Legalized cannabis has so far been confined only to certain states and cannabis remains illegal under federal law. If you have a marijuana business in a state where marijuana is legal, you need to ensure your contracts take into account this state/federal dichotomy. If you don’t, you may find yourself unable to enforce your contract.

Let me explain.

In states where marijuana (be it recreational or medical) is now legal, your marijuana business is now legal. With this legitimacy comes the expectation that you will operate like a legal business. For us cannabis business lawyers, this means that we are constantly drafting all types of contracts for our cannabis business clients. We draft leases. We draft employment contracts. We draft distribution agreements. We draft licensing agreements. We draft purchase and sale agreements for all sorts of items that go with operating a legal cannabis business, including contracts to buy and sell cannabis trademarks and copyrights.

We draft our cannabis contracts to require resolution of disputes in the state in which the medical cannabis business operates, to ensure that the contract will be enforceable. Because of federal prohibition, the federal courts are not likely to enforce most contracts entered into by cannabis businesses, and they certainly will not enforce a contract to buy or sell cannabis. In other words, if you should find your cannabis business in a federal court, (be it a district or bankruptcy court), or in a state court where marijuana is still illegal, there is a good chance the court will deem your contract void and will not enforce it. The same goes for states that have not legalized cannabis.

In real world business terms this means that if your cannabis business is going to use contracts to protect its business interests, (which it should), and you want to be able to enforce those contracts, (which of course you do), you are going to want to avoid the state and federal jurisdictions where marijuana remains illegal. In other words, you need to ensure your dispute will stay in your “home” court. Such forum selection clauses have the added benefit of minimizing the risk that the counter-party on your contract can remove your case to federal court after you sue in state court.

Therefore, you must be certain that any contract you sign on behalf of your cannabis business contains a provision making clear that all claims must be resolved in the state courts of the state in which you operate. Be sure the contract also provides that the contracting parties waive any right they might have had to pursue claims in or remove claims to a federal court.

Bottom LIne: The patchwork of legalization on the state and federal levels creates obstacles for cannabis business at nearly every turn, but finely tuned contracts provide one opportunity to put some predictability into your business relations.

 

As cannabis businesses begin competing with one another for customers, communicating their superior quality and value becomes key. Companies that understand the need to differentiate their businesses from their competitor’s businesses come to us asking us what they should be doing to enhance and protect their brands.

To greatly simplify, the goal of branding is to efficiently communicate something about your product. Maybe your cannabis products or strains are cool. Maybe they’re highly potent. Maybe they’re cheap as dirt. The point is that you want to tell customers that products with your brand name will consistently offer whatever it is that you offer. You want consumers to know what you offer simply by virtue of seeing your brand name.

You certainly don’t want other businesses to use your brand names, especially since they may use your brands in a way that damages your reputation or leeches business away from you. Continue Reading How To Protect Your Cannabis Brand

Do not risk crossing this with marijuana on you
Do not risk crossing this with marijuana.

Though cannabis tourism was certainly contemplated by Washington State’s recently enacted Initiative 502, cannabis products leaking into other non-recreational markets is a concern for both Federal and state governments, especially in areas that border states where cannabis is still illegal. Not to mention the international drug crime issues that arise for border crossers into Canada. How might I-502 affect this? The answer is that cannabis is still a Federal crime and nothing changes the fate of border crossers who violate US Federal and/or Canadian cannabis laws.

Individuals (21 or older) need not be residents of Washington to acquire or use cannabis for recreational use while in the state. This means that people can and will come to Washington to purchase and use recreational cannabis. This also means that legal issues are bound to arise when these people return to their home states or countries with Washington grown cannabis. In addressing “leakage,” Washington’s Governor Inslee has made clear that “it is Washington’s responsibility to show the federal government we will be a responsible entity,” while also optimistically stating that “the federal government probably won’t be too concerned about marijuana sold in stores making its way across the borders. The limit of one ounce per person in the new law is likely too small of an amount for federal agents to worry about.”

As cannabis lawyers, we are not so sure Governor Inslee got that later point quite right and we caution our clients not to cross any borders (but especially the US/Canada border) with cannabis. US Customs and Border Protection agents routinely roam the Canadian border looking to bust Americans and Canadians seeking to cross the border with marijuana. US Customs recently made very clear that “state initiatives did not change federal law.”

The bottom line for border crossers? I-502 does not change the Federal status of cannabis as a Schedule I controlled substance and so no one should consider taking cannabis out of the State of Washington. Even if the Federal government relaxes its enforcement and defers to state law within Washington, we fully expect it will continue prosecuting interstate and international cannabis movement. Crossing a border with marijuana is just not worth the risk.