Canna Law Blog ™

Canna Law Blog


What’s Up With Marijuana in Canada? A LOT

Posted in International, Medical Marijuana, Recreational Marijuana
How many countries have a leaf on their flag?

How many countries have a leaf on their flag?

We have recently written blog posts on our Southern neighbor, Mexico (see Marijuana Legalization: Bad for the Cartels and Mexican Marijuana Laws: Change is Here/Coming) and with all that has been going on with Canada cannabis lately, we are going to start giving our Northern neighbor equal time. Like nearly every other country in the world, marijuana is federally illegal in Canada. See Canada’s Controlled Drugs and Substances Act. Nonetheless, Canadian law does make certain that Canadians can buy and possess marijuana for medical purposes. Unlike the United States, Canada’s medical marijuana laws and rules are governed by federal legislation, making them uniform and enforceable in all Canadian provinces.

Until two years ago, Canadian patients to be authorized to possess marijuana for medical purposes had to fall into one of two categories of illnesses and associated “debilitating symptoms.” Under newer regulations, Canada removed patient categories to allow medical marijuana to be used to treat any medical condition. In Canada today, its “Healthcare Practitioners” fill out a “Medical Document” for patients that serves as sufficient authorization for them to use medical marijuana. Patients authorized to use medical marijuana then send their Medical Documents to a licensed medical marijuana producer who registers them as “clients.” Canadian patients may then place orders for their medical marijuana with their producer who then mails their clients their medical marijuana.

Before 2013, if you wanted medical marijuana in Canada you either had to grow your own or you could go through Health Canada’s lone designated marijuana provider, Prairie Plant Systems. Then Canada enacted Marihuana for Medical Purposes Regulations (MMPR), which expanded access to marijuana for medical purposes:

Under the MMPR, individuals who have the support of their healthcare practitioner can access marijuana for medical purposes from licensed producers. Licensed producers must meet strict security and quality standards. The maximum amount that may be possessed by clients registered with a licensed producer is 30 times the daily amount indicated by their healthcare practitioner, to a maximum of 150 grams.

A current list of all producers registered with Health Canada can be found here. In addition to the MMPR requirements, Canada’s licensed cannabis producers must comply with all applicable provincial, territorial, and municipal legislation and regulations, including zoning restrictions. And Health Canada’s cannabis producer license application is notoriously difficult and expensive.

Until recently, Health Canada limited producers to selling only dried marijuana flower. That changed this past summer when Canada’s Supreme Court ruled that patients are entitled to more than just flower, given that some medical conditions make smoking both a health risk and a less effective medical treatment. Today, those producers who have obtained expanded production licenses from Health Canada are authorized to produce, but not yet sell, marijuana oil for patients. 

Though Canada’s federal law now allows for the production and wholesale distribution of marijuana for medical purposes, it has not legalized medical marijuana dispensaries. Patients in Canada still must get their cannabis from one of the limited number of producers, and then only through the mail.

Though compassion clubs and dispensaries remain illegal in Canada, they exist in large numbers. British Columbia alone has at least one hundred illegally operating dispensaries in the City of Vancouver; and federal enforcement against dispensaries has been spotty and inconsistent at best. In June of this year, the City of Vancouver became the first Canadian city to take control of the situation by approving a regulation-intensive, two-tier licensing system for dispensaries operating within its borders. Two months later, federal authorities sent the Vancouver City Council a letter explaining why the City should abandon this plan, but not threatening any legal action. In September, federal authorities sent cease and desist letters to 13 Vancouver-based dispensaries. The City has ignored federal government prohibitions and entreaties, and as of August was in the process of reviewing 176 license applicants.

A recent CBC survey shows that 56 percent of Canadians favor legalizing marijuana, with an additional 30 percent favoring eliminating criminal penalties for marijuana use. On top of this, Canada’s newly elected prime minister, Justin Trudeau, promises nationwide legalization and he has been working hard to secure federal legislation that will do exactly that since taking office earlier this month.

Our cannabis business lawyers already represent Canadian companies looking to profit from the U.S. cannabis industry, and vice-versa. As Canada and the U.S. both grow their cannabis industries, we expect these cross-border transactions will only increase.We see Canada becoming one of the leading cannabis countries within a year, and likely surpassing the U.S. with cannabis legal and policy reform. And within ten years, we see  Canada and the U.S. (and maybe Mexico and no doubt other countries as well) opening up their borders for trade in cannabis just as is done for virtually all other legal products.

That will be the day….

Happy Thanksgiving to All

Posted in Events
Have a GREAT DAY, everyone.

Have a GREAT DAY, everyone.

On this Thanksgiving Day, we want to take a bit of a time out to express those things related to cannabis for which we are thankful. Just to be clear, we are focusing on cannabis, not because we think cannabis takes priority over everything else (because it does not), but merely because this is a cannabis blog. So, with that caveat, here goes.

1. We are thankful for our readers, both here and on our Canna Law Blog Facebook Page. We are thankful for your loyalty and we are especially thankful for our being able to interact with you. We are thankful for your comments, from which we learn all sorts of new things and from which we are challenged. But most of all, we are thankful and honored that you trust us for your information.

2. We are thankful for each and every award we have received, many of which come from our readers and from our clients and from those who know us. In just the past few months, The ABA Journal (the leading lawyer association and magazine) named us to its top 100 Legal Blog List and the Expert Institute chose us as Best Speciality Blog.

3. We are thankful for Oregon starting legalization faster than anyone ever thought possible and we are especially thankful for how our Portland Office and our Oregon attorneys stepped up (and are still stepping up) to help our many clients interested in building an Oregon cannabis business.  We have to give a big shout out and thanks to Vince Sliwoski, who not only heads up our Portland office and provides over-the-top client service to Oregon marijuana businesses, but also without fail churns out great stuff every week as the Ask A Pot Lawyer columnist for the Portland Mercury.

4. We are thankful for the majority of voters realizing that each individual should be able to decide especially for herself/himself regarding cannabis and we are particularly thankful that this desire to normalize cannabis is spreading across the United States. Most of all though, we are thankful for the tens of thousands of people who will NOT be going to jail this year for marijuana. But we would be seriously remiss on this Thanksgiving Day if we did not call for pardoning more than just turkeys: those serving prison sentences for marijuana — especially those who did nothing but have it in their possession — should be pardoned as well.

5. We are thankful for those states that are slowly (always far too slowly) moving forward with cannabis. Minnesota, Illinois, New York, and Florida are just some of the states that have been moving forward in the past year or so.

6. We are especially thankful for those who believe and even fight for legalization even though they themselves do not consume and even though some of them do not believe anyone at all should consume. These are the people who realize that it is not for them to decide what others do and that our country (and other countries as well) do best when letting people decide for themselves. Or to quote from Abe Lincoln, these people may simply realize the following:

Prohibition will work great injury to the cause of temperance. It is a species of intemperance within itself, for it goes beyond the bounds of reason in that it attempts to control a man’s appetite by legislation, and makes a crime out of things that are not crimes. A Prohibition law strikes a blow at the very principles upon which our government was founded.

7. Most of all though, we are thankful for the great friends we have made by having been in this industry since 2010. You readers already know that the diversity of the cannabis industry mirrors the diversity of the country as a whole, and we are thankful that this realization of normalcy is starting to spread and the belittling of those in this industry and those who consume is on the decline. As we so often ask on our Facebook page: why can’t we all just get along? Let’s please at least get along today.

Thank you, all of you, from the Canna Law Group

Oregon Marijuana: Amended Rules for Residency Mean Busywork for Lawyers

Posted in Business Basics, Licensing, Oregon, Recreational Marijuana
Oregon cannabis business residency requirements are getting curiouser and curiouser.

Oregon cannabis business residency requirements are getting curiouser and curiouser.

A few weeks back, we wrote about Oregon residency requirements contained in last month’s OLCC rules for Oregon marijuana businesses. Even for us lawyers, those rules were somewhat opaque. This may be attributable to the fact that the legislature gave OLCC very little guidance other than the HB 3400 requirement that “an applicant listed on an application… has been a resident of this state for two or more years.”

When the dust settled, the basic idea appeared to be that a licensed entity has to be at least 51% owned by a two-year Oregon resident, in one manner or another. Still, the rules adopted on October 22 had some issues as to who can apply (along with a few other issues, which aren’t addressed here). Last Friday, OLCC met to discuss some proposed amendments to the rules, and it adopted a few key changes regarding residency and the application process.

The new language is at OAR 845-025-1045(3)(d), 845-025-1045(6) and 845-025-1030(4)(b). These rules should be published on the OLCC website soon. To us, the rules are still opaque, and still seem to require gymnastics for non-residents and their Oregon partners. However, this is what we have to work with until the legislature hopefully does away with residency requirements once and for all in February.

OAR 845-025-1045(3)(d). This new rule requires that, for a legal entity applicant, “any individual who owns or controls at least 10% of the legal entity” must be listed as an applicant on an application. This addresses the odd situation we wrote about where an LLC applicant entity was required to list all of its members, but there was no similar provision regarding corporate applicants and their shareholders. Now, it’s a little strange the other way, in that an LLC member who owns just 1% of an applicant entity must be disclosed, but a shareholder of a corporation who owns 9% of an applicant entity need not be. But there you have it.

OAR 845-025-1045(6). This amended rule erases a distinction between “applicant” and “applicant legal entity” in the “legitimate owner” analysis. The rule now reads “an applicant will be considered by the Commission to be a legitimate owner of the business if the individual applicant or applicant legal entity owns at least 51% of the business proposed to be licensed; or one or more individual applicants or applicant legal entities in sum own at least 51% of the business to be licensed.” This appears to be more of a housekeeping change, designed to stave off confusion as to whether an applicant entity is somehow treated differently than an applicant individual in the legitimate owner context.

845-025-1030(4)(b). This amendment, contained in the “Application Process” section of the rules, relates back to the 10% owner criterion of OAR 845-025-1045(3)(d), and it requires that the OLCC receive information or finger prints for a criminal background check, as well as an Individual History Form, “for an individual listed as a person with a financial interest who holds or controls an interest of ten percent or greater in the business proposed to be licensed, or an individual who is a partner member or corporate officer of a legal entity with a financial interest in the business proposed to be licensed.”

So, those are the relevant changes. Unfortunately, the amended rules do not address two issues we previously raised. The first is that an LLC member or 10% corporate shareholder “not directly involved” in the business and therefore not an “applicant” under 845-025-1045(1), nonetheless becomes an “applicant” by virtue of ownership (without direct involvement) under 845-025-1045(3). The second, related issue is that 845-025-1045(10) still requires that “an individual listed as an applicant on an initial or renewal application, or identified by the commission as an applicant must maintain Oregon residency while the business is licensed.”

Under a plain reading of the amended rules, any non-resident LLC member or 10% corporate shareholder of an applicant entity could be viewed as an “applicant” herself, subject to the residency requirement of 845-025-1045(10). For this reason, the safest course for a non-resident appears to be to own her interest in an applicant entity by and through an LLC or corporation, established expressly for that purpose. Presumably, the ownership entity would not be identified as an “applicant” under 845-025-1045(3) and would not be subject to residency requirement of 845-025-1045(10).

Overall, this system is creating plenty of work for Oregon cannabis lawyers and plenty of revenue for the Oregon Secretary of State (and probably other Secretaries, too), which shouldn’t really be the point of any of this. Fortunately, the OLCC has advised us that they will be publishing examples of specific scenarios involving nonresidents, soon, and they will answer questions on these issues at the upcoming licensing workshops held around the state. Stay tuned.

Illinois Cannabis: Whatever Happened to Free Speech?

Posted in Federal law and policy, Illinois, Licensing, Litigation, Medical Marijuana
Why limit the free speech rights of cannabis businesses?

Can Illinois limit the free speech rights of cannabis businesses? (by Newtown Grafitti,

Illinois Libertarian candidates Claire Ball and Scott Schluter have filed a federal lawsuit challenging a provision of Illinois’ medical cannabis law that prohibits any medical cannabis cultivation center, dispensary, or any Political Action Committee they create, to “make a campaign contribution to any political committee established to promote the candidacy of a candidate or public official.”

Why does this ban even exist? Outside of the context of medical cannabis, governments often impose heavy restrictions–and sometimes prohibitions–on political contributions from individuals or companies who obtain merit-based licenses and lucrative government contracts. For example, a number of states prohibit casino licensees and their employees from making political contributions. The same is true for companies involved in procurements and government lobbyists.

Although the context differs, the rationale is the same: companies that stand to gain from preferential administrative actions (i.e., issuance of an exclusive license, or selection of their contract bid over another) have a much stronger incentive than most to influence the outcome of that decision making process. Limits on campaign contributions, the argument goes, can act as a buffer between government officials and the people who benefit from and try to influence their decisions.

This lawsuit challenges whether or not this buffer impermissibly restrains the candidates’ and Illinois medical cannabis licensees’ freedom of speech. It alleges that the prohibition is a form of viewpoint-based discrimination, which is subject to strict scrutiny. Under this test, the restriction survives only if it is narrowly tailored to achieve a compelling government interest.

The plaintiffs contend that Illinois’ contribution ban meets neither of these elements. The most frequently-invoked government interest justifying these bans is avoiding corruption or the appearance of corruption. The plaintiffs’ best chance for challenging these bans is in the often-criticized Citizens United v. Federal Election Commission case, which held, as a matter of law, that “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.” The gaming industry has been, historically speaking, rife with corruption, organized crime elements, and coercive political influence. It isn’t clear whether the cannabis industry rises nearly to the same level as the casino industry, at least one that justifies an outright ban on contributions.

One critical way in which this case is distinguishable from the landmark election cases is that the contributions ban is not generally applicable. The prohibition applies specifically and is completely voluntary by virtue of the cannabis license holder continuing to hold the license. The restrictions vanish the minute the the license is relinquished—the same isn’t true for individual campaign contribution limits. The restrictions also only apply to up to 82 licensed companies and their employees, and to the Political Action Committees and candidates to which they may give money. Nobody forced any of these entities to apply for licenses. To the contrary, they competed fiercely to obtain them, and presumably did so while well aware of the legal strings attached. In many respects, licensees have to waive constitutional rights to obtain operator licenses, such as their Fourth Amendment rights against warrantless searches and seizures. Is it unreasonable to require companies to waive their right to free speech, at least where their protected “speech” is actually a campaign contribution?

I doubt these prohibitions against cannabis donations will withstand constitutional scrutiny. There is no reason, let alone a compelling one, that justifies excluding cannabis businesses from the political process. If anything, given how obviously ridiculous our country’s cannabis laws are, cannabis businesses’ participation in politics is even more crucial. Could you imagine if these restrictions were applied to any other agricultural business, like a corn or soybean farmer? There’s absolutely no chance they would pass muster, and you would have industry lawyers filing a flurry of lawsuits faster than you could say “Monsanto.”

The bottom line is that cannabis businesses that want to start contributing money to political candidates who support cannabis legalization should check their local election laws before doing so. For now, at least.

For more on this, please check out my radio interview.

Cannabis IP Licensing: It’s Complicated

Posted in Business Basics, Intellectual Property/Branding

Whether they realize it or not, every single one of my law firm’s cannabis clients owns some sort of intellectual property. And for those clients who do realize it, most of them seek not only to protect it, but to exploit and monetize it. Even our clients without well-developed brands are regularly solicited by companies claiming to have brands and other intellectual property (IP) to license to them. The race is certainly on to become the “national brand” or the “household name” of cannabis.

Cannabis IP licensing. It's complicated.

Cannabis IP licensing. It’s complicated.

But these licensing deals are complicated, and in our experience, always fraught with unique cannabis-related issues. Many companies come to us with such licensing deals expecting the biggest hurdle to be state cannabis law compliance. And though this is certainly a major concern, it is important to take a step back and start at square one, analyzing the validity and strength of the IP itself. With any licensing deal, the first step should be determining who actually owns what intellectual property. This is especially true when it comes to the cannabis industry, where information, strain names, and industry terminology have been shared freely since long before state level legalization.

Ownership of IP in the cannabis industry is a tricky issue, in large part because the USPTO will not issue federal trademark registrations for cannabis-related marks. Far too regularly, cannabis companies come to us with proposed licensing deals where basic due diligence quickly reveals that the licensor simply does not own what it claims to own. If you are looking to get a license for another company’s IP, here are the most basic questions you should be able to answer about that other company and its IP:

  • Does the licensor own any federal trademark registrations?
  • If so, what goods and/or services do those trademark registrations cover?
  • Was the description of goods and/or services filed with the USPTO accurate and true? Were there possible misrepresentations?
  • Are the trademark registrations based on actual use, or upon intent-to-use?
  • What representations and warranties is the licensor making (or, often more importantly, not making) regarding the marks?
  • If the licensor doesn’t own any federal trademark registrations, is it licensing someone else’s trademarks?
  • Does the licensor have a master licensing agreement? Do the terms of any proposed sub-licensing agreement mirror that master licensing agreement?
  • What quality control standards will you be held to by the trademark owner?
  • Has the trademark owner warranted to keep all USPTO filings up-to-date?
  • Does the licensor own any state trademark registrations?
  • If so, has the licensor made lawful use of its mark in commerce in the state of registration?
  • Does the licensor have any common law trademark rights? Can the licensor even legally acquire common law trademark rights in your jurisdiction?

This is a substantial list, but it only scratches the surface of the issues you and your cannabis IP counsel must consider before you enter into any IP licensing deal. Parties are often quick to skip straight to negotiating commercial terms for a deal, without ever assessing whether the rights they are licensing actually exist. Just like with any other type of property, like a house or a car, a licensor of intellectual property must actually own the rights to that property to be able to confer those rights to another party. Seems basic, but it’s truly shocking to see the deals we’ve seen put together by attorneys who either do not know cannabis or, more often than not, do not know the intricacies (or even the basics) of intellectual property law.

And of course, even after you resolve the fundamental IP issues, you still must resolve the state cannabis law issues. Just by way of an example, in Washington State, traditional royalty payments based on sales are generally not allowed, because anyone sharing in the profits or revenues of a licensed cannabis entity must be declared to the Liquor and Cannabis Board as a true party of interest, which requires residency and vetting by the Board.

Fortunately, the news isn’t all bad. Though these licensing deals are complicated, there are certainly creative and effective solutions to all of these problems, but those take a firm understanding of both IP and state marijuana laws from the outset.

Marijuana Bars Coming Soon to Alaska. This Is H-U-G-E

Posted in Alaska, Licensing, Recreational Marijuana

On November 20, Alaska’s Marijuana Control Board voted to allow consumption of marijuana at licensed retail stores. The amended regulation must pass through a few more procedural hurdles before going into effect. The Department of Law will conduct a formal review on the new regulation and then it will be submitted to Lt. Gov. Byron Mallott for final approval. If this regulation ultimately passes, Alaska will become the first state to allow for marijuana consumption bars.

Alaska may become the first state to allow cannabis bars. This makes us very happy.

Alaska may become the first state to allow cannabis bars. This makes us very happy.

This will be a huge deal.

Prior to November 20, the Board maintained that it lacked authority to create a new type of license because Alaska’s legalization initiative created only four types of cannabis licenses: retail, cultivation, manufacturing, and testing. Instead of creating a new license for marijuana bars, the Board chose to allow consumption under a retail license. The Board also sidestepped Alaska’s law prohibiting marijuana consumption in a public place. The proposed regulation would exempt retail stores from being defined as a public place.

Despite this change by the Board, limitations on marijuana consumption in retail stores remain. According to Alaska Dispatch News, members of the Board stated that this law does not impact local smoking prohibitions. Unlike many other states, Alaska does not have statewide prohibitions on smoking, but its municipalities can enact their own localized smoking prohibitions and though these no-smoking laws were put in place to prevent tobacco smoke, they also apply to marijuana. For example, Anchorage prohibits smoking in all public places and places of employment. Though retail stores are exempted from the Alaska state law definition of “public place,” they would still be considered a place of employment under Anchorage law. Therefore, a retail store in Anchorage could not permit its patrons to smoke marijuana in the store, but they could permit them to consume it in other ways.

If Alaska moves forward (and my firm’s Alaska lawyers tell me that it will) it will mark a major departure from other states that have legalized adult use marijuana but failed to provide a legally sanctioned place to consume. All of the other states that have legalized recreational marijuana so far (Colorado, Oregon and Washington) prohibit consuming marijuana in public places. This makes it very difficult for the homeless, tourists, renters, and condominium owners, whose buildings or hotels likely forbid smoking and/or marijuana use, to find a place where they can legally consume. As we have written previously, landlords can still legally evict their tenants for smoking.

Our kudos to Alaska.

They Said It On Marijuana, Quotable Saturday, Part LXXXVI

Posted in Advocacy

Even for those who hate cannabis and believe nobody should ever use cannabis, there are countless good arguments as to why cannabis should nonetheless be legalized. This John Legend quote nicely highlights one of these arguments, which is that keeping cannabis illegal does more harm to communities than legalizing it.

This quote harkens back to the episode from The Wire where Major Colvin seeks to move all of the drug sellers into one “tolerant zone” so as to keep them away “from the decent people in the neighborhood.” Colvin had come to the conclusion that because the police were not able to stop the buying and selling of drugs, they should instead move it to one area so as to stop the collateral harm it was having on the neighborhood. In other words, the illegality of the drugs had created an illegal and harmful presence in the neighborhoods and setting up an essentially legal zone would actually mitigate the harms.

In one of our previous posts in this series (we are now at number 86!), we used the following Abraham Lincoln quote:

Prohibition will work great injury to the cause of temperance. It is a species of intemperance within itself, for it goes beyond the bounds of reason in that it attempts to control a man’s appetite by legislation, and makes a crime out of things that are not crimes. A Prohibition law strikes a blow at the very principles upon which our government was founded.

Abraham Lincoln, December 18, 1840 before the Illinois House of Representatives.

Lincoln’s quote joins nicely with Legend’s quote in that Legend talks about how prohibition harms communities and Lincoln talks about how prohibition harms the cause of temperance and even our souls.

Marijuana and Telemedicine: The Doctor Will Skype You Now

Posted in Alaska, California, Colorado, Medical Marijuana, Washington

Telemedicine is booming. Telemedicine (sometimes referred to as Telehealth) is the use of telecommunication and information technologies to provide clinical health care at a distance. Telemedicine is developing over a growing variety of applications and services, including two-way video, email, and texting. Skype calling your doctor to discuss and show them your symptoms is just one example of telemedicine.

Telemedicine gives patients access to doctors and their medical advice without the burden of travel. It also can connect specialists with patients around the country (or even the world) where such connections might otherwise be difficult or even impossible.

State policies on telemedicine vary greatly. The various state rules on telemedicine are created by state medical boards, who are tasked with regulating medical licenses. Doctors must follow the regulations and guidelines of their state medical boards.

Given the foregoing, it begs the question whether medical marijuana can take advantage of this modern advancement.

Can Doctors Recommend Medical Cannabis Using Telemedicine? Many states require a healthcare provider and his or her medical cannabis patient have a pre-existing, bonafide relationship. Most states also require an in-person examination of the patient before any recommendation of medical marijuana, in addition to various requirements regarding follow-up care. Still, in some states it is not clear whether this doctor-patient relationship may be established virtually.

On the other hand, some states explicitly prohibit physicians from recommending medical cannabis via telemedicine. Colorado’s Medical Board took this approach last August. Illinois also directly prohibits the practice. And Washington requires healthcare providers to complete “an in-person physical examination of the patient” to issue a medical cannabis authorization, rendering telemedicine a moot point. Some states that allow medical cannabis have not directly addressed the issue of recommending cannabis through telemedicine, leaving doctors with little guidance on whether they will face consequences for engaging in this practice.

California Leading the Way. In October 2014, the Medical Board of California stated the following regarding cannabis telemedicine:

The initial examination for the condition for which marijuana is being recommended must be an appropriate prior examination and meet the standard of care. Telehealth, in compliance with Business and Professions Code section 2290.5, is a tool in the practice of medicine and does not change the standard of care.

This is significant because California is the only state whose medical board has explicitly set forth an affirmatively favorable policy regarding telemedicine and medical cannabis. This clarity has allowed California doctors to recommend medical cannabis via telemedicine without fear of losing their license to practice medicine.

However, California recently overhauled its medical cannabis laws and those new laws may impact cannabis telemedicine in California. Senate Bill 643 (SB 643), which goes into effect on January 1, 2016, sets forth standards for licensed medical physicians who recommend cannabis for medical use, including the fact that:

No person or entity may prescribe, dispense, or furnish, or cause to be prescribed, dispensed, or furnished, dangerous drugs or dangerous devices, [] on the Internet for delivery to any person in this state, without an appropriate prior examination and medical indication[.]

Though this new law can be read to prohibit doctors from recommending cannabis through telemedicine channels, it also can be read to allow for recommendations via telemedicine if California continues to consider a doctor-patient examination through telemedicine a legitimate “appropriate prior examination.” California agencies will process rules and regulations related to SB 643 probably until January 2018.  During this time, I expect California’s Medical Board to provide further guidance on telemedicine, and I expect that guidance will ultimately favor telemedicine and cannabis especially under California’s imminent hardcore MMJ regulatory regime.

So, What’s Next? We’ll likely will see more states grapple with telemedicine as they consider medical cannabis legalization. This issue is especially relevant in states with geographically spread out populations, such as Alaska. We will keep you updated.

Mexican Marijuana Laws: Change Is Here/Coming

Posted in International, Legal Issues

There has been a tidal shift in Mexico. The weight of political power and public opinion remains opposed to marijuana legalization there, but in a recent decision (the Amparo Case) the Mexican Supreme Court created an imperative for marijuana reform. Here’s why this case is so important for marijuana legalization in Mexico and around the world:

Mexican marijuana. Its time has come.

Mexican marijuana. Its time has come.

Imperative to Reform Marijuana Laws. First, though the ruling in the Amparo case technically applies only to its four plaintiffs, the decision essentially requires the Mexican government to reform its drug laws.

The decision granted relief to four individual plaintiffs from Mexico’s marijuana laws, giving them the right to grow and consume recreational marijuana. For now, that decision only applies to the four plaintiffs, all of whom are high ranking members of two advocacy groups which aim to combat organized crime in Mexico. It bears mentioning that plaintiffs brought this case in an effort to help take down organized crime, which makes roughly 35-40% of its annual $1.5 billion profits on the illegal marijuana market.

Regardless of the case’s limitations, the Mexican Supreme Court has the power to legalize recreational marijuana throughout the country in later cases if it so chooses. It used a similar process earlier this year to legalize gay marriage in Mexico. If the Mexican government fails to reform its drug laws, the Supreme Court is positioned to legalize marijuana throughout the country without the permission of either the president or the legislature. This means that if these branches of the Mexican government do not start implementing cannabis reform, we may be seeing full blown legalization from the Mexican Supreme Court before too long.

Recreational Marijuana as a Human Right. In this case, the Mexican Supreme Court ruled that recreational marijuana use is protected as a human right to develop one’s “personality”. The right to the development of personality is tied up in human dignity; it is essentially the belief that each human being has the innate right to make his or her own decisions. It is the fundamental belief behind American values of freedom and liberty, and it is the foundation of modern liberal democracies. Most importantly for the Amparo case, this human right is enshrined in Mexico’s Constitution:

The choice of a recreational or leisure activity is a decision that undoubtedly belongs to the sphere of personal autonomy protected by the Constitution. That choice may include, as in this case, the intake or consumption of substances that produce experiences that in some way “affect” the thoughts, emotions and / or feelings of the person. In this line, the decision to smoke marijuana can have different purposes, including “the relief of stress, the intensification of perceptions or include the desire for new personal and spiritual experiences.” So, being “mental experiences”, they are among the most personal and intimate that anyone can experience, so that the decision of an individual of senior age to “affect” his personality in this way for recreational or entertainment purposes is covered under for the right to free development of personality.”

When it comes to international marijuana legalization in democratic nations, this case could well prove critically important beyond just Mexico; it is precedent from the highest court in a major country stating that there is a human right to the recreationally use marijuana. It also creates a new argument for international treaty discussions, like the U.N. Special Session on Drugs next year. We’ve previously written about how international drug treaties restrict cannabis legalization, but most of the countries that are parties to these international drug treaties are also party to human rights treaties. If the recreational use of marijuana is a human right, those treaties are now in conflict, meaning something will eventually need to be done to reconcile them.

This case is also important for the simple reason that the Court actually rationally analyzed the country’s marijuana laws. The Court points out that drug laws are usually judged solely upon whether they reduce consumption, but that they should be looked at more holistically with an eye towards protection of the public:

This Supreme Court finds that the prohibitory rules cannot be considered unconstitutional simply for being ineffective in motivating the behavior of people. The reduction in consumption can not be considered an end in itself of the measure itself, but in any case a state of affairs which is a means or an intermediate in order to achieve a further purpose, such as the protection of public health or public order.

The Court then notes that scientific evidence does not show that marijuana use in adults poses a significant risk to health except when used chronically and excessively. It also notes that claims of marijuana being a gateway drug have been debunked. The Court goes on to point out that Mexico’s current marijuana prohibition has done little if anything to reduce marijuana use and trade. Marijuana remains ubiquitous, use has actually increased since prohibition, and, in the meantime, murderous and lawless drug cartels are reaping the profits from the black market. The Court also compared Mexico’s cannabis laws to reasonable, better alternatives, such as its laws for tobacco and alcohol and, not surprisingly, found Mexico’s cannabis laws to be lacking.

As attorneys, we are heartened by the Mexican Supreme Court’s logical conclusions. As lawyers we are trained to compare like with like and when one looks at how alcohol and cigarettes, and even Diet Coke, are treated by our legal system, it is difficult from a legal perspective to understand why cannabis is the outlier. And Mexico’s Supreme Court agrees.

Cultivating or consuming marijuana remain illegal in Mexico, but with this Mexican Supreme Court decision the tides have finally begun to turn. Don’t be surprised if we hear more news out of Mexico on marijuana law reform in the near future.

Cannabis Business License Applications: How To Succeed

Posted in Licensing, Medical Marijuana, Recreational Marijuana

With the advent of more and more states opting out of federal prohibition, there has been a rise in immensely complicated and extremely long marijuana license applications (i.e., like the application processes we’ve seen in Nevada, Illinois, Minnesota, Maryland, and New York). In turn, commonalities regarding client questions and application strategies have emerged; how and when to apply, how much it costs, what the competition will be like, and on and on. Over the past five years, we’ve handled licensing applications in more than a dozen states with more to come on the horizon. And we have developed some best practices for potential applicants that make sense no matter what the jurisdiction. Today we share several of them with you:

Follow our tips to get your cannabis business license approved

Follow our tips to get your cannabis business license approved

Start early. If there’s just one piece of advice we could offer, this would be it. To distinguish your application, you want to ensure it has fewer mistakes, more robust content, and is more polished than the competition. More importantly, the competitive license applications in particular can be tedious and time consuming, requiring the compilation of business plans, financial reports, and background checks. You don’t want to be rushed for time in putting it all together.

Even if the regulations or the application itself are not yet available, there is plenty you can do to prepare your application in advance. Our experience is that the application almost certainly will require information and documentation concerning your business plan and team (owners, managers, and company agents), finances, security plans, standard operating procedures, proposed product lines, quality assurance and safety, and location. Specifically, you should be working on the following sooner rather than later:

  • Get your corporate ducks in a row. Register an entity, sort out stock options and equity shares, and set tentative capital contributions and sweat equity expectations. We say tentative because there may be requirements or advantages/disadvantages to certain allocations based on the eventual requirements of regulations and the actual application (like having investors who are also residents of the state).
  • Identify your main players and experts. This obviously includes officers and managers but also, for example, your head horticulturist, security officer, chemist, etc. Consider those who will actually have an ownership stake or will get a salary as well as outside expert/consultants who may be utilized on an independent contractor basis (regulations permitting). With the latter, you’ll want plenty of time to review consulting agreements; we’ve seen 15-20 page contracts for such services with aggressive non-competes and confidentiality provisions.
  • Vet your vendors. There are still relatively few reputable vendors for things like security and traceability, but that number is growing. Watch out for snake oil and those that claim to possess significant experience in your state (especially if your marijuana regime is brand new and not even implemented). You’ll also want to make sure that your vendors have clean backgrounds where, if they become an agent of the company, state law may require that they submit themselves to a criminal background check.
  • Scout locations. Even if your state will not require you to pin down a specific location or secure a lease for your prospective grow operation or retail shop, it behooves you to look early and often. In most states, the location of any kind of marijuana enterprise is so tightly regulated, applicants may be vying for limited qualifying spots in out-of-the-way pockets. In addition, landlords, because of federal asset forfeiture, are still risk averse when it comes to renting to marijuana businesses, making a local search potentially a long, hard journey.
  • Check your local laws and take your neighborhood’s temperature. Make sure local law (ordinances, zoning rules, etc.) will allow you to operate a cannabis business in your desired locale. Also, if you are facing strong local resistance, it may be best to look elsewhere where NIMBYs won’t hesitate to ruin your plans with a lawsuit. Feet dragging and lawsuits aimed at preventing you from doing business will only slow you down and cost you money. You don’t want to be the town pariah anyway, as that isn’t good for business and will only bring further unwanted (and likely unwarranted) scrutiny to your marijuana start-up.

Once the application is in your hands, you should narrow your focus to what is realistic, not just what is possible. If you haven’t read your state’s regulations already, do so now. Even if you’ve hired a consultant or attorney to complete your application, you too must understand the scope and tenor of the rules because you’re going to be the one making the actual business decisions about the company.

That said, an application will have a lot of moving pieces that require tracking:

  • Background checks. Background checks rank high on the list, because if you don’t do them or members of your team don’t pass them, your application will be dead in the water. If your state will be tapping the FBI database, those checks can take time, so get your fingerprints in early. States’ approaches to background checks vary – some partner with a third-party vendor to fingerprint and submit forms, while others have you going directly to the state for submission.
  • Score the big points. If the state is a scoring state (which is becoming increasingly common), the state will give you at least a rudimentary understanding of how the application will be scored; some will disclose the weighting rubric as well. Don’t ignore small-point categories or pass/fail questions where you can pick up a few easy points, but focus your efforts first on the big, important categories. In our experience they usually are business plan, finances, security, cultivation and processing methodologies, patient interaction and education at the retail level, employee training, and seed-to-sale tracking. If you don’t have solid information in each of these categories, your application probably won’t stand a chance of being competitive.
  • Double and triple-check all mandatory forms. Along with your application, you will probably submit a good number of forms. These forms often cover attestations by team members that they understand cannabis is still illegal under federal law, promises to conduct strictly intrastate business, and possibly declarations from a prospective landlord that if you are awarded a license, you will be allowed to grow or sell marijuana on the property. Forms are certainly not optional, and they must be done correctly. Have a second and third pair of eyes on these forms – inevitably a checkbox, date, or signature will get missed somewhere, and since many forms are notarized, correcting mistakes is not quick or something to leave to the last minute.
  • Assume the application will be a moving target. Rules, timelines, and state-issued FAQs will all be tweaked throughout the application process. Check the relevant state agencies’ websites frequently for updated information and be prepared to deal with some changes along the way. Many states set up an email account to field questions, So, don’t be shy about asking for clarification about the process or the application itself.
  • Remember your reader. The person or persons reviewing your application materials will ultimately be laypeople. Therefore, no super dense chemical, technical, or legal lingo is advisable. You want your application to be understood and get to the point of the state’s goals according to its scoring methods.

So, prepare early and check the rules often. Failure to do so could mean a wasted investment and a missed opportunity for one of these highly coveted state marijuana licenses.