On September 1st, I’ll be joining Hilary Bricken in Montego Bay for the CanEx Jamaica Business Conference and Expo. This two-day event features a conference on day one and a job expo on day two. Hilary will speak at the conference alongside cannabis entrepreneurs, doctors, and fellow cannabis industry leaders, including Montel Williams, an outspoken advocate for medical cannabis. CanEx will connect professionals across the Caribbean, Latin America, Europe, and North America interested in opportunities and developments in the cannabis industry.

Jamaica is a fitting locale as cannabis has played a significant role in its history and culture. Starting in 1655, Jamaicans were subject to slavery under British rule until an abolitionist uprising ended the practice in 1838. The end of slavery created a demand for labor on the island. Workers from India traveled to Jamaica and brought the cannabis plant with them. Linguistic scholars determined that the term “ganja” is rooted in Hindi. Cannabis quickly spread around the Island as the Jamaican climate is ideal for cannabis growth, allowing multiple harvests in a given year. Cannabis use became a tenet of the Rastafarian religion which emerged in the 1930s and rose to prominence in Jamaica.

Despite cultural associations with cannabis, Jamaica outlawed cannabis by passing the Ganja Law of 1913. Jamaica’s government pushed back against its international reputation as a pot-friendly nation by strictly enforcing cannabis prohibition until recently. But Jamaica’s attitude changed in 2015 when Jamaica decriminalized marijuana. Jamaica then legalized medical cannabis the following year.

CanEx Jamaica reflects an emerging interest in cannabis on a global scale. America has taken much of the media spotlight when it comes to cannabis reform, but it is important to realize that the push for legalization extends far beyond US borders. It is truly a global movement and my firm’s international attorneys are constantly answering inquiries from business people from around the world interested in cannabis across the globe. Our lawyers in our Spain office often represent foreign businesses that want to expand to Spain and Spanish and Catalon businesses that want to expand beyond Spain. Countries like Australia, Bangladesh, Cambodia, Canada, Chile, Colombia, Costa Rica, the Czech Republic, Germany, India, Israel, Jamaica, Mexico, the Netherlands, Portugal, South Africa, Spain, and Uruguay have all legalized cannabis to some degree. Israel has long been a leader in researching medical cannabis and has its own robust medical program. Canada has begun the process of legalizing recreational cannabis across the country and Uruguay has already done just that. An international cannabis marketplace is quickly developing as more cannabis businesses look to take their expertise beyond their own borders. CanEx is a great opportunity for entrepreneurs from across the world to meet and connect the emerging market and we hope to see you there.

You can find more information on international cannabis on the following post.

 

Barcelona Spain CannabisThe Parliament of Catalonia just approved by a 118 to 9 vote a new law that (Ley de asociaciones de consumidoras de cannabis) that establishes legal standards for cannabis clubs. Up until now, cannabis clubs in Catalonia were protected solely by municipal regulations and they have to a large extent been operating in legal limbo. This new law gives greater legal certainty to Catalonian cannabis clubs.

The law could still face legal challenges by Spain’s central government in Madrid or in front of Spain’s Constitutional Court, but for now it is the law of the land for Catalonia (which consists of four provinces: Barcelona, Girona, Lleida, and Tarragona. The law is intended to regulate recreational and therapeutic uses of cannabis as a way to improve public health standards, while also curtailing the illegal market and cannabis tourism. Here are some of the new laws key points:

  • The law will regulate the consumption, cultivation, and transportation of cannabis.
  • The cannabis clubs must be self-sustaining non-profit associations.
  • The law will impose requirements on how, who, and by what means cannabis can be delivered to a cannabis association.
  • To combat “cannabis tourism,” members of cannabis clubs must wait 15 days after joining an association to obtain cannabis.
  • The law will establish limits on advertising.
  • Cannabis clubs may not sell alcohol, cannabis-infused food, or any other drug.

Catalonia’s new cannabis law also imposes the following limits, but not for those utilizing cannabis for therapeutic purposes:

  • You must be 18 years or older to join a cannabis club.
  • Cannabis club members between the ages of 18 to 20 years old will be limited to obtaining 20 grams of cannabis per month.
  • Cannabis club members 21 years old and above are limited to 60 grams of marijuana per month.
  • The quantities of cannabis dispensed to club members must be accurately logged in a ledger.
  • Each cannabis non-profit association can produce no more than 150 kilograms of cannabis per year.

For more of our articles on cannabis in Spain (written mostly by our lawyers in Barcelona) go here.

 

Canada cannabis marijuanaMaking good on Prime Minister Justin Trudeau’s 2015 campaign promises, Canada’s Liberal Party-led government last week announced a suite of bills to legalize recreational marijuana use throughout Canada. Also last week, I was on “To the Point” with Warren Olney to try to answer two big questions regarding Canada’s legalization plans: How will Canada legalize and what impact will that have on the United States?

First though, some history.

Canada already has legalized medical marijuana and its production, including production of “non-dried marijuana,” and some of its current producers, such as Tweed and Tilray, are well-recognized brands both within and outside Canada. What is little known about Canada’s medical cannabis regime, however, is that Canada never legalized medical marijuana distribution or dispensaries; Canadian medical marijuana patients order and receive their medical marijuana through Canada’s mailing system. Despite dispensaries being illegal, many operate relatively freely due to local law enforcement tolerance in certain Provinces. All of that will change when Canada legalizes marijuana, and the pending legalization bills are widely expected to pass.

With a desired goal of July 1, 2018 to get legalization off the ground, Canada is nothing if not ambitious. The legalization bills contain many interesting restrictions and standards, including the following:

  • The legal age to purchase up to an ounce of marijuana will be 18, but the Provinces are free to set higher age limits.
  • Individuals 18 and older can grow up to four plants per household for personal use.
  • Tourists cannot bring cannabis into Canada, but they can purchase and use it while there.
  • The provinces will almost exclusively regulate retail and marijuana distribution, as well as the retail price of marijuana. They can even own their own retail establishments if they wish.
  • Provinces will be able to decide whether alcohol and marijuana can be sold at the same retail location.
  • According to the federal government’s own press release, “those jurisdictions that have not put in place a regulated retail framework, individuals would be able to purchase cannabis online from a federally licensed producer with secure home delivery through the mail or by courier.”
  • Marijuana vending machines and self-service displays are banned.
  • The federal government will regulate marijuana producers.
  • Advertising, promotions, and marketing cannot appeal to children and they will be heavily regulated by the federal government, including the possibility of no branding at all on the production side.
  • Regulations regarding packaging and labeling are mandated, but they need to be debated by government first.
  • No federal taxes or licensing fees are contained in the bills.
  • Cannabis cannot be used to infuse alcohol, nicotine, or caffeine and vice-versa.
  • More than 2 nanograms of active THC in the blood is a criminal driving offense punishable with a fine and the presence of more than 5 nanograms is a more serious offense, and officers will test driving impairment by using “fluid” samples, including saliva and blood samples.

As these cannabis bills make their way through Canada’s Parliament, there will no doubt be robust debates among lawmakers and regulators on everything from potency limitations to the kinds of cannabis products that will be available to quality assurance testing requirements. One of the most grueling debates will likely be over whether the Provinces should be the ones running all marijuana retail establishments.

To date, the U.S. only has one city-owned marijuana retail store. Needless to say, the idea of government owned and distributed marijuana hasn’t taken off in the U.S., both because it’s still federally illegal here and because we simply do not have a tradition of government ownership of anything retail. So even if Canada does embrace a “government weed” model, it’s unlikely this will cause the U.S. to influence our own state-by-state legalization scheme with private marijuana markets.

China counterfeit lawyers
There are a lot of fakes out there, in the cannabis industry too.

As we’ve previously written, my law firm, which does considerable international trade and China law work in addition to our regulated substances practice, has on all fronts been getting an influx of clients complaining about counterfeit cannabis goods and seeking our help in dealing with the problem. The problem of counterfeit goods in the cannabis industry has only continued to grow over the last year.

I was interviewed earlier this year about the lawsuits brought by Roor pipes against nearly 200 smoke shops and convenience stores, alleging those stores are selling counterfeit Roor bongs in violation of Roor’s U.S. federal trademark registration. Though those lawsuits may be on uncertain ground from a federal trademark law perspective, Grenco Science, maker of the G-Pen brand vaporizer, recently found success in federal court against counterfeiters.

Earlier this year, Grenco sued more than 65 different online retailers for selling counterfeit G-Pen products. Most of the offending companies were based in China, which is consistent with the majority of the counterfeit cases my firm handles. Some of the lawsuits settled out of court, but many of the Chinese companies failed to respond to Grenco’s complaints filed in court – also a common occurrence when trying to pin down a Chinese company in U.S. court. In light of this, a federal judge in Illinois granted Grenco $47 million in damages, which equates to $1 million from each of the 47 companies found to have infringed Grenco’s federal trademarks, as well as injunctions against each of the companies ordering them to cease sales of the counterfeit goods.

Of course, getting a judgment against a Chinese company for trademark infringement is only half the battle – Collecting on these judgments is another matter. Oftentimes, U.S. judgments against Chinese companies are worth very little. A U.S. judgment against a Chinese company can lead to collection, but for that to occur, one must know about the operations of the Chinese company and one must be prepared to be legally creative in figuring out how and where to act in using the U.S. judgment to go after the Chinese company’s assets.  We’ve written extensively about this process on our firm’s China Law Blog, and you can read more about it here and here.

Given the difficulty in enforcing these judgments it is critical that you as a business owner take preventative steps to ward off counterfeiters, and to know what to do in the unfortunate event someone does counterfeit one of your goods. And as we tell all our clients: investing in these preventative steps now is always way less expensive than fighting a legal battle (and trying to enforce a judgment) in court down the road.

So what preventative steps should cannabis businesses take to address counterfeiting? Prevention hinges on first identifying your intellectual property (IP), determining what categories it falls into, and then protecting it accordingly in the relevant jurisdictions. The design of a novel device like a water pipe, for example, could be subject to patent protection. Though we’ve blogged extensively about the difficulty in obtaining federal cannabis trademarks, federal patent law does not contain the same “legal use in commerce” requirement, or a prohibition on “immoral or scandalous” matter. A patent is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office (USPTO), and this property right gives the inventor “the right to exclude others from making, using, offering for sale, or selling the invention in the United States or importing the invention into the United States.” Patents are often the most powerful tool in fighting counterfeit goods.

Patent infringement is not the only way counterfeiters can rip off products. Oftentimes, when talking about counterfeits, we’re talking about trademark infringement (as in the G-Pen and Roor cases) rather than patent infringement. A counterfeiter could, for example, slap your logo on its vape pen, exploiting the goodwill and notoriety you’ve established through your brand. Of course, the best way to prevent trademark infringement is to register your trademark with the USPTO. Though it is not possible to obtain a federal trademark for use on goods that violate the Controlled Substances Act (CSA), it is often possible to obtain trademark protection for goods that do not violate the CSA, like many smokers’ accessories. A trademark gives the owner the exclusive right to use their mark on the specified goods in commerce, and it gives the owner a right to seek remedy in federal court in the event of infringement.

If you are having your products manufactured in China (or anywhere else overseas), as is the case these days with so many of our clients, you need to protect your IP there as well. Because if you don’t register your trademark or your design patent in China, someone else almost certainly will and then that someone else will be able to stop your products from leaving China because those products violate their intellectual property! For more on this, check out China: Do Just ONE Thing: Register Your Trademarks AND Your Design Patents, Part 1 and China: Do Just ONE Thing: Register Your Trademarks AND Your Design Patents, Part 2. You should also check out Your China Factory as your Toughest Competitor for the contractual steps you need to take to prevent your own manufacturer in China from selling your product worldwide, and likely at prices far lower than you can ever match.

But logistically, how does enforcing your IP rights against counterfeiters play out? Typically, it doesn’t make sense to take the alleged infringer straight to court. Litigation is expensive, and there is often room to negotiate. When you know who the infringing party is, your attorney can contact them with a cease and desist letter directly. But when the party is, for example, a third party seller on a larger platform like Amazon or Alibaba, tracking down the infringer is much more difficult. See also China Counterfeiting: 8 Common Myths and Alibaba and Small Business Owners.

The protocol for dealing with online retail platforms in taking down counterfeit goods will vary depending on the company. With every online retail platform with which our lawyers have worked (be they in the United States or in China), the process is expedited greatly when our client alleging a counterfeit is able to offer up proof of its own IP rights. This is particularly true with trademarks, where infringement is often apparent, and the retail platform can quickly decide to suspend a counterfeiter’s account. Without verifiable IP rights, the retail platform is put in a difficult position of having to figure out who has the right to sell what. This involves complicated legal analysis, and takes substantial time and resources, as well as back-and-forth with both parties. In the meantime, you’re likely losing business. See How To Remove Counterfeits From Alibaba.

So the lesson here is two-fold. First, make sure you’ve identified your intellectual property and that you’ve taken every step possible to register and protect it. Second, if you suspect a company is selling a counterfeit of your product, contact your attorney immediately and develop a strategy for blocking the counterfeit sales, whether through direct communication with the counterfeiter, or by working with the relevant online retail platform. There is often much that can be done to stop a counterfeiter before resorting to filing a lawsuit, and ending up with potentially un-collectable judgment.

International cannabis lawsI have been traveling for the past couple of weeks in Japan and Taiwan, so I thought I’d write a brief post about cannabis in East Asia. In addition to having a cannabis business practice, our firm’s other main focus is on international business — we have lawyers in Beijing and in Barcelona — so East Asian marijuana businesses would fit nicely into our niche practices.

The problem is that cannabis legalization still seems a long way off in these countries. Anecdotal information isn’t super helpful, but I was really struck in Japan by how strongly most people I talked to felt about marijuana remaining illegal. It felt like the attitude of the Just Say No campaign of the 1980s and 1990s has fully seeped into the culture. There seems to be a feeling that marijuana is a drug and drugs are bad and that marijuana is clearly very different from alcohol and tobacco. Similar to the United States there is also a criminal argument. People in the U.S. are often told that if you buy on the black market, your money will probably end up in the hands of the Mexican cartels. In Japan, they say the same thing, but it’s the yakuza (Japanese organized crime) who are the bogeymen.

Several months ago, a former actress, Saya Takagi, was indicted for possession of marijuana when authorities in Okinawa found 55 grams of marijuana in the home she shares with two housemates. Before her arrest, Takagi has been a medical marijuana activist in Japan and had run for the legislature on a medical marijuana platform, but gained relatively little support. In a sad story, Japanese authorities went so far as to arrest a man for using medical marijuana to help alleviate symptoms of liver cancer. That man, Masamitsu Yamamoto, died of liver failure while his criminal trial for possession was ongoing. Despite all of that, cultural attitudes seem cemented in place.

The type of rhetoric I heard about marijuana in Japan was similarly stated by Taiwanese and Chinese people I spoke with as well. Many people in China assume that if something is related to drugs, the triads (Chinese organized crime) are involved.

In searching for something to tie together why attitudes toward marijuana are so hostile, the most glaring possibility is China’s sordid history with opium. In the mid nineteenth century, the Qing dynasty in China fought two wars with the United Kingdom, the First Opium War and the Second Opium War. In these wars, the British fought for, among other things, the right to continue selling opium into China, where a huge addiction problem had been developing throughout the nineteenth century. The British were successful in these wars despite being outmanned, and the wars ended, specifically the First Opium War, with treaties being signed that were heavily in the United Kingdom’s favor (China gave up Hong Kong in the first one). China was basically forced to keep opium legal and allow the British to make money off of its addicted citizens, which had a devastating effect in China. Opium specifically, and drugs generally, are now tied in the cultural memory to the humiliation of these wars (though the British come off as worse actors historically).

This is all without mentioning the effectiveness of the United States as an international drug control ambassador. The U.S. tied all sorts of development funds and other economic relations to harsh, U.S. style drug criminalization throughout the 20th century. In many of the countries that we had relationships with, the diplomacy worked, and drugs were portrayed as one of the greatest evils in society.

BESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswyBESbswy

Throughout East Asia, there is a widely-held deep-seated belief that drugs are bad and have harmed society in the past. In the United States, many people feel the same way, but we are largely removing marijuana from the larger umbrella of “drugs” in the culture. That separation is not happening right now in East Asia, and it may not happen for a long time. In the United States, it is easier for ideas that are outside the mainstream to find a footing because of our ability to maintain a counterculture. Then, social changes can seep from the counterculture into the mainstream. Asian countries tend to be a little more homogenous in those attitudes, so changes in ideas have a tougher time gaining initial footing. Still, you are starting to see a little more activism in East Asia dedicated toward legalization, so we may see some changes over time. But I wouldn’t expect it any time soon.

American lawyer in BarcelonaI spent last weekend in Barcelona attending Spannabis. Our Barcelona lawyers constantly get inquiries from serious international businesspeople wanting to start a cannabis social club or some other sort of cannabis business in Spain. And with more than 200 medical marijuana social clubs in Barcelona alone, I wanted to go there to meet with key industry players to learn more about what is going on with marijuana in Catalonia’s capital city and in the rest of Spain.

Barcelona and medical marijuana felt to me like some combination of California, Oregon, and Washington seven years ago. Namely, it feels like an unregulated, quasi-commercial gray market chalk full of “collective” non-profits and rotating patient members, unclear laws and inconsistent enforcement of those laws. For a breakdown on the current medical marijuana laws in Spain and in Barcelona, go here. This unclear and pioneer atmosphere was also in full force at Spannabis, which was in many respects just like pretty much every other marijuana trade show/expo I’ve attended in the United States: light on serious education about marijuana laws and regulations and heavy on promoting marijuana consumption and on seeking to preserve the counter-culture. But with cannabis cups and consuming events dwindling in the U.S. from increasing state marijuana regulations, I would be remiss if I did not mention how the Spannabis fairgrounds managed to maintain a steady cloud of overhanging marijuana smoke from its more than 3,000 attendees who openly and consistently consumed despite the presence of law enforcement.

Spannabis had only a single panel on the legality and rules surrounding Barcelona’s (mostly medical) marijuana social clubs and the panelist gave little detail or explanation about the law that enables cannabis clubs to operate. That panel was made up of one criminal defense attorney telling attendees about the national and local government’s conflicting policy positions on health and law enforcement and the rights of individuals to consume cannabis for medical use. Needless to say, since our cannabis lawyers represent the business side, I didn’t this panel very helpful. More importantly, this panel served as just another indication that Barcelona and Spain as a whole have just not yet really “arrived” yet as destinations for those seeking to form and operate a cannabis business fully compliant with local (in this case Barcelona), provincial (Catalonia) and federal (Spain) laws. Fortunately, our Spain lawyers mostly focus on representing ancillary cannabis businesses and CBD businesses, along with the standard fare of helping foreign companies in all industries seeking to form a business in Spain and make a go of things there.

But as many in the industry there were quick and emphatic about telling me, the cannabis scene in Barcelona and in Spain is slowing maturing and slowing getting “more legal.” As we wrote just last week, the regional Parliament of Catalonia has proposed reforms in line with a 2014 initiative advocated by Regulacion Responsible in advance of the 2014 Spain national elections. The initiative’s aim was to create a framework for the national reform of cannabis laws to permit regions like Catalonia and cities like Barcelona to set their own cannabis policies. Though the 2016 legislative initiative stalled, it has recently reemerged and anticipation is building for a revised version of this bill that would mean increased regulation for legalized marijuana businesses on a regional basis. Given the inconsistent enforcement of current laws (within both Catalonia and Spain) and the lack of meaningful or comprehensive business regulations, such reforms cannot come soon enough to better protect and give more structure to those cultivating and distributing marijuana for and to patients. Patients would also benefit from such regulation as it would increase both transparency around the sourcing of cannabis products and cannabis quality assurance standards.

Even though marijuana social clubs in Spain exist in a risk-laden gray area, it’s clear that manufacturing and distributing CBD is a popular and, more importantly, legal practice in Spain and Barcelona (in contrast to the United States). Indeed, the majority of booths on the exhibitor floor at Spannabis focused on hemp seeds (there was even a company there from Humboldt County) and CBD-based products. Manufacturing and distributing cannabis paraphernalia or equipment used for consuming, cultivating or handling are also legal and ancillary companies are alive and well in Barcelona, just like in most of the U.S. This is why foreign investors looking at Spain are mostly focusing on financing, starting, managing or assisting ancillary companies and not so much on marijuana social clubs, all of which are non-profit because of existing laws prohibiting commercial “trafficking.” The Arcview Group (well-known for angel investments in ancillary marijuana businesses) held an investor meeting in Barcelona for the first time last week.

Barcelona’s medical marijuana marketplace remains immature and risky (these were the words used by many of those with whom I spoke while I was in Spain), but it no doubt has tremendous potential. Once local governments in Spain are given the freedom (and they might soon) to take the reigns on cannabis regulation and to create a better business atmosphere for cultivators, manufacturers, and distributors, Barcelona will no doubt quickly become a major marijuana city in terms of popularity, investment, and access. The lawyers in our Barcelona office can hardly wait.

Cannabis exportsIsrael is moving toward authorizing the export of medical marijuana. Israel is an example of how advanced a market can get with a relatively small number of potential customers. With only around 23,000 patients, Israeli’s medical marijuana businesses have thrived, benefiting from the country’s open approach to research, unlike in the United States. So, how will potential Israeli exports affect markets in the United States?

Countries can regulate trade on two fronts — outgoing goods (exports) and incoming goods (imports). On the export side, countries will generally have limits or bans on the export of munitions or military items, items that have military applications, and items intended to go toward countries or individuals that the U.S. has designated under its sanctions regime. For imports, countries will generally track what is coming in for customs purposes to levy import duties and will require proof of licensure for the import of regulated goods that require licenses to possess. Israel may allow the exports, but it doesn’t mean that the United States will allow the imports. Because marijuana is still a controlled substance that is illegal to possess without permission from the DEA, medical marijuana patients in the United States likely won’t be able to import marijuana for their own use.

But for researchers, access to Israeli medical marijuana strains would be a huge boon. For years, the only marijuana researchers can use has been controlled by the National Institute on Drug Abuse at a licensed facility at the University of Mississippi. This has been a problem because NIDA’s Mississippi marijuana has often been found by researchers to be of inferior quality, and many research projects have ground to a halt after receiving all required licensing and permits because the NIDA facility simply didn’t have the type of marijuana that needed to be researched. In August, the DEA announced a new policy that would potentially expand the list of permitted facilities for the cultivation of cannabis for research. In that policy statement, the DEA used the Single Convention on Narcotics to provide it some cover for its continued limitations on cannabis growing for research. The primary limitation for those permitted by the DEA to cultivate marijuana is that they receive written permission from the DEA each time that they distribute marijuana.

The DEA continues with these limitations for a number of reasons as we have discussed here and here. But the DEA’s best arguments for its ongoing limitations are based on the U.S.’s obligations under the Single Convention. Articles 23 and 28 of the Single Convention make clear that countries that allow cultivation of cannabis for research purposes must ensure that research marijuana not be diverted to the illegal market. This is only a problem for the DEA domestically when the cultivation is in the United States, though. If the DEA licenses importers, only a limited quantity of marijuana comes into the United States, and protection against diversion from the grow operation is the problem of the exporting country.

The DEA has authorized importation before. In December 2015 it granted Catalent CTS, LLC of Missouri a registration to import “finished pharmaceutical products containing cannabis extracts in dosage form for clinical trial studies.” These imports would presumably be from GW Pharmaceuticals, which has a massive facility in the United Kingdom.

But Israel’s medical marijuana cultivators have a strong reputation around the world, and researchers will be eager to run trials with strains of cannabis they cannot get anywhere else. It will take some time for Israel to move the marijuana export allowance through its legislature (it has only been voted out of committee), but don’t be surprised if a number of U.S. based researchers start applying to the DEA for import permits and start getting their cannabis from Israel.

Barcelona lawyersOur Barcelona lawyers have lately been receiving a steady stream of calls about producing and distributing cannabidiol-based products around the world, from Spain. Cannabidiol  (CBD) is a compound found in cannabis but unlike tetrahydrocannabinol (THC), the compound in cannabis that gives users a high, CBD is non-psychoactive. Studies suggest CBD can be effective in treating epilepsy and other neuropsychiatric disorders including anxiety and schizophrenia. CBD may also be effective in treating post-traumatic stress disorder and may have anxiolytic, antipsychotic, antiemetic and anti-inflammatory properties. With so many potential benefits, it should come as no surprise that our Barcelona attorneys are so often asked about the legality of CBD oil in the European Union?” In short, it depends on what part of the cannabis plant from which the CBD oil was derived.

CBD can be extracted from marijuana plants (cannabis sativa) or from industrial hemp plants. Both are cannabis varieties but grown for a different purpose and with a different “legal personality” reflecting the legal status of extracted CBD oil in the EU. Hemp has been cultivated throughout the world for industrial and medical purposes, and for the production of useful objects such as clothing, candles, paper, and thousands of other products. Hemp oil and hemp seeds also contain many essential nutrients. In Europe and in Spain, hemp must be grown under EU regulations. Industrial hemp must contain no more than 0.2% THC on a dry weight basis. If the EU criteria are met, then a hemp producer may obtain EU certification for the product. Failure to follow protocol can lead to trouble. Local Spanish farmers producing hemp are right now facing criminal charges for crimes against public health for having not fulfilled current regulations in production. This adds uncertainty for foreign investors in finding the right provider of raw material. Medical marijuana contains high levels of THC, concentrated mainly in flowers and trichromes of the plant.

Those wishing to import CBD based products into Spain face labeling requirements. The number of CBD products available on the Spanish market has increased but most consumers are unaware of the exact amount of CBD they should take, or do not know the exact composition of the CBD oil or tincture they are buying. Clear labeling is essential when distributing CBD in Spain. A product’s label should describe the exact concentration of CBD as an active ingredient, the content of the solution, the specified amounts of each ingredient, the manufacturing method used, and the instructions for use and dosage. The label should also refer to a website with more detailed information.

Uncertainty also comes from a recent change in US law. Previously, the legal status of CBD products in the US also turned on the part of the cannabis plant from which the product was extracted. However, the Drug Enforcement Administration recently promulgated a rule creating a new “Controlled Substances Code Number” for “Marihuana Extracts” and extends that classification to extracts “containing one or more cannabinoids from any plant of the genus Cannabis.” CBD is a cannabinoid and hemp is a plant of the genus Cannabis so the rule explicitly applies to CBD products sold in the US. Though we vehemently dislike this new rule, it does mean that companies should not distribute CBD products in the US unless they are doing so pursuant to state law in a state where marijuana is legal in some form.

The Spanish market has an appetite for CBD dietary supplements that is not being met by the many other plant-based dietary products being launched and accepted by the Spanish public. The opportunities for CBD products are clearly there in both the EU and in Spain, but this is a complicated legal arena that calls for caution.

Canada cannabis trademarksFor quite some time now, my firm’s cannabis lawyers have been working with Canadian clients looking to enter various state-legal markets for cannabis in the United States. Now, with recreational cannabis legalization poised to happen in Canada, we’re predicting even more collaboration between Canadian and U.S. cannabis companies. And one of the ways companies are already building cross-border collaborations is through IP and brand licensing deals, which raises the issue of trademark protection.

According to Canada’s health minister, federal legislation to legalize marijuana will be introduced in spring 2017. In the meantime, many Canadian companies are pursuing opportunities to partner with cannabis businesses in the United States to gain valuable industry experience, and to establish their brands in anticipation of going to market in Canada.

When Canadian clients are preparing to move into the U.S. market, one of the first questions they ask is if they can simply use their existing Canadian trademark registration as the basis for obtaining a trademark registration in the U.S.. The answer to that question is no. To obtain a trademark in the U.S., the applicant must make actual use of that mark in U.S. commerce. A Canadian applicant can also file a federal trademark application on an intent-to-use basis if they have a bona fide intent to sell their goods in the United States.

When applying for a trademark in another country, regardless of your country of origin, it is important to perform a clearance search on your mark to make sure the mark is available in the new country. Just because a mark is available in Canada, doesn’t mean the same mark will be available in the United States, or vice-versa. And even if there are no similar marks registered with the USPTO, it is also important to perform a clearance search to determine whether there are any conflicting state trademark registrations, or any companies with superior common law rights in your mark. This means that if you know you will be operating in both Canada and in the United States, you should choose a brand name you know you can register as a trademark in both countries.

Another important thing to note is that filing fees are structured differently in the U.S. than in Canada. In Canada, there is one fixed fee for any trademark application, and that fee is relatively low. In the United States, the fee will depend on the number of classes of goods and/or services the application covers.

Canada does not require a specimen of use for trademark registration or renewal purposes, but the U.S. requires a specimen be filed with every trademark application based on actual use. This specimen must show how the trademark is being used on the relevant goods and/or services, and may include packaging, labeling, or samples of advertising of services such as brochures or signage.

And finally, whereas Canada has only a single trademark register, the U.S. has what are referred to as both a “principal register” and a “supplemental register.” The supplemental register provides limited protection for certain marks that do not qualify for registration on the principal register due to, for example, mere descriptiveness. Registration on the supplemental register is limited to marks that are already in use in the U.S.. The supplemental register offers benefits to marks deemed descriptive, including the ability to use the ® symbol. It also may be used to prove exclusive use of the mark for a five-year period, which is one of the requirements for proving distinctiveness in order to transfer the mark to the principal register.

With these significant differences between Canadian and U.S. trademark law, it is important to consult with experienced international trademark counsel when pursuing trademark applications in both countries. And if your company is considering doing cross-border work, it’s important to explore whether your trademark rights can be utilized sooner rather than later.

Foreign cannabis investmentIn addition to my work on corporate, finance, and transactional issues with marijuana-related businesses, I also work with my firm’s foreign direct investment group. We have been getting a lot more interest recently about foreign investment into the U.S. cannabis industry, so today’s post will be a brief primer on some of the legal issues involved in this tricky space. As would be expected, much of this interest is from Canada, Spain, Israel, The Netherlands and Germany, with a bit from Croatia, Chile and China as well.

What does foreign direct investment mean? In general, foreign direct investment (FDI) refers to any type of cross-border transaction where a company or investor from Country A invests money in a company located in Country B. It generally doesn’t refer to dumping money broadly into stocks and bonds — it is specifically about a concentrated single-enterprise investment.

FDI exists in several forms. Foreign investors can start a new company and can finance and build it from the ground up. They can participate in a joint venture with U.S. partners. They can wholly or partially acquire a U.S. business. They can also take a lighter touch, where they provide primarily branding and process support while having U.S. parties take on the bulk of the financial risk — the basic franchise model.

State Cannabis FDI Issues. In the marijuana industry, we have already seen large FDI projects in cannabis ancillary services. Foreign investors have opened up domestic companies for the manufacture and import of cultivation equipment like grow lights and hydroponic equipment, processing equipment like automated trimmers and extraction machines, and associated inputs including soil, fertilizer, vapor pen batteries and cartridges, and more. We have also seen large amounts of foreign money come in for cannabis real estate projects. In addition to buying the real estate, the foreign investors put money into greenhouses, grow lights, storage facilities, and more to offer turnkey cultivation and processing facilities for lease to local businesses. These companies are largely unregulated at the state level, and their foreign investment issues are similar to non-cannabis businesses, dealing with things like registering as U.S. taxpayers for partnership taxed businesses, complying with FIRPTA, and dealing with immigration issues.

For firms directly involved in the buying and selling of cannabis, state restrictions become more of a concern. States like Washington do not allow anyone who is not a state resident (much less not a U.S. resident) from having any profit interest in a marijuana business. Even Oregon, which has the most liberal ownership restrictions in the country for marijuana businesses, presents some unique issues. State regulations and state laws are written with U.S. residents in mind. Though Oregon does not require state or even U.S. residency to have an ownership interest in a marijuana business, it is unclear how Oregon would deal with foreign owners that need to get a criminal background check. Neither state officials nor the FBI are likely to have any real information on foreign nationals that haven’t had prior contact with the United States. Questions remain regarding how states would deal with foreign owners of marijuana businesses. 

What about federal criminal law? The Federal Controlled Substances Act doesn’t differentiate between activities that are international, interstate, or fully intrastate in nature. Possessing, manufacturing, and distributing marijuana are illegal federally regardless of where the company’s owners live. Still, there are a couple of criminal statutes that add fuel to the fire when interstate and international commerce are involved. 18 U.S.C. § 1952, for example, criminalizes traveling or using the mail in interstate or foreign commerce with intent to distribute the proceeds of marijuana sales.

More questions arise when considering foreign ownership in the context of the Department of Justice marijuana enforcement memoranda that cannabis-legal states are working under. The main takeaway from the August 2013 Cole Memorandum was that if the states want to keep federal law enforcement away, they need to make sure their regulations prevent state license-holders from violating the various federal enforcement priorities. One of those priorities was that state regulations need to prevent “revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels.” If the state and federal criminal background check databases don’t have extensive coverage on foreign crimes, how can the state have faith that the foreign investors don’t fall into one of those categories? For now, with no broad pronouncements coming out, it appears that the federal government is taking a wait-and-see approach to foreign ownership of state cannabis businesses. It is up to state cannabis business participants and the states themselves to ensure that foreign owners do not violate federal enforcement priorities.