cannabis trademark infringementAs ardent followers of this blog are well aware, one of my favorite pastimes is keeping tabs on who is suing whom in the cannabis industry for trademark infringement. These lawsuits serve as great examples for my clients of what NOT to do when choosing a brand for their company. The last couple of years have provided a couple of big-name cannabis trademark lawsuits, including the Gorilla Glue dispute and the Tapatio Foods lawsuit.

This time, it’s the United Parcel Service (UPS) suing a group of cannabis delivery companies for trademark infringement. The lawsuit was filed in the U.S. District Court for the Central District of California on February 13, 2019 and alleges trademark infringement against United Pot Smokers, UPS420, and THCPlant, all of which market and sell cannabis products. These companies, according to the complaint, offer delivery and logistics services via the websites www.upsgreen.com and www.ups420.com.

In its complaint, UPS accuses the defendants of infringing its family of trademarks, which includes its famous shield logo, and states that the defendants “intended to capitalize off UPS’s extensive goodwill and reputation.” UPS allegedly sent multiple cease and desist letters to the defendants, which were unwisely ignored.

The lawsuit includes claims for trademark infringement, trademark dilution, false designation of origin, deceptive advertising, and unfair business practices, and includes a request for damages, an end to defendants’ infringement, and control over defendants’ websites.

We’ve made this point many times before, but it warrants repeating: Cannabis companies are not immune from trademark infringement claims, and must choose brands that do not infringe the rights of third parties, including third parties outside of the cannabis industry. For ease of reference, here are several past blog posts relating to trademark infringement, and how to choose a brand that won’t get you sued:

And here are the factors a court will consider in assessing whether one mark is likely to be confused with another, proving trademark infringement (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.

The two most basic factors I recommend our cannabis clients evaluate before they select a brand are 1) is your mark similar to or the same as an existing mark, and 2) are you intentionally “riffing” off an existing brand? Remember that parody is not a defense to trademark infringement that will typically fly in a commercial setting. When you choose a mark as a “parody” of an existing brand, chances are you’re actually infringing a registered trademark, and possibly diluting a famous mark, which is exactly what is alleged here, in the UPS case. And the fact that you knew of the senior trademark would absolutely play against you in litigation, as your infringement would be deemed willful.

These two factors are only the beginning of the analysis. There are instances where similar, or even the same brand names can coexist if the goods those brands are used on are completely different and marketed through separate channels to disparate groups of consumers. The analysis for likelihood of confusion can be quite complex.

Before adopting a new brand name, we recommend consulting with an experienced trademark attorney and we also recommend having them perform a trademark clearance search to ensure your brand won’t be infringing any existing registrations.

We have been critical of cities licensing cannabis businesses in the past. Cannabis businesses are taxed and regulated heavily enough at the state level–why involve cities as well? We have always thought that if a city is going to be involved in the licensing process, it might as well do some good along the way. Portland, Oregon has provided one example of what a city can do with those tax funds.

As many cities in Oregon have done, Portland imposes a 3% local tax on retail cannabis sales. The City allocated $500,000 of the taxes to support neighborhood small businesses, especially women-owned and minority owned businesses and to provide economic opportunity and education to communities disproportionately-impacted by cannabis prohibition. Of that $500,000, $150,000 was allocated to specifically reinvest in minority- owned cannabis businesses.

portland minority cannabis marijuanaTo receive a City Grant, a Cannabis Business must complete a Cannabis Tax Allocation Grant Application. The Grant Application requires the cannabis business to identify a project/program that meets the “Record Clearing” or “Workforce Development” goals of the grant. The Record Clearing goals focuses on awarding money to those that have been disproportionately impacted by cannabis prohibition by removing barriers to housing, employment and education through legal support including, expungement, fine reduction, and charge reduction. The Workforce Development goals focus on creating pathways for people disproportionately impacted by previous cannabis laws to obtain family-wage jobs, including training, mentorship, and other workforce reentry support.

The application is detailed and requires the applicant to explain the background and mission of their organization, specific examples of activities to be completed, major milestones, along with questions regarding budget. The Portland City Council then reviews the applications and allocates the grants.

The first recipients of grants intended to help communities historically harmed by cannabis prohibition were awarded on January 21, 2019. Green box, an African American owned cannabis delivery company, was awarded $30,000. Adrian Wayman has reported he intends to use the money to hire his first employee.

The second recipient of $30,000 is Green Hop. Green Hop is an African American owned dispensary in North Portland. Green Hop also runs the “Green Hop Academy”, an apprentice program that provides training to individuals who hope to one day own their own cannabis business.

The City plans to keep moving forward with the grants and has increased its allocations for the grants to $700,000 for the fiscal year 2018-2019. It is comforting to see money from cannabis taxes being reinvested into the community. While the grant application can seem daunting, it can certainly make a huge difference in the Portland community to assist those that historically have been disproportionately impacted by cannabis prohibition. Here’s to hoping other cities follow in Portland’s footsteps and reallocate taxes and other fees to good causes.

fda cannabis dietary supplement foodWith the passage of the 2018 Farm Bill and the proliferation of food products containing CBD, we’ve been writing extensively about how the United States Food and Drug Administration (FDA) and in particular, the United States Food, Drug, and Cosmetic Act (FDCA) apply to the interstate sale of CBD products. Unfortunately, however, we have little guidance from the FDA regarding how hemp-CBD products such as foods, beverages, dietary supplements and cosmetics should comply with basic FDA requirements, including labeling rules.

What we do know is that the FDA has consistently taken the position that that CBD is excluded from the definition of “dietary supplement” under the Federal Food, Drug & Cosmetic Act (“FDCA”) because CBD is an active ingredient in FDA-approved drugs and was the subject of substantial clinical investigations before it was marketed as a dietary supplement. Therefore, the FDA maintains, as stated by Commissioner Scott Gottlieb, that:

[It is] unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. This is because both CBD and THC are active ingredients in FDA-approved drugs and were the subject of substantial clinical investigations before they were marketed as foods or dietary supplements. Under the FD&C Act, it’s illegal to introduce drug ingredients like these into the food supply, or to market them as dietary supplements. This is a requirement that we apply across the board to food products that contain substances that are active ingredients in any drug.”

On January 15, 2019, in light of the FDA’s current position on hemp-derived CBD and the recent passage of the 2018 Farm Bill, Senators Ron Wyden (D-OR) and Jeff Merkely (D-OR) sent a letter to FDA Commissioner Gottlieb urging the Commissioner to update federal regulations governing the use of certain hemp-derived ingredients in food, beverages, and dietary supplements. The Senators began their letter by stating,

As authors of the Hemp Farming Act, which removed the outdated restrictions on the production and marketing of industrial hemp, we urge the U.S. Food and Drug Administration (FDA) to immediately update federal regulations governing the use of certain hemp-derived ingredients in food, beverages or dietary supplements.”

The Senators go on to note that the Act removed from the federal list of controlled substances the hemp plant, and “derivatives of cannabis, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (THC) concentration of less than 0.3 percent on a dry weight basis. Under this definition, Congress legalized the production and sale of industrial hemp and hemp derivatives, including hemp-derived cannabidiol (CBD).”

Because of the removal of hemp-derived CBD from the list of controlled substances, as well as growing interest from the public in CBD products, the Senators argue that the FDA’s regulations are outdated, and urge the agency to “immediately begin updating regulations for hemp-derived CBD and other hemp-derived cannabinoids, and [to] give U.S. producers more flexibility in the production, consumption, and sale of hemp products.” The Senators also requested a response from the FDA to the following questions within thirty days:

  1. What steps are the agency advancing to clarify to the public the authority the agency has in the production and marketing of hemp, specifically Cannabis sativa L. and its derivatives?
  2. What lawful pathways are currently available for those who seek approval to introduce Cannabis sativa L. and its derivatives as a food, beverages or dietary supplement, including into interstate commerce?
  3. Are there circumstances in which Cannabis sativa L. and its derivatives may be permitted as a food, beverages or dietary supplement by the agency?
  4. Will the agency consider issuing a regulation, or pursuing a process, that would allow Cannabis sativa L. and its derivatives in food, beverages or dietary supplements that cross state lines?

Given the ongoing government shutdown that has left the FDA short on staff, we will be waiting to see if they are able to respond to the Senators’ questions within the requested thirty days. There is no doubt that thorough responses to these questions would provide the hemp-CBD industry with some much needed clarity regarding the FDA’s position on the sale of these products.

HR 420 marijuana blumenauer

On Wednesday, January 9, 2018, Representative Earl Blumenauer (D-Or) introduced the aptly designated H.R. 420, or the Regulate Marijuana like Alcohol Act. The bill is still so new that it’s not yet up on Congress’ site, but the apparent text for the bill can be found online.

H.R. 420, if passed in its current form, would remove marijuana from the Controlled Substances Act’s scheduling. The law wouldn’t allow complete legalization without regulation. It still makes clear that bringing cannabis into a jurisdiction would be unlawful where it would violate the laws of that jurisdiction. Instead of full-scale legalization, the bill would require the Secretary of the Treasury to establish a permitting scheme which could, like state law, involve different permits for each different kind of cannabis activity. It’s not yet totally clear how this would play out for permit holders in states with current regimes, i.e., whether they would have to get federal permits and/or what criteria they’d be held to.

Interestingly, these federal permits appear to last indefinitely until suspended and can be transferred if the transferee makes a timely request. There are of course disqualifying convictions, but those appear to be relatively narrow and exclude federal or state offenses if the underlying conduct was lawful in the state where the conviction was rendered. The bill also makes clear that applicants couldn’t get permits that would violate state law (this is an interesting flip where federal law bows to state law) or if an applicant wasn’t likely to commence operations within a reasonable period or maintain them in accordance with federal law.

One other interesting component of the bill is that it would transfer jurisdiction from the Attorney General over marijuana to the re-named Bureau of Alcohol, Tobacco, Marijuana, Firearms, and Explosives. The bill would also give the Food and Drug Administration the same authority over marijuana that it has over alcohol. The bill would also give the Treasury Secretary the authority to regulate certain elements of marijuana advertising to ensure that it was not false or misleading.

Ultimately, the bill leaves more unsaid than said, and if it is ever passes, it will be up to the regulators to figure out the mechanics. It’s not certain that this bill will go anywhere, especially in such a tumultuous and chaotic time. However, the approach of regulating marijuana more or less like alcohol, similar to what many states are already doing and with an element of federal oversight, is a compelling idea. Stay tuned to the Canna Law Blog for more details and updates.

california cannabis final regulations

Yesterday afternoon, on January 16, 2019, the California Office of Administrative Law (“OAL) finally approved the sets of final regulations under it had been reviewing after submissions from the California Department of Public Health (“CDPH”) which regulates cannabis manufacturers, the California Department of Food and Agriculture (“CDFA”) which regulates cultivators, and the Bureau of Cannabis Control (“BCC”) which regulates distributors, retailers, event organizers, and testing laboratories. You can find the final regulations here.

The three sets of regulations follow on the heels of final proposed regulations that the CDPH, CDFA, and BCC submitted to the OAL for its review in December. We will be providing some overview of the key components of the final regulations shortly, but it looks upon initial review like these regulations adopted most or all of what was submitted for review in December.

These regulations are “final”, meaning cannabis operators and applicants no longer need to worry about discrepancies between emergency regulations (which as of now are no longer effective per the OAL’s statement) and whatever version of proposed regulations were then out in the ether. But though these regulations are “final”, we’re pretty positive that there will be changes and modifications—probably on a more incremental level—in the future.

Stay tuned to the Canna Law Blog for further insight and analysis into these final regulations and any final regulations that will come.

Congratulations to Canna Law Blog’s Hilary Bricken, recently named one of the cannabis industry’s top lawyers by Business Insider!

The cannabis industry is volatile and deals are growing more complex as markets evolve. Having worked with clients in the cannabis industry for over eight years, though, and in multiple jurisdictions, there is no deal too complex for Hilary. In 2018 alone, she closed an estimated $100 million in industry transactions.

Because Hilary has been in the industry for so long, she is also uniquely equipped to make observations regarding its changes. As she states in the article, the field is now more diverse, including among service professionals. Among the other attorneys listed were lawyers from large international firms such as Dorsey and Whitney and Fox Rothschild.

With an industry “set to skyrocket to $194 billion,” the diversity and complexity of cannabis transactions will only increase over time. All in all, we are super proud of Hilary and our growing L.A. office, and looking forward to big things in 2019.

california cannabis seminar san franciscoOn Thursday and Friday of next week, January 17 & 18, our own Daniel Dersham and Julie Hamill will present at a two-day continuing legal education (CLE) event in San Francisco called The Business of Marijuana in Northern California, to discuss cannabis real estate and land use issues in California. The roster of speakers lined up for this CLE includes an array of lawyers, consultants, and business professionals working with the cannabis industry, and everyone, including non-lawyers, would be well served to attend. For a full event description, including topics, speakers and registration links, click here.

Looking back over the past two years since the passage of Prop 64 legalizing adult-use cannabis in California, it is amazing to see how much things have changed in California cannabis. At this point, the state’s adult-use and medicinal cannabis regulatory regime is fully built out, with thousands of license applications now on file with the state. We are proud to call many of these California producers, processors, wholesalers and retailers our clients, alongside the many investors and ancillary service providers we represent.

Now that the California regulatory groundwork has stabilized, local jurisdictions have continued to open up their markets to the cannabis industry, and the legalization and decriminalization movement has continued to forge ahead, cannabis business activity in California is at an all-time high. Many of these new industry entrants bring skills, capital, and experience from other regulated markets, while others are new to the space. California attorneys and business owners alike need to be familiar with the unique regulatory concepts and industry dynamics that will be discussed on January 17 & 18 in order to best serve the California cannabis industry.

Specific topics at this CLE include: state laws and administrative rules, developments in the highly dynamic federal sphere, and practical approaches to working with and in the cannabis industry. Attendees will hear from consultants, lobbyists, business professionals, and, of course, lawyers aplenty, with specialized experience in fields such as insurance, tax, real estate, litigation, intellectual property, investment, and regulatory compliance.

If you are in or around San Francisco next week, we hope you will join us on January 17 & 18 for a two-day exploration of California cannabis law and business that is both broad and deep. And if you are a Harris Bricken client or a friend of the firm, please click here to request a promotional discount code, which can be applied to either the webcast, or to in-person attendance.

See you soon.

washington marijuana justice
We are glad to Washington opening up with pardons.

Today I’m attending the Washington State Cannabis Summit. This is the 5th Annual summit, but this year is particularly special due to a major announcement by Governor Jay Inslee. During the morning session, Gov. Inslee unveiled the Marijuana Justice Initiative. The Initiative will allow individuals to submit an online petition to Gov. Inslee requesting a pardon for certain marijuana convictions.

To be eligible for clemency under the Initiative, an individual’s conviction must meet the following criteria:

  • It must be an adult conviction for misdemeanor marijuana possession;
  • Prosecuted under Washington state law (RCW), not a local ordinance;
  • The conviction must have occurred between January 1, 1998 and December 5, 2012;
  • It must be the only conviction on a person’s criminal record.

Individuals who do not qualify under the initiative may seek clemency by filing a petition with the Clemency and Pardons Board. 

Gov. Inslee deserves credit here for using his pardon power to address some of the damage done by the war on drugs. The Governor’s office summarized this harm in its press release announcing the Initiative:

For decades, people have faced criminal prosecution for behavior that is no longer considered a crime in Washington. Inslee believes that forgiving these convictions will allow people to move on with their lives without these convictions causing additional burdens on people, their families, their employers and their communities. This is a small step, but one that moves us in the direction of correcting injustices that disproportionately affected communities of color. A successful pardon of a marijuana possession conviction can assist with barriers to housing, employment and education.”

Gov. Inslee’s office estimates that roughly 3,500 individuals will qualify for clemency under the Initiative.

Gov. Inslee made the announcement to a room full of Washington’s marijuana industry stakeholders. This includes marijuana business, owners, lawyers, accountants, regulators, and lawmakers. As the industry develops, it’s important that criminal justice issues remain in the forefront. This Initiative is a good start. Hopefully, in the future this Initiative can expand to encompass more than just 3,500 individuals. Kudos to Gov. Inslee for starting off 2019 with marijuana criminal justice reform.

FDA CBD Industrial HempYesterday, President Trump signed the 2018 Farm Bill, paving the way for industrial hemp legalization. Within hours, the U.S. Food and Drug Administration (“FDA”) Commissioner, Scott Gottlieb, issued a statement clarifying the FDA’s position on industrial hemp.

The FDA’s position: Just because industrial hemp is legal doesn’t mean that you can put it in food or call it medicine.

Gottlieb was quick to point out that even though the Farm Bill modified the Controlled Substances Act, the FDA still retains the authority to “regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug, and Cosmetic Act” (or “FDCA”). Gottlieb went on to state that the FDA fully intends to exercise that authority:

[I]t’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. This is because both CBD and THC are active ingredients in FDA-approved drugs and were the subject of substantial clinical investigations before they were marketed as foods or dietary supplements. Under the FD&C Act, it’s illegal to introduce drug ingredients like these into the food supply, or to market them as dietary supplements. This is a requirement that we apply across the board to food products that contain substances that are active ingredients in any drug.”

Moving on, Gottlieb was careful to point out that the FDA is open to taking steps to clearing pathways for those who wish to seek FDA approval—as it did for Epidiolex. And in fact, the statement incorporates yet another statement by the FDA issued yesterday which concluded that the FDA “has no questions about Fresh Hemp Food’s conclusion that the following ingredients are GRAS under their intended conditions of use: hulled hemp seed (GRN765), hemp seed protein powder (GRN771), and hemp seed oil (GRN778).”

But Gottlieb was careful to cite, in general terms, a number of different kinds of conduct by companies selling products containing CBD that, according to the statement, are unlawful. These include things like claiming CBD or cannabis products cure diseases prior to undergoing FDA approval. And Gottlieb noted that the FDA will not hesitate to warn consumers and even initiate enforcement actions. In that sense, status quo prevails.

What does this mean for California? We’ve written pretty extensively on the California Department of Public Health’s FAQs which take the position that industrial hemp derived food products are unlawful. In fact, we wrote just days ago that the Farm Bill was unlikely to change the core of the FAQs.  The FDA’s statement from yesterday in combination with the FAQs seem to hammer home that in California, CBD in food products will not be considered lawful unless the FDA and CDPH say otherwise.

international law WHO UN cannabisLast Friday, December 7, the World Health Organization (“WHO”) Expert Committee on Drug Dependence (“ECDD”), was scheduled to make a recommendation about the international legal status of cannabis. The WHO is a “specialized agency” of the United Nations, and the ECCD is a WHO committee consisting of experts in the field of drugs and medicines, that assesses the health risks and benefits of the use of psychoactive substances. Alas, the ECDD announced it would temporarily withhold the results of the assessment until January, declaring it needed additional time “for clearance reasons.”

Earlier this year, the ECDD released a preliminary report (“Pre-Review”) on the effects of the plant, which concluded that cannabis is a “relatively safe drug.” The Pre-Review also revealed that cannabinoids (“CBD”) offer numerous therapeutic benefits, including reduction of pain, promotion of sleep, and improvement of motor function for individuals affected by Parkinson’s disease. As a result, the ECDD made the recommendation to the United Nations Commission on Narcotic Drugs (“CND”), that pure CBD not be scheduled under any international drug treaty.

The Pre-Review results gave us and other reform advocates great hope that a more in-depth review would take place before the ECDD makes a final recommendation to U.N. Secretary António Guterres. Comprehensive scientific data on the effects and benefits of cannabis are hard to find. Indeed, the current status of cannabis as a strictly prohibited substance has forced researchers who wish to study the plant to overcome additional hurdles that do not exist for the study of other drugs. To this end, U.S. Surgeon General Jerome Adams declared last week that the federal government should evaluate how it classifies the drug because the restrictive scheduling hinders research.

Just as we need to look at criminal justice laws, rules and regulations, we need to look at health laws, rules and regulations, and that includes the scheduling system.”

This statement by one of the key officials of the Trump administration highlights a shift in the U.S. federal government’s strict position on the prohibition of cannabis. As we previously discussed, the federal government has repeatedly cited to obligations under international treaties to perpetuate the current ban on cannabis and its derivatives. Back in May, the Food and Drug Administration (“FDA”) concluded that CBD should be descheduled but felt forced to recommend rescheduling the plant to Schedule V of the Controlled Substance Act to comply with international treaties to which the U.S is a party. Nonetheless, the FDA specified that if treaty obligations were to no longer require control of CBD that its recommendation would need to be promptly revisited.

Accordingly, the potential recommendation by the ECDD to remove cannabis from international control would create wide-ranging implications for the global effort to legalize the plant, including in the U.S. But for now, we must wait patiently for the ECDD’s recommendation to the CND, which is scheduled to be discussed and to go up for a vote in March 2019. The delay is frustrating, although we are encouraged to see that the U.N. continues to take a hard look at cannabis. Sit tight.