marijuana cannabis federal policy
Let’s hope so, when it comes to prohibition.

The election of Donald Trump as president of the United States caught many pundits and prognosticators off guard. President Trump’s victory also instilled a level of uncertainty in America’s burgeoning state-legal cannabis industry. During the presidential campaign, Trump routinely professed his adherence to states’ rights when it comes to cannabis legalization (at least for medical cannabis activities). Once elected, however, President Trump appointed known cannabis prohibitionist Jeff Sessions to be his choice as U.S. Attorney General for the Department of Justice (DOJ) and cannabis operators went from feeling uncertain to outright fear.

It now appears that those fears may have been unfounded. After his confirmation, Sessions didn’t immediately seek to enforce federal laws against marijuana operators (to the pleasant surprise of many in the cannabis industry). The honeymoon lasted until January 4, 2018. Just four days into adult-use cannabis sales being legal in the state of California, Sessions formally rescinded the Cole Memo and the cannabis industry was once again thrown into turmoil. The rescission of the Cole Memo, when added with the Environmental Protection Agency’s refusal to register pesticides on cannabis crops and the Federal Drug Administration’s (FDA) threatened crackdown on medical cannabis claims, painted an ominous picture for the cannabis industry throughout the United States (although some of us were more optimistic).

It’s been over four months since Sessions rescinded the Cole Memo and although he’s rattled his saber on some occasions, the dreaded crackdown has not occurred. For that we may have Russia to thank. Sessions’ self-recusal from the DOJ’s investigation into Russian government meddling in the presidential election has made him persona non grata in the Trump administration — thereby placing his priorities at the very bottom of President’s Trump list.

Rather than a return to federal enforcement actions, we’ve begun to see quite a few positive developments as of late. Last week, President Trump told U.S. Senator Cory Gardner (R-CO) that he was committed to supporting a legislative solution to the tension between state’s that regulate cannabis activities and federal law (which we covered here). This could be a very important development, and let’s hope that this is one issue in which the President doesn’t change his mind.

Besides the commitment that the President made to Senator Gardner, there have been a number of other developments that have given cannabis businesses a reason to be optimistic:

  • The FDA just released a report that a CBD based drug has shown to have positive effect on those that suffer from seizures and epilepsy. This is a big blow to the federal government’s position that the cannabis plant has no medical value.
  • U.S. Senator Mitch McConnell (R-KY) recently introduced a bill in the Senate that would authorize hemp as an agricultural product. Any progress in the federal legalization of hemp will eventually also benefit marijuana legalization.
  • Senators Orrin Hatch (R-UT) and Kamala Harris (D-CA) sent a letter to the DOJ and the Drug Enforcement Agency, calling on them to increase the pace of medical research in cannabis. There have been approximately twenty-five applications submitted to the DEA to produce federally approved research-grade marijuana but none of them have been approved.
  • U.S. Representative  Dana Rohrabacher (R-CA) recently issued a statement that he plans on introducing a stand-alone bill that will respect a state’s right to regulate cannabis and would make the Rohrabacher-Bluemenaur Amendment permanent.

Taken as a whole, these are all encouraging developments– especially considering their bipartisan support. However, this is not the time to rest on our precarious laurels. The November mid-term elections will be on us before we know it and it will be up to all of us to elect officials that are against the government’s draconian war on cannabis. We can’t leave this up to Russia to decide for us, after all.

marijuana intellectual property licensing
Licensing agreements can get complicated. Start with who owns what.

We’ve written extensively about the potential pitfalls of intellectual property (“IP”) licensing deals, which are prolific within the cannabis industry. (For a few select articles, try here, here and here). Recently, news broke of another licensing-related lawsuit, this time involving Tommy Chong. According to the lawsuit, Chong and his son allegedly conspired to steal profits from Evergreen Licensing LLC. The complaint seeks damages for breach of contract, fraud and unjust enrichment.

The complaint alleges that after three years and $1 million spent on the project, Chong and his son conspired to “take it all away, even hacking into Evergreen’s Gmail account in order to misappropriate social media sites that plaintiffs created for the project.” The plaintiffs further allege that they were cut “entirely out of the picture, the project and the revenue and profits the project was going to generate and is generating.” It all sounds pretty unfair.

Unfortunately, these types of allegations come as no surprise given some of the proposed deals that have come across our desks. IP licensing is often seen as a quick and easy way to enter the marijuana industry, without having to clear the hurdles of state and local licensing and regulatory compliance. But unfortunately, this simply is not the case. These deals are complicated and fraught with unique cannabis-related issues beyond those posed by state and local regulations.

In addition to regulatory compliance, those contemplating a cannabis-related IP licensing deal need to understand the fundamentals of intellectual property, and this often begins with determining who actually owns what. In the cannabis industry in particular, information, strain names, and industry terminology have been shared freely since long before state-level legalization, and this compounds the difficulty faced by cannabis business owners in protecting their IP.

Ownership of IP in the cannabis industry is fraught with issues, as we’ve discussed before, in large part because the USPTO will not issue federal trademark registrations for cannabis-related marks. Far too often, cannabis companies come to us with proposed licensing deals where basic due diligence quickly reveals the licensor simply does not own what it claims to own.

If you’re looking to license IP from another company, here are the most basic questions you should be able to answer about that 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 an “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 list is only the beginning of the questions that will need to be asked and answered, but failing to address these issues at the outset of a deal is a recipe for litigation, as we see in the case of Tommy Chong. As a business owner considering entering one of these deals, don’t be distracted by big names or big promises: If the IP doesn’t exist and if ownership cannot be demonstrated, there is no real value to be had. Although IP licensing in the cannabis industry is complex, there are creative and valuable solutions to be had, but those require a solid understanding of both IP law and state and local cannabis laws to execute.

There are no shortage of employment laws related to cannabis businesses.

Cannabis businesses, as part of a highly regulated industry, have a lot of rules to follow. In addition to state regulatory rules, cannabis businesses have to follow a multitude of other state and federal laws specific to employment. Among these, the subset of wage and hour laws are particular, fact-specific, and can be some of the most difficult to comply with. Unsurprisingly, even the most sophisticated of cannabis business owners may be unaware of some of the more obscure wage and hour laws.

When it comes to cannabis employment matters, one of the questions I see most frequently relates to final paychecks. Like many states, Oregon has complicated laws surrounding final paychecks. Knowing the requirements and complying with them to a T can save money and expensive litigation. And we have definitely seen a recent uptick in cannabis litigation related to employment (see our posts on recent filings here and here).

To begin, timely payment of final paychecks in Oregon depends on how the employment relationship was separated. If an employer terminates an employee, or the employment relationship is terminated by mutual agreement, the final paycheck is owed at the end of the first business day after the termination. This means that if you plan on terminating someone, have payroll prepared to issue a check immediately.

If, on the other hand, an employee quits with at least 48 hours notice, the final paycheck is owed on the employee’s last day of employment. This may seem harsh, and it can definitely create some logistical headaches, but there is little wiggle room on this statutory requirement.

If an employee quits without 48 hours notice, things are a bit easier on the employer’s side. The final paycheck is due within five business days, or at the next regularly scheduled payday, whichever is sooner. If the employee’s time records are required to calculate the amount owed, and they are unavailable, the employer must pay the employee what it reasonably believes is owed. If the employee later provides the time records, the employer must issue payment for any remaining amount owed within five days of receipt of the time records.

Failure to timely pay a final paycheck comes with strict and hefty penalties. Penalty wages begin from the due date of the final paycheck. Penalty wages are calculated as the employee’s regular hourly rate for eight hours per day until paid or until legal action is commenced.  Penalty wages are tricky and continue even if you have paid the employee their regular wages.  For example, let’s say an employee quits with at least 48 hours notice. She is given her final paycheck three business days after she quits. Penalty wages began to accrue on her final day, but the final paycheck did not include penalty wages. Despite the fact that she was paid her final wages, penalty wages continue to accrue until the penalty wages are paid. Penalty wages continue for 30 days or until legal action is commenced.

Penalty wages only kick in if an employer willfully fails to timely provide a final paycheck. “Willfully” sounds like it requires intent by the employer to avoid paying the wages, but court cases make it clear that much less is required. In fact, Oregon courts only require that some sort of effort by the employer be shown to make the final wage payment. Without this showing, a court will find that the employer has “willfully” fail to pay final wages.

There is only one real way to avoid wage and hour lawsuits for your marijuana business: Ensure that your practices comply with the law. The ending of employment relationship can come with a lot of stress and potential litigation. Learn and comply with wage and hour laws to reduce exposure. If you are unsure if your practices comply, it’s best to have an outside expert like an employment attorney review your practices.

california alameda marin marijuana
Alameda and Marin Counties are moving ahead, slowly.

Our offices in San Francisco and Los Angeles constantly get calls from entrepreneurs looking to launch or expand their cannabis businesses. By far, one of the most challenging aspects for any attorney advising clients in the cannabis industry is staying up to date on all the developments in the Golden State’s 58 counties and 482 cities. And although it’s a daunting task, we work hard to stay on top o things.

Avid readers of our California Cannabis Countdown series are well aware of the ever-changing cannabis regulatory landscape at the local level. Every week there are a number of Board of Supervisors or City Council hearings throughout the state where cannabis-related rules and ordinances are enacted and amended. We are constantly advising our clients about any changes in the cannabis ordinances of the local jurisdictions of interest.

It’s this constant flux of change at the local legislative level that brings me to today’s topic: an update on the counties of Alameda and Marin. We last covered Alameda here and Marin here.

Let’s start with Alameda County. The County passed its most recent cannabis ordinance last September (with some minor amendments since then). That ordinance created a medical cannabis pilot program that authorized up to three dispensaries, and up to four mixed-light and two indoor cultivation permits. The County’s Cannabis Interdepartmental Work Group (“Work Group”) has taken direction from the Planning Department and has proposed to amend their cannabis ordinance to include the following:

  • Authorize adult-use cannabis activities;
  • Allow for up to five dispensaries;
  • Allow for up to ten cultivation permits (only in the East County);
  • Remove cultivation from a pilot program to a permanent use; and
  • Establish a permit fee structure (the fees are quite significant so if the County is serious about bringing operators into the legal market they will hopefully lower the proposed fees).

The Board of Supervisors will meet this Wednesday to discuss these amendments as well as determine whether the County should allow for manufacturing, distribution, and testing. The County has also expressed an interest in the recently released emergency regulations by the Department of Public Health in regard to Type S manufacturing licenses, which we covered here. If you’d like to see Alameda expand the types of cannabis activities it is willing to authorize, showing up is paramount.

As for Marin County, it is still moving at a deliberate pace– some might call it too deliberate. After the County rejected all applications for medical dispensaries, its cannabis ordinance was amended to only authorize medical delivery-only services: Adult-use cannabis activities are still some ways away in Marin County. The County hopes to begin accepting applications this month but that might be overly ambitious. Marin’s delivery-only ordinance only authorizes up to four delivery licenses and applications will be graded on a 100 point scale: Business plan (20 points), operating plan (50 points), and public benefits plan (30 points). Today at 2 p.m., the Board of Supervisors will hold a briefing to discuss the following items:

  • The medicinal cannabis license application;
  • The license application submittal guide (which provides guidance on what to include in your business, operating, and public benefits plan);
  • The owner submittal form;
  • The owner submittal form guide; and
  • The financial information form.

Although these are steps in the right direction, both Marin and Alameda can still make more progress. At the very least both counties should be open to testing laboratories and non-volatile manufacturing. Marin, with nearly 70% of its residents voting in favor of the Adult-Use of Marijuana Act (Prop 64), needs to stop dragging its feet when it comes to allowing adult-use. The slow and restrictive pace of cannabis legislation at the local level is one of the biggest impediments to cannabis operators entering the regulated market. Let’s applaud Marin and Alameda for making progress, but let’s also reach out to our local officials to let them know they can also do better. There are two great opportunities to let them know in person this week.

california cannabis marijuana

Welcome back to “California Cannabis: Scams and Schemes of the Week.” We are publishing this series to shed light on the unscrupulousness of certain attorneys, consultants, and operators in the California cannabis industry, with the goal of establishing a more ethical and regulated industry in the state. You can find last week’s post here.

Scam #1: Attorneys Representing Buyer and Seller and Taking Commission

We continue to see attorneys representing cannabis entities on both sides of mergers and acquisitions, and in addition to taking an hourly rate, they’re taking a commission on the deal (from both parties)! We are seeing the same attorneys appoint themselves as counsel for the purchased corporation. We’ve seen some shocking deals that harm both parties and benefit only the attorney. Most often, troubling information about a business or property is concealed for the benefit of the seller and the attorney, to the detriment of the buyer. We often see good, trusting people get taken for a ride by attorneys with unethical motivations. The incentive to close a deal as quickly as possible to get a commission is at odds with the incentive to conduct careful due diligence. Make sure your agents and attorneys have your best interests at heart, and if a lawyer tells you he or she can represent “both sides” in a transaction, run!

Scam # 2: The $10 Million Plot of Empty Desert Land

We’ve seen some outrageous land deals in California. There are a number desert parcels without any improvements or utilities, in the middle of nowhere, being offered for millions of dollars. Due diligence is key in real estate transactions, especially in the speculative cannabis market. Just because cannabis activity is possible in a certain jurisdiction does not mean an empty plot of desert land there is worth $10 million. Supplying that land with water, electricity, and building out the structure is no small feat. Many remote desert areas lack the infrastructure to supply these parcels with necessary utilities, and the installation of such infrastructure takes many years and substantial cost. Beware.

Scam #3: Work for Equity in My Nonprofit! 

In California, no one “owns” a nonprofit. One cannot buy or sell a nonprofit corporation, and no stock can be issued or authorized by a nonprofit. We’ve discussed this before on the blog.

Still, we have people asking us to review equity agreements where their nonprofit employer is offering stock instead of salary. In some cases, the company offering these fake stock deals may not know any better because they’re being advised by incompetent attorneys. In other cases, however, these companies are knowingly taking advantage of employees who are blinded by the excitement of being part of a bourgeoning industry. Walk away.

Scam #4: Buy My License!

Under MAUCRSA, state licenses are non-transferable. According to 16 CCR 5023(c), if one or more of the owners of a state license change, a new license application and fee must be submitted to the BCC within 10 business days of the ownership change.

Most local cannabis permits are similarly non-transferable. And if they are transferable, most jurisdictions require you to obtain written approval from the local government prior to transfer. Keep this in mind if you’re looking to buy or lease a “cannabis approved” property, There is simply no guarantee you will be able to get a license to operate there.

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If you’ve come across a California cannabis industry scam, we would like to hear from you! Leave a comment below, or email us at firm@harrisbricken.com.

cannabis cryptocurrency bitcoin
Not just yet.

Two of the biggest buzzwords of 2018 have been cyrptocurrency and cannabis. Both industries have seen an tremendous influx of investment from people trying to capitalize on these new business ideas. Almost every week, I see a new event pop up for people who are interested in finding the synergies between these different industries. Everyone knows that banking is a huge problem for the cannabis industry (as we’ve discussed here, here, and here), and many see the obvious connection for how cryptocurrency could help resolve that. However, that connection will not likely occur anytime soon (at least not before the cannabis banking issue is resolved).

The cannabis industry is a highly-regulated industry at the state level, and marijuana remains a strictly controlled substance under federal law. In order to prevent theft, product diversion, and other criminal activity, states have required businesses to use state-run track-and-trace systems. This system also tracks the amount of money businesses are making and where that money is coming from.

Cryptocurrencies are peer-to-peer networks of decentralized currencies that are traded on a public ledger by using blockchain technology. A cryptocurrency platform could allow cannabis businesses to transact with digital currency instead of cash, making the business safer for all players, and bypassing the need for banks in many cases. It sounds like a natural fit. So, why won’t it work for now?

Combining cryptocurrency and the cannabis industry would join two extraordinary and rapidly changing industries. Although the federal government decided it would proscribe marijuana long ago, it has not decided how to manage cryptocurrencies. The underlying blockchain technology is also largely unregulated, and is overseen only by other users on the blockchain (see our articles on blockchain and cannabis here, here, and here). Both cryptocurrency and blockchain have been used by people for money laundering and evading taxes.

A growing number of recreational marijuana states have implemented stringent licensing and control programs to demonstrate the legitimacy of their respective industries to federal government. Bringing in a technology and a payment protocol that has been used for money laundering and tax evasion could delegitimize the progress that the cannabis industry has made. At the very least, if cannabis businesses start running transactions on cryptocurrency platforms, their businesses will see more government oversight from other federal bodies, like the SEC and IRS.

It will be interesting to see if a real crypto/cannabis relationship can emerge to help resolve the banking issue, but for now we have more faith in the underlying technology, blockchain. We will continue to monitor the possible synergies between cryptocurrency and cannabis and update on any developments.

gardner marijuana cannabis
Martin Sheen? Or Cory Gardner? Either way, good news!

In January 2018, Cory Gardner, Colorado’s junior senator (and Martin Sheen doppelgänger) made news by announcing that he would block Trump Administration Department of Justice appointments after Attorney General Jeff Sessions released a memo suggesting that U.S. Attorneys could consider prosecution of federal marijuana laws despite state legalization. In keeping his promise, Gardner has held up about 20 DOJ nominees proposed by the Administration.

Senator Gardner released the following statement today, April 13, 2018:

“Since the campaign, President Trump has consistently supported states’ rights to decide for themselves how best to approach marijuana. Late Wednesday, I received a commitment from the President that the Department of Justice’s rescission of the Cole memo will not impact Colorado’s legal marijuana industry. Furthermore, President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.

Because of these commitments, I have informed the Administration that I will be lifting my remaining holds on Department of Justice nominees. My colleagues and I are continuing to work diligently on a bipartisan legislative solution that can pass Congress and head to the President’s desk to deliver on his campaign position.”

White House legislative affairs director Marc Short confirmed on Friday that Trump “does respect Colorado’s right to decide for themselves how to best approach this issue.”

While no specific legislation has been announced, the Washington Post reports that “Gardner has been talking quietly with other senators about a legislative fix that would, in effect, make clear the federal government cannot interfere with states that have voted to legalize marijuana.”

Sessions has been on the outs with Trump since he recused himself from the Mueller Russia investigation. The Trump Administration’s willingness to back off from Sessions’ attempts to revise the Cole Memo suggests a further wedge between the President and his Attorney General.

Or not. Consult the oracle at Twitter for the latest.

merger cannabis marijuana

The cannabis industry in California in 2018 is still finding its feet on many fronts – with both a regulatory framework and a banking solution being very much under construction. As these normalize, companies will establish their business metrics and get a firmer idea of the size of their opportunity, and then naturally increased M&A activity will follow, as has been the norm in other states, like Oregon and Colorado.

There’s a strong argument to be made that the M&A market for cannabis ancillary technologies will be very active in coming years, with companies having tremendous opportunities for exits at high valuations relative to their business metrics. Certainly those companies that create technologies and prove business models now stand to gain from future expansion in legalization of adult use, and any future, positive change in federal policy. With a few exceptions, such as Constellation Brands (makers of Corona) buying a minority stake in a Canadian medical cannabis company, almost all large U.S. companies cannot be owners in the cannabis industry, meaning the future acquisition of established companies is likely to be at a premium.

M&A activity for direct operators will continue to be driven by regulatory concerns, including local ownership requirements, political pushback against widespread “big marijuana” acquisitions, and the transferability of underlying permits and licenses. State licenses are not transferable in California, or Oregon, and if other states follow this model, then acquisitions are unlikely to be a primary means to achieving scale for direct operator businesses.

Preparing for M&A Opportunities: Get Your House In Order Now

The M&A diligence process is notoriously comprehensive, invasive, and painful – an acquirer is not only confirming the business assets and backing up the numbers, but just as importantly they are trying to avoid acquiring any liability or future regulatory issues. Therefore, by taking the steps below, you not only minimize the pain of any diligence process, but you also get out ahead of any the issues, and even without M&A on the horizon, you’ll never regret paying more attention to organization and compliance in your business. Here are some steps you can take now to best prepare for future M&A:

  1. Create a Secure Data Room. Include everything a potential acquirer wants to see: business and financial records, tax records and all government filings, equity ownership documents including vesting details, key business contracts, contracts with employees, and all agreements with investors. With all this data, did we mention that it must be secure? Look for a provider with encrypted transmission and two-step authorization, and limit those who have access.
  2. Standardize key contracts, and contemplate M&A Scenarios. If your business depends on key contracts with partners, suppliers, distributors, key customers, etc., and those contract all contain a strict “no assignment” clause, then your desirability as an acquisition target will be severely diminished.
  3. Tie Up Loose Ends and Prepare for the Disclosure Schedule. M&A can be a delicate scenario, and a surprising percentage result in disputes – in my experience, 90% of M&A disputes stem from an undisclosed issue of the target company. Hence, the disclosure schedule, which will list every known issue – the company’s key contracts, financing arrangements, and every claim threatened or brought against the company. Therefore, any claims should be resolved prior to the transaction, if at all possible, and all others will need to be disclosed.
  4. Get a Chief Compliance Officer and Document their Work. We’ve written previously about the work of a Chief Compliance Officer, and although it’s a more primary concern for direct operators, even ancillary business should maintain in strict compliance with applicable state laws.

M&A Consultants – Some are Great, Some are Useless, and Some are Downright Dangerous

The cannabis industry, as a whole, is experiencing an explosion of industry-focused consultants, whose levels of competence run the gamut. As an industry still in its infancy, the consulting market hasn’t yet matured, to weed out the bad actors through reputation or elevate the best firms. I regularly hear from clients that past consultants added zero value or (worse yet) badly mismanaged aspects of their business. Also, remember that consultants are not bound by the same ethical rules as attorneys, for example, concerning confidentiality and conflicts of interest.

So for consulting services in 2018, it’s very much buyer beware, and you should assume no level of competence until competence is demonstrated. If you are hiring an M&A consultant – consider that because so few large-scale cannabis M&A deals have been successfully consummated to date, you may be better served to retain a top M&A consultant that services businesses generally, and then rely on your excellent cannabis-focused attorneys (*ahem*) to guide you on all of the cannabis-related aspects.

Finally, if you have your house in order as described above, you may have much less of a need for an M&A consultant and a much smoother time through the M&A process. Ultimately, that’s what it’s all about.

For more on cannabis company acquisitions, see:

marijuana trademark canada
Some U.S. companies are looking north for trademark protection

With U.S. federal trademarks being impossible to obtain for cannabis goods and services that violate the Controlled Substances Act, my trademark clients are beginning to ask questions about their options for international trademark protection. Canada, having legalized cannabis and being our closest neighbor, is usually one of the first countries my clients are interested in.

According to a recent piece written by a group of Canadian attorneys at Torys LLP, the number of trademark filings covering cannabis-related goods and services in Canada has increased dramatically since talk of cannabis legalization began.

Canada has made some big changes to its Trademarks Act that will likely be implemented early next year, and these changes will make it much easier to register trademarks. In particular, Canada will remove the requirement that a trademark be “used” prior to registration issuing. In the U.S., an applicant can file a trademark application prior to making use of their mark in commerce if they have a bona fide intent to do so (this is called an “intent to use” application), but in order for a registration to actually issue, the applicant will need to submit a “Statement of Use” to the USPTO within six months from the date the Trademark Office gives a “Notice of Allowance.” One of the policy reasons for this “use” requirement in the U.S. is to prevent trademark “squatting,” where individuals register marks without any intent to use them in order to either prevent others from making use of the marks, or to extract payment from those wishing to do so.

It is indisputable that by removing the “use” requirement for trademark registration, Canada will be opening the doors to “trademark trolls” and “squatters.” According to the Torys attorneys, there are nearly 2,000 trademarks listed on the Canadian trademarks register with goods or services containing the words “cannabis” or “marijuana.” More than half of those applications were filed since January 2017 (apparently, as of five years ago, fewer than 100 such applications had been filed, making for a 1,900 percent increase in cannabis-related Canadian trademark applications). This rush to file for trademark protection makes sense, where companies will be forced to either register their marks, or risk losing them to third parties or squatters.

But given how relatively straightforward it is to obtain a trademark for cannabis goods or services in Canada, there are many restrictions placed on how those cannabis trademarks can be used via the proposed cannabis regulatory framework. For example, cannabis trademarks may not be used to promote cannabis goods:

  • In a manner that appeals to children;
  • By means of a testimonial or endorsement;
  • By depicting a person, character or animal, whether real or fictional;
  • By presenting the product or brand elements in a manner that evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk, or daring;
  • By using information that is false, misleading or deceptive, or that is likely to create an erroneous impression about the product’s characteristics, value, quantity, composition, strength, concentration, potency, purity, quality, merit, safety, health effects or health risks;
  • By using or displaying a brand element or names of persons authorized to produce, sell or distribute cannabis in connection with the sponsorship of a person, entity, event, activity or facility, or on a facility used for sports, or a cultural event or activity; and
  • By communicating information about price and distribution (except at point of sale).

With the exception of the fourth point, which could be construed as somewhat vague and certainly subjective, many of these restrictions on advertising and labeling are contained in the various state cannabis regulatory regimes here in the U.S., so these limitations should come as no surprise to cannabis business owners.

For cannabis business owners in the U.S., it may make strategic sense to consult with a trademark attorney with experience filing cannabis-related applications to consider filing for trademark protection in Canada. Successful brands will be those that think globally, not nationally.

washington cannabis license

As of April 1, 2018, Washington marijuana processors are required to hold a special endorsement from the Washington State Department of Agriculture (WSDA) to make marijuana-infused edibles (MIEs). This requirement follows from the WSDA’s appointment to share regulatory authority over MIEs with the Washington State Liquor and Cannabis Board (LCB). The WSDA’s Food Safety Program regulates, inspects and provides technical assistance to food processors generally, regarding product safety issues. Now, the WSDA will conduct similar activities with MIE processors including carrying out enforcement and recalls when necessary.

The endorsement costs $895 initially and $895 for each annual renewal. Applications must be submitted to the Washington State Department of Revenue Business Licensing Service website. Technically, processors are required to hold the endorsements as of April 1, but WSDA is providing a 30-day grace period. Therefore, the clock is ticking on any processors who have not yet acquired this mandatory endorsement.

Note that the endorsement is only available to businesses that already hold a processor license. The LCB is not currently accepting applications for new processor licenses. To add an MIE endorsement, a business or individual must currently have a processor license and only produce MIE products at a single facility. A business or individual cannot add MIE products under a Food Processor license, process MIE products at a facility that processes non-marijuana food products, or process non-marijuana food products at a facility that produces MIE products.

Prior to April 1, the WSDA had contracted with the LCB to inspect the facilities of processors making MIEs, so in some ways, not much is changing. Other than the new $895 fee, processors shouldn’t feel the impact of this regulatory change immediately. The LCB will maintain authority over marijuana activities such as processor license requirements, packaging, and labeling. Processors that are currently in compliance with food-related regulations for MIEs will not need to re-submit food safety information (e.g., floor plan, sanitation procedures) when applying for the MIE endorsement. If there are no changes to ownership, location, or products, WSDA will not require an inspection. Processors that have not produced MIEs before will have to submit additional information to WSDA and LCB. In 2015, the WSDA provided an outline of the basic requirements for processing MIEs and that document is available here.

Looking forward, processors can expect to deal with the WSDA more frequently. The WSDA now has authority to undertake enforcement action and implement recalls. On March 19, the WSDA issued a letter to stakeholders, stating that processors “may experience more frequent inspections, as well as more outreach efforts and industry engagement.” WSDA intends to inspect MIE-producing facilities within 12 months of the endorsement and may collect additional information during those inspections. Processors who make ownership, location, or product changes must submit materials to both WSDA and LCB.

If you hold a processor license that currently produces MIEs, you need to apply for this special endorsement this month to continue operating. This firm is very familiar with licensing procedures and can assist your business throughout the process of applying for this new endorsement. Feel free to contact us with any questions and stay tuned for additional updates.