county approve ordinance imposing tax or fee, governing body of city or county may amend ordinance, without referring amendment to electors, to adjust rate of tax or fee.

HB 2205. Directs State Department of Agriculture to solicit proposals from third party vendors to create for producers of cannabis efficiency standards for energy and water consumption and certification protocols for meeting those standards.

HB 2371. Specifies that, for purposes of statutes regulating seeds, agricultural hemp seed is flower seed. Directs Director of College of Agriculture and dean of College of Agricultural Sciences of Oregon State University to establish program for labeling and certification of agricultural hemp seed.

HB 2372. Establishes Oregon Industrial Hemp Commission.

HB 2556. Restricts sale and delivery of marijuana paraphernalia. Creates violation for unlawful sale or delivery of marijuana paraphernalia. Punishes by maximum of $2,000 fine.

If you made it this far, well done. We will continue to offer updates as events unfold this February and March. In the meantime, please let us know if you have comments on any of the specific bills listed above, or on the Oregon legislature’s approach to cannabis this session.

 

 

Arkansas CannabisArkansas voters’ decision to approve state-legal medical marijuana evidences a shift in attitudes towards medical cannabis that transcends stereotypical red-state/blue-state division on progressive cannabis reform. Arkansas will soon join Florida and Louisiana as traditionally “southern” states to embrace some form of medical marijuana legalization.

The Arkansas Medical Marijuana Commission is developing rules and regulations that will shape the trajectory of medical cannabis in the state. Though medical marijuana is now enshrined in the Arkansas state constitution, the Commission’s implementation of the law will largely determine the character and viability of the system.

Investors and entrepreneurs looking to capitalize on Arkansas medical marijuana should consider several questions raised by the legalization amendment itself and by the actions the Medical Marijuana Commission has taken since the November vote. The Commission has yet to promulgate final rules, and it will not do so for at least a few more months. But the rules trickling in already shed some light on several challenges and opportunities facing early movers in Arkansas’ medical marijuana industry.

Do I have to be an Arkansas resident to enter the industry? Not necessarily. Issue 6 as passed requires an individual applying for a dispensary or cultivation license to have been a resident of Arkansas for the past seven consecutive years and a rule adopted by the Commission requires applicants establish residency through two forms of identification. However, Issue 6 requires only that 60% of the individuals owning an interest in a medical marijuana dispensary or cultivation operation meet the residency requirements. This means that even though the individual named as the applicant on the form must be a long-time, continuous resident of Arkansas, that individual can recruit non-resident investors if Arkansas residents make up 60% of the syndicate. Interestingly, Issue 6 states that 60% of owners must be Arkansas residents – not that 60% of the cannabis company must be owned by Arkansas residents. Accordingly, a group of six Arkansas residents could own a medical marijuana facility with as many as four non-residents even if the four non-residents own a disproportionate share of the ownership interest.

Residency rules are more and less restrictive for other medical marijuana stakeholders. For example, “visiting qualified patients” (defined as visitors and those who have lived in Arkansas for less than 30 days) may receive medical marijuana from Arkansas dispensaries if they present a valid medical marijuana registry identification card from another state. On the other hand, members of the Arkansas Medical Marijuana Commission must be residents for ten years.

Are there capital requirements to obtain an Arkansas cannabis license? Capital requirements are a big obstacle to entering the Arkansas medical marijuana market. The Commission recently approved a licensure and renewal fee of $100,000 for dispensaries and cultivation operations. This is in addition to the several thousand dollar –- and only partially refundable -– application fee. The fees are steep, especially considering the uncertainty surrounding the mostly unknowable and uncertain market and regulatory environment of the fledgling Arkansas medical marijuana industry. The Commission also required proof of assets or a surety bond of $1,000,000 and proof of $500,000 in liquid assets to obtain a license. We see these high financial barriers as likely to limit the growth of Arkansas’ cannabis industry, while at the same time leading to experienced and well-funded non-residents taking a large stake in it by providing necessary start-up capital. Our cannabis business lawyers are already getting a slew of calls and emails from cannabis industry veterans from outside Arkansas looking to get in and from Arkansas residents looking for experienced outside help and funding.

What else should I know before getting into an Arkansas cannabis business? In addition to the usual concerns about federal illegality of marijuana and obstacles to operating a marijuana business like lack of banking, investors in Arkansas should beware that the Arkansas Medical Marijuana Commission has yet to complete its work creating rules and much could change. Ultimately, the Commission’s final rules will not be finalized for a few months and all manner of restrictive local land use codes, ordinances, and other laws could result. Nonetheless, the potential for a vibrant medical marijuana industry in Arkansas is undeniable and investors and entrepreneurs should pay close attention. After all, Arkansas is famous for its diamonds in the rough.

oregon

2016 was a huge year for cannabis. So we decided we would rank the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts analyzed one state. We started this series on January 10, 2016, and now, over a year later, we are ready to crown the top state for cannabis law: Oregon.

Our previous rankings are as follows: 2. Colorado; 3. Washington; 4. California;  5. Alaska; 6. Massachusetts;  7. Maine; 8. New Mexico; 9. Nevada; 10. Hawaii; 11. Maryland; 12. Connecticut; 13. Vermont; 14. Rhode Island; 15. Kentucky; 16.Pennsylvania; 17.Delaware; 18. Michigan; 19. New Hampshire; 20. Ohio; 21. New Jersey; 22. Illinois; 23. Minnesota; 24. New York; 25. Wisconsin; 26. Arizona; 27. West Virginia; 28. Indiana; 29. North Carolina; 30. Utah;  31. South Carolina; 32. Tennessee; 33. North Dakota; 34.Georgia; 35. Louisiana; 36. Mississippi; 37. Nebraska; 38. Missouri; 39. Florida; 40. Arkansas; 41. Montana; 42. Iowa; 43. Virginia; 44. Wyoming; 45. Texas;  46. Kansas;  47. Alabama;  48. Idaho; 49. Oklahoma;  50. South Dakota.

Oregon

Recreational Marijuana. Oregon voters approved Measure 91 to legalize recreational cannabis in 2014. This was two years after the failure of the Oregon Cannabis Tax Act, which appeared on the 2012 ballot and would have legalized recreational marijuana.  Measure 91 allows adults, 21 and over, to grow up to 4 plants on their property, possess up to 8 ounces of usable marijuana (dried marijuana flowers or leaves that are ready to smoke) in their home, and carry up to 1 ounce in public. Like other legal states,  marijuana cannot be consumed in public.

The Oregon Liquor Control Commission has the authority to tax, license and regulate recreational marijuana grown, sold, or processed for commercial purposes but does not regulate the home grow/personal possession provisions of Oregon law. The OLCC oversees multiple license types including producer, processor, wholesale, retail, and researcher licenses. Oregon has not limited the number of licenses it will grant, meaning that OLCC is continuously accepting applications. It also allows a single licensee to own multiple licenses (e.g., an entity can hold a producer, processor, and retail license). This differs from the approach taken by Washington, which limits the number of licenses granted and is currently not accepting new marijuana applications. Oregon’s marijuana market is open to out of state actors as the state does not impose a residency requirement. This also differs from Washington and from Colorado which require licensees to be state residents. Oregon imposes a relatively low 17% tax on recreational marijuana sales. Finally, Oregon is one of the few states to allow for cannabis delivery, although Portland, the state’s largest city, does not (yet) allow for marijuana delivery.

Medical marijuana. Oregon first legalized medical marijuana in 1998 by passing Ballot Measure 67. Oregon’s medical market is distinct from the recreational market although there is some regulatory overlap between the two. For example, Oregon medical dispensaries were authorized to sell recreational marijuana from October 1, 2016-January 1, 2017 while the recreational market took shape.

Oregon medical marijuana is regulated by the Oregon Health Authority. Individuals with a qualifying medical condition and a recommendation for medical marijuana from an attending physician can apply for a medical marijuana card. Qualifying conditions include the following:

  • Cancer
  • Glaucoma
  • Alzheimer’s
  • HIV/AIDS
  • Cachexia (wasting syndrome)
  • Severe pain
  • Severe nausea
  • Seizures, including but not limited to seizures caused by epilepsy
  • Persistent muscle spasms
  • Multiple sclerosis

Medical patients may possess up to 6 plants, which may only be grown at a registered grow site address, and up to 24 ounces of marijuana. This means patients are legally allowed to possess more cannabis than recreational users. Medical users may purchase from licensed medical marijuana dispensaries, but are limited to purchasing the following amounts in a single day

  • 24 ounces of usable marijuana;
  • 16 ounces of a medical cannabinoid product in solid form;
  • 72 ounces of a medical cannabinoid product in liquid form;
  • 16 ounces of a cannabinoid concentrate whether sold alone or contained in an inhalant delivery system;
  • Five grams of a cannabinoid extract whether sold alone or contained in an inhalant delivery system;
  • Four immature marijuana plants; and
  • 50 seeds.

Many expect Oregon’s medical and recreational cannabis regimes will eventually merge, and proposed legislation could accomplish just that.

Bottomline. Determining the top state in this series was not easy. There was significant debate among our cannabis lawyers as to whether California, Colorado, Oregon, or Washington should take top honors. Seeing as how we have offices and lawyers in California, Washington and Oregon, we must concede just a bit of bias here. Ultimately, we determined that Oregon has the best marijuana program.

One of the prime determinants for us was Oregon not having a residency requirement, as we see this as very business friendly and making it much easier for cannabis businesses to secure funding. Oregon also has shockingly low licensing fees and it does not cap the number of licenses it will grant. This means one need not be a millionaire to get into the industry and this also means there will be (and there is) substantial competition to keep cannabis prices down. Oregon also allows its cannabis licensees to vertically integrate by owning multiple license types. The state is also consumer friendly, with relatively low taxes and with laws that allow for home growing your own cannabis. Oregon has had legal medical marijuana for nearly twenty years and it used this medical market to permit early sales of recreational marijuana, evidencing the state’s willingness to take a pragmatic approach to marijuana legalization.

Oregon’s cannabis laws are not perfect, but they are the best in the nation.

Do you agree?

jeff-sess-quote

Despite our strong dislike of Jeff Sessions’ views on cannabis, he actually makes a very good point here. It is indeed a concern that Congress has made the possession and distribution of marijuana an illegal act, as that is definitely not something “desired any longer.” With over half the country supporting legalization of recreational marijuana and far more people favoring legalizing medical marijuana, what’s truly criminal is maintaining our outdated and undesired federal cannabis laws. Why continue playing games by saying it’s illegal, but we as the federal government will not fund certain enforcement actions? Why keep laws that have become irrelevant and unwanted? Weak, unpopular and unenforced laws weaken the concept of law as a whole.

As Sessions essentially says, Congress should get off the pot and “pass the law to change the rule.” It is time and just about everybody would benefit.

Proposition 64California cannabis laws states that adults in California age 21 and older may legally possess, plant, cultivate, harvest, dry, or process up to six marijuana plants as well as possess the marijuana produced from those plants. Though cities and counties can completely prohibit personal outdoor cultivation (and some already do), Prop 64 does not allow them to prohibit personal cultivation indoors or in an outside structure that is fully enclosed and secure.

However, Prop 64 does grant California cities and counties the authority to reasonably regulate these activities and requires that all persons cultivating cannabis for personal use comply with any local ordinances. In addition, Prop 64 limits personal cultivation to six marijuana plants per private residence (regardless of the number of adults living in the residence) and requires any marijuana produced from the plants that is over the legal possession limit of 28.5 grams be kept within the residence or in a locked, outdoor space not visible to the public.

Some California municipalities have already started passing local ordinances to regulate personal cultivation. Prop 64 allows cities and counties to “enact and enforce reasonable regulations to reasonably regulate” personal cannabis cultivation activities. So now the question is just how reasonable are these new regulations?

In December, the City of Indian Wells passed an ordinance that requires residents to register for a permit from City Hall to cultivate marijuana at home. To receive the permit, residents must allow home inspections by city employees and pay an annual fee of $141. According to Erwin Chemerinsky, Dean of University of California, Irvine Law School and prominent constitutional law scholar, Indian Wells’ regulation “goes significantly beyond what state law allows local governments to do.” There is also concern that by requiring individuals to register to grow, the City’s regulation forces them to self-incriminate themselves under federal law and is therefore unconstitutional.

Last week, the City of Los Banos also considered an ordinance requiring its residents to first register with the City to cultivate marijuana indoors for personal use. The stated reason for requiring residents to register was so authorities could educate them on how to safely grow marijuana and avoid fire hazards. However, one City Council member did not support the ordinance because he was concerned about creating a public registry that could potentially expose home growers to “shaming, harassment or violence.” The Los Banos City Council later amended the proposed ordinance to provide greater privacy for registrants by avoiding collection of personal data. The modified ordinance was approved unanimously on January 4th.

We’ve been working with plenty of cannabis companies in California on the local permitting and future state licensing processes, but this is the first time individuals are being asked to register to cultivate marijuana in their own homes for their own personal use. Ultimately, it may be up to a court to decide whether these new local regulations are indeed “reasonable,” as required under Prop 64. In the meantime, California residents should be aware that they cannot legally purchase recreational cannabis from any dispensaries and, if they happen to live in a city or county that has passed regulations on personal cultivation, they also may not be able to legally grow marijuana in their residences without first registering and complying with any new rules.

Yes, California has legalized recreational cannabis, but we still have a long way to go until it becomes widely available for all adults living in our state.

Cannabis lawOn Tuesday, we wrote that Jeff Sessions’ confirmation hearing had begun, for the post of U.S. Attorney General. In that piece, we expressed our hope that one of the committee members would “drill down from civil rights to marijuana legalization, and specifically, to enforcement of the Federal Controlled Substances Act.” The hearing concluded yesterday and no one did exactly that. No one turned the screws.

Still, Sessions fielded questions from a few different Senators related to marijuana and the Controlled Substances Act (CSA). Below is a close reading on Sessions’ pot-related testimony, beginning with the opening question, when Senator Patrick Leahy (D-VT) asked if Sessions would use federal resources to prosecute sick people using marijuana in accordance with state law. Sessions responded: “I won’t commit to never enforcing federal law, Senator Leahy, but absolutely it is a problem of resources for the federal government….”

This comment is interesting in a few respects. First, and unfortunately, Sessions keeps all options on the table as to CSA enforcement. As we have mentioned, that could mean suing states to block implementation of state marijuana programs, or, more narrowly, wielding the CSA’s asset forfeiture provisions against specific cannabis businesses and related parties. That probably sounds ominous, but two years ago, current Attorney General Loretta Lynch said this (in response to a question by Sessions himself, at her own confirmation hearing): “I can tell you that not only do I not support the legalization of marijuana, it is not the position of the Department of Justice currently to support the legalization. Nor would it be the position should I become confirmed as attorney general.”

We all know that states have largely proceeded with impunity on cannabis during Lynch’s tenure, even though the country had far less state-sanctioned pot activity than it does today. Sessions’ reservation about “never enforc[ing] federal law” seems benign by comparison. Regarding the second part of Sessions’ quote, and the “problem of resources for the federal government,” he concedes a key point: even if it were the Trump administration’s number one goal to eradicate state level marijuana, there are likely too many people involved and too much money to revert to the past.

In the hearing on Tuesday, Sessions continued by discussing the Cole memo and the factors considered by the current administration regarding prosecution of state-level marijuana programs:

The Department of Justice under Lynch and Holder set forth some policies that they thought were appropriate to define what cases should be prosecuted in states that have legalized, at least in some fashion marijuana, some parts of marijuana…. But, fundamentally the criticism I think was legitimate is that [the policies] may not have been followed. Using good judgment about how to handle these cases will be a responsibility of mine. I know it won’t be an easy decision, but I will try to do my duty in a fair and just way.

Again, Sessions leaves open the possibility of enforcing federal cannabis prohibition. His talk of “using good judgment about how to handle these cases” is a euphemism for using prosecutorial discretion, something he misleadingly claimed he didn’t have in a subsequent response to Sen. Mike Lee (R-UT):

One obvious concern is the United States Congress has made the possession [of marijuana] in every state and distribution an illegal act. If that’s something that’s not desired any longer, Congress should pass a law to change the rule. It is not so much the attorney general’s job to decide what laws to enforce. We should do our job as effectively as we’re able.

Here Sessions appears to have forgotten his earlier reference to prosecutorial discretion. His disingenuous argument that “my hands would be tied” by Congress, compelling enforcement action, should not be taken seriously – especially because Congress has sheltered state level medical programs for the past few years, and is likely to do so again. Sessions’ point, however, that Congress should pass a law if it permanently wants to prohibit federal enforcement actions, is probably a fair one, and only reinforces the need for us to secure federal legalization of cannabis.

In all, the hearing could have been better, could have been worse. Sessions was far less retrograde in his statements toward marijuana than he has been in the past. He played his cards closely, as nominees are wont to do, and — like it or not — he is going to be confirmed. This means cannabis operators will simply have to wait and see, which has been the name of the game for a while now.

 

 

 

Cannabis Trademarks
Monitor your cannabis trademark

We’ve written about trademark basics, about the importance of trademarking your brand, about choosing a brand that sells, and about how to choose a strong mark. We have even written about the differences between U.S. and Canadian trademarks. But we have not delved into the mechanics of prosecuting a trademark application because, quite frankly, the details can be a bit uninteresting. But having a basic understanding of the timeline of events that take place during a trademark prosecution (the trademark filing process) can help cannabis business owners to understand what to expect, the importance of filing early, and how to make sure they don’t lose their brand to someone else.

The timeline for trademark prosecution varies somewhat depending on whether you are filing your trademark application based on actual use (meaning you’ve already sold goods or services bearing the mark in commerce) or based on an intent-to-use (meaning you haven’t sold branded goods yet, but you intend to do so in the near future). The USPTO provides a couple of great flow charts laying out the timeline for applications, which I will summarize here.

For a Section 1(a) application based on actual use, it will take approximately three months after filing before an examining attorney actually reviews your trademark application. Following that initial review, the examining attorney will either publish the mark for opposition, or issue an office action setting forth any deficiencies with the application. If an office action issues, the applicant has six months to respond, or the application will be abandoned.

Office actions can issue for a multitude of reasons, including simple problems like a misclassification of entity or a failure to provide a translation of a foreign word. These types of office actions are usually easy to respond to and remedy. Other office actions, however, issue for more substantive reasons, such as confusing similarity to a previously registered mark. These types of office actions require a more lengthy response arguing in favor of registration.

If no office action issues, and an application is approved for publication, the mark will be published in the Official Gazette (OG). The OG is a weekly online publication that gives notice to the public of the USPTO’s intent to issue a trademark registration. Any party who opposes the registration (for example, due to a claim of prior common law rights) has thirty days to note their formal objection. If no parties object within the thirty day opposition period, the mark will be cleared for registration and that registration will issue within approximately three months.

The next filing for a registered mark occurs between the fifth and sixth years of registration, where a trademark owner must file a Declaration of Use or Excusable Non-Use under Section 8.

The timeline for an application filed on an intent-to use basis is the same all the way through the issuance of office actions and publication. However, after an intent-to-use mark is published, a Notice of Allowance will issue approximately two months later. This notice indicates that the USPTO intends to register the mark once a sufficient statement of use is filed. After the Notice of Allowance is sent, the clock starts ticking for another filing. An applicant has six months from the Notice of Allowance to either file a statement of use (meaning you must have used the mark in commerce), or to file for a six-month extension. An applicant who files based on an intent-to-use can file up to five of these six-month extensions, but must be able to show use within 36 months of the Notice of Allowance.

All of the above timelines are as true for cannabis related trademarks as for any other kind of trademark, though it is true that the USPTO may examine your trademark a bit more closely if it has apparent cannabis connections.

Of course, it’s important if you intend to file a trademark application to have reasonable expectations surrounding the timeline for your trademark registration. But understanding the trademark registration process has other benefits, even to those not considering filing for a federal trademark. If you have been using a trademark in commerce, you likely have common law rights in that mark, even if you haven’t filed for registration. If another company files a trademark application claiming ownership of the same mark, and you want to oppose that registration, you must do so within the thirty-day opposition window. Otherwise, you will be forced to wait for the registration to issue to file a petition to cancel (which in the case of an intent-to-use application could take up to three years), or for the application to be abandoned. You may want to purchase trademark-monitoring services to ensure you know if a potentially similar mark to your own is published in the OG. These services can be a useful tool in making certain your trademark rights are not undermined.

Regardless of whether you intend to file a federal trademark application or not, if you have a brand, you should understand the registration process. Failure to stay on top of monitoring the use of your mark can result in loss of any rights in your brand.

 

 

 

Cannabis lawyerThe confirmation hearing for Alabama Sen. Jeff Sessions, Trump’s nominee to serve as the U.S. Attorney General, begins this morning at 9:30 a.m. ET. You can view the live feed here. Sessions is opposed by civil rights groups and championed by law enforcement, which, together, signal poorly for marijuana. On the specific issue of federal marijuana prohibition, we wrote on his nomination day that the Senator has been hostile to marijuana for a long time.

If each member of the Senate Judiciary Committee votes with his or her party, Sessions will pass by a vote of 11 to 9. That seems likely, as there have been no reported signs that any Republicans will defect, either in the committee or on the Senate floor. Still, Democrats have the opportunity to ask some tough questions on a variety of topics. It is our sincere hope that somebody takes the opportunity to drill down from civil rights to marijuana legalization, and specifically, to enforcement of the Federal Controlled Substances Act (CSA).

As it stands, a hostile, Sessions-led Department of Justice (DOJ) could attempt to kneecap marijuana policy reform nationwide. Its options would include everything from suing states to block implementation of marijuana programs, to leveraging the CSA’s asset forfeiture provisions against pot businesses and related parties. These actions would likely be massively unpopular, but they would be well within the power of a hostile administration – even one that ostensibly supports limited government and states’ rights.

Fortunately, there is a bipartisan majority in each chamber of Congress that appears interested in seeing states, and not federal law enforcement, lead on the issue of cannabis legalization. If Congress continues to prohibit the DOJ from chasing state medical marijuana actors, it may be hard for Sessions to keep the jails as full as he would like. There is also a possibility that as much as Sessions dislikes pot, he may have other priorities, at least to start.

As of today, there is probably more uncertainty than at any point in the past few years with respect to enforcement of federal prohibition. Anyone interested in federal marijuana policy would be well served to tune into today’s hearings, and to closely monitor the hearings of other Trump nominees like Georgia Rep. Tom Price, who has been nominated to serve as Secretary for Health and Human Services (and also has a very poor record on pot). Mr. Price is set for hearing next week.

Stay tuned.

Cannabis growsThe Seattle Times ran a story last week about the DEA continuing its marijuana eradication program even in states with legal marijuana like Washington. The DEA authorizes funding for state law enforcement to search for and eradicate marijuana, generally on public land.

Several of our clients asked us about this story, wanting to know if it meant the DEA was also taking action against state-legal marijuana businesses. Fortunately that is not the case. The DEA eradication program is specifically targeted at illegal operations on public lands. Federal law enforcement is going after cannabis grows it claims are operated by Mexican cartels. Regardless of who runs these cannabis grows, they are not compliant with state law. Under current federal enforcement policy, the federal government still has free reign to support law enforcement action against marijuana operations that are outside the bounds of a state-regulated system.

On one hand, this eradication program is in the best interests of compliant, tax-paying marijuana businesses as it eradicates competition from illegal cannabis. If we are going to have a Drug Enforcement Agency to which Congress appropriates funds, we would prefer it spend its time and money seeking to eradicate illegal marijuana grows than going after state-legal cannabis businesses. Even if the DEA is only scratching the surface with the total amount of marijuana it seizes, the mere threat of these eradication efforts forces illegal cannabis growers to try harder to hide their products, increasing their costs and forcing them to sell at a higher price. Anything that increases the legal market’s competitive edge against the illegal market has some benefit to our clients who pay taxes and registration fees and operate fully above board. Finally,  illegal, unregulated cultivation on public land, often in national parks or national forests, can have significant negative impacts on the environment.

Still, we have to ask if local marijuana eradication is the best way for the federal government to spend its money. In 2016, the DEA spent $760,000 in Washington, $200,000 in Oregon, and $4.3 million in California on eradication efforts. In Washington, because of the mountainous areas where illegal grows are found, the per plant eradication cost is $26.49. That’s a huge cost per plant when evidence has shown that these eradication efforts have not significantly reduced the total amount of illegal marijuana making its way to market.

Like a lot of other government programs, it seems that much of the reason for continuing with the cannabis eradication program is that the money is easy for Congress to spend and law enforcement jobs remain secure so long as they continue to receive this kind of money. If the federal government were serious about the ecological concerns of illegal marijuana growing, the eradication program would be run by the United States Forest Service or the Department of Interior or the EPA. Not by the state highway patrol with funding from the DEA.

One of the most pernicious challenges for marijuana decriminalization nationwide is the continued financial interest of those politically popular groups that generate revenue from illegality. Law enforcement and corrections officers represent a huge and organized political constituency, and though they don’t all speak with one voice (see Law Enforcement Against Prohibition), they tend to favor anti-cannabis programs that keep federal funds flowing their way because of the security it brings to the agencies as a whole and to the individual law enforcement officers. So long as marijuana remains illegal, we will throw money at quixotic eradication efforts.

In discussing this money tug, Lt. Chris Sweet of the Washington State Patrol told the Seattle Times that public perception that the money can be used for other programs like education and treatment is “definitely a big concern.” The pie is only so big, and those of us who think the money would be better spent on education or treatment need to make our voices heard too.