Intellectual Property/Branding

canada cannabis trademarkNews broke recently that Tweed, Inc., a subsidiary of Canadian cannabis company Canopy Growth Corp., filed a Canadian trademark application on August 31, 2018 for CHRONIC BY DRE, which they subsequently withdrew, apologizing and calling it a mistake. As we’ve written before, the number of trademark filings covering cannabis and cannabis-related goods and services in Canada has increased dramatically since the cannabis legalization process began. This rush to file cannabis trademarks in Canada could have been what spurred Tweed’s employee to rashly file the CHRONIC BY DRE mark without obtaining the artist’s consent and without having any sort of licensing deal in the works. (No matter what jurisdiction you’re in, don’t ever file for trademark protection for a mark that is already affiliated with a celebrity, hoping to beat them to the punch.)

The application filed for CHRONIC BY DRE covered a wide range of goods including body lotion and body creams, essential oils, personal preparations containing cannabis or cannabis derivatives, sunglasses, housewares, jewelry, stationery, pet accessories, clothing, dog and cat toys, beverage products, smoking products and accessories, and “cannabis and marijuana and derivatives thereof, namely live plants, seeds, dried flowers, liquids, oils, oral sprays, capsules, tablets, and transdermal patches.” That’s pretty broad.

For anyone familiar with the trademark application process in the United States, this specification makes Tweed’s registration of the CHRONIC BY DRE mark seem unattainable, but in Canada, it is not (setting aside the fact that Tweed does not have any deal in place with Dr. Dre himself). In the U.S., as we’ve covered extensively, in order to obtain federal trademark protection, your mark must be in lawful use in commerce (or, if you’re filing an intent-to-use application, you must have a bona fide intent to use the mark lawfully in commerce at the time of filing). This precludes the federal registration of any mark for use on goods or services that violate the federal Controlled Substances Act.

And in fact, Andre Young AKA Dr. Dre filed a U.S. federal trademark application for CHRONIC BY DR. DRE way back in 2013, and it was ultimately abandoned. The examining attorney at the time inquired into whether the goods contained marijuana because if they did, the mark would not be eligible for registration.

But back to Canada, where it is possible to obtain a trademark registration for cannabis, and where Dr. Dre would likely be successful (barring other legal obstacles) in obtaining such a registration for CHRONIC BY DRE. Even though it is relatively straightforward 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).

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 whether Canadian trademarks make sense. Because successful brands will be those that think globally, not nationally.

For more on Canadian branding (and marketing) regulations, check out my recent post here.

cannabis litigation trade secrets
Protect them at all costs!

Over the course of the next few weeks and months, we intend to write a number of blog posts about various forms of civil litigation that could arise in future in the cannabis industry. This is the first, and is focused on trade secret litigation.

For those of you who haven’t read some of our earlier posts on trade secret law, here’s a short recap of what trade secrets even are. A trade secret is virtually any form of information, formula, device, method, etc. that is kept secret, and that derives an independent economic value from being kept secret. For example, a cannabis cultivator invents a new process to cultivate cannabis more quickly. That process is valuable not only intrinsically (i.e., because the cultivator can now work faster), but also because it’s secret (because competitors will still be producing cannabis more slowly without the new process). Trade secrets are not limited to technical inventions—they can also include run-of-the-mill confidential information such as customer lists, preferred vendor pricing lists, and so on. The key is secrecy.

Trade secret protection can often be more valuable than patent protection, as trade secrets are kept secret for so long as their owners choose to keep them secret (or until they get released to the public through other means). Patented inventions, on the other hand, are immediately disclosed to the government and anyone with a computer. To boot, a patent owner loses protections after a fixed period of time.

In short, trade secret protection is a great system—if you can keep your secrets secret. But as you can imagine, that can be difficult and expensive to do—and in some cases third parties take your secrets. Thus, litigation is sometimes necessary.

There are a number of ways in which trade secret cases play out, but there are essentially two common fact patterns in the cannabis industry and elsewhere. First, an employee or group of employees leave one company for a competitor and are alleged to take its trade secrets.  Second, a company who comes out with a similar product/device/set of information, and is alleged to have stolen the idea from its competitor.

In the legal world, the theft of a trade secret by any source is referred to as “misappropriation”, and the party from whom the secret was taken can assert civil claims for misappropriation (we won’t address any criminal issues in this post). Until relatively recently, parties were forced to litigate disputes pursuant to various state laws, which are mostly relatively similar. In 2016, the federal Defend Trade Secrets Act (“DTSA”) was passed, which opened up the doors to the federal court system for many plaintiffs who otherwise would have been stuck in state court.

The remedies available under the various trade secret laws vary, but generally include, among other things, damages, injunctions (orders by a court to do or stop doing something), and in some cases, a requirement that the losing party pay the attorneys’ fees of the winning party. The DTSA also allows, in certain circumstances, a plaintiff to obtain an order to seize property that would assist with continued misappropriation of trade secrets.

Why is trade secret law important or applicable to the state-legal cannabis industry? The answer is that the industry is in its infancy, which necessarily means that it will experience great innovation and invention in the coming years—anyone with experience in the industry can attest to that. Unfortunately, and like in any other growth-phase industry, this also means that there may be an abundance of misconduct and theft. Even companies that take steps to prevent misappropriation could be the victims of it in the near future.

Navigating the trade secret landscape may be tough—especially for new cannabis businesses. Spending time and resources up-front to develop safeguards to protect from misappropriation and train employees is critical, even though it may be costly. But by that same token, litigating trade secret disputes can be even more difficult and costly. Consulting with trade secret counsel, both during the normal course of business and after any potential dispute arises, is always a good approach.

cannabis marijuana trademark
Having to re-brand can be pretty painful.

One of my favorite pastimes is perusing the United States Patent and Trademark Office’s (USPTO) Trademark Trial and Appeals Board’s (TTAB) records for disputes involving cannabis, hemp and CBD because there are often valuable lessons to be learned. One such record is the pending Notice of Opposition filed by Heineken Asia Pacific against Hemp Beer Inc., a Colorado company making hemp beer.

As a little bit of background on the trademark opposition process, the owner of a registered trademark can file a Notice of Opposition against a trademark applicant when the opposer believes that the applicant’s pending mark infringes on the opposer’s registered trademark rights. In this case, Heineken owns eight U.S. federal trademark registrations for TIGER, TIGER WHITE, TIGER BLACK, and multiple other variations on the “tiger” marks for “beer, ale, lager, stout, pilsner, porter, and non-alcoholic [malt beverages] beer.”

The applicant in this case, Hemp Beer Inc., makes a hemp beer called “Tiger Hemp Beer,” and has filed for trademark protection with the USPTO for GET THE EYE OF THE TIGER for “beer; beer, ale and lager; craft beers; flavored beer.”

Heineken alleges in its Opposition that “[t]he mark shown in the Opposed Application so resembles the “TIGER” word or design marks previously used in the United States by the Plaintiff, when used or in connection with the goods identified in the Opposed Application, to cause confusion, to cause mistake, or to deceive, and Applicant’s mark is thus unregistrable under § 2(d) of the United States Trademark Act, 15 U.S.C. §1052(d), as amended.”

Now, perhaps the applicant did a search of the TESS database prior to filing its application, and came up with no hits for “get the eye of the tiger” in Class 32 (the class that covers beer). However, a hard lesson that many applicants have learned is that one mark does not need to be identical to another in order to infringe that other mark. And a quick look at Hemp Beer’s branding quickly reveals that they are using a mark (“Tiger Hemp Beer”) that is even more similar to Heineken’s TIGER registrations than the mark for which they’ve filed for federal trademark protection (and it is possible that Heineken has taken separate action on this account).

This serves as a good reminder to conduct a trademark clearance search prior to filing your federal trademark application to make sure that there are no existing “confusingly similar” trademarks to the mark you propose to use. It is also helpful to keep in mind the factors a court will consider in determining whether two marks are confusingly similar (AMF Inc. v. Sleekcraft Boats):

  • Strength of the mark;
  • Proximity of the goods;
  • Similarity of the marks;
  • Evidence of actual confusion;
  • Marketing channels used;
  • Type of goods and degree of care likely to be exercised by the purchaser;
  • Defendant’s intent in selecting the mark; and
  • Likelihood of expansion of the product lines.

“Similarity of the marks” is only one factor, and where the goods are very similar, or where the marketing channels and consumer base is the same, a registered mark may be given a broader scope of protection. The analysis for likelihood of confusion can be quite complex.

Before adopting a new cannabis brand name, we recommend consulting with an experienced cannabis trademark attorney and we also recommend having them perform a trademark clearance search to ensure your brand won’t be infringing any existing registrations. Even if you manage to avoid litigation over trademark infringement, you could still open yourself up to an opposition proceeding with the TTAB months or years down the line, which can be expensive and time-intensive, and should be avoided at all costs.

california cannabis marijuana advertising
Seem likely, anyway.

It’s been a while since we wrote about advertising regulations in California, in large part because the regulations have been a moving target. But with AB 2899 making steady progress, we thought it would be a good time to give a rundown of current Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”) advertising regulations, and what AB 2899 would do to change them.

Currently, Section 26151 of the Business and Professions Code states as follows regarding cannabis advertising:

(a)(1) All advertisements and marketing shall accurately and legibly identify the licensee responsible for its content, by adding, at a minimum, the licensee’s license number.

(2) A technology platform shall not display an advertisement by a licensee on an Internet Web page unless the advertisement displays the license number of the licensee.

(3) An outdoor advertising company subject to the Outdoor Advertising Act (Chapter 2 (commencing with Section 5200) of Division 3) shall not display an advertisement by a licensee unless the advertisement displays the license number of the licensee.

(b) Any advertising or marketing placed in broadcast, cable, radio, print, and digital communications shall only be displayed where at least 71.6 percent of the audience is reasonably expected to be 21 years of age or older, as determined by reliable, up-to-date audience composition data.

(c) Any advertising or marketing involving direct, individualized communication or dialogue controlled by the licensee shall utilize a method of age affirmation to verify that the recipient is 21 years of age or older before engaging in that communication or dialogue controlled by the licensee. For purposes of this section, that method of age affirmation may include user confirmation, birth date disclosure, or other similar registration method.

(d) All advertising shall be truthful and appropriately substantiated.

And Section 26152 states that a licensee (or third-party advertising on behalf of a licensee) shall not do any of the following:

(a) Advertise or market in a manner that is false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific, or technical matter, tends to create a misleading impression.

(b) Publish or disseminate advertising or marketing containing any statement concerning a brand or product that is inconsistent with any statement on the labeling thereof.

(c) Publish or disseminate advertising or marketing containing any statement, design, device, or representation which tends to create the impression that the cannabis originated in a particular place or region, unless the label of the advertised product bears an appellation of origin, and such appellation of origin appears in the advertisement.

(d) Advertise or market on a billboard or similar advertising device located on an Interstate Highway or on a State Highway which crosses the California border.

(e) Advertise or market cannabis or cannabis products in a manner intended to encourage persons under 21 years of age to consume cannabis or cannabis products.

(f) Publish or disseminate advertising or marketing that is attractive to children.

(g) Advertise or market cannabis or cannabis products on an advertising sign within 1,000 feet of a day care center, school providing instruction in kindergarten or any grades 1 through 12, playground, or youth center.

The key with these rules is that all advertising must be tied to a specific licensee and must include that licensee’s license number. So, in the case of a non-licensed third-party looking to advertise a cannabis brand, that company would need to be working with a licensed manufacturer, for example, in publishing those advertisements, and the licensed manufacturer would need to be involved in the advertising such that its identification on the advertisement does not render it false and misleading.

Under AB 2899, the legislature is proposing to do away with the cumbersome requirement that a license number must be included with each advertisement. This would make it much easier for third-parties–including, for example, out-of-state brand licensors–to advertise their products in California, even without a license of their own. Rather than requiring a license number attached to each advertisement, the new legislation states that it would “prohibit a licensee from publishing or disseminating advertisements or marketing of cannabis and cannabis products while the licensee’s license is suspended.” That makes sense to us.

Of course, in addition to state advertising requirements, cannabis licensees should make sure that any outdoor advertising complies with applicable local law. Some local jurisdictions further limit the placement of billboards or signage, or may have other related restrictions. Businesses need to be mindful of that.

We’ll be monitoring AB 2899 closely, as it could give many of our cannabis intellectual property licensing clients more flexibility in how they address the delegation of marketing responsibilities in their licensing agreements. Stay tuned!

marijuana trademark cannabis licenseI’ve worked on many celebrity licensing and endorsement deals, and my firm’s cannabis intellectual property lawyers have received countless inquiries from companies looking to partner with one celebrity or another. And while the best of the deals can be very lucrative (and interesting) for everyone involved, plenty of them fizzle out for one reason or another. Often, the excitement over the prospect of partnering with a celebrity can blind businesses to the bigger intellectual property and trademark issues they should consider before negotiating one of these deals.

Earlier this month, Above the Law published a great article on the potential pitfalls of utilizing personal names as trademarks, as is done in celebrity licensing deals. The author noted the recent trademark litigation brought by a company that owns a registered trademark for SWIFTLIFE for “consulting services in the field of design, selection, implementation and use of computer hardware and software systems for others” against none other than Taylor Swift and her “SwiftLife” app. And while a celebrity’s name and likeness can be protected under rights of publicity or privacy law, this case raises the issue of when and how personal names can be recognized as trademarks.

In the United States, a person’s name can be eligible for trademark protection only if that individual is able to establish secondary meaning for their name. In other words, a celebrity will only be able to trademark their name if, through use of the name, it has come to identify a single source of origin for a particular set of goods or services. And it isn’t enough for the name to be well-known – the name must actually be associated with a set of goods or services in order to qualify for protection. While for a celebrity like Bob Marley, the connection to cannabis goods may seem clear, for many other celebrities, there is simply no connection at all and establishing trademark protection would be difficult (even setting aside the federal issues surrounding cannabis trademarks, which we have written about at length).

Some key takeaways to consider if your cannabis business is looking to partner with a celebrity for a licensing deal are as follows: First, the more unique the name or moniker, the better the chance of that name being protectable. And second, consider whether the celebrity name has a strong association with the cannabis products you’re looking to sell, as this will help determine whether the name could be shown to have secondary meaning. A licensee should be secure in the licensor’s ability to protect what it is licensing, otherwise what is the licensee paying for?

With a number of celebrities having jumped on the cannabis branding bandwagon–including the Marley estate, Snoop Dogg, Willy Nelson, Whoopi Goldberg and Melissa Etheridge, along with many lesser known celebrities who have used their name to promote ancillary cannabis products–these deals are certainly promising. Though trademark registrations are at play for many of these brands, the rights of publicity of the celebrities are at the center of each of these branding deals. Because state law and not federal law regulates the right of publicity, it is not subject to the same restrictions based on legality of use as federal trademarks. This makes enforcement in the event of infringement much easier for celebrities.

It’s important to remember, however, that using one’s name and likeness to sell cannabis is not without risk. Even ancillary companies face the risks posed by federal illegality, since these companies and their financial backers could be subject to charges of aiding and abetting or conspiring to violate the Controlled Substances Act for providing goods and services to cannabis businesses. Given the proliferation of celebrity-branded cannabis, however, this appears to be a risk that many celebrities are willing to take to become early entrants into the cannabis market.

It’s clear that celebrity licensing and endorsement deals in the cannabis industry are trending, but if your company is seeking a celebrity partnership, be sure to assess the deal not only from a business perspective, but from a legal perspective as well. While celebrity trademark rights in the cannabis industry are particularly difficult, rights of publicity have provided celebrities with a powerful tool for establishing and protecting their cannabis brands. This is a real leg up in an industry where federal law has made brand protection such a complex legal issue.

Hacking back isn’t the answer, unfortunately.

As I have discussed for the last two weeks, cannabis businesses have become increasingly vulnerable to cyberattacks. It is natural for a company victimized by data breaches to want to retaliate by hacking back. However, under current U.S. law, which is codified under the Computer Fraud and Abuse Act (“CFAA”), it is strictly prohibited to intentionally access another’s computer without authorization.

Legislators have given some thought to this problem. Most recently, the re-introduction in October 2017 of the Active Cyber Defense Certainty (“ACDC”) Act, a bill sponsored by Congressman Tom Graves (R-Ga) and Congresswoman Krysten Sinema (D-Az), raised questions about the legality of counter attacking. Indeed, the ACDC Act proposes to amend the CFAA and enable victims of cyberattacks to adopt active defensive measures to identify the hackers, destroy information originally stolen from the victims’ networks, and attack the intruders’ servers to interrupt the ongoing attack. Although an eye-for-an-eye form of justice is appealing, unauthorized access to networks is not a good idea. Here is why.

First and foremost, the ACDC Act has not be enacted. This means that the CFAA remains the law of the land, and accessing others’ computer systems without their permission is a criminal offense. Every state law punishes hacking under the computer crime statutes. These crimes carry serious penalties ranging from a class B misdemeanor (punishable by up to six months in prison, a fine of up to $1,000, or both) to a class B felony (punishable by up to 20 years in prison, a fine of up to $15,000, or both).

Second, even if retaliation were legal, most companies would lack the expertise required to safely conduct an offensive cyber operation. It is incredibly difficult to identify individuals and entities behind cyberattacks. Most intruders cover their tracks very carefully by using encryption and by routing strikes through others’ computers. Given this, counter hacking would most certainly result in attacking computer systems and destroying data belonging to innocent third parties.

Then, there is the issue of whether victim companies have the technical proficiency required to effectively take counter measures against cyber intruders. Indeed, the internal tools needed to effectively hack back represent a major undertaking: a high level of expertise, constant vigilance, and huge financial resources. Moreover, it is highly unlikely that companies that could not prevent the intrusion of their networks would manage to take on their attackers on their own digital turf.

Lastly, retaliation by companies that fell victim of a data breach would most certainly impede law enforcement investigations and delete or temper with evidence that could be useful in a prosecution. Unlike law enforcement agencies, companies do not have the relevant technical expertise or diplomatic tools to pursue hackers. Most companies ignore how to preserve a chain of custody that would enable the introduction of untampered evidence at trial. In addition, counter hacking is an incredibly dangerous endeavor because it is very difficult, if not impossible, to see what a company would be up against. In retaliating, a company would run the risk of escalating the situation and of further injuring itself.

As I have discussed before (here and here), no one and no company is immune to cyberattacks. It is understandable that companies, including cannabis companies, are getting tired of being passive and of merely defending against these breaches. However, hacking back is not a feasible option given its illegality and the negative consequences it could have on the retaliating company. When faced with a data breach, don’t let your emotions dictate your actions; instead, stick with a comprehensive plan of action that will help you minimize your damages and let skilled, experienced law enforcement agents do the job of tracking and investigating your attackers.

cannabis marijuana patent litigation

In previous posts, we’ve puzzled about why no one has filed a cannabis patent infringement case, despite the large number of patents granted for cannabis plants and compounds. See here, here, here, and here.

That all changed last week. United Cannabis Corporation (“UCANN”) has now filed what is believed to be the first cannabis patent infringement complaint. The case is United Cannabis Corporation v. Pure Hemp Collective, Inc., case no. 1:18-cv-01922-NYW, in the United States District Court for the District of Colorado.

The patent asserted is U.S.P. 9,730,911, “cannabis extracts and methods of preparing and using same.” The claims in the patent generally cover liquid cannabinol formulations using tetrahydrocannabinol (THC), cannabidiol (CBD), and various terpenes. See, for example, claim 10: “A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is cannabidiol (CBD).”

Although the UCANN complaint does not specify which claims are being asserted, it appears that the plaintiff may focus on CBD-related claims, e.g., claims 10-15, rather than claims for THC. The complaint devotes several paragraphs to discussing FDA’s recent approval of Epidiolex, a CBD-based drug, as we discuss here and here. The complaint suggests that FDA will reclassify CBDs generally as Schedule II or Schedule III drugs. While it is clear that FDA will do a reclassification, it is not clear that it will reclassify all CBDs, rather than just the Epidiolex compound.

In any event, we expect to see more cannabis patent litigation soon, perhaps in Colorado, California, Oregon or elsewhere. Whether it will be a trickle or a flood remains to be seen, but we will be following the UCANN case closely and providing regular updates.

For more on cannabis patents, see our series here:

With implementation of Canada’s Cannabis Act (the “Act”) set for October of this year, many of our clients owning brands that will be sold in both the United States and Canada are beginning to wonder what the implications of new branding and marketing regulations will be. So far, more than 1,500 trademark applications for cannabis and cannabis-related products have been filed with the Canadian Trademark Office, and that number is certain to grow as legalization rolls out.

The Act, through its regulation of packaging, addresses many of the same concerns as certain state statutes in the U.S.: preventing false and misleading advertising and prohibiting advertising that is appealing to children. Some of the key prohibitions contained in the Act are on testimonials and endorsements, the use of real or fictional people, characters or animals, and branding or packaging that connotes “glamour, recreation, excitement, vitality, risk or daring.” Interestingly, there was discussion in the government’s Proposed Approach to the Regulation of Cannabis of implementing a plain packaging regime, something we’ve long suspected could be applied to cannabis.

The new regulations will require that all cannabis products be packaged in a manner that is tamper-evident, child-resistant, prevents contamination, and keeps cannabis dry. Packaging must be opaque. Pursuant to the Proposed Approach to the Regulation of Cannabis, licensed processors must label the package in which the cannabis product is contained in both French and English, and the following information would be generally required:

  • Name and contact information of the processor who packaged the product;
  • Product description;
  • Product lot number;
  • Product weight or volume, depending on the product class;
  • Packaging date (and expiry date, if one has been set);
  • Recommended storage conditions;
  • THC / CBD content (expressed as the percentage of THC / CBD the product could yield, and by unit or dose, if applicable); and
  • Inclusion of the statement: “KEEP OUT OF THE REACH OF CHILDREN”.

Under the Act, it is prohibited to promote cannabis in a manner that is false, misleading or deceptive, or that is likely to create an erroneous impression about its characteristics, value, quantity, composition, strength, concentration, potency, purity, quality, merit, safety, health effects or health risks. This aligns well with what we’ve seen in U.S. jurisdictions with regulated cannabis.

However, interestingly, the Act also prohibits promotion of cannabis brands using foreign media:

“It is prohibited to promote … cannabis, a cannabis accessory, a service related to cannabis or a brand element of any of those things in a publication that is published outside Canada, a broadcast that originates outside Canada or any other communication that originates outside Canada.”

This regulation could have serious implications for brands that are looking to position themselves not only in Canada, but also in other jurisdictions, including the U.S. The Canadian government has made it a priority to ensure that companies cannot evade the Act’s advertising and promotion restrictions by merely promoting the products abroad.

Sponsorship by Canadian cannabis companies will also be prohibited (perhaps even if a particular brand is only sponsoring events or individuals abroad). As such:

“It is prohibited to display, refer to or otherwise use any of the following, directly or indirectly in a promotion that is used in the sponsorship of a person, entity, event, activity or facility:

  • A brand element of cannabis, of a cannabis accessory or of a service related to cannabis; and
  • The name of a person that
    • Produces, sells or distributes cannabis,
    • Sells or distributes a cannabis accessory, or
    • Provides a service related to cannabis.”

Clearly, the implications of Canada’s cannabis advertising regulations will be far-reaching once they are implemented in October. For brands that intend to have a presence in both the U.S. and Canada, it will be particularly important to ensure that no advertisements or promotions produced in the U.S. run afoul of the Act, as they could ultimately jeopardize the license(s) in Canada and open the responsible individuals up to liability. Having an understanding of how Canada’s rules will impact your brand, if you intend to expand beyond the U.S., will be critical in the coming months.

cannabis cybercrime
Protect your business and its data from theft.

To our surprise, many of our clients remain convinced that they are immune to cyberattacks. Yet, cannabis businesses house incredibly valuable information, making them exceedingly vulnerable to these attacks. This misplaced confidence has led numerous cannabis companies to operate without the necessary protective measures. Given the fact that more than 4,000 attacks occur daily, this post briefly discusses how cybercrime is affecting the cannabis industry and provides basic precautions companies should take to reduce the risk of falling prey to cyber hackers.

The most common type of cybercrime is known as ransomware. Ransomware is a form of malware that targets a business’s sensitive information for extortion purposes. This information may include customer lists, trade secrets, financial information and research and development information. Specifically, hackers block access to a database or system until the user agrees to pay a ransom. Not only does the temporary, and potentially permanent, loss of critical data disrupts a business’s regular operations, it also creates massive financial losses associated with restoring systems—assuming the business pays the ransom and that the hacker provides access back to the database—and severely damages the business’s reputation.

Bringing about awareness and training your team is a paramount preventative measure. Indeed, effective precautionary measures can significantly mitigate the risk of falling victim to a cyber infection. Here are a few simple precautions cannabis businesses should take:

  1. Educate Your Personnel: Attackers often enter a business by deceiving an internal user to disclose a password or click on a virus-laden email attachment. You should therefore remind your employees to never click or open unsolicited email attachments. In addition, you should emphasize the importance of not sharing personal passwords to be able to determine how your system was compromised in the event of an attack.
  2. Use Complex Passwords: You should use 12-character or longer passwords and change your passwords regularly.
  3. Enable Strong Spam Filters: Strong spam filters will prevent phishing emails, which purport to be from reputable companies to induce individuals to reveal personal information, from reaching the end users and will authenticate incoming emails.
  4. Set Anti-Virus and Anti-Malware Programs: Setting anti-virus and anti-malware programs will automatically and frequently scan your database and system to detect threats and filter files from reaching end users.
  5. Shred Physical Documents Containing Sensitive Information: Avoid old fashioned dumpster diving by shredding all sensitive information you may have printed or written down.

Although ransomware is the most commonly known and used technique, it is no longer the sole method of attack used against cannabis businesses. You may recall the precarious situation in which MJ Freeway, the giant cannabis compliance software system, found itself in 2016 and again in 2017. The company’s databases were hacked, preventing MJ Freeway from processing transactions and precluding over 1,000 dispensaries from tracking sales and inventories for weeks. These cyberattacks against MJ Freeway revealed a new kind of cybercrime where no extortion demands are made, but rather are used by competitors to destroy valuable data to gain a competitive advantage.

The MJ Freeway case highlights the concerning fact that cybercrime variants are continually emerging, making companies, including cannabis businesses, increasingly more vulnerable to these attacks. Accordingly, cannabis businesses must stop underestimating the value of their data and must protect it by putting in place a comprehensive data security system that will minimize their risk of attack and ensure the continuation of their financial success in this high-risk cyber environment.

cannabis copyrightI previously discussed how cannabis works of authorship, including the design of sufficiently original logos (only the graphic elements of the logo, not the words), are copyrightable. I also alluded to the possibility that such copyrights may be unenforceable due to the federal illegality of cannabis. Indeed, whether a cannabis copyright is enforceable remains speculative as none of the U.S. federal district courts (which hold exclusive jurisdiction over copyright infringement cases) have issued an order in a cannabis copyright lawsuit. Today, I revisit this issue by looking at whether federal district courts have enforced other copyrighted illegal works and how those legal decisions may help us determine the likelihood of courts enforcing cannabis copyrights.

Under current copyright law, illegal works are often treated similarly to other works. Illegal works are entitled to copyright protection and are eligible for registration so long as the works are:

  1. Original, meaning that the works are independently created by their authors and possess a “modicum of creativity;” and
  2. Fixed in a tangible medium of expression, which allows for their reproduction.

A certificate of registration from the U.S. Copyright Office is a prerequisite to initiate a lawsuit for copyright infringement—including lawsuits alleging infringement of illegal works. To establish copyright infringement, a plaintiff must prove two elements: First, ownership of a valid copyright, for which the certificate of registration will provide prima facie evidence; and second, that the defendant copied substantial elements of the copyrighted work.

Copyright law does not require the plaintiff demonstrate the legality of the work’s content. The currently prevailing view is that “even illegality is not a bar to copyrightability.”

Because illegal works are copyrightable, illegality is not generally a defense in an infringement suit. For example, the Ninth Circuit Court of Appeals has held that fraudulent content is not a defense to infringement. The Fifth Circuit Court of Appeals reached a similar decision when it dismissed the defense of obscenity to a claim of copyright infringement.

Favoring the enforcement of copyrighted illegal works is also consistent with their authors’ constitutional right to freedom of speech. If Congress were to impose copyright restrictions on illegal works, it would essentially censor these works, which would likely be deemed unconstitutional.

So, given the fact that the prevailing view under U.S. Copyright law is that illegality is not a bar to either copyrightability or enforceability, it is likely most U.S. federal district courts would enforce cannabis copyrights. Therefore, the strong likelihood of a court enforcing cannabis copyrights, combined with the ease and minimal cost of copyright registration, should incentivize you, cannabis businesses, to copyright your work.