Tag Archives: cannabis

COVID-19 Forces Cannabis Industry and State Regulators to Evaluate and Improve Methods of Cannabis Delivery and Access

By Justin A. Santarosa, Arletta Bussiere, Joe Pangaro and Justin Stern

Cannabis operators, like all other businesses, are searching for new ways to reach their customers during the COVID-19 pandemic. Cannabis businesses have been generally treated as “essential” under the various state orders that have otherwise closed businesses and ordered people to stay at home. Even though they have been permitted to operate, it is not business-as-usual for these operators as they grapple with CDC workplace restrictions and guidelines for reducing the spread of COVID-19.

As a result of these restrictions, state regulators and cannabis business have begun implementing new policies and procedures such as curbside pick-up, expanded delivery zones and increased use of contactless payment methods. While these changes are viewed as temporary, if properly implemented, cannabis businesses may be able to show regulators that these expanded policies should continue after the crisis has passed. This difficult time presents an opportunity for cannabis retailers to expand their reach and help bolster support for more online ordering, home delivery and other delivery methods.

Below is a summary of how several states have handled the COVID-19 pandemic in relation to the operations of cannabis businesses during the stay at home orders. Continue reading COVID-19 Forces Cannabis Industry and State Regulators to Evaluate and Improve Methods of Cannabis Delivery and Access

A Cannabidiol Catalyst? Recent Events Increase Pressure on FDA to Regulate CBD

By Justin M.L. Stern and Frederick R. Ball

For consumers, the widespread availability of products containing cannabidiol (CBD) is old news. But for those in the cannabis industry—and in particular, those monitoring applicable regulatory developments—the state of CBD remains largely in flux and continues to be marred by uncertainty.

Under the 2018 Farm Bill, the U.S. Food and Drug Administration (FDA) retained its regulatory authority over products derived from hemp, including CBD incorporated into products it traditionally regulates, such as food, dietary supplements, and cosmetics. Unfortunately for the industry, FDA has yet to propose or issue formal regulations concerning the manufacture, distribution, or sale of such products. At the same time, FDA has issued numerous warning letters to producers and retailers incorporating CBD into products operating in the complex gray area between state and federal law. Nevertheless, recent events occurring across all three federal branches of government may reflect an impetus for change in FDA’s approach to CBD products.

To read the full article, please visit the FDLI website.

Essential Yet Illegal: COVID-19 Shows Fed Cannabis Policy is Unsustainable

Seth Goldberg
Seth A. Goldberg

Although the cannabis reform movement has made incredible strides over the past 25 years, our industry and the medicinal potential of the plant are still not recognized at the federal level. The COVID-19 pandemic is drastically altering our lives but difficult times are able to expose many truths, including the understanding that legalization and safe access to cannabis is critical, especially during a crisis.

Thankfully, many states already have come to the realization that cannabis, especially medicinal use, is not a luxury but a necessity. Although states are restricting access to public places and prohibiting gatherings, many governors have designated cannabis dispensaries as an “essential service.” […]

“Opponents of federal legalization are likely to argue the categorization was merely a natural extension of the law in states that have already legalized medical marijuana to treat certain conditions, and that the uniqueness of the COVID-19 situation limits the ‘essential’ designation to that very urgent and unprecedented fact pattern,” Seth Goldberg, attorney and partner at Duane Morris LLP told mg.

To read the full text of this article, please visit the mg website.

Will Cannabis Workers Be Eligible for Coronavirus Unemployment Benefits?

[…] With so many out of work and many more likely joining them in the coming weeks, Americans are looking to Washington D.C. to provide a lifeline. One bill, the Families First Coronavirus Response Act (FFCRA), has already been signed into law by President Trump. This provides $1 billion in additional funds for states to direct toward bolstering their unemployment insurance programs.

Lawmakers on Capitol Hill have been working to pass additional relief legislation—but when it comes to the federal government and the cannabis industry, the relationship is not usually cozy. Will those relief funds find their way to cannabis workers who are out of work due to the coronavirus pandemic?

“Given that marijuana remains an unlawful substance under Schedule I of the Controlled Substances Act, there has been concern that the relief under the FFCRA would not be available to cannabis businesses and, therefore, would not be available to support cannabis workers,” Linda Hollinshead, an attorney and Partner at Duane Morris LLP told mg.

[…]

“The law provides that any administrative grants transferred to the account of a state may be used ‘by such State only for the administration of its unemployment compensation law,’ suggesting that the money is being provided to support a state’s program, and that the federal government will not dictate how it is spent or what industries will be recipients of those grants,” Hollinshead said. “As a result, it does not appear that the additional availability of these federal funds under the FFCRA jeopardizes an individual’s ability to have access to state unemployment benefits.”

[…]

To read the full article, visit the mg Magazine website.

Patent protection of psychedelic therapeutics: a page from the cannabis playbook?

As increasing numbers of U.S. states have legalized both medical and adult-use cannabis, another set of Schedule 1 controlled substances – psychedelics – has begun to emerge from the shadows. Psychedelics such as psilocybin, lysergic acid diethylamide (LSD), mescaline, and ayahuasca were designated along with cannabis as Schedule I controlled substances under the Controlled Substances Act of 1970. Recently, several U.S. cities, including Denver, Colorado and Oakland, California, have decriminalized possession of psilocybin-containing mushrooms and plants having psychedelic properties. In February 2020, the Washington D.C. Board of Elections voted to advance an initiative to decriminalize possession of plants and fungi containing psilocybin and other psychedelic agents. As was the case for cannabis, biomedical research into psychedelics ground nearly to a halt following the Schedule 1 designation. But, over the past 10 to 15 years, researchers at both universities and in the private sector have turned back to both cannabis and psychedelics as possible therapies for disorders that are intractable to standard pharmaceutical treatments. In 2019, FDA approved esketamine, a compound from a family of compounds known to have hallucinogenic effects, for treatment-resistant depression. As has been the case for cannabis, the renewed interest in psychedelics has brought with it an increase in patenting activity. Even though legalization of psychedelics has lagged behind that of cannabis, legal wrangling over patents covering psychedelics has not, as demonstrated by recent developments in the area of psilocybin-based therapeutics.

Psilocybin is a tryptamine alkaloid found in a number of fungal species, also known as “magic mushrooms.” The psychoactive and hallucinogenic properties of such fungi have been a part of traditional religious rituals of indigenous cultures in Central and South America for centuries. In the 1950s, scientists at Sandoz Ltd., isolated psilocybin from fungi. The first US patents covering psilocybin issued to Sandoz Ltd. in 1965: U.S. Patent No. 3,183,172, “Obtaining Psilocybin and Psilocin from Fungal Material” and U.S. Patent No. 3,192,111, “Method of Inducing Therapeutic Tranquilization with Psilocybin and Psilocin.” Continue reading Patent protection of psychedelic therapeutics: a page from the cannabis playbook?

Key Cannabis Issues for Illinois Employers in 2020

By Jennifer Long

On January 1, 2020, Illinois became the 11th state to legalize adult-use cannabis. The Cannabis Regulation and Tax Act is comprehensive and impacts employers in many ways. Following Illinois’ legalization of medical cannabis in 2014, marijuana is now available for recreational use by all adults age 21 and older, while remaining an unlawful controlled substance under federal law. As a result, Illinois employers must ensure that they have considered their organization’s philosophy for dealing with marijuana in the application and disciplinary process for all positions and employees. Continue reading Key Cannabis Issues for Illinois Employers in 2020

Next Chapter in the Big Sky Case: Idaho State Court Approves Seizure of Hemp

On January 21, 2020, an Idaho state court held the Idaho State Police had the authority to seize a shipment of federally lawful hemp that was transported through Idaho in January 2019. Idaho State Police v. One White 2013 Freightliner Commercial Vehicle et al. Although the hemp businesses involved had turned to federal courts for help, when we last left off with the story, the Ninth Circuit had held that the federal courts should abstain from hearing the case until the Idaho state courts fully resolved both the pending criminal and civil actions. Big Sky Scientific LLC v. Jan Bennetts et al.[1]

Big Sky Scientific, LLC, a Colorado-based hemp processor, had purchased hemp from a state-licensed hemp cultivator in Oregon after passage of the 2018 Farm Bill. The parties arranged to ship the hemp from Oregon to Colorado via motor carrier. En route to Colorado, the shipment entered Idaho, where the Idaho police seized the cargo and arrested the driver, alleging violations of Idaho state law. Idaho initiated a state court criminal proceeding against the driver, and a state court civil proceeding against the hemp itself, to ensure the hemp would not be returned to Big Sky.

In response, Big Sky filed a motion for a temporary restraining order and preliminary injunction in federal court to force the Idaho State Police to return the seized cargo and stop seizing hemp shipments that pass through the state. The federal District Court ruled in favor of the Idaho State Police, and on appeal, the Ninth Circuit declined to rule on the merits of the case, and instead sent it back to state court. Shortly after the Ninth Circuit’s ruling, prosecutors announced the state reached a plea deal with the trucker that had been charged with illegally transporting hemp through Idaho. With the criminal case resolved, only the civil proceeding against the hemp itself remained.

In the state court civil proceeding the state police “implicitly conceded that the plant and plant parts it seized were entirely low-THC C. sativa.” With this fact established, the court turned to the statutes at issue—the 2014 Farm Bill, the 2018 Farm Bill, and the Idaho Controlled Substances Act—to consider whether federal law regarding an entity’s ability to transport hemp in interstate commerce preempted Idaho state law. Central to this argument is a provision in the 2018 Farm Bill that provides “No state or Indian tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with” the Agricultural Marketing Act.

It was undisputed that the hemp seized by the state police was cultivated prior to passage of the 2018 Farm Bill. Therefore, in order for Big Sky to prevail, the court would need to find the provision of 2018 Farm Bill that protects hemp transportation applied retroactively to hemp cultivated under the 2014 Farm Bill. The Idaho police argued it did not, and the court agreed: “the plain language of the [2018] Farm Bill . . . applies only to low-THC C. sativa grown after the enactment of the 2018 Farm Bill and after the various regulations . . . have been promulgated.”

The court then turned to the question of whether the hemp at issue, which was grown in accordance with Oregon state law, was even compliant with the 2014 Farm Bill. The court held that Oregon’s 2014 hemp program was non-compliant for two crucial reasons.

First, Big Sky argued that the Oregon cultivator’s sale of his hemp crop “may be considered research into the marketing” of hemp—a common assertion among hemp businesses that sell their crops and are licensed pursuant to a 2014 Farm Bill program. But the court scoffed at that rationale. “That argument is absurd on its face. . . . he wasn’t growing the crop to help the Oregon Department of Agriculture do research, he was trying to make money.”

Second, the court found Oregon’s hemp law was so dissimilar to both the 2014 and 2018 Farm Bills that hemp cultivated under Oregon’s program could not be considered compliant with federal law. The 2014 and 2018 Farm Bills define hemp as only those Cannabis sativa L. plants with a THC concentration of 0.3% or less, but the Oregon hemp laws only require the 0.3% THC concentration to apply crop wide. “Through the miracle of legal linguistics and basic math, C. sativa plants that would be ‘marijuana’ under Oregon law if grown individually, suddenly became ‘hemp’ if grown in the right field.” Additionally, while federal law defines hemp only with respect to Cannabis sativa L., Oregon law does not limit the definition to only that strain of cannabis. Thus, a field of Cannabis indica with a crop-wide average of 0.3% THC would be lawful hemp in Oregon, but illegal federally. Accordingly, the Court found there is insufficient evidence that the hemp at issue was botanically within the federal definition of cannabis permitted under the 2014 Farm Bill

This last holding could portend continued problems for hemp transportation through Idaho, and perhaps elsewhere. For example, while this litigation was ongoing, in November 2019, Idaho Governor Brad Little issued executive order 2019-13, which ordered “the State of Idaho permit, on and after October 31, 2019, the interstate transportation of hemp produced in accordance with the 2014 Farm Bill or the 2018 Farm Bill and the rules and regulations promulgated thereunder.” Although clearly intended to prevent future litigation on this issue, under the Idaho state court opinion, if a state in which the hemp was grown has a definition of hemp not identical to the federal definition, the grower/transporter might be required to offer proof that the its hemp meets the federal definition. Stay tuned.

For Further Information

 If you have any questions about this blog post, please contact David Landau, Joe Pangaro, any of the attorneys in our Cannabis Industry Group or the attorney in the firm with whom you are regularly in contact.

[1] Duane Morris filed an amicus brief on behalf of the American Trade Association for Cannabis and Hemp in support of Big Sky, arguing that an adverse ruling would have a serious negative impact on the hemp industry. (Duane Morris is the national law firm partner of the American Trade Association for Cannabis and Hemp.). Duane Morris has previously written about the oral argument before the Ninth Circuit and the court’s subsequent decision that remanded the case to state court.

Cannabis patent litigation update: construing cannabis claims

Because enforcement of patent rights in the U.S. is governed by federal law, the Schedule I status of cannabis continues to cast uncertainty over whether cannabis patent rights can actually be challenged or enforced. That uncertainty diminished with the filing of the first patent infringement case in federal court on a patent covering a cannabis-related technology on July 30, 2018 when United Cannabis Corporation (“UCANN”) sued Pure Hemp Collective, Inc. (“Pure Hemp”) in the United States District Court for the District of Colorado (United Cannabis Corporation v. Pure Hemp Collective, Inc.(Case No.: 1:18-cv-01922-NYW) for patent infringement. (https://www.duanemorris.com/articles/patent_litigation_cannabis_industry_2_cases_to_review_0319.html) UCANN alleged that Pure Hemp is selling products that are encompassed by the claims of its patent, US 9,730,911. Pure Hemp denied infringement and counterclaimed that the UCANN patent is invalid and should never have been granted because similar products were well known long before the filing date of the patent.

These proceedings have now moved to the claim construction stage, a stage specific to patent litigation, The claims in a patent specify the rights to which the patent owner is entitled, just as language in a deed to real property specifies the boundaries of the real property. But, unlike the quantitative verifiable measurements taken to define the boundaries of real property, claim language can be imperfect and open to more than one interpretation. Continue reading Cannabis patent litigation update: construing cannabis claims

Jennifer Fisher and Justin Santarosa

California’s Governor Proposes Changes to Cannabis Regulation and Taxation

By:  Justin A. Santarosa and Jennifer Briggs Fisher

Gavin Newsom, Governor of California, released his proposal for the State’s budget today, outlining a number of items of importance for the California cannabis industry.

The most noteworthy proposal is regulatory consolidation.  In an effort to improve and simplify regulatory oversight of commercial cannabis activity, the Governor’s office is proposing to consolidate the three licensing entities that are currently within the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health, into a single “Department of Cannabis Control” by July 2021.

Such a change would be welcomed by many operators in the State, especially vertically integrated operators who must now contend with multiple state agencies that have different regulatory requirements and interpretations.  This may also boost M&A activity in the state, given that it could lead to more consistent regulations regarding ownership changes and a more efficient regulatory approval process.  A single regulatory agency would also streamline fee collections and enforcement.  More details on this proposal are expected in the Spring of 2020 and we will be watching closely for those updates.

Additionally, the budget looks to “fix” what many consider to be a broken cannabis taxation regime. The Governor states that the goal of the proposal is to reduce the tax collection burden on the cannabis industry and simplify the tax collection process. The proposed changes move the responsibility for the cultivation excise tax from the final distributor to the first, and for the retail excise tax from the distributor to the retailer.

While no changes to the tax rates are specified, the proposed budget does state that the Governor will consider other changes to the existing cannabis tax structure, including the number of taxes and tax rates.  The California tax burden is viewed as one of the major inhibitors of the growth and success of the cannabis market in the state.

We will continue to monitor these developments as they unfold, so please check back for further updates and analysis.