Canna Law Blog ™

Canna Law Blog

LEGAL SUPPORT FOR THE CANNABIS BUSINESS COMMUNITY SINCE 2010

Marijuana Patents: Fear, Loathing, and Beating Monsanto

Posted in Intellectual Property/Branding, Medical Marijuana, Recreational Marijuana

Cannabis patentsSome of you may have noticed that on the day before 4/20 this year, Monsanto tweeted the following public service announcement:

Tomorrow is 4/20. FYI: Monsanto has not & is not working on GMO marijuana. We address other Monsanto myths here:

 

But what about in the future? Is Monsanto GMO marijuana a possibility? That’s anyone’s guess. But the existing state-legal cannabis industry is already taking steps to curb the Agro-giant’s (and anyone else’s) control over marijuana patents. And, according to VICE News, a patent war could be looming as a result.

We’ve blogged in the past that we believed that the USPTO could, in theory, grant a cannabis-related or cannabis strain patent (unlike a cannabis-related trademark). And now we have confirmation that our belief was correct. VICE News reported last week that an unnamed spokesperson for the USPTO admitted that,

In general, the [patent] office issues both utility and plant patents to all types of plants, including cannabis and poppy, provided the applications meet and comply with the applicable patent statutes . . . [t]here are no special statutory requirements or restrictions applied to marijuana plants.

Some of the issues surrounding the ability to obtain a patent for a given marijuana strain (whether it’s a utility or a plant patent) revolve around the “novelty and non-obviousness” requirements for a patent. However, you are not going to be able to secure a patent for an “invention” that already existed in the public domain before you filed a patent for it, and tons of well-known strains have existed in the public domain for decades (though at least one Portland-based company is trying to remedy the relatively unknown “authorship” of some of the best known strains). However, opportunities for new inventions when it comes to strains and cannabis genetics are emerging and industry players are starting to take advantage of the patent system.

In August of 2015, the USPTO issued to California-based Biotech Institute, LLC what is apparently the first-ever marijuana breeding-related patent (which Biotech Institute filed in 2013). See here. The abstract for the patent (which is part of a 147-page application) states that “[t]he invention provides compositions and methods for the breeding, production, processing and use of specialty cannabis.”

Monsanto currently maintains that its seed-trade does not include marijuana and that it just isn’t interested in the cannabis industry. Which makes sense so long as marijuana is still federally illegal, especially since Monsanto is publicly traded and its involvement with cannabis could create new risk for its shareholders who don’t need to violate federal law to receive a healthy return. Industry fears of Monsanto’s involvement with GMO marijuana stem from Monsanto’s willingness to sue farmers (large or small) who appropriate its seeds and agro-innovations in alleged violation of the company’s licensing agreements. Nonetheless, unless and until Monsanto starts playing in the marijuana sandbox, cannabis cultivators and processors still have a significant window of time to protect their creations. Especially now that patents are officially a playing piece in the game.

 

 

 

Oregon Cannabis: Concentration Limits for Edibles May Stay Low

Posted in Advocacy, Medical Marijuana, Oregon, Recreational Marijuana

Oregon Cannabis LawyerCompared to other states, there is a lot to like about Oregon’s medical and recreational marijuana programs. We can say that now that the statutory framework for Oregon pot is set and the bulk of administrative rule-making is behind us. At this point, we are waiting on rules related to February’s short legislative session and a few odds and ends. One unsettled area is potency limits for edibles in both the retail and medical markets. It’s not looking great.

Right now, concentration limits are covered by temporary rules that expire on June 28, 2016. Those rules were promulgated by the Oregon Health Authority (OHA), but apply to both the retail and medical markets. OHA will be issuing permanent rules, which again will apply to both markets. We expect to see the new rules very soon, alongside rules governing early sales of edibles to recreational customers under Oregon’s “early start” program.

Currently, for retail marijuana items, the maximum concentration or amount of THC per serving allowed is a conservative 5 mg for both scorable and non-scorable cannabinoid edibles, with container sizes allowed up to 50 mg. For medical marijuana items, there are no per serving limitations, although the container size limit is 100 mg. Under both regimes, there are separate limits for topicals, tinctures, concentrates/extracts and other products. These limits are mostly lower for retail items than medical items.

Last week, OHA issued its medical and retail concentration and serving size limits. These limits remain low, particularly in the retail market, which remains pegged at 5 mg of THC per serving and 50 mg per container. As the Oregon Cannabis Association has argued, low potency 5 and 50 mg serving/package limits are unnecessary to protect public health and safety. Instead, the low limits will create higher costs (passed to the consumer), more packages (yuck) and a possibly even an increase in black market activity.

The 5 and 50 mg limits appear especially low given that the Colorado and Washington retail market limits are twice those amounts. Because Washington and Oregon share a border, we expect at least some Oregonians will cross the river to get their edibles in Washington State, just as they did for their recreational cannabis before Oregon fully legalized. Not only would this impair the Oregon industry and state tax receipts, but it could create interstate commerce issues under the federal Controlled Substances Act. That would be a shame.

OHA has stated that its goal with these limits is to protect the Maureen Dowds of the world, and children. In a belt and suspenders approach, OHA also will attempt to head off danger with labeling and packaging rules (similar to its bridge rules here). As of today, there are no scheduled hearings on the proposed OHA limits, but email comments are being accepted at publichealth.rules@state.or.us. [CORRECTION: the OHA hearings schedule on the new rules, including proposed edibles concentration limits is posted here.] We will continue to work with OHA on behalf of our many Oregon clients and we will keep you apprised as to developments.

 

 

San Diego Targets Illegal Marijuana Dispensaries with Criminal Prosecution

Posted in California, Legal Issues, Licensing, Medical Marijuana

San Diego Cannabis Dispensaries

As more and more cannabis businesses open up shop in California, cities and counties in the state are faced with a local enforcement problem. Over the past few years, several cities and counties have passed local ordinances to allow for and regulate marijuana businesses within their boundaries.  By complying with these local ordinances and obtaining proper permits, as may be required, many marijuana businesses are able to operate legally in the state for the first time. However, the ongoing transition from an illegal market to a legal California marijuana market has also led to a divide between the legal marijuana businesses and those that continue operating illegally under not only federal but now state and local laws as well.

Local authorities in San Diego are facing this problem head on as they work to enforce their marijuana laws. There are currently 14 legally permitted dispensaries in San Diego that operate in compliance with the city ordinance adopted in 2014. The city has been attempting to enforce its ordinance against illegal operations through civil enforcement actions in court, which often result in multimillion dollar fines for the violating dispensary. Judges have also issued injunctions to keep the offending dispensary from reopening in the same location or anywhere else in the city.  However, so far these civil penalties have not been an effective deterrent.

Thus, on April 20, 2016 (usually associated as a day of celebration for cannabis consumers), San Diego City Attorney Jan Goldsmith announced his office would begin pursuing harsher, criminal prosecutions against illegal San Diego dispensaries. The City Attorney’s office is aware of at least 35 dispensaries currently operating illegally in the city and it stated that the majority of these illegal businesses are repeat offenders, who reopen their stores in new locations even after being shut down. In addition, Goldsmith claims many of these illegal businesses lack security and at times have felons and weapons on the premises. These so called “hardcore offenders” are the target of the city’s new efforts to enforce its local rules through criminal prosecution.

The city’s position is also supported by the local community and legal marijuana business owners. Community members have expressed concerns that illegal dispensaries are located too close to schools and other protected locations that state and local rules require dispensaries to distance themselves from, and owners of legal dispensaries in San Diego have argued that the illegal business are unfair competition as they continue to operate illegally without having to shell out the roughly $500,000 cost of obtaining a proper city permit.

Under San Diego’s new and tougher enforcement approach, illegal marijuana businesses as well as their landlords will face the risk of serious criminal convictions, including a criminal misdemeanor for violating local zoning laws which can result in jail time. For anyone still considering operating an illegal marijuana business in California, it is time to reevaluate as cities and counties are quickly catching up and not hesitating to use force to shut you down. And when statewide regulation kicks in under the Medical Marijuana Regulation and Safety Act (MMRSA) in 2018, the state is also expected to take action to shut down any marijuana businesses in violation of state rules.

The takeaway is that operating an illegal marijuana business is not a good idea for anyone wanting to avoid individual liability, and also not a good long-term strategy if you’re hoping to form and grow a profitable marijuana business during the oncoming green rush. If you’re serious about getting in compliance, review your local ordinances, work with your local authorities, and consult a professional if you need more guidance. It’s finally possible to operate a legal marijuana business in California; so why not avoid the multimillion dollar fines and possible jail time by doing it right?

Global Marijuana: The United Nations has Spoken, Badly as Usual

Posted in International, Medical Marijuana, Recreational Marijuana

The UN on cannabisI was in New York last week chairing a panel about investment in the cannabis industry for NYU’s Cannabis Science and Policy Summit (which I’ll blog about shortly). While I was there, the United Nations kicked off its first Special Session of the United Nations General Assembly (“UNGASS“) in two decades on worldwide drug policy reform. At the last UN special session on drugs in 1998, international leaders agreed to “work toward a ‘drug free world‘ by 2008.”The UN is well known for being no fan of cannabis legalization. It has openly criticized legalization in Washington and Colorado and its drug control policies are mostly centered on prohibition based on the. The 1961 Single Convention on Narcotic Drugs, the 1971 Convention on Psychotropic Substances, and the 1988 Convention Against Illicit Traffic in Narcotics mandate UN member states combat drug use and implement prohibition and criminalization.

The UNGASS agenda this year contained multiple round tables on myriad issues related to worldwide drug policy reform and, ultimately, reduction of harm. Unfortunately, the Special Session still supports prohibition of marijuana via a “drug plan” the Commission on Narcotic Drugs adopted in Vienna in 2014, which adoption takes the form of this “outcome document” adopted at this year’s UNGASS. Still, there was at least a bit of robust debate regarding cannabis and some even talked about the need for more sensible drug policies worldwide. Representatives from Jamaica asked the UN to specifically review marijuana’s illegal status and multiple other countries (including Mexico and Colombia) expressed their disappointment with the international community’s failure to acknowledge that the “war on drugs” in pretty much all countries has been a complete failure.

Jamaican Foreign Minister Kamina Johnson-Smith talked about how absurd it is to schedule cannabis as a dangerous drug with no medical uses:

Scheduling cannabis as a dangerous drug with no medical use — a status that dates back to the 1961 Single Convention on Narcotic Drugs — is outdated and out of touch. Johnson-Smith further stated that “[w]e contend that the classification of cannabis under the Single Convention is an anomaly and that the medical value of a substance must be determined by science and evidence-based analysis, above other considerations . . . .

Ultimately, the “outcome document” adopted at this UNGASS adhered to the UN’s existing conventions which only support hardline drug policies. This means that the UN will not be embracing cannabis legalization (for non-medical or non-scientific use) anytime soon (or at least not until 2019 when the next UNGASS is scheduled). As multiple countries continue to implement more progressive recreational cannabis law reform, the UN’s overall support for prohibition is going to continue to create political conflict and inconsistency across borders. As Richard Branson aptly puts it in his op-ed on UNGASS 2016:

The problem is that UNGASS is out of step with realities on the ground. As more and more national, state and municipal governments pursue progressive approaches – including regulation – the more they will show the inherent flaws of the international drug control regime. The risk is that the UN fails to adapt to changing priorities, realities and evidence and that the multilateral approach to controlling drugs collapses altogether. It may already be too late to save the broken and fragmented drug regime.

Though many Americans view the UN unfavorably and of little import, many smaller countries around the world view it with more respect. Our fear is that those countries will listen to and abide by the UN’s dictates on cannabis and slow down their own legalization programs. We will see.

MAPS Overcomes Barriers to Marijuana Research

Posted in General

Medical cannabis researchThe DEA has been active lately. A couple of weeks ago, it announced it would make a decision soon regarding rescheduling marijuana. On April 22, the Multidisciplinary Association for Psychedelic Studies  (MAPS) announced the DEA had finally approved its application for the first approved study of smoked marijuana for effectiveness in treating PTSD. The study, as described by MAPS, is randomized, blinded, and placebo-controlled, and it involves providing military veterans suffering from PTSD with various strains of marijuana with different cannabinoid profiles.

Want to know what bureaucratic hell is really like? Let’s review MAPS’s arduous road in getting to this point.

In 2010, MAPS first applied to the FDA to approve the study, and it received that approval in December 2010. The study had already been approved by the University of Arizona Institutional Review Board. But the only way MAPS could actually get marijuana for its study legally was through the National Institute on Drug Abuse (NIDA) managed cultivation facility at the University of Mississippi. In order to get that product, the DEA had to approve. MAPS made its application, and the DEA sat on it. For over 5 years. In 2014, MAPS ran into a roadblock when the FDA approval came into question because the study hadn’t been commenced within 3 years of the initial approval. The Department of Health and Human Services, which includes the FDA, wasn’t done with MAPS either. Unlike other drugs, including other Schedule I drugs, HHS requires a secondary review of any marijuana research by another part of HHS called Public Health Services, which is an amalgam of various groups within HHS. This requirement for public health services was purely obstructive in nature, as we generally trust the FDA to approve research on its own, and the Obama administration officially got rid of it in June 2015. In March 2014, MAPS finally received its approval from the Public Health Services, after a whole lot of complaining. Still, it didn’t have DEA approval.

One month later, after receiving a recommendation from the Department of Health and Human Services, MAPS got word from NIDA that NIDA didn’t actually have the research-grade marijuana available for the study. This announcement was extra galling, because when the study was originally planned, the DEA had rejected its request to have a professor at the University of Massachusetts grow the cannabis. MAPS sued the DEA and lost because the DEA and NIDA claimed that the independent professor wasn’t necessary — NIDA had all the marijuana they needed with the same cannabinoid profiles. So, NIDA said that the marijuana wouldn’t be available until at least January 2015.

In June 2014, without warning, the University of Arizona fired Sue Sisley, the professor designated as the Principal Investigator of the study. There was no explanation, but it was assumed to be a political decision. Undeterred, Dr. Sisley and MAPS moved on and applied for approval of the study from Johns Hopkins University’s Independent Review Board.

In March 2015, NIDA finally provided marijuana cost and availability information for the study. All that MAPS needed at this point was for the DEA to grant a Schedule I license for the study site, and MAPS finally got that approval. It is expected to start getting NIDA marijuana within the next several weeks.

On the one hand, this a positive story about the tenacity of an organization and its lead researcher. But at its core, we are really looking at what a giant hellhole dedicated bureaucrats can create when they put their minds to it. There is no universe where a 6-year window between crafting a study and actually doing a study is reasonable. As long as our leaders take a laissez-faire stance toward research obstacles, these delays will be par for the course. The only way that this is ever going to change is through actual leadership. The direction that cannabis research takes in the future is dependent on four people: the President, the Secretary of Health and Human Services, the FDA Commissioner, and the DEA Chief. The Obama administration has not made access to marijuana research a priority. Let’s hope that the next administration does, because cannabis research matters.

State of Cannabis: Louisiana Not Yet Letting the Good Times Roll

Posted in Advocacy, States

Louisiana and MarijuanaThis is going to be a big year for cannabis. As a result, we are ranking the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts will analyze one state and our final post will crown the best state for cannabis. As is always the case, but particularly so with this series, we welcome your comments. Today we turn to number 35. Louisiana. Our previous rankings are as follows: 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.

We are now reaching the point in our series where the states we are listing are not laughably (or should we say screamingly) bad, nor are they good. They are generally okay in some areas and bad (without being horrible) in others. That’s Louisiana. We’ve seen better, but we’ve also certainly seen worse.

Louisiana

Criminal Penalties. In June 2015, Louisiana reduced penalties for possession of less than 2.5 pounds of marijuana. The Times-Picayune reported that the reform is expected to save the State $17 million over 5 years.

First-time offenders caught with less than 14 grams of marijuana can earn a $300 fine and up to 15 days in jail. If the amount of marijuana exceeds 14 grams but is under 2.5 pounds, then the fine rises to $500 and the jail time to 6 months. Louisiana offers to clear any first offense for marijuana one time if the person is not charged with another offense for two years.  Second convictions for possession of under 2.5 pounds earns a $1,000 fine and up to 6 months in jail.

Second convictions for possession of under 2.5 pounds earns a $1,000 fine and up to 6 months in jail. Third convictions for possession earn a fine of $2,500 and up to 2 years in prison and fourth convictions earn a $5,000 fine and up to 8 years in prison.

Possession of larger amounts are punished more harshly regardless of prior convictions:

  • 2.5 – 60 pounds earns a sentence between  2 and 10 yeas and a fine up to $30,000.
  • 60 – 2,000 earns a sentence between 5 and 30 years and a fine of $50,00 – $100,000.
  • 2,000 – 10,000 pounds earns a sentence between 10 and 40 years and a fine of $100,000 – $400,000.
  • Over 10,000 pounds earns a 25-40 sentence.

Punishment for distributing marijuana is not contingent on the amount. The first offense can result in a fine of up to $50,000 and 5-30 years of in prison. Subsequent offenses are punished with a sentence of 10-60 years in prison and a fine of up to $100,000. If the person selling marijuana is over 18 and is selling to a minor who is at least 3 years younger, the seller faces up to 45 years in prison for a first offense and up to 90 years for a subsequent offense.

Medical Marijuana. Louisiana has a long history of medical marijuana bills (for a great overview, see this slideshow by the Times-Picayune). In 1978, Governor Edwin Edwards signed Act 725 which allowed patients suffering from glaucoma and those undergoing chemotherapy to use medical marijuana. The Act required the Department of Health and Hospitals (DHH) set up a regime to give patients access to marijuana. However, the DHH never actually undertook this task. In 1991, the Act was amended to include spastic quadriplegia as a qualifying condition, but again the DOH did not act and so there was no legal method for patients to obtain marijuana.  A 2014 bill to allow for dispensing of medical marijuana failed to make it through the state legislature.

However, in June 2015, Governor Bobby Jindal signed into law Senate Bill 143 which amends the previous legislation to allow for dispensing medical marijuana. The bill provides that the Louisiana Board of Pharmacy will create rules on dispensing marijuana and the Department of Agriculture and Forestry will oversee the licensing of production facilities. The bill allows doctors to recommend marijuana consumption in any form other than smoking. Qualifying conditions include glaucoma, cancer, and spastic quadriplegia. The Louisiana State Board of  Medical Examiners is tasked with providing reports on medical marijuana and may recommend additional qualifying conditions.

Bottomline. Louisiana is on a cannabis upswing, but it still has a ways to go in reforming its marijuana laws, especially considering some of the harsh penalties for possessing large amounts of or distributing marijuana. However, it deserves credit for its recent legislation aimed at decriminalizing marijuana and implementing medical marijuana. If Louisiana continues its reform trend, we could see New Orleans eventually becoming a Southern marijuana destination. For now though, if you are planning on visiting for Mardi Gras, you should most definitely leave your marijuana back home and be wary once there, because though bourbon flows freely and legally, cannabis does not.

 

They Said It On Marijuana, Quotable Saturday, Part CVII

Posted in Advocacy

Marijuana Legalization

Marincolo, who authored the book High. Insights on Marijuana, makes a good point. Marijuana allows for expanding the way we think about our experience and others’ experiences, at times leading us to entirely new perspectives.

Why is such a perspective still illegal in most places, and still stigmatized in places where marijuana is legal? Is it time for our society to consider and embrace a new perspective on marijuana? Is marijuana for recreational uses in any way “worse” or less moral than marijuana for medical uses?

You tell us.

California Cannabis: Vertical Integration and Big Cannabis

Posted in Business Basics, California, Licensing

California cannabis lawsThe New York Times recently did a story on the merging of big business and the marijuana industry in California, noting that California is currently the world’s largest legal (though we would not exactly characterize it as “legal” – see here and here) market for cannabis. Even though licensing under California’s Medical Marijuana Regulation and Safety Act (aka the “MMRSA”) has not yet begun, and medical marijuana businesses are still not permitted under state law to operate on a for-profit basis, we’re already seeing a massive influx of investors, both in-state and out-of-state, looking to claim their piece of the proverbial pie. And though the profit potential for cannabis in California is high, we think it important to step back and take a look at exactly how large “big cannabis businesses” will be, given the limits California law will be placing on vertical integration.

Recall that the MMRSA, which will regulate medical marijuana businesses, is made up of three bills – Assembly Bill 266, Assembly Bill 243, and Senate Bill 643. Each bill has a unique function, but all three bills contain overlapping language regarding certain aspects of medical marijuana regulation. AB 266 establishes the Bureau of Medical Marijuana Regulation (BMMR), which is vested with the power and authority to develop and implement the rules necessary to enforce the MMRSA (the first chief of the BMMR was appointed in February). Specifically, the BMMR will be tasked with developing the licensing requirements for each of the 17 different types of medical marijuana operational licenses provided for in AB 266.

But, barring a single exception, vertical integration of these 17 different types of medical marijuana licenses is prohibited. A licensee may only hold a California license in up to two separate license categories out of the 17, and the state restricts which combinations of licenses may be held. The biggest exception to the prohibition on vertical integration essentially states that if your city or county has an ordinance that requires or permits vertical integration, and your business was vertically integrated prior to July 1, 2015, and you’ve been continuously operating and registered with the Board of Equalization, your business will be allowed to remain vertically integrated until January 1, 2026.

Below are the license types established pursuant to AB 266 and SB 643

  1. Type 1 = Cultivation; Specialty outdoor.  Up to 5,000 square feet of canopy, or up to 50 non-contiguous plants.
  2. Type 1A = Cultivation; Specialty indoor.   Up to 5,000 square feet of canopy.
  3. Type 1B = Cultivation; Specialty mixed-light. Up to 5,000 square feet of canopy.
  4. Type 2 = Cultivation; Outdoor. 5,001-10,000 square feet of canopy,  using natural lighting.
  5. Type 2A = Cultivation; Indoor. 5,001 -10,000 square feet of canopy, using artificial lighting.
  6. Type 2B = Cultivation; Mixed-light. 5,001 -10,000 square feet of canopy, using a combination of natural and artificial lighting.
  7. Type 3 = Cultivation; Outdoor. 10,001 square feet – 1 acre of canopy.
  8. Type 3A = Cultivation; Indoor. 10,001 – 22,000 square feet of canopy.
  9. Type 3B = Cultivation; Mixed-light. 10,001 – 22,000 square feet of canopy.
  10. Type 4 = Cultivation; Nursery.
  11. Type 6 = Manufacturer 1 for products not using volatile solvents.
  12. Type 7 = Manufacturer 2 for products using volatile solvents.
  13. Type 8 = Testing.
  14. Type 10 = Dispensary; General.
  15. Type 10A = Dispensary; No more than three retail sites.
  16. Type 11 = Distribution.
  17. Type 12 = Transporter.

The MMRSA establishes numerous restrictions intended to prevent vertical integration, including the requirement that, as stated above, licensees may only hold licenses in up to two separate categories. Large-scale cultivators cannot also hold manufacturing licenses, although small-scale cultivators may. And small-scale cultivators may be able to obtain a Type 10A limited dispensary license. Cultivators and Manufacturers must utilize a Type 11 Distribution licensee to transport all product to a Type 8 Testing licensee, and then to other Manufacturers and to Dispensary licensees. Distributors and Testing licensees may not hold any other type of license. The restrictions are complicated.

Whatever your opinion on state prohibitions on vertical integration, there are a multitude of arguments advanced for developing a complex licensing scheme that precludes vertical integration, including public safety justifications, as well as an intent to prevent just the sort of big businesses many investors are hoping to capitalize on. These regulations mimic the alcohol industry’s tied-house laws, which prevent alcohol manufacturers, distributors and retailers from being “tied” to one another. Tied-house laws emerged following the repeal of Prohibition in 1933 to limit the power of big alcohol businesses and to limit sales of alcohol to consumers. And it’s no secret that every state that has legalized recreational marijuana so far has used alcohol licensing as the starting point for developing their cannabis licensing regime. California will be no exception.

The proposed Control, Regulate and Tax Adult Use of Marijuana Act (the “AUMA Initiative”), which would regulate recreational marijuana entities, goes a step further than the MMRSA, providing for, at a minimum, 19 different types of licenses:

  1. Type 1 = Cultivation; Specialty outdoor; Small.
  2. Type 1A = Cultivation; Specialty indoor; Small.
  3. Type 1B = Cultivation; Specialty mixed-light; Small.
  4. Type 2 = Cultivation; Outdoor; Small.
  5. Type 2A = Cultivation; Indoor; Small.
  6. Type 2B = Cultivation; Mixed-light; Small.
  7. Type 3 = Cultivation; Outdoor; Medium.
  8. Type 3A = Cultivation; Indoor; Medium.
  9. Type 3B = Cultivation; Mixed-light; Medium.
  10. Type 4 = Cultivation; Nursery.
  11. Type 5 = Cultivation; Outdoor; Large.
  12. Type 5A = Cultivation; Indoor; Large.
  13. Type 5B = Cultivation; Mixed-light; Large.
  14. Type 6 = Manufacturer 1.
  15. Type 7 = Manufacturer 2.
  16. Type 8 = Testing.
  17. Type 10 = Retailer.
  18. Type 11 = Distributer.
  19. Type 12 = Microbusiness.

All of these licenses would be distinct from licenses issued for commercial medical cannabis activity pursuant to the MMRSA. The big difference with the AUMA Initiative is that it does allow for vertical integration, with the exception of Testing licensees, which are prohibited from holding any other type of license. According to Section 26053(c) “Except as provided in subdivision (b), a person or entity may apply for and be issued more than one license under this division.” It will be interesting to see how a recreational market that favors big business will play with a medical market that does not. Allowing for recreational vertical integration but not medical vertical integration could prove detrimental to small medical cannabis businesses, which would be a shame given the importance of affordable patient access.

So, there you have it. If the AUMA Initiative passes this November, vertical integration for adult use cannabis businesses could be allowed, though vertical integration of medical cannabis businesses will be disallowed. Of course, it remains to be seen what regulations the BMMR will promulgate for recreational licensees, and we wouldn’t be surprised if some restrictions on total vertical integration are imposed. In any event, these are the types of licensing restrictions that investors should be considering as they plan their move into the rapidly changing California cannabis industry.

 

The Top 10 Things You Need to Know to Start a Cannabis Business in Oregon

Posted in Business Basics, Medical Marijuana, Oregon, Recreational Marijuana
The Top Ten Things You Need to Know to Operate a Cannabis Business

The Top Ten Things You Need to Know to Operate a Cannabis Business

This is the second installment on our state by state series on “The Top Ten Things You Need to Know to Start a Cannabis Business.” Our first entry, on Washington, is here. Today’s entry covers Oregon, a pot friendly state with two separate programs: a recreational marijuana program run by the Oregon Liquor Control Commission (OLCC), and a medical marijuana program run by the Oregon Health Authority (OHA). Below are the top ten things you should know before making a run at starting a cannabis business in the Beaver State.

  1. You need a license from the OLCC or OHA. In both the recreational and medical programs, you need a license for almost every class of marijuana related activity. In the recreational program, license categories include producers, processors, wholesalers, retailers and research labs. In the medical program, license categories include dispensaries and processors. To grow medical marijuana, you don’t need a license per se, but you do need to grow for designated patients registered to your grow site, and you need to track plants and report monthly to OHA.
  1. The OLCC program is generally better for new entrants. We have written time and again about the fact that Oregon’s medical and recreational programs appear to be merging. There are many reasons for this, but a big one is that many medical operators are moving toward the recreational market. When you also consider the fact that the OHA program is laced with two-year residency restrictions for certain key positions, the recreational market is a better bet for new entrants.
  1. If you want to go both ways, you can. Under recently passed SB 1511, recreational program licensees can register with OLCC to produce, process, transfer or sell pot for medical purposes. So, to the extent the medical market seems attractive, you can participate in both programs concurrently.
  1. Barriers to entry are relatively low. In a landmark step, Oregon recently did away with all residency requirements related to ownership and investment in recreational pot ventures. There are also no formal capital requirements for starting a pot business in the state. If you are able to pay an annual state license fee (around $5K) and pass a criminal background check, the only barrier to entry is the general overhead that comes with starting any business.
  1. Location is key. Location location location. This is critical in any business venture, but especially with Oregon marijuana. Currently, the state is a curious patchwork of friendly and unfriendly marijuana jurisdictions, and even in the friendly locales, zoning rules and time, place and manner restrictions may govern where pot ventures can exist. Before even applying for any species of OLCC license, you must submit a local Land Use Compatibility Statement (LUCS), showing that you are approved by the local jurisdiction to operate. Finding a suitable location is a challenge, but with some diligence it can be done.
  1. Wherever you find yourself, there you are. Each activity and license in the OHA and OLCC programs is tied to a specific address. So, if you acquire a cannabis producer license, for example, that license is not mobile; nor can it be renewed elsewhere in the state. This underscores not only the importance of finding a location where your activity is permitted, but finding one that makes sense from a business planning perspective.
  1. You can probably get a bank account. While the local banking scene has been slow to warm to Oregon marijuana, many of our clients now have accounts. Oregon recently passed a law designed to encourage banks to service pot business, and with federal FinCEN guidelines in place, things are looking better and better.
  1. Oregon has a hemp program. If you are in the cannabis game for hemp, we recently wrote that Oregon is a great place to land. The hemp application is a two-page walk in the park, and the Oregon Department of Agriculture is currently turning applications around in a couple of weeks. Because hemp, like marijuana, is statutorily defined as a “crop” in Oregon, hemp cultivation is protected by Oregon’s “right to farm” laws. These laws afford cannabis farmers ample room to operate.
  1. Compliance is going to be a big and constantly changing part of your life. In our last entry, we wrote that Washington State’s cannabis regulations change on at least a monthly basis. The same is true in Oregon. The legislature recently passed four new marijuana bills, and OHA and OLCC are scrambling to write rules around all of them. For the first time in 17 years, medical program growers are now required to report online, effective June 1, and OHA is still fussing with concentration limits for edible products. The only constant here is change, and it will be that way for a while.
  1. Things are looking good. Oregon has always been a small business state, but friendly to large companies too, like Nike and Intel. Beginning with HB 3400 last summer, the legislature, OLCC and OHA generally have done a fantastic job of creating a viable marijuana industry. Oregon is an open cannabis market where everyone gets to bring ideas, capital and expertise, and everyone gets to compete. Oregon should continue to be a great state for pot start-ups and an ideal launching pad for national ventures.

 

 

Five Great Reasons to Celebrate This 4/20

Posted in Events, Medical Marijuana, Recreational Marijuana

Happy 420 dayHappy 4/20 everyone! On this 4/20, here are another five great reasons to celebrate cannabis:

1. The Department of Justice accepts that it can no longer spend money shutting down state-law compliant medical marijuana. In 2014, Congress passed the Rohrabacher-Farr amendment, which prohibited the Department of Justice (DOJ) from using federal funds to prevent states from implementing their own medical marijuana laws. The amendment was the basis behind a federal judge’s ruling last October that the DOJ could not enforce injunctions against a California dispensary in compliance with the state’s medical marijuana laws. During the case, the DOJ argued that prosecuting and shutting down medical marijuana dispensaries does not prevent states from implementing their laws. Judge Breyer did not respond well to this argument, saying that the DOJ’s interpretation “tortures” the meaning of the law and “defies language and logic.” The DOJ appealed the district court’s ruling to the Ninth Circuit Court and then, in a surprising turn of events, the DOJ dropped its appeal earlier this week by filing a motion to dismiss its own case. This is a big win for those who believe that marijuana businesses operating in compliance with state and local laws should be treated the same as any other legally compliant business. As long as Congress continues to renew the amendment each year, marijuana business owners in legal states can sleep more soundly knowing they will not be woken up by DOJ boots kicking down their doors, and that even if this does happen, they could have the courts on their side

2. More states are looking to try on medical cannabis. Multiple states are looking to try out more comprehensive medical marijuana programs, like Florida. Other states are looking to implement medical marijuana through legislative action, like Pennsylvania which just passed its first medical marijuana legislation. More states are recognizing the medical value of cannabis and taking steps — through ballot initiatives or legislative action — to allow their citizens the use marijuana for medical purposes.

3. More states are looking to all out legalize marijuana. California, Maine, Arizona, Massachusetts, and Nevada will all be considering legalization by ballot initiative this year. That’s huge. We already have four states that have gone the adult use cannabis route–Oregon, Alaska, Washington, and Colorado. We expect these four states will soon be joined by at least a couple of other states this fall in ending marijuana prohibition.

4. The DEA may consider re-scheduling marijuana (but don’t hold your breath on this one). The Drug Enforcement Administration announced this month that it will consider rescheduling marijuana sometime in 2016. The DEA has the legal authority to reschedule substances and for years marijuana advocates have urged it to move marijuana to a less restrictive Schedule or to remove it from scheduling altogether. The DEA’s memo comes in response to a 2015 letter from Senator Elizabeth Warren and other Democratic senators, urging the federal government to allow more research into the benefits of medical marijuana. In its response memo, the DEA said it will consider a Food and Drug Administration recommendation on whether it should reschedule marijuana. The DEA did not disclose what the FDA recommended, only that it has received a recommendation. The DEA (finally) conceded it “understands the widespread interest in the prompt resolution of these petitions [to reschedule marijuana] and hopes to release its determination in the first half of 2016.” The DEA has previously routinely denied any such rescheduling, and our thinking is that it will likely do so again because it’s the DEA.

5. SCOTUS declined to hear the Nebraska and Oklahoma v. Colorado cannabis lawsuit. Remember when Nebraska and Oklahoma sued Colorado in the U.S. Supreme Court over its recreational marijuana program, basically alleging Colorado’s program was allowing marijuana to enter their states and thereby straining their own law enforcement resources? When the case came up, SCOTUS issued a decision rejecting the challenge. For more on the case and its failure to proceed, see here. More than anything, we hope and predict that this decision will cause states like Oklahoma and Nebraska to stop wasting their own taxpayers’ money by butting into the affairs of neighboring states.

Happy 4/20!