A Refresher and an Update: The (Cannabis) STATES Act

It seems like every year, the old pot guard in Congress tries its hand at some form of marijuana legalization. Although these sorts of actions attract headlines (and votes?), they never seem to go anywhere. But for the first time ever, a real and legitimate bipartisan “respect states’ rights” effort is being pushed by some powerful members of Congress. Specifically, Republican Senator Cory Gardner is picking up the mantle for Congressional cannabis reform and it may actually pass this time (if the MFOA doesn’t get there first).

On June 7^th, Senators Gardner and Elizabeth Warren released a bipartisan marijuana bill that would explicitly allow states to determine the fate of marijuana in their own jurisdictions. Here’s a copy of the bill, entitled the “Strengthening the Tenth Amendment Through Entrusting States Act” (“STATES Act”). Most importantly (and wisely, if anyone wants this bill to go anywhere), it doesn’t change the Controlled Substances Act (CSA) on cannabis scheduling and so even if it passes, cannabis will remain a Schedule I controlled substance. But it will mean the CSA will be amended to give each state the freedom to determine how best to address commercial cannabis activity within its own borders, state-approved commercial cannabis activity will cease to be considered drug trafficking, and proceeds from and assets used in legal cannabis operations would not be subject to forfeiture by the Department of Justice (DOJ).

If the bill passes, the CSA would not apply to:

[A]ny person acting in compliance with State law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana . . . any person acting in compliance with the law of a Federally recognized Indian tribe within its jurisdiction in Indian Country . . . related to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana so long as such jurisdiction is located within a state that permits, respectively, manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.

State-legal marijuana businesses would still be in trouble under the CSA for employing anyone “under 18 years of age to manufacture, produce, distribute, dispense, administer, or deliver marihuana.’’ This bill will also remove industrial hemp from the CSA, which would finally square away its precarious legal status regarding its derivative products, like CBD.

Though the Rohrabacher-Blumenauer Amendment prevents the DOJ from interfering with a state’s right to implement medical cannabis laws and regulations, the STATES Act would make it illegal for the Department of Justice to enforce the CSA against state-legal marijuana users or medical or recreational marijuana businesses. Passage of this bill would obviously be a huge, huge step forward for marijuana legalization. This bill would lead to improvements in the banking situation for cannabis businesses and realizing this, some bank are lobbying for cannabis reform to be able to better serve the cannabis industry. Passage will also mean state-legal cannabis businesses can finally secure federally protected trademarks and avail themselves of other federal protections and benefits currently denied to them, including nondiscriminatory tax treatment.

Ironically, the one person we may deserve the most thanks for this big move is Attorney General Jeff Sessions who — as we all know — loathes cannabis. His blitzkrieg to undo state progress on cannabis law reform is backfiring. I previously wrote how Senator Gardner was so irritated by Sessions’s rescinding the 2013 Cole Memo that he took it upon himself to block numerous DOJ appointments. This got President Trump’s attention and led Gardner to receive, according to The Washington Post, “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 . . . assured [Gardner] that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.”  And Trump echoed on June 8^th that he’d “probably” support the STATES Act.

The STATES Act is a bipartisan bill that does not outright legalize marijuana or even re-schedule or decriminalize it. Couple this with President Trump’s strong dislike of Sessions anyway and it does very much look as though the political stars may finally be aligned to see meaningful marijuana law reform at the Congressional level.

Editor’s Note: A version of this post originally appeared in an Above the Law column, also by Hilary Bricken.

source https://www.cannalawblog.com/a-refresher-and-an-update-the-marijuana-states-act/

Cannabis Company Basics: Capitalization and Licensure

BREAKING NEWS: Senate Bill Introduced to End Cannabis Prohibition

Federal Trademarks for Cannabis CBD? The USPTO Says No.

California Cannabis Countdown: City of Antioch (Hearing Today!)

California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between.  For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of San Jose, and before that the City of Cotati, the City of San Luis Obispo, the City of Redding, the City of San Rafael, the City of Hayward, Alameda County, Oakland, San Francisco, Sonoma County, the City of Davis, the City of Santa Rosa, County and City of San Bernardino, Marin County, Nevada County, the City of Lynwood, the City of Coachella, Los Angeles County, the City of Los Angeles, the City of Desert Hot Springs, Sonoma County, the City of Sacramento, the City of Berkeley, Calaveras County, Monterey County and the City of Emeryville.

Today’s post is on the City of Antioch.

Welcome to the California Cannabis Countdown.

Location. Antioch is the second largest city in Contra Costa County and its location on the banks of the San Joaquin River links it with the San Francisco/East Bay region, Sacramento, and the Central Valley. Although Antioch is not home to any of the major tech companies found throughout the Bay Area (Kaiser Permanente is the City’s largest employer), its low cost of living (for Northern California) and new public transportation options will likely attract new residents and businesses.

History with Cannabis: When it comes to cannabis, Antioch lags far behind some of its progressive Bay Area neighbors. While Oakland, San Francisco, Richmond, and Berkeley (just to name a few) are continuously working on their cannabis ordinances and licensing procedures, Antioch’s been busy extending moratoriums. The City Council passed its first moratorium on medical marijuana facilities back on April 26, 2011. The City then extended the moratorium on May 24, 2011, and passed an ordinance permanently barring medical marijuana facilities on October 22, 2013. Antioch did have an exception allowing for limited medical cultivation but when the City amended their cannabis ordinance on January 20, 2016, they added cultivation to the prohibited list of cannabis activities. When the Adult-Use of Marijuana Act (“AUMA”) made it onto the California ballot in 2016, Antioch followed its normal course of action: It passed multiple moratoriums prohibiting adult-use cannabis activities. However, there’s proof out there that Antioch is starting to come around on its view of cannabis. Much like the progress we’re beginning to see on the federal level with pro-cannabis measures, California jurisdictions that used to have bans in place are now deciding to regulate (and tax) commercial cannabis activities. You can now add Antioch to that list (hopefully).

Proposed Cannabis Laws: On May 2, 2018, Antioch’s Planning Commission held a public hearing and recommended that the City Council amend the City’s Municipal Code to establish a cannabis business zoning overlay district for commercial cannabis activities. The amended ordinance passed its first City Council reading on May 22, 2018, and will hopefully be adopted later this evening. Here are some of the ordinance’s highlights:

• Would allow commercial cannabis activities in the eastern waterfront industrial area between the San Joaquin River and east 18^th street, as well as along the business park area around Verne Roberts Circle;
• Establishes and defines a cannabis business as “a person, partnership, corporation, company, association, collective, or cooperative which engages in commercial cannabis use(s)”;
• Establishes and defines cannabis retail as “a cannabis business that distributes, dispenses, stores, exchanges, packages, re-packages, labels, sells, makes available, transmits, or gives away cannabis or cannabis products for either medical or recreational use and is operated in accordance with state and local law and regulations”;
• Prohibits cannabis businesses with 600 feet of a school, residential area, or public park; and
• Allows cannabis uses upon approval of a Use Permit from the City Council and the recommendation of the Planning Commission.

It’s also important to note that as of right now Antioch is considering licensing all seed to sale license types, so interested cannabis entrepreneurs need to keep communicating with the City Council to keep all those cannabis activities available. The proposed ordinance does not specify the general requirements and operating procedures for obtaining a cannabis use permit. That issue will be addressed by local regulators in the future but in order to get to that point, the City Council needs to adopt the amended ordinance today! Let’s hope that Antioch takes a step in the right direction.

source https://www.cannalawblog.com/california-cannabis-countdown-city-of-antioch-hearing-today/

Cannabis Taxation: Another Day, Another 280E Case (or Two)

On June 13, the U.S. Tax Court issued an opinion regarding the application of IRC §280E. In Alterman v Commissioner of Internal Revenue (“Alterman“) the Court held, yet again, that IRC §280E operates to disallow a cannabis businesses’ tax deductions. A few days later, the Court also issued Loughman vs. Commissioner of Internal Revenue (“Loughman“). In that case, the Court held that IRC §280E disallowed the deduction of wages paid to S Corporation shareholders. The disappointing but predictable outcomes in these cases highlight the need for Congress to repeal or modify IRC §280E.

By now, the destructive force of IRC §280E is well known. IRC §280E disallows deductions and credits to a business trafficking in a controlled substance. One exception is cost of goods sold (“COGS”). Other than a 2015 IRS General Counsel memorandum, the IRS has not offered much guidance regarding the application of IRC §280E. With this gap in IRS guidance, it is the courts that have outlined the (fairly narrow) parameters of IRC §280E.

Reading the IRS guidance and court rulings together, it is clear that selling or growing cannabis is always considered trafficking and expenses related to such activity are disallowed. A cannabis business can deduct all expenses related to a separate trade or business. A court is more likely to accept a separate business activity if that business can operate independently of a cannabis business.

Alterman

Alterman does not offer broad guidance regarding IRC §280E. In part, this is because the Court issued a Memoranda opinion.  A Memoranda opinion does not set a precedent for taxpayers; however, they are useful to illustrate how the Court may analyze the law.

Laurel Alterman and William Gibson operated a Colorado medical marijuana grow and dispensary. These taxpayers also sold cannabis paraphernalia, hats and shirts. The Court held that the sale of paraphernalia, hats and shirts was not a separate trade or business primarily due to the lack of records. Accordingly, costs associated with these activities were not deductible under IRC §280E.

In addition, the Court determined that certain costs were not allowable as COGS because of insufficient records, which should be a lesson to any cannabis business owner: It’s not enough to have potentially deductible costs, if you don’t keep records! Interestingly, the opinion uncharacteristically discusses, in detail, the records available, only to hold that those records were insufficient. (Court cases that disallow deductions because of poor recordkeeping typically do not discuss in detail, the records examined.)

Because of the fact-specific nature of this case, Alterman offers little guidance to cannabis businesses other than recordkeeping must be sufficient to support deductions.

Loughman

In Loughman, the Court did not address the issue of record keeping or substantiation. Instead, the Court addressed the issue of double taxation of income because of IRC §280E. And the Court concluded that double taxation is allowed.

Jesse and Desa Loughman were licensed in Colorado to grow and sell cannabis through a Colorado corporation, Colorado Alternative Health Care (“CAHC”). The Loughmans were the sole shareholders of CAHC and elected to be treated as an S Corporation for federal tax purposes.

An S corporation is not subject to tax; instead shareholders are taxed on S Corporation income at the individual level. Special rules treat S Corporation shareholder/officers as employees and require the S Corporation to pay them a reasonable wage. Under ordinary circumstances, an S Corporation deducts shareholder/officer wages; the shareholder/officer then pays income tax on the wages. The S Corporation’s deduction of wages prevents double taxation.

In this case, the IRS applied IRC §280E and disallowed CAHC’s deduction for wages paid to the Loughmans. Consequently, the amount of S Corporation income passed through to the Loughmans increased. The result is that the Loughmans wages are taxed twice — first as an employee and then as S Corporation shareholders.

The Court rejected the argument that IRC§280E discriminates against S Corporation shareholders operating a cannabis business. The Court reasoned that wage payments to a third-party performing the same services as the Loughmans would not be deductible under IRC §280E. Accordingly, the amount of pass through income to the Loughmans would not change: IRC §280E applies equally to increase S Corporation income, regardless of who receives wages. Furthermore, the Court noted that the taxpayer did not have to, but chose to, elect S Corporation status for their cannabis business.

As in Alterman, the Court issued a memorandum opinion. Accordingly, the Court’s determination only applies to the Loughmans and does not set precedent. Nonetheless, the Court highlighted a serious disadvantage to operating a cannabis business through an S Corporation– namely, double taxation.

The STATES Act

So where does that leave us? These cases highlight the dire need for a legislative fix of IRC §280E. On June 7, 2018, Senators Gardner and Warren introduced the Strengthening the Tenth Amendment Through Entrusting States Act (The “STATES Act”). The STATES Act exempts persons from the Controlled Substances Act, so long as they are acting in compliance with a state’s cannabis law. Specifically, under the STATES Act, the production or sale of cannabis in a cannabis legal state “shall not constitute trafficking”. Because IRC §280E applies to a trade or business that consists of trafficking, the STATES Act would effectively eliminate the impact of IRC §280E.

As more cannabis businesses are audited, expect more cases like Loughman and Alterman to move through the system. In addition, expect similar results on similar facts, unless Congress finally takes action. The STATES Act would do a lot of good for the industry, and eliminating the oppressive impact of IRC §280E is high on the list.

source https://www.cannalawblog.com/cannabis-taxation-another-day-another-280e-case-or-two/

Mediation of Cannabis Disputes: Part 2

In Part 1 of this series we discussed how mediation works in most cannabis disputes. Today, we discuss some strategic considerations to increase the likelihood of success in cannabis mediation.

     Know your audience(s): Unlike in litigation or arbitration, where your audience is a disinterested third party judge, jury, or arbitrator, your primary audience in mediation is the other side. After all, mediation will not result in settlement unless both sides agree. But consider the other audiences, i.e., those on your own side. Many cannabis businesses have multiple owners or decision makers. Mediation can be an excellent way for your management team to fully understand the dispute, so that the team itself can decide on a resolution that will best satisfy all the stake holders.

     Look for a resolution, not a victory: The goal in most mediation is for all parties to resolve the dispute, not for one party to emerge victorious at the other’s expense. It is the rare case where a party in mediation will find it in its best interests to completely capitulate. If you expect to get all or most of what you might get at trial, you are unlikely to succeed in mediation.

     Don’t just trade offers: Even when the principal issue between parties seems to be how much money will change hands, just exchanging numbers is not always effective in mediation. The concept of “principled negotiation,” developed by Roger Fisher and Bill Ury in the book Getting to Yes, involves considering the parties’ underlying motivations and interests, rather than just their negotiating positions. Seeking to address each party’s interests can change the dispute from a zero-sum game to one where both parties will benefit. For example, if one marijuana business is suing another for intellectual property (IP) infringement, a possible resolution could involve a cross-license agreement where each party agrees to license its IP to the other party.

     Mediation is a process: It is not uncommon for parties to engage in two or more rounds of mediation before reaching a settlement. During litigation, there are several critical points at which mediation might take place. Early mediations are attractive, because the parties will not have spent time and money litigating. But the parties will be handicapped because they will not have the documents and other information that becomes available during discovery. For this reason, some parties choose to voluntarily exchange critical information, e.g., sales data, very early in a case to enable a more informed mediation. In general, as the parties spend more time and money on litigation they will be less likely to settle. However, certain expensive litigation events, such as expert discovery, summary judgment, and especially trial, may encourage parties to mediate later. Consider your mediation strategy at the beginning of a dispute, and be ready to reconsider your strategy as the case develops.

     Get Authority: Each party must bring to the mediation the person or people who have actual power to decide the case that day, preferably in person. This often include a representative from any insurer who might contribute to a settlement. Most experienced mediators will insist upon this.

     Get it in writing: If a settlement is reached, even if it is partial, that agreement should be reduced to writing and signed by all parties before they leave the mediation session. It is essential that this writing capture the agreed-upon terms, even if the parties contemplate drafting a more detailed agreement later on. It is also essential that this writing be enforceable. An oral agreement, while potentially enforceable, is likely to lead to more litigation, thereby undermining the objective of settling the case.

The majority of cannabis disputes are likely to go to mediation at some point. Making the most out of your mediation can help you get, at least some, satisfaction.

source https://www.cannalawblog.com/mediation-of-cannabis-disputes-part-2/

California Cannabis Leasing: Federal Enforcement Is Not The Only Concern

Cannabis Intern: Is That Even a Thing?

Protecting Your Cannabis Copyrights (Yes, You Have Them)

Copyright is an aspect of intellectual property (IP) law less frequently considered by cannabis businesses than trademark, trade secrets or even patents it seems. Yet, like these other forms of intellectual property, copyrights can afford their holders with market dominance and profitability when utilized correctly. Almost all marijuana businesses own numerous unregistered copyrights, whether or not they realize it.

This post briefly covers the concept of copyright and how it applies to the cannabis industry.

What does copyright protect?

Copyright is a form of IP law that protects creative expression of ideas. Specifically, copyright protects original works of authorship, including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture.

The cannabis industry protects copyrights in a variety of ways. For example, the writing and photographs on a cannabis business’s website are copyright protected. This might include descriptions of a particular product or just the layout of the website itself. Physical media like labels, product tags, packaging, logos, instructional materials, and product design can all be protected by cannabis industry copyrights. Books that discuss cannabis production methods, such as Ed Rosenthal’s “Marijuana Grower’s Handbook,” also have copyright protection.

Is registration necessary for copyright protection? 

No. A work of authorship is protected the moment it is created and “fixed in a tangible form.” A work is fixed in a tangible form if its expression is sufficiently permanent to allow it to be communicated for more than a transitory duration. Accordingly, registration is not necessary for copyright protection.

However, registration affords significant benefits, particularly in the context of copyright infringement. These benefits include:

• The right to sue for infringement;
• Automatic proof that the registrant is the rightful owner of the copyright, which shifts the burden of proof on the defendant to show that the registrant is not the rightful owner or that her work is not protected; and
• Additional remedies, like statutory damages and attorney’s fees, if the registrant prevails on her infringement claim.

Given the fact that copyrights are inexpensive and quick to register online, we recommend registration in most cases.

Are cannabis copyrights registrable and enforceable?

The Copyright Act contains virtually no prohibitions on what types of work are eligible for copyright protection, including cannabis-related work. Instead, the Copyright Act simply contemplates the level of originality in a given item. And on that point, the Act provides a decidedly low bar to registration, requiring only “a minimal degree of creativity.” For cannabis brands, federal copyright protection is available to protect most business creations, as long as those creations are sufficiently original to be copyrightable.

Nevertheless, it is important to remember that under the Copyright Act federal courts have exclusive jurisdiction over infringement actions. Therefore, like in patent infringement lawsuits, there is a potential risk that the federal illegality of cannabis would be raised in various litigation aspects and would impeded the enforceability of a cannabis copyright. To this date, no cannabis copyright infringement claim has been raised, making it impossible to determine whether cannabis copyrights are in fact enforceable.

What rights does copyright afford?

Copyright affords the holder the exclusive right to control his work through reproduction, distribution, public display and performance.  Copyright also gives the holder the right to be compensated for the use of his work.

How long does copyright protection last?

Generally, works created by individuals are copyright protected for the life of the author, plus 70 years. Works created anonymously, pseudonymously, and for hire are protected for 95 years from the date of publication or for 120 years from the date of creation, whichever is shorter. Compared to the maximum shelf life of a patent, or terms of trademark registration, copyright protections last incredibly long.

How does copyright infringement occur?

Copyright infringement occurs when an individual uses another’s work without permission. Typically, permission is granted through a licensing agreement, which transfers some of the owner’s exclusive rights to another. In addition, the terms of the license agreement may limit the transfer of those rights to a specific period of time, to a physical location or to the means through which the rights may be exercised.

Note, however, that the legal doctrine of fair use, which promotes freedom of expression, permits certain unlicensed uses of copyrighted works, such as criticism, comment, news reporting, teaching and research.

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As this post highlights, copyright affords valuable protection of certain intangible business assets.  As such, every cannabis business should take the time to determine which of its assets are copyrightable and whether registration would give them a competitive edge. Given the ease of registration and the rights associated therewith, it’s a no-brainer.

source https://www.cannalawblog.com/protecting-your-cannabis-copyrights-yes-you-have-them/

Oregon Cannabis: The Week that Was

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Oregon OSHA and Your Cannabis Business

ICYMI: Los Angeles Amends Local Commercial Cannabis Regulations

It’s no secret that the City of Los Angeles has struggled with implementing its commercial cannabis program under the Medicinal and Adult-Use Cannabis Act (“MAUCRSA“). The licensing of existing medical marijuana dispensaries (“EMMDs”) under Measure M has been a slow and opaque process, but Los Angeles is committed to the success of its cannabis program long-term and isn’t in any rush to act hastily when it comes to continued licensing by the Department of Cannabis Regulation (“DCR“) and Cannabis Regulation Commission. Indeed, just last week, the Los Angeles City Council adopted a handful of ordinances and made several recommendations to the City Attorney (and other City departments) to tighten, clarify, and technically fix its current commercial cannabis legislation. The amended regulations take effect on July 23, 2018.

Here are the major highlights:

• Off-site Advertising. Ordinance No. 185607 addresses commercial cannabis advertising in the City. We now have a 700-foot distance buffer for any off premises advertising for “Cannabis, Cannabis Products, or Cannabis Activity” in any “Publicly Visible Location” from “any School, Public Park, Public Library, Alcoholism or Drug Abuse Recovery or Treatment Facility, Day Care Center, and Permanent Supportive Housing,” except for those advertising signs that are located inside the licensed premises (unless it’s a window sign), or if the advertising sign is on any “commercial vehicle used exclusively for transporting or delivering cannabis or cannabis products.” The distance buffer also doesn’t apply to “the display of public service messages or similar announcements cautioning against the use of Cannabis or Cannabis Products or that are designed to encourage minors to refrain from using or purchasing Cannabis or Cannabis Products.” However, this exemption won’t be used “. . .to permit an advertisement that purports to caution against the use of Cannabis or Cannabis Products when that message is conveyed in conjunction with the display of a logo, trademark or name used by any person or entity engaged in any Cannabis Activity for marketing or promotion of Cannabis or Cannabis Products.” Lastly, the 700-foot buffer is measured as the crow flies from the property line of the prohibited facility to the “closest visible edge of the advertising sign face of the off-site sign.”
• On-site Advertising. Ordinance No. 185607 also tackles on-premises advertising. Only one on-site sign per street frontage is allowed. And that signage is included in the “maximum sign area” allowed for the property (this is in addition to any mandatory state signage under MAUCRSA). On-site signage is now going to be content controlled–you can only have the following information on the sign: “name of business; ‘logogram’ of business; and business’ address, hours of operation and contact information. Other than the foregoing information, no advertising for Cannabis or Cannabis Products shall be displayed on any sign in a Publicly Visible Location.” And here’s the list of all the fun signage you CAN’T utilize: Portable signs or sandwich signs located in the public right-of-way; Digital signs; Spinner signs; Monument signs; Illuminated architectural canopy signs; Pole signs; Marquee signs; Roof signs; Temporary signs; Moving signs and signs with moving parts; and Supergraphic signs.
• Testing. Ordinance No. 185609 addresses quality assurance testing in that licensees won’t have to have their products fully tested “until 120 days after City licensure, or until required under State of California Code of Regulations Title 16, Division 42, Chapter 5, Section 5715, whichever is sooner, after which all cannabis goods shall be labeled and tested.”
• Technical fix legislation. Ordinance No. 185608 is the first technical fix legislation for existing commercial cannabis regulations in L.A. Here are the need-to-knows:
  1. EMMDs that entered into a payment plan with the Office of Finance to become current on outstanding taxes owed will be considered fully paid up for priority licensure (which closed back in March).
  2. The Type 10 Delivery Retailer License has been deleted–Type 10’s under state law outright allow delivery anyway.
  3. Crimes that will bar you from applying from a license have been further amended to include: “A Person with a felony conviction for violating any State or local law involving violent crimes, sex trafficking, rape, crimes against children, gun crimes or hate crimes for a period of 20 years from the date of conviction or completion of a term of imprisonment, supervised release or probation imposed as a sentence for the conviction, whichever is later.”
  4. EMMDs can now be approved for the full type 11 distribution license (not just “self-distribution transport only”).
  5. Since the April 1, 2018 deadline for accepting “Non-Retail” priority applications has come and gone, the DCR’s new standard is that it will accept those applications for no more than 30 days after it opens that particular application window. There’s City-wide speculation that this window will open on July 1, but the City hasn’t made anything official yet.
  6. If a testing lab obtains and maintains an ISO/IEC 17025 accreditation, the DCR may issue temporary approval to the testing lab before completion of a pre-licensing inspection.

What is probably even more interesting than the foregoing is that the City Council also asked (based on a June 5th motion) that the City Attorney, in conjunction with the DCR and other City offices, prepare and present an ordinance to make the following additional changes to existing cannabis regulations:

• Address and control cannabis management companies. The City proposed that “management company” be defined as “any person who participates in the management, direction or control of the operations of a business licensed to conduct commercial cannabis activity, or any person who participates in the management, direction or control of another person who participates in the management, direction or control of the operations of a business licensed to conduct commercial cannabis activity.” The City Council has also proposed that “a management company shall not hold equity ownership in the applicant licensee or have the authority to make major decisions impacting the corporate structure of the applicant or licensee or the license held by the applicant or licensee.” However, a management company would be able to “receive revenue or profit-based compensation, subject to limitations established by the DCR.” Of course, this would still make the management company a financial interest holder under MAUCRSA.

Social Equity Program applicants (“SEPs”) and regular licensees would also have to get written approval from the DCR before engaging with a management company. All SEPs and licensees would also have to disclose to the DCR all written agreements or contracts with a management company and all other documents the DCR requires to identify all persons who will act as the management company for the business premises. And if you can’t qualify for licensure from the DCR, the DCR may also stop you from acting as a management company. Or if you’ve violated any local or state cannabis laws, the DCR may also knock you out from acting as a management company to a SEP or licensee. SEPs and licensee will be responsible for all acts or omissions of its management company in connection with compliance with state and city laws. All management companies engaged in commercial cannabis activity within the City of Los Angeles would have to register and maintain appropriate records with the DCR. Finally, management companies would be limited to entering into management agreements for no more than 3% of commercial cannabis businesses within the City of Los Angeles, by license type. That percentage will increase 1% on July 1st of every year beginning in 2019 until a total of 7% is reached. Tier 1 and Tier 2 SEPs would be exempt from these management company license limits.

• More clarity on the social equity program and allowing more flexibility for Social Equity-licensed businesses. Among other tweaks and additions, Tier 1 and Tier 2 SEPs would be able to apply for retail licenses under the 2:1 ratio already set by the City, and Tier 3 applicants won’t be able to apply for retail licenses. Tiers 1 through 3 applicants would though be able to apply for non-retail licenses under the 1:1 ratio set by the City. The City also wants to allow the DCR to license incubator projects with multiple licenses for the education, training, etc. for SEPs. The City also asked that SEPs be allowed to apply for licensure even if they do not have local land use authorization, but local land use authorization must be obtained prior to completing the licensing process. The City would also increase term of Social Equity Program agreements to five years, and would allow Social Equity-licensed businesses to terminate their agreement with the actual SEP after five years, all with the approval of the DCR. Interestingly, the City added that the Social Equity-licensed business would have the right of first refusal to buy out the SEP applicant (presumably at any time). The City is also planning to allow the Social Equity-licensed business to replace the SEP under certain criteria and conditions.
• Taxes and Cannabis Reinvestment Act. The City Council also asked the City Attorney to draft an election “Ordinance and Resolutions” to place a ballot measure before the voters at the November 6, 2018 State General Election entitled the “Cannabis Reinvestment Act,” and that the ballot measure would, among other revenue captures, implement a one percent gross receipts tax on all commercial cannabis activity to be “reinvested in the community with all funds going to a newly created Cannabis Reinvestment Trust Fund” earmarked for various City items and groups.

Without a doubt in the coming weeks we’re going to see even more legislation from L.A. regarding amending its current cannabis regulations (with specific regard to its much-anticipated Social Equity program), and these forthcoming changes will also directly affect would-be licensees’ ability to pursue licensure in the long run in what may end up being California’s largest cannabis marketplace. So, stay tuned!

source https://www.cannalawblog.com/icymi-los-angeles-amends-local-commercial-cannabis-regulations/

The Anatomy of a Cannabis Trademark TTAB Decision

Cannabis Patent Applications: Prolonging the Lifespan of Trade Secrets

Breaking Cannabis Banking: Tips on Getting an Account

Top Five Things Your CBD Business Needs to Consider

It is no secret that cannabidiol (CBD) is having a moment right now. Unlike its cousin tetrahydrocannabinol (THC), which is another cannabinoid found in the cannabis plant, CBD is not psychoactive. It has been growing in popularity for years for medical and other applications, but has really taken off lately.

Though CBD has become increasingly popular, it is still important to proceed with caution for any businesses operating in this space. Below are five important questions to keep in mind when dealing with CBD.

1.  What is the source of the CBD?

It’s not an accident that this question is first on this list. The source is key. If you are selling CBD at a licensed dispensary in a state that permits the sale of marijuana, then you need to verify that the product comes from a licensed source. Some states like Washington and Oregon may allow CBD additives from other sources, while other states are silent on the topic. You should act cautiously either way.

If you are selling across state lines or in stores that are not licensed to sell marijuana, then you must ensure that  your product is either derived from industrial hemp or from portions of the cannabis plant exempt from the Controlled Substances Act’s (CSA) definition of “marijuana.” If using industrial hemp, you need to make sure that the cultivator has a license from a state that  has implemented an agricultural pilot program in compliance with Section 7606 of the 2014 Farm Bill. If you are using exempt plant  material, you need to verify that the product was derived from mature stalks or seeds incapable of germination  as those sections are specifically exempted from the CSA.

If you a buying from a cultivator or processor, you should carefully draft your purchase and sales agreements to include representations and warranties from the supplier. It’s also important to learn about  who you are doing business as the question of source can determine whether or not something is legal.

2.  What do the lab tests say?

If your first thought in reading this is, “should I be testing CBD products?” the answer is “yes!” It’s important to test for items that could pose a risk to public health including pesticides, heavy metals, and microbials. States may require such testing, but the risk will ultimately fall on any company in the line of production. If a consumer is harmed, the cultivator, processor, and distributor may all be sued for product liability.

CBD is not independently listed as a controlled substance in the CSA. However, THC is. This means you need to test to make sure you CBD product does not contain THC, unless you are selling it in states that have legal marijuana programs. This is important whether your are dealing with Farm Bill hemp as it is defined as containing less than .3% THC on a dry weight basis, or if you are dealing with exempt plant material as THC alone is a Schedule I controlled substance.

3.  Where is the CBD going to be sold?

I recently wrote about how state law impacts the distribution of hemp-derived CBD products. If you are distributing products in a state that restricts the sale of CBD, like Michigan, you products could be seized and your company and its stakeholders could face criminal sanctions. It’s important to track where your products are being distributed and to inform your potential customers that they too must monitor state law.

4. What claims are you making about CBD?

We’ve written before that the FDA will treat products as drugs if their own labeling or marketing suggests they are “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease.” Phrases like “combats tumor cells” and “[has] anti-proliferative properties that inhibit cell division and growth in certain types of cancer” clearly suggest that the CDB product can cure, mitigate, treat or prevent cancer, and is thus a drug.

Any suggestion that a product might have a role in treating or diagnosing disease, or that it is intended to affect the structure or any function of the human body of humans or other animals, is a health claim that subjects the product to drug regulations (unless it falls within the narrow confines of the Dietary Supplement Health & Education Act, which the FDA has ruled that  CBD does not.)

It’s important to remember that only the FDA can determine whether a drug can be labelled as safe and effective for a particular disease. Preventing health claims based on anecdotal evidence is one of the FDA’s core functions and  the agency will not hesitate to issue warning letters based on CBD health claims.

Long story short, don’t make health claims about your CBD products or allow others to post testimonials on your website.

5.  Has the law changed?

Finally, it’s important to keep up with the ever changing legal landscape. Tom Angell of Marijuana Moment recently reported that Mitch McConnell announced that his proposed  hemp bill will be included in the broad ranging agricultural act of 2018. This comes shortly after Congress approved a non-binding resolution acknowledging the vast potential of hemp.

In addition to federal law, stakeholders need to stay informed as to how the DEA feels about CBD that week. The DEA is often changing its policy on this subject, whether  that comes through a post on its website or an internal directive. It’s important to stay up-to-date on the  DEA’s latest position on CBD.

Finally, monitor state law. This is probably the hardest to accomplish  since there are 50 states who each  may  treat CBD  differently. Still, if you  are doing  business in  a state, it’s on you to  know the rules.

CBD law is incredibly complex and this list only scratches the surface as to what you need to look out for. If you have additional questions, give our firm a call to see how we can help your CBD business thrive.

source https://www.cannalawblog.com/top-five-things-your-cbd-business-needs-to-consider/

Now is the Time to Identify and Protect Your Cannabis Trade Secrets

In the world of intellectual property (“IP”), there are four categories under which your IP may fall:

1. A trademark is any word, phrase, symbol and/or design that identifies and distinguishes the source of the goods of one party from those of others. Similarly, a service mark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of a service rather than goods. Trademarks are your brand names, and can remain in place forever so long as you are making actual, lawful use of your mark in commerce.
2. A patent is a limited duration property right relating to an invention that is granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention. Patentable materials may include machines, manufactured articles, industrial processes, chemical compositions, and certain plant genetics. Design patents will give the patent holder exclusive rights to exploit the patented materials for 15 years from issuance, and a utility patent or plant patent will be valid for 20 years from issuance.
3. Copyrights protect original works of authorship including literary, dramatic, musical, and artistic works, including poetry, novels, movies, songs, computer software, and architecture. For works created by an individual, copyright protection lasts for the life of the author, plus 70 years. For works created anonymously, pseudonymously, and for hire, protection lasts 95 years from the date of publication or 120 years from the date of creation, whichever is shorter.
4. Trade secrets (the subject of this post) in general can be comprised of any confidential business information that provides a company with a competitive edge. Trade secrets can include manufacturing or industrial secrets like recipes, formulas, processes or techniques, as well as commercial secrets, such as client lists or business plans that have commercial value because of their secrecy. Unauthorized use of this information by anyone other than its owner is an unfair practice and violation of the trade secret. The key to trade secret law is that something is only regarded as a trade secret so long as it’s kept secret.

Many clients come to me with the belief that patent protection is more valuable than trade secret protection, but that isn’t always the case. Where patent protection is available for a limited duration, trade secrets can provide their owners with protection so long as the secrets are not disclosed to anyone. In some cases, this can be a very long time. Perhaps the most famous example of a trade secret is the recipe to Coca-Cola. Coca-Cola claims this to be the “world’s most guarded secret,” as it is known to only a few key employees at any given time. The recipe is locked in a purpose-built vault in the company’s museum in Atlanta.

If Coca-Cola had opted instead to patent their recipe, it would have been disclosed to the public, and they would have had the ability to exclusively exploit the recipe for only 20 years. Protection under trade secret law, however, will benefit them for much longer, but the key is in taking adequate steps to prevent trade secrets from being revealed. In a case for misappropriation of trade secrets, one of the factors considered by the court is whether the owner of a purported trade secret implemented adequate measures to keep their secrets secret.

Steps that can be taken to protect trade secrets include limiting the number of individuals who know the secret, implementing security protocols in the facility that holds the secret, and requiring employees and others with access to the trade secret to sign a thorough confidentiality and non-disclosure agreement (NDA). These types of agreements are used extensively by marijuana businesses.

Although trade secrets abound in the cannabis industry, information and techniques have also been shared quite freely for a very long time. And information that has been disclosed is not subject to trade secret protection under the Uniform Trade Secrets Act or the Defend Trade Secrets Act of 2016. However, even if you determine that your recipes or processes or other business information doesn’t qualify for trade secret protection, they may still have value as proprietary information, which can be licensed. For this reason, we encourage all of our clients to have confidentiality and non-disclosure agreements in place with their employees and with other key individuals with whom they transact business. Even if you don’t have a claim for misappropriation of trade secrets under trade secret law, you can still go after someone in court to try to stop them from disclosing your confidential information or for damages for having disclosed such information pursuant to your NDA.

The necessity for keeping trade secrets secret is why it is important to consult with an IP attorney as early in your development process as possible to determine whether patent or trade secret protection makes the most sense. And regardless of whether your business materials meet the criteria for trade secret protection, every company should have a form NDA that they can have employees and others exposed to confidential information sign.

source https://www.cannalawblog.com/now-is-the-time-to-identify-and-protect-your-cannabis-trade-secrets/

President Trump, Cannabis and the STATES Act

Industrial Hemp: Don’t Forget About State Law!

As CBD and hemp continue to grow in popularity we are receiving an increasing number of calls and emails from companies that want to distribute hemp across the country. We have written about the legality of hemp and CBD under federal law:

• DEA Confirms It Cannot Regulate All Parts of the Cannabis Plant
• Cannabis Taxation: Does IRC Section 280E Apply to Industrial Hemp?
• Federal Court Denies Review of DEA’s Marijuana Extract Rule
• Legal Hemp: Coming Soon Nationwide?
• Is CBD Legal? Hemp Industry Case Ruling Due Soon
• Target Sold CBD Online: Was it Legal?

This post focuses on another topic: state law on CBD and Industrial Hemp.

The 2014 Farm Bill grants states the authority to regulate Industrial Hemp, which contains less than .3%  THC on a dry weight basis, through an Agricultural Pilot Program. The Farm Bill also requires that Industrial Hemp is overseen by a state’s department of agriculture. The Farm Bill is light on additional details and states have taken different approaches to regulating Industrial Hemp and CBD derived from Industrial Hemp.

Colorado cemented its place in history as a cannabis pioneer by legalizing marijuana in 2012 along with Washington. Colorado’s hemp credentials are also solid as it has dedicated more acreage to the cultivation of hemp than any other state. Cultivators are permitted to sell hemp to the public. Colorado does not oversee the processing of hemp though which makes the extraction process largely unregulated.

Unlike Colorado, Oregon regulates both the production and processing of Industrial Hemp. Oregon’s Department of Agriculture (ODA) oversees the state’s industrial hemp program. “Growers” must register with the ODA in order to produce Industrial Hemp and “Handlers” must register to process Industrial Hemp. Oregon differs from Colorado in that it does not permit its Growers to sell Industrial Hemp directly to the public. Conversely, Handlers are permitted to sell Industrial Hemp to any person. Growers and Handlers may also sell their products to licensed recreational marijuana businesses giving them access the state’s recreational marijuana market. Growers and Handlers can apply to the Oregon Liquor Control Commission (OLCC) for an Industrial Hemp certificate to transfer hemp to recreational processors. OLCC retailers can then turn around and sell these hemp-based products to Oregon consumers.

Washington recently passed a law that sets up a similar structure. You can read about this law here, as we covered it a few months ago when it was still a proposed  bill. Washington’s licensed processors will soon be allowed to use additives derived from hemp-based products that were grown outside of its licensed marijuana system. These additives may come from Washington’s own Industrial Hemp program, which has been stalled for the last few years due to budget issues, or from Industrial Hemp sourced from other sources.

California has followed a similar path to Washington in that its hemp program has failed to launch in a meaningful way. Part of the hold up has been that California requires that Industrial Hemp only be grown by those on the list of approved hemp seed cultivars. That list includes only hemp seed cultivars certified on or before January 1, 2013. Industrial hemp may only be grown as a densely planted fiber or oilseed crop, or both, in minimum acreages. Growers of industrial hemp and seed breeders must register with the county agricultural commissioner and pay a registration and/or renewal fee. We wrote about proposed changes to California’s program here.

Michigan‘s office of Licensing and Regulatory Affairs (LARA) recently issued an Advisory Bulletin that only permits the sale of CBD in licensed medical marijuana dispensaries. The Bulletin first states that CBD cannot be found in portions of the cannabis plant that fall outside the state’s definition of “marihuana” (i.e., the mature stalks, seeds incapable of germination, fiber from stalks, oil or cake made from seeds or other derivatives of the mature stalks) other than in trace amounts. The Bulletin goes onto state that Michigan’s Industrial Hemp program does not authorize the “sale or transfer” of Industrial Hemp.

This is significant as it means that CBD derived from Industrial Hemp cannot be sold and that CBD derived from marijuana can only be sold in dispensaries. The Bulletin also seems to include Industrial Hemp from other states as it concludes with the following:

Any possession or transfer of industrial hemp – or any product claimed to be “hemp”-related – must be done in compliance with Michigan’s Industrial Hemp Research Act.

The bottom line in Michigan is that to sell CBD in that state, whether from marijuana or hemp, you need to go through a dispensary.

Also keep in mind that some states do not regulate Industrial Hemp at all. This should not be interpreted to mean that they will turn a blind eye to hemp products distributed within their borders. Other states, regulate CBD specifically, which can be found in Industrial Hemp, and those states limit the use of CBD to patients who have received an authorization from a physician for its medical use.

If you want to distribute Industrial Hemp across the country it is not as simple as making sure that you have a licensed cultivator. Sure, you need to know the laws of the state in which you are sourcing hemp, but that’s not enough. You need to also consider the legal landscape of the places you intend to ship and sell Industrial Hemp products.

source https://www.cannalawblog.com/industrial-hemp-dont-forget-about-state-law/

Cake and Cannabis: What the Masterpiece Cakeshop Case Means for Marijuana Businesses

How To File A Mesothelioma Claim

How To File A Mesothelioma Claim

How to file a mesothelioma claim may sound complex at first. If you or a loved one is looking for compensation for asbestos-related injuries, picking the best mesothelioma lawyer is an essential primary step.

Your case will certainly have a much better opportunity for success if you collaborate with a seasoned  mesothelioma cancer lawyer. When you choose to file a claim, your lawyer will need to prepare and send the needed lawful records to start the suit procedure.

Experienced mesothelioma cancer attorneys have extensive knowledge of asbestos producers and can aid you identifying which ones are in charge of your health problem. A professional lawyer is well-informed on mesothelioma trust funds that have been set aside for victims nationwide.

Options On How To File A Mesothelioma Claim

Currently, there are many ways to file a mesothelioma claim. This can include, but is not limited to classic lawsuits, asbestos trust fund claims and Social Security disability claims. Military veterans exposed to asbestos during service may be eligible to file disability and health care claims with the U.S. Department of Veterans Affairs (VA).

Here at Goldberg, Persky & White we are able to pursue claims in any fashion that gives our client the best possible outcome for compensation. Below are a list of a few possible options on how to file a mesothelioma claim.

Litigation

Mesothelioma and other asbestos related diseases are very frequently the result of a corporation’s negligence or a company’s failure to warn of asbestos hazards. Filing a lawsuit against the company or companies responsible for your asbestos exposure may result in compensation for many types of damages.

Damages covered by an asbestos claim:

• Medical expenses
• Lost income
• Pain or suffering
• Loss of intimacy

A lawyer can determine whether additional expenses may be covered under your claim. It is important to save all medical and financial records relating to your illness for this reason.

There are two types of mesothelioma lawsuits:

• Personal Injury Claims: A lawsuit filed by an individual diagnosed with an asbestos-related illness.
• Wrongful Death Claims: If the original claimant dies as a result of the disease, family members or loved ones may be able to step in as plaintiffs. If a claim was never submitted, they may have the option to file a wrongful death claim on behalf of their deceased loved one.

Your attorney will be aware of the legal options available and can guide you through the process of filing a claim. After speaking with your attorney, you may determine that a lawsuit offers the best opportunity to obtain a large award for your injuries. Most mesothelioma lawsuits are settled out of court before a trial takes place.

How to File Mesothelioma Bankruptcy Claims

In the previous couple of years, numerous asbestos production companies have filed bankruptcy for a range of factors. Filing for bankruptcy does not indicate the asbestos businesses have actually run out of money. Rather, a lot of asbestos companies that file bankruptcy just do it to rearrange as well as to allow more stability. In many cases, the courts associated with these corporate bankruptcies ordered the development of mesothelioma cancer settlement funds, likewise referred to as mesothelioma trust funds.

These funds are meant to supply compensation for people impacted by an asbestos-related cancer cells. A mesothelioma lawyer could assist you in figuring out whether the business in charge of your injuries has a trust fund and help you file a claim.

How to File Mesothelioma Workers Compensation Claim

The laws for workers’ compensation vary from state to state. Some worker’s compensation laws change every year as well. If you were recently diagnosed with an asbestos-related illness such as mesothelioma, you may be able to file for workers’ compensation to your cover medical bills, as well as pain and suffering endured.

Eligibility and compensation are separate things under the law. The workers’ compensation board in your particular state can provide more information on the matter. Working with a mesothelioma lawyer can be very valuable to anyone diagnosed with an asbestos related disease.

While filing for workers’ compensation may be a viable option, a lawsuit often provides much larger compensation. Before pursuing any workers’ compensation, one should speak with an experienced mesothelioma and asbestos lawyer to determine if a traditional lawsuit is a better route for your specific case.

Most attorneys don’t file a claim against your former or current employer, unless the employer is an asbestos related company. Instead, attorneys typically file lawsuits against the manufacturers of asbestos-containing products that were used at the victim’s place of work. These product manufacturers are generally held liable for the damages.

How to File Mesothelioma Veterans Benefits Claim

The brave men and woman who served in the U.S. armed forces have a much higher risk of developing mesothelioma and other lung diseases due to the dependence on asbestos in vessels, barracks and pipe coverings, tools and machinery, and other such sources. Men and woman who served in the U.S. Navy, especially those who worked in shipyards are at the highest risk.

Armed Forces veterans can file claims with the VA when seeking compensation for any injuries or illnesses resulting from their military service. Veterans can seek disability compensation, VA health care and dependency as well as indemnity compensation.

Deadlines for Mesothelioma Claims

Unlike the common personal injury claims where the clock starts ticking at the specific moment of the victim’s injury, it’s difficult to determine exactly where and when the asbestos related injury occurred because an accurate diagnosis of mesothelioma typically comes 20 to 50 years after the initial exposure to asbestos. How to file a mesothelioma claim can be complex at first, a mesothelioma lawyer can make this process very simple. How to file a West Virginia mesothelioma claim can be challenging.

Due to this long latency period, some courts have made exceptions applying statutes of limitations.

“Statutes of limitations” refer to the time period a victim has to file a claim for their illness. For victims of asbestos exposure, this time period usually begins once a person is diagnosed with an asbestos-related cancer such as mesothelioma.

A qualified mesothelioma attorney can ensure your claim is filed before the statute of limitation expires.

You may also be able to file a lawsuit in multiple states at once. Doing this depends on the location of the organizations identified as defendants and where the asbestos exposure originally occurred. An attorney who specializes in these cases can further explain your rights, which vary by state and jurisdiction, in this particular field of law. Mesothelioma lawyers are very valuable to those diagnosed with a asbestos related disease. A florida mesothelioma lawyer is also very valuable to anyone diagnosed in florida. How to file a West Virginia mesothelioma claim can be challenging.

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