Friday, October 24, 2014

Trademarks for Marijuana Products


Following Maureen Dowd’s experience with edibles in Colorado, we’ve seen greater national interest in the Colorado marijuana market.  A larger audience brings greater scrutiny – resulting in July’s last-minute changes to the LCB’s rules regarding edibles, and bringing greater attention to the importance of the trademark in building a strong brand.  The first trademark infringement cases involving marijuana businesses surfaced this past spring in Colorado, including the Hershey’s suit, and the MED-a-Mint conflict.  These cases emphasize two different points:  first, the infringement of existing registered trademarks, and second, the role of a properly registered trademark in protecting a business’ interests in a contractual agreement.

Businesses in an emerging industry are in a position to experience even greater profit from time spent developing solid branding.  A good brand not only helps drive a product’s sales, but builds a platform for long-term growth.  Registering a trademark gives a business the means to protect its exclusive use of a brand, and protect its product’s market share from confusion with similar products.  A trademark can consist of words, names, symbols, devices, colors used in a distinguishing way, brands, logos, even audible signs, fragrances, or three-dimensional signs.  

If a trademark is being improperly used, a business may file a lawsuit to accuse another business of infringing upon their exclusive right to its use.  TinctureBelle, the defendant in the Hershey case, surely knew that their Ganja Joy and other chocolate bars were a bit close to the mark, but chose to produce these products as novelty items.  This only became an issue when the products became more visible through media coverage of Colorado’s emerging recreational market.  TinctureBelle changed their packaging, but a little too late to avoid Hershey’s suit.  We expect to see similar cases as other novelty items become more widely (and publicly) available through retail stores in Washington.   

The MED-a-mint case illustrates a similar use of the trademark to protect a brand.  When the contracted manufacturer changed the labeling and packaging of the MED-a-mint product, the business owner determined that the brand was being misrepresented.  Citing their registered trademark, the company filed a suit claiming a violation of contract that was causing damage to the company’s brand.

When preparing to market a new product or brand, a business will likely want to pursue a trademark. We strongly recommend seeking an attorney’s input during this process, and the KB Law Group provides this service for our clients.

The trademark search is among the first steps, to ensure that no similar trademark is currently pending or registered in the federal or state databases, or in established common law use.  Once a mark’s uniqueness is established, a business can either reserve the right to register it, or begin the process of filing for registration.  In most cases, a business must be actively using a mark prior to filing for its registration:  it must be printed on signs, marketing materials, packaging, or business correspondence.

Because of marijuana’s status as a federally controlled substance, federal trademark protections are not available through the United States Patent & Trademark Office (USPTO).  However, ancillary businesses that provide merchandising or produce non-marijuana products may be able to obtain federal trademarks. 

In order to protect a proprietary name or image, marijuana businesses may only acquire trademarks on a state-by-state basis, through the Secretary of State’s office.  Businesses wanting to secure a trademark over a larger geographical area will want to consider applying for trademarks in multiple states – which means vetting the desired name and image in all target states before developing the brand or submitting the first application.  As Alaska and Oregon prepare to vote on recreational marijuana this November, securing a regional (i.e. multiple state) trademark could be even more important.

Wednesday, October 15, 2014

Marijuana Advertising

We’ve all seen the billboards in Seattle, advertising for cannabis products. Given the guidelines provided in the I-502 legislation, are these billboards legal? 

Most current cannabis advertising is for medical – and not retail – products.  Requirements are not consistent across the marijuana industry, although a number of bills were under consideration during the 2014 session of Washington’s state legislature.  Until decisions are made regarding the future of medical marijuana in Washington State, marijuana advertisements will continue to have differing restrictions. Clearly this is a source of confusion for new I-502 licensed recreational marijuana businesses.

Not all advertising is prohibited for recreational marijuana businesses; it’s just subject to greater limitations than medical marijuana products. Recreational advertisements must not:
  • Be false or misleading
  • Promote over-consumption
  • Make therapeutic claims
  • Depict children or attempt to appeal to children
  • Be within 1,000 feet of a sensitive area (see the locational rules)
  • Be posted in or on public property, including public transit vehicles or shelters
And finally, all recreational marijuana product advertisements must include the standard four marijuana health disclaimers:
This product has intoxicating effects and may be habit forming.
Marijuana can impair concentration, coordination, and judgment. Do not operate a vehicle or machinery under the influence of this drug.
There may be health risks associated with consumption of this product.
For use only by adults twenty-one and older. Keep out of the reach of children. 

Permitted Advertisements


Online advertising – from product websites to banner ads on industry pages – is allowed, though online sales are not. Social media – from dominant players like Facebook or Twitter, to industry-specific marijuana finders – are all acceptable forms of connecting with customers.  Use of YouTube or other video sharing websites to post promotional videos is expressly permitted by the LCB, but businesses are cautioned to avoid material that would appeal to younger viewers, and to exclude viewers under the age of 21 if possible.  This translates to an extra caution for posting on YouTube, which permits age restriction to 18+ only.

Businesses must perform due diligence to ensure they take all precautions to limit online traffic to adults, and to deter minors. Easy steps are to add an age verification key to a business website, and to monitor the site of origin for incoming traffic.  Any online advertising must also contain the standard four marijuana health disclaimers, as detailed above.

Traditional advertising options can be complicated, but are generally allowed.  Stores may include flyers or brochures with a purchase, and supply customers with branded shopping bags. Ads in newspapers or other printed media intended for adults are fine. Direct mail and e-mail marketing are allowed, though they may not feature coupons or discounts. Broadcast advertisements on radio or TV are theoretically permitted, though they might be questionable under current FCC regulations, and near-impossible to segregate from a minor audience.  Sign wavers wearing provocative or eye-catching costumes may be permitted – depending on local ordinances – but businesses should take care, once again, to make sure they are not appealing to children and that  mobile advertisements do not encroach on the 1,000 foot rule. 

Merchandising


Marijuana businesses not only want to promote their brands, but also profit from promotional sales.  The problem is this:  the rules for marijuana producers, processors, and retailers (WAC 314-55-075, 314-55-077, 314-55-079) expressly prohibit the sale of anything other than marijuana, and, in the case of retailers, marijuana and marijuana paraphernalia. The solution? Many licensed marijuana businesses have created and licensed a separate merchandising company with Washington’s Secretary of State. This secondary company does not seek to produce or sell marijuana products through the Liquor Control Board, but exists solely to produce and sell materials that promote a licensed marijuana business.  These merchandising products, mostly apparel and souvenirs such as t-shirts, hats, bags, glasses, coasters, etc., may not be sold or given away in a recreational retail store, but they can be sold at non-marijuana stores or provided to bars or other adult venues.  

Because this arrangement is complicated, we must emphasize the following:
Licensed marijuana retailers are not allowed to sell anything but marijuana products and paraphernalia. Paraphenalia is in a class of its own:  it may only be sold by retail stores, and it is the only non-marijuana swag that retailers can sell.


Wednesday, July 30, 2014

New York Times Speaks Up for Legalization



We were excited to see the New York Times’ endorsement of legal marijuana in their Sunday Editorial Repeal Prohibition, Again.  In its brief position statement, the NYT Editorial Board boldly states:  “It has been more than 40 years since Congress passed the current ban on marijuana, inflicting great harm on society just to prohibit a substance far less dangerous than alcohol.”  The article advocates legalization on the federal level, giving states the responsibility to regulate marijuana.

Supporting their argument, the editorial board cites to the systemic racial inequality in marijuana prosecution and criminal enforcement (unduly affecting young black men).  The article also discredits the unsubstantiated concerns that marijuana is a "gateway" drug and acknowledges that addiction and dependency of marijuana pales in comparison to alcohol and tobacco.

The newspaper plans to print six articles addressing specific issues pertinent to the legalization of marijuana, including Sunday’s Let States Decide on Marijuana and The Injustice of Marijuana Arrests.

Monday, July 7, 2014

First Licenses Issued for Retail Marijuana Shops

The wait is almost over. Early this morning the Washington State Liquor Control Board (WSLCB) provided licenses to the first small group of 24 retail marijuana stores. It's been six long months for these applicants, who could open their doors and begin selling marijuana for recreational use as early as tomorrow, July 8, 2014. This will mark the first time that adults can legally purchase marijuana grown, processed, and sold by state-licensed businesses under I-502. (Keep in mind that marijuana remains a Schedule I controlled substance, subject to federal prosecution and civil forfeiture.

First, a little background: the Washington State Liquor Control Board (WSLCB) has been reviewing retail applicants based on the results of April’s retail license lottery (see map). The board announced its intention to issue retail licenses in groups of 10-30 beginning this week. We expect to see licenses issued for approximately another hundred stores during the next 30-60 days, and the remainder sometime in the fall.

The total number will likely fall short of the WSLCB's proposed 334 stores statewide. This discrepancy is due to a number of factors, including a lack of applicants in some jurisdictions and local zoning prohibitions. More details to follow.

Where will the first stores open?
On April 2, 2014 the WSLCB stated:  “The initial retail licenses will be issued in batches (10-20) in the most populous areas.”  First reports indicate 14 stores in western Washington and 10 stores in the eastern part of the state. By WSLCB rules, retail stores may be open 8:00 am – 12:00 midnight.

Why are there so few stores (and when will there be one in my neighborhood?)
The allocation of only 334 retail stores across the state was based on population and demand estimates prepared by BOTEC, a consulting team hired by the WSLCB shortly after I-502 passed.

Unfortunately, local zoning moratoriums and permanent bans significantly decrease the public's access to state-licensed, legal marijuana.  If you are curious about whether your own local government has banned marijuana or enacted a temporary zoning moratorium, a good place to start your search is the MRSC Marijuana Guide for Local Governments (although this page may not be up-to-date, since local marijuana zoning is changing weekly).

Note that although a county (Pierce) may ban marijuana sales, such a ban may not apply within the municipal limits of a city in that county (Tacoma).

How many stores will there be?
The WSLCB limited the state to 334 retail licenses, although we may have significantly less than that when all is said and done.  It's important to understand that the 334 licenses were allocated to specific cities or counties-at-large, so presumably, if a city institutes a ban, any licenses allocated to it would be removed from the equation, reducing the state-wide count.

Taking into account the current permanent and temporary bans, as well as jursidictions which failed to attract an initial applicant, we estimate the state-wide number to be closer to 250 retail stores.  This could change, however, if local jurisdictions lift their temporary bans or the WSLCB readjusts the allocation of licenses by jursidiction.

How much will marijuana cost?
Current prices for medical marijuana are roughly $8-12 per gram. General consensus is that when stores open, the starting price for recreational marijuana will be $12-25 per gram. This takes into account the additional overhead, excise taxes, and expected product shortages during the first year of sales.

Shortages?
On average, it takes 3-4 months to bring a crop to harvest, and the first producer’s license was issued on March 4, 2014. Do the math. This recent AP story about testing labs provides some data about the state-wide harvest so far. As of June 28, eleven producers had harvested and submitted samples for testing. The WSLCB has now licensed 79 producers, so the production rates will increase, in time.

Will they sell out?
Most likely.

How much marijuana can I buy?
Under Washington State Law, individuals over 21 years of age may buy up to one ounce of marijuana, 16 ounces of solid marijuana-infused product, 72 ounces of infused liquid, or 7 grams of concentrates. Sales of amounts in excess of transaction limits can result in the retailer’s immediate loss of license.

When the stores open on July 8, only usable marijuana will be available, as no extracted or infused products have been approved.

How much marijuana can I have on me?
An individual 21 years or older may possess no more than one ounce in Washington state. You may not take it over the border to Canada. Possessing more than one ounce may result in jail and fines.

An individual providing marijuana to an underage person may be punished with up to ten years imprisonment and up to $10,000 fine under state law. Penalty for a retailer selling to an underage person is a 10-day suspension or $2,500 fine (first offense).

Can I smoke it or use it anywhere I want?
Opening a package of marijuana or consuming marijuana within view of the public is a civil infraction and you may receive a ticket and a fine of up to $100. Individuals consuming marijuana should be on their own property, or on the property of someone who permits consumption.

What are the limits for legal driving?
If an officer suspects someone of driving impaired, he may obtain a search warrant for a blood sample. Drivers with blood tests that show more than 5 nanograms of active THC per milliliter of whole blood will be charged with a DUI – regardless of the driver’s performance on other sobriety tests.

One study compared the 5 nanogram THC limit to an equivalent 0.05 percent blood-alcohol level, less than the state DUI limit for alcohol in Washington. In short, do not drive if you are even slightly impaired. 

Tuesday, July 1, 2014

Emergency Changes to Liquor Control Board Rules

The Washington State Liquor Control Board ("WSLCB") adopted emergency rules on June 25, 2104, which changed and added requirements regarding marijuana infused products and security measures for marijuana licensed premises.

Because these rules were enacted on an emergency basis, there is no opportunity for public input and feedback.  In other words, the rules become effective immediately.  Under permanent rule changes (non-emergency), the public is given the opportunity to comment, based on which, the WSLCB may revise the proposed changes.  Emergency rules, however, expire 120 days after filing, at which point a permanent (non-emergency) rule is usually adopted.  You will be given the opportunity to comment during the permanent rule-making process, which the WSLCB should initiate shortly.

 

Rule Changes for Processors

1.      The WSLCB must pre-approve all infused products, labels, and packaging.
This rule change presents a number of questions.  For example, how long will it take for the WSLCB to approve products…a week, month, or more?  What efforts will the WSLCB take to ensure this delay will not negatively impact licensed businesses?  Going forward, as products and packaging are revised and tweaked, what changes will require additional approval?  This will be important for limited edition products, or holiday packaging, etc.

2.      Solid infused edibles must be scored to indicate individual servings.
It is unclear how you would “score” snack mix, pretzels, popcorn and similar products.  Presumably these products would not apply to this rule, but more clarification would be helpful.
Remember, a single serving of a solid infused product is limited to 10 milligrams of THC; one package of such product cannot be more than 100 milligrams of THC (or 10 servings); and a single consumer transaction is limited to 16 ounces of such product (which may include multiple packages or just one package, depending on the product size).
This rule does not address liquid infused products or concentrates.  Concentrates are defined as “products consisting wholly or in part of the resin extracted from any part of the plant Cannabis and having a THC concentration greater than sixty percent.”  ESHB 2304, Sec. 1 (2014).

3.      All infused products must be homogenized.
It is unclear, at this time, what specific technology must be employed to ensure homogenization and the uniform disbursement of cannabinoids in certain products.  For example, is a thorough blending of ingredients prior to baking sufficient to satisfy the homogenization requirement?

 4.      In addition to the other warnings, infused products must also contain the warning: “This product contains marijuana.
For the list of other warnings, go to WAC 314-55-105(15)

5.      Infused edibles “designed to be especially appealing to children” are PROHIBITED.
The decision on what snacks and products are appealing to children is subjective.
The WSLCB’s issue paper on this emergency rule states that “lollipops, gummy bears, and cotton candy are very appealing to children.”  Presumably those items are prohibited.  But what about other popular infused products like jolly ranchers, gummies/chews, chocolate bars, cookies, popcorn—where will the WSLCB draw the line, and will this rule become a prohibition on all infused candy?

6.      Infused edibles which contain certain food items are PROHIBITED.
Food items prohibited under this rule change include:
Any food that has to be acidified to make it shelf stable,
Food items made shelf stable by canning or retorting,
Fruit or vegetable juices,
Fruit or vegetable butters,
Pumpkin pies, custard pies, and any pies containing egg,
All dairy products, including butter, cheese, ice cream, or milk, and
Dried or cured meats.
Many of these food items were already prohibited under the prior rule change that prohibited “potentially hazardous foods” as defined in WAC 246-215-01115.

7.      Certain infused vinegars and oils are permitted.
Vinegar and oil derived from natural sources may be infused with dried marijuana if the plant material is removed from the final product and the vinegar and oil is not infused with any other substance, including herbs and garlic.

8.      Infused jams and gellies made from scratch must utilize a standardized recipe in accordance with 21 C.F.R. Part 150.

9.      A processor may infuse dairy butter or fats for use in the preparation of other infused edibles, but the butter and fats may not be sold to consumers as stand-alone products.

10.  All processors producing infused edibles must pass a processing facility inspection and ongoing annual compliance inspections.
This rule change already went into effect under the WSLCB’s earlier policy decision.  For more information on the requirements of a commercial kitchen, visit the Department of Agriculture’s website.

 

Rule Changes for All Licensees

1.      All visitors must display an identification badge while on the licensed premises.

2.      Licensees must maintain a visitor’s log.

3.      Finally, the emergency rule made slight adjustments to camera surveillance requirements.
In what appears to be an effort to streamline and clarify the camera surveillance requirements, the WSLCB revised the language regarding video surveillance system requirements.  These revisions do not appear to be material.

Monday, June 23, 2014

Multiple Challenges to DEA Control Over Medical Marijua

The Drug Policy Alliance’s new report, The DEA: Four Decades of Impeding and Rejecting Science, is released at a pivotal time, as federal legislators consider limiting financial support of the DEA. On May 29, the U.S. House of Representatives approved a bipartisan appropriations measure to withhold funding from the DEA’s raids of state-legalized medical marijuana facilities. The Senate followed suit last week with the proposal of a similar funding amendment prohibiting the DEA from pursuing providers and patients of medical marijuana and extracted cannabididol oil. Also last week, New York became the 23rd state to legalize medical marijuana. 

The Case Against the DEA
The Drug Policy Alliance (DPA) advocates for drug law reform, including legalization, sensible regulation, and harm reduction. The Alliance challenges the DEA’s willful disregard of scientific evidence that has kept marijuana in the federal list of most-highly controlled substances. Their report reviews the basis of the DEA’s authority and details five cases: three unsuccessful petitions to reschedule marijuana, a researcher’s application to create a licensed research-grade marijuana production facility, and – as a point of comparison – the speedy process through which MDMA (Ecstasy) was classified as Schedule I. 

The Controlled Substances Act (CSA) of 1970 granted the U.S. Attorney General with responsibility over classification, scheduling, and enforcement of drugs; Nixon created the Drug Enforcement Agency (DEA) in 1973 as the designated agency for handling these matters.  Drugs are classified into Schedule I – Schedule V based on medical and scientific evidence.  The distinction of interest between Schedule I and Schedule II-V is that Schedule I drugs have “no currently accepted medical use,” a fact that was the focus of the 1995 and 2002 petitions to reschedule marijuana.  In its 2011 response, the DEA brazenly claimed the following:
According to established case law, marijuana has no ‘currently accepted medical use’ because the drug’s chemistry is not known and reproducible, there are no adequate safety studies, there are no adequate and well-controlled studies proving efficacy; the drug is not accepted by qualified experts, and the scientific evidence is not widely available.

The DEA’s position seems patently ridiculous, given just a few touchstones from the past decade.  First, the medical use of marijuana has been legal in the state of California since 1996, supported by the Institute of Medicine’s 1999 recommendation that marijuana be allowed for some patients.  Second, the 2009 AMA Policy: Medical Marijuana, calls for a review of marijuana’s Schedule I status to facilitate further medical studies of marijuana.

In contrast to the lethargic pace at which the DEA responds to rescheduling petitions (6-22 years), the report documents the DEA’s speedy action to schedule drugs new to the market, such as MDMA (two years), synthetic cannabinoids such as Spice, K2 (less than one year), and synthetic stimulants like mephedrone and MPDV (less than two years), with control of the latter two substances dictated by the Synthetic Drug Control Act of 2011.

DEA’s Control over Research
The report reveals a systematic effort to undermine and obstruct scientific research. The National Institute on Drug Abuse (NIDA) is the only legal producer of marijuana for research. Studies of marijuana require review by the FDA, NIDA and the Department of Health and Human Services (HHS). A 1999 HHS directive stipulates that NIDA should not provide research marijuana to studies with the goal of developing an FDA-approved medicine. This has resulted in what the report labels as a catch-22:  only FDA-approved studies may apply to NIDA for marijuana product, yet NIDA is compelled to reject the majority of those studies.  NIDA has repeatedly delayed delivery or refused to provide approved studies with product. Finally, the low-quality marijuana produced by NIDA is not representative of the marijuana currently available to the public:  NIDA has only a limited number of low potency strains (7% THC) compared to the market (15-24% THC).

Recommended Action
The report states that the DEA is “incapable of accurately assessing the state of medical and scientific knowledge about those drugs and scheduling them appropriately.” The DPA recommends that the United States Attorney General designate a different agency as responsible for classifying drugs and making schedule determinations, perhaps even commissioning a non-governmental agency, such as the National Academy of Sciences. NIDA’s current monopoly on research-grade marijuana should be eliminated, instead contracting to licensed private producers.