Tag Archives: complaint

Biros' Blog

Judge Dismisses Claims in Vaping Illness Lawsuit

By Aaron G. Biros
No Comments

In September of 2019, Charles Wilcoxen fell seriously ill after vaping cannabis oil from a cartridge. Just days after he began experiencing symptoms he was hospitalized and later diagnosed with lipoid pneumonia, the mysterious lung illness now known as EVALI associated with the 2019 vape crisis.

Wilcoxen spent three days in the hospital and ever since he was diagnosed, he has been unable to exercise, return to work full time or even play with his daughter. Attorneys for Herrmann Law Group representing Wilcoxen filed a product liability lawsuit, Wilcoxen v. Canna Brand Solutions, LLC, et al., in Washington State Court, naming six cannabis companies as defendants: Canna Brand Solutions, Conscious Cannabis, Rainbow’s Aloft, Leafwerx, MFused and Janes Garden.

This image came from the complaint filed, alleging that Mr. Wilcoxen believes this was a CCELL product.

This case was allegedly the first lawsuit in the wake of the 2019 vape crisis. The Vanderbilt University Law School Blog has a very comprehensive post on this case that has the original complaint and a lot of information on the lawsuit.

Canna Brand Solutions, the primary defendant named in the complaint, is a packaging supplier and distributor for CCELL vaping products (heating elements, pens and batteries) in the state of Washington. The complaint alleges that Wilcoxen believes he used a CCELL vape. CCELL is a Chinese company, which makes it notoriously difficult to pursue legal action against them, hence why Canna Brand Solutions was listed as a defendant instead.

On August 31, 2020, Judge Michael Schwartz dismissed all claims against Canna Brand Solutions. “All claims asserted by Plaintiff against Canna Brand in the above-mentioned matter shall be voluntarily dismissed without prejudice and without costs or fees to any of the parties to this litigation,” Judge Schwartz says in the dismissal. Judge Schwartz dismissed the case without prejudice, meaning it could be brought to the court again should the plaintiff’s attorneys decide to do so.

With the allegations against Canna Brand Solutions focusing on CCELL products, it seems that the case was dismissed largely due to a lack of evidence connecting exactly which product resulted in the illness, as well as the lack of culpability for a distributor of products they did not manufacture.

These are the vape cartridges that Mr. Wilcoxen purchased

Daniel Allen, founder and president of Canna Brands Solutions, claims that the product mentioned in the complaint did not come from his company. “We stand by our high quality and customizable CCELL vaporization products,” says Allen. “We feel vindicated in this case by the judge’s decision, which shows the claims against our company and products were completely unfounded from the beginning.”

He also added that the quality and safety of the products they distribute is their highest priority. “The product in question involved in this case did not come from Canna Brand Solutions,” says Allen.

Wilcoxen’s illness and subsequent long-term lung injury is extremely unfortunate. Thousands of people have been hospitalized and 68 deaths have been confirmed by the CDC. The CDC is still calling the illness EVALI (e-cigarette, or vaping, product use-associated lung injury). According to the CDC, there is no real known cause of EVALI, but they have found that vitamin E acetate is “strongly linked” to the outbreak. Knowing that, it is entirely possible that Mr. Wilcoxen’s illness was a result of one of the cannabis products he consumed, just most likely not anything that came from Canna Brand Solutions. A closer look at the contents with an independent lab test of the THC oil he consumed could shed some more light on what exactly caused the illness.

I would venture to guess that one of the products he consumed did have vitamin E acetate. Because the case was dismissed without prejudice, it could be brought to the court again if, say, Mr. Wilcoxen’s attorneys were to obtain more evidence, such as an independent lab report showing vitamin E acetate in the contents of one of the products he consumed. If Mr. Wilcoxen’s attorneys can figure out which product actually contained vitamin E acetate, perhaps the lawsuit could get a second shot and Mr. Wilcoxen could have a greater chance at getting some long-overdue and much-deserved restitution.

CBD You in Court: Consumer Class Actions Involving Hemp-Derived CBD Products

By David J. Apfel, Nilda M. Isidro, Brendan Radke, Emily Notini, Zoe Bellars
No Comments

Consumer demand for products containing cannabidiol (CBD) is on the rise across the country, with industry experts estimating that the market for CBD products will reach $20 billion by 2024. This boom in consumer demand has outpaced the regulatory framework surrounding these products. While the 2018 Farm Bill decriminalized hemp, it left much up to individual states and preserved the FDA’s jurisdiction over dietary supplements, foods and cosmetics. The FDA has not yet issued any specific rulemaking for CBD products.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

Against this background, it is not surprising that consumer class actions regarding hemp-derived CBD products are flourishing. Over the past year alone, the plaintiffs’ bar has filed approximately twenty putative class action lawsuits against manufacturers of hemp-derived CBD products. The cases are primarily in federal court in California and Florida, with additional cases in Illinois and Massachusetts. Plaintiffs challenge the marketing and advertising of a variety of CBD products, including oils, gummies, capsules, creams, pet products and more.

The cases so far follow a familiar pattern seen in prior consumer class actions, especially in the food and beverage industry. Read on to learn what plaintiffs have claimed in the CBD lawsuits, how companies are defending their products, and how best to position your hemp-derived CBD products in light of lessons learned from past litigation.

What These Lawsuits Are Claiming, and How Companies Are Defending Their Products

In most of the recent CBD lawsuits, plaintiffs claim either that: 1) product labels over- or understate the amount of CBD in the products; and/or 2) the sale of CBD products is inherently misleading to consumers because the products are purportedly illegal under federal law. Regardless of which theory underlies the claims, plaintiffs typically frame their claims as consumer fraud, false advertising, breach of warranty, unjust enrichment, and/or deceptive trade practices.

Just some of the many CBD products on the market today.

In most cases, defendants have filed motions to dismiss seeking to have the cases thrown out. In these motions, defendants argue that plaintiffs’ claims are “preempted” by the Federal Food Drug and Cosmetic Act (FDCA), and that only the federal government can enforce the FDCA. Some defendants have additionally argued that if the court is not prepared to dismiss the claims as preempted, the doctrine of “primary jurisdiction” applies. This means that the issues raised regarding CBD are for the FDA to decide, and the cases should be stayed until the FDA finalizes and issues rules on products containing hemp-derived CBD. Many defendants have also advanced dismissal arguments for lack of standing, claiming that the individuals bringing the lawsuits are trying to sue for conduct that never harmed them personally (e.g., because they never purchased a particular product), or will not harm them in the future (e.g., because plaintiffs have stated they will not buy the product again). The standing arguments often apply to particular claims or products within the lawsuit, rather than to the lawsuit as a whole.

Current Status of the Cases

Of the approximately twenty consumer class actions filed over the last year, about half remain pending:

  • Five have been stayed pursuant to motions filed by defendants;
  • Two have motions to dismiss pending;
  • One has a pending motion to vacate a default judgment against defendants;
  • One was filed earlier this month, and defendant’s deadline to respond has not yet elapsed.

FDAlogoTo date, none of the cases (currently pending or otherwise) has proceeded to discovery, and no class has yet been certified. That means that no court has yet determined that these cases are appropriate to bring as class action lawsuits, rather than as separate claims on behalf of each individual member of the putative class. This is significant, because plaintiffs’ ability to achieve class certification will likely influence whether these CBD lawsuits will continue to be filed. Consumer fraud cases like these typically do not claim any physical injury, and the monetary damages per individual plaintiff are relatively low. As such, the cases often are not worth pursuing if they cannot proceed as class actions.

Of the cases that are no longer pending, all but two were voluntarily dismissed by plaintiffs. While the motivation behind these dismissals is not always announced, approximately half of the voluntary dismissals came after defendants filed a motion to dismiss, but before the court had ruled on it. One Florida case was mediated and settled after the court denied defendant’s motion to dismiss.1 A California court spontaneously dismissed one matter (without the defendant having filed any motion) due to a procedural defect in the complaint, which plaintiffs failed to correct by the court-imposed deadline.2

Early Outcomes on Motions to Dismiss 

Of the thirteen motions to dismiss filed to date, only five have been decided. So far:

  • No court has dismissed a case based on federal preemption grounds. Courts have either deferred ruling on preemption, or denied it without prejudice to re-raising it at a later time.
  • Four courts have stayed cases based on primary jurisdiction.3
  • Only one court has denied the primary jurisdiction argument.4
  • Standing arguments have been successful in three cases,5 and deferred or denied without prejudice to later re-raising in the other two cases.6 However, the standing arguments applied only to certain products/claims, and were not dispositive of all claims in any case.

These rulings show a clear trend towards staying the cases pursuant to primary jurisdiction. In granting these stays, courts have noted that regulatory oversight of CBD ingestible products, including labeling, is currently the subject of FDA rulemaking, and that FDA is “under considerable pressure from Congress” to expedite the publication of regulations and guidance.7

Any label claims need to meet FDCA regulations and applicable FDA guidance.

Plaintiffs may be recognizing the trend towards primary jurisdiction as well, since there is now at least one case where plaintiffs agreed to a stay after defendant filed a motion to dismiss asserting, among other things, primary jurisdiction.8 But some plaintiffs are still resisting. For example, in the first case to have been stayed plaintiffs have since filed a motion to lift the stay. The motion—which was filed after the case was reassigned to a different judge—argues that primary jurisdiction does not apply, and that the FDA’s recent report to Congress suggests no CBD-specific rulemaking is forthcoming.9 The motion is pending.

Lessons Learned From Food Industry Consumer Class Actions

The motions to dismiss that have been filed to date in CBD-related class actions follow a tried and true playbook that has been developed by defense counsel in other food and beverage industry class actions. For example, the primary jurisdiction arguments that have been gaining traction in the CBD consumer class actions are very similar to primary jurisdiction arguments that were successful years earlier in cases involving the term “natural” and other food labeling matters.10

Similarly, the standing arguments that have succeeded in the early motions to dismiss CBD consumer class actions followed similar standing arguments made years earlier in food and beverage class actions.11

Work with reputable labs to ensure the potency stated on the label is accurate

The preemption arguments that have largely been deferred in CBD consumer class actions to date could become a powerful argument if and when the FDA completes its CBD rulemaking. The preemption defense has been particularly effective when the preemption arguments focus on state law claims that require defendants to omit or add language to their federally approved or mandated product labeling, or where plaintiffs otherwise seek to require something different from what federal standards mandate.12 These arguments could be particularly compelling once the FDA issues its long-anticipated rulemaking with respect to CBD products.

Until then, primary jurisdiction will likely continue to gain traction. The FDA’s comprehensive regulatory scheme over food, dietary supplement, drug, and cosmetic products, combined with the FDA’s frequently-expressed intention to issue rulemaking with respect to CBD-products, and a need for national uniformity in how such rulemaking will interface with state requirements, converge to make primary jurisdiction especially appropriate for CBD-related class actions.13

How to Best Position Your Products

Until the FDA issues its long-awaited rulemaking regarding CBD products, companies can take the following steps to best position their products to avoid litigation and/or succeed in the event litigation arises:

  • Work with reputable labs to ensure the amount of CBD stated on product labeling and advertising is accurate;
  • Ensure that the product is manufactured according to appropriate current Good Manufacturing Processes (cGMPs);
  • Ensure that any claims made on product labeling and/or in advertising are consistent with FDCA requirements and applicable FDA guidance to date – for example, if the product is a dietary supplement, avoid making express or implied claims that it can cure or prevent disease;
  • Maintain a file with appropriate substantiation to support any claims stated in product labeling and advertising;
  • Work with legal counsel to stay abreast of developments in federal and state laws applicable to hemp-derived CBD products, and how any changes might impact potential class action defenses; and
  • If a lawsuit arises, work with legal counsel to develop a strategy that not only resolves the current litigation as efficiently as possible, but also positions the company strategically for any future consumer claims that may arise.

References

  1. Final Mediation Report, Potter v. Potnetwork Holdings, Inc., 1:19-cv-24017-RNS, (S.D. Fla. July 30, 2020).
  2. Court Order, Davis v. Redwood Wellness, LLC, 2:20-cv-03273-PA-JEM (C.D. Cal. Apr. 10, 2020).
  3. Electronic Order, Ahumada v. Global Widget LLC, 1:19-cv-12005-ADB (D. Mass. Aug, 11, 2020); Memorandum and Order, Glass v. Global Widget, LLC, 2:19-cv-01906-MCE-KJN (E.D. Cal. June 15, 2020); Order Granting in Part Defendant’s Motion to Dismiss and Staying Remaining Causes of Action, Colette et al. v. CV Sciences Inc., 2:19-cv-10227-VAP-JEM (C.D. Cal. May 22, 2020); Order on Motion to Dismiss, Snyder v. Green Roads of Florida LLC, 0:19-cv-62342-AHS (S.D. Fla. Jan. 3, 2020).
  4. Order on Motion to Dismiss, Potter v. Potnetwork Holdings, Inc., 1:19-cv-24017-RNS, (S.D. Fla. Mar. 30, 2020).
  5. Order Granting in Part Defendant’s Motion to Dismiss and Staying Remaining Causes of Action, Colette et al. v. CV Sciences Inc., 2:19-cv-10227-VAP-JEM (C.D. Cal. May 22, 2020); Order on Motion to Dismiss, Potter v. Potnetwork Holdings, Inc., 1:19-cv-24017-RNS, (S.D. Fla. Mar. 30, 2020); Order on Motion to Dismiss, Snyder v. Green Roads of Florida LLC, 0:19-cv-62342-AHS (S.D. Fla. Jan. 3, 2020).
  6. Electronic Order, Ahumada v. Global Widget LLC, 1:19-cv-12005-ADB (D. Mass. Aug, 11, 2020); Memorandum and Order, Glass v. Global Widget, LLC, 2:19-cv-01906-MCE-KJN (E.D. Cal. June 15, 2020).
  7. Order on Motion to Dismiss at 12, Snyder v. Green Roads of Florida LLC, 0:19-cv-62342-AHS (S.D. Fla. Jan. 3, 2020).
  8. Minute Entry, Pfister v. Charlotte’s Web Holdings, Inc., 1:20-cv-00418 (N.D. Ill. Aug. 11, 2020).
  9. Plaintiff’s Motion to Lift Stay, Snyder v. Green Roads of Florida LLC, 0:19-cv-62342-AHS (S.D. Fla. July 13, 2020).
  10. See, e.g., Astiana v. Hain Celestial Grp., Inc., 905 F. Supp. 2d 1013 (N.D. Cal. 2012), rev’d on other grounds, 783 F.3d 753 (9th Cir. 2015); Taradejna v. Gen. Mills, Inc., 909 F. Supp. 2d 1128 (D. Minn. 2012).
  11. See Miller v. Ghirardelli, 912 F. Supp. 2d 861, 869 (N.D. Cal. 2012) (holding that the named plaintiff lacked standing where the products purchased by the putative class members were not “substantially similar” enough to those purchased by the named plaintiff); Colucci v. ZonePerfect Nutrition Co., No. 12-2907-SC, 2012 WL 6737800 (N.D. Cal. Dec. 28, 2012) (finding one of two named plaintiffs lacked standing because, even though the other named plaintiff (his fiancée) purchased the nutrition bars for him, he himself did not purchase any of the bars); Veal v. Citrus World, Inc., No. 2:12-CV-801-IPJ, 2013 WL 120761 (N.D. Ala. Jan. 8, 2013); Robinson v. Hornell Brewing Co., No. 11-2183 (JBS-JS), 2012 WL 6213777 (D.N.J. Dec. 13, 2012) (holding that there was no Article III standing because the named plaintiff had testified and stated in written discovery that he would not purchase the product in the future).
  12. See, e.g., Turek v. Gen. Mills, Inc., 662 F.3d 423 (7th Cir. 2011); Lam v. Gen. Mills, Inc., 859 F. Supp. 2d 1097 (N.D. Cal. 2012); Veal v. Citrus World, Inc., No. 2:12-CV-801-IPJ, 2013 WL 120761, at *9-10 (N.D. Ala. Jan. 8, 2013).
  13. See, e.g., Astiana v. Hain Celestial Grp., Inc., 905 F. Supp. 2d 1013 (N.D. Cal. 2012), rev’d on other grounds, 783 F.3d 753 (9th Cir. 2015); Taradejna v. Gen. Mills, Inc., 909 F. Supp. 2d 1128 (D. Minn. 2012).

Practical Advice on How to Avoid a TCPA Suit

By Paul Gipson
1 Comment

Texting consumers is a very effective means to drive engagement and ultimately sales. Text messages have outpaced emails when looking at conversion and click-thru rates. In fact, 95% of texts are read in ninety seconds or less! While text messages can be a great way to engage with prospects and customers, the FCC’s Telephone Consumer Protection Act (TCPA) is a regulation you need to be mindful of. In fact, the average cost of a TCPA settlement is over $6m dollars, which doesn’t include legal fees or reputational damage.

Over the past few years, there have been about 4,000 TCPA cases filed annually. Take a look at the growth:

Companies are being targeted for various reasons, but there are a few that I’ll cover below along with some advice on how to avoid TCPA suits.

See if you can spot the trend in these cases:

  • Papa Johns: $16.5m settlement due to texting pizza specials to consumers without their consent.
  • Abercrombie & Fitch: $10m settlement due to texting store promotions to consumers without their consent.
  • Rack Room Shoes: $26m settlement for texting their reward program members with various sales without their consent.

Do any of these campaigns sound like something your company is engaged in?

So, you’ve got someone who has signed up for a rewards program, wants to receive deals, or has provided their number to your company for other purposes, but you are concerned about the TCPA (hopefully). Based on my experience working with hundreds of clients at CompliancePoint, here’s where I think you should start. But first…

Quick assumption: Your company is using an automated system to send both informational and promotional texts. Examples include “blast campaigns” (upcoming sale) or “triggered campaigns” (signed up for rewards).

Quick point: Just because the text message says your store is having a sale but doesn’t ask the consumer to buy anything on the message, you may think it’s not considered “telemarketing”. This is wrong. Any plan to sell now or in the future through direct marketing is telemarketing and subject to the TCPA.

Here are my top 5 things to consider:

  1. Obtain consent. This is not achieved by simply having a number provided by the consumer. Instead, the consumer must affirmatively agree to receive promotional calls/texts by automated means. This is done through a clear disclosure and often accompanied by an unchecked checkbox.
  2. Honor opt-outs. This seems obvious right? Provide instructions on how to opt-out and look for other phrases like “stop/quit/cancel”. Opt-outs should occur immediately with most common texting platforms.
  3. Keep records. If you receive a complaint, you want to be able to respond confidently and records help you do that. The key records to maintain are your texting records (the phone numbers you texted, the date/time of the text, and the content of the text), your consent opt-in forms, and opt-out requests from consumers with dates. Ask yourself: what records do you need to prove you had consent, and what records prove you didn’t text a consumer after they opted out.
  4. Only text consumers between the hours of 8AM and 9PM according to their time zone. I always recommend going off address and not phone number due to cellphone mobility. If you text a California number at 8PM, but the phone owner lives in New York, you might get a few complaints.
  5. Monitor compliance with these items. Another one that seems obvious, yet most companies fail to do so, and you see above what happens. I guarantee you’ll find issues with most audits.

Bonus – here is a more comprehensive checklist on how to achieve a Safe-Harbor defense.

This article is not intended to be a scare tactic. The TCPA legal landscape is rampant and consumers are more aware now than ever of their rights. A quick Google search of “Cannabis TCPA” helps to illustrate the fact that this industry, like most, is not immune. However, with proper compliance parameters in place, your company can enjoy the benefits of texting with consumers with peace of mind.

german flag

How Germany Gets Its Cannabis

By Marguerite Arnold
No Comments
german flag

The German cannabis cultivation bid may be mostly done and dusted (although the last four lots are now up for legal challenge) but the drama is only intensifying on the ground in Germany. Namely, where is the cannabis being consumed on the ground now actually coming from?

For the past several years (in fact since 2016 when a Frankfurt-based start-up called Medcann imported the first Canadian medical cannabis into the German market in partnership with Canopy Growth), the conventional wisdom has been that Holland and Canada were the only two countries allowed to import medical cannabis into the country.

Canopy_Growth_Corporation_logoAs is usually the case in the cannabis industry, when it comes to such things, there were also multiple and highly creative explanations about this strange state of affairs that sounded oddly exotic enough to be plausible. This is after all, the international cannabis business.

These explanations also usually referenced conventional industry “lore” including such tall tales as these two countries were not signatories to an international drug treaty (not true), to being European (nope) or even a member of the EU (also completely false).

Yet there was always something strange with such urban legends – perpetuated by insiders across the German industry. Starting with a deliberate vagueness about details. Especially as in the summer of 2017 when Tilray announced grow facilities in Portugal, and by the end of it, Canopy was moving into Spain, and later by early 2018 Denmark and more. Italybegan to appear on the radar of multiple big Canadian companies. Clearly all these big companies seemed to know something that those outside did not. See Greece. Not to mention the teeth-gnashing of the Israelis– repeatedly shut out of the German market by not being allowed to export by their own government until Christmas Day, 2018.

The mystery deepened in March in fact, as a furore rocked the German-based cannabis industry over the last weeks. Farmako, a new, Frankfurt-based distributor, not only announced that it was importing 50 tonnes of cannabis into the country– and from Poland (where production of such bulk has not even been seeded) – but then gave additional details on a Bloomberg appearance that appeared to indicate that in fact the medical cannabis they were already selling (sourced from other places) had come from Macedonia. 

Certification, and most certainly paperwork are the name of the gameIn fact, no such transfer of cannabis had occurred from the Macedonian side (yet), although the firm in question at the other end of the deal was subjected to considerable harassment in the German canna-specialty press in the meantime.

The news, that occurred right at a time when Tilray is clearly training pharmacists for the German market, the first bid is concluding, Greece issues even more cultivation licenses, Canadian companies are clearing still stepping up their production game, and South Africa is also getting into the formal licensing act, with all sorts of interesting things afoot in Uruguay, also set off what appears to be an official investigation of the firms involved at the governmental level.

Insiders are tight lipped and nobody is willing to talk on record. However, the distribution firm, Farmako, has subsequently reported that in the month of March, they became the top selling cannabis specialty distributor in Germany. And since they are not out of business, it is also clear that while their PR may have been a little premature if not easily misunderstood, the broader message is very obvious.

What is also very clear at this point, in other words, is that the German door for cannabis and the international industry appears to be opening to product sourced from many places. Further by extension, the German government is in the process of recognizing foreign GMP certification processes from multiple countries all over the world as being equal to its own – at least on the cannabis front.

In fact, this has been going on relatively quietly for the past six months or so.

What Are The Standards, Certifications, and Qualifications?

A press release from January of this year, issued from an Australian firm called MCA, announced they had accepted the first letter of intent to ship to a German firm (in 2020). The company is currently accepting pre-orders as it finishes construction and achieves EU GMP certification. The same (female founded) firm was also present at the ICBC in Berlin this year in March, reporting that German demand from a universe of local distributors was already greater than they could fill. The news that their first sale went to German firm Lexamed, the controversial German wheelchair distributor who helped bring down the first German bid, was also largely unremarked upon at the time by most of the industry press and in fact, ever since.

GMPIn truth, it appears that the countries and companies that have the right to import to Germany must first have their own national GMP certification recognized as being equal to German standards – or a so-called Mutual Recognition Agreement (or MRA) must exist between the importer and exporter nations. It still means that to be really EU-GMP compliant, inspectors have to walk your cultivation floors. But first your country has to have the MRA. And that is a matter for lawyers and regulators to decide.

In the Australian case, the GMP equivalence for cannabis production apparently became reality within the last six months although no one is giving exact dates. In the case of Macedonia, this is pending, with German inspectors now apparently scheduled to begin inspecting domestic cultivation facilities within the next month to six weeks.

The biggest news, of course, which makes even more sense on the heels of Canopy’s latest “record breaking” U.S. acquisition, is that the EU and the U.S. will enter into an MRA in July that was finally agreed to in February of this year. This will also mean that cannabis “medicines” potentially even beyond CBD, produced via U.S. GMP processes, will be allowed to enter Europe if not Germany in the near future – and from the U.S. for the first time. Ahead of federal legalization in the U.S.

It also means that Israeli and American firms will be allowed to enter the European and thus German market for the first time (on the ground with product) by at latest, the third quarter of this year.

Caused By The Bid….and Likely Shorter Term Outcomes

What the events of the last several weeks make clear is that the bid is not only insufficient for demand, but the authorities are officially, if quietly recognizing the same. There are already rumours about the next cultivation tenders in Germany, and there is a high likelihood that other countries (see Poland in particular) may also follow suit shortly.

Further, the difficulties in making sure that not only countries but the companies based in the same remain compliant with EU and further German sanctified EU- GMP processes (for one) is likely to be an issue that continues to bubble. Why? It is a problem already in the broader pharmaceutical market here.

The Plusses and Minuses of The News

The first thing that is also obvious is that even Wayland cannot source the entire German market with the product it has begun to grow here no matter who ends up with the last four cultivation licenses this time around. Further, that the other winning bid firms (Aphria and Aurora as known at this point) without cultivation on the ground, are sourcing from somewhere that is also probably at this point, not even Canada. No matter how much expansion is going on in Canada, in other words, what is now entering the German market may bear a Canadian brand but could just have easily been sourced from almost anywhere in the world.

That also means that enterprising firms (see Australian MCA) can skip the Canadian introduction to the German market and sell directly to local producers before they even have crops on the ground, as well as the burgeoning German cannabis distributors across the country.

For such firms now wanting to enter the market, however, it is not all clear sailing. The events of the last few weeks clearly show that the government is watching, including reading English language industry press, and willing to pursue any firms it deems are breaking the rules on both sides of national borders.

Certification, and most certainly paperwork are the name of the game, as well as greater accuracy in company intentions (even if in the near term).


Disclaimer: Nysk, the Macedonian firm referred to in this story, is a sponsor of the MedPayRx pilot to market program

California Releases Proposed Emergency Regulations

By Aaron G. Biros
No Comments

Last week, the California Bureau of Cannabis Control released their proposed emergency regulations for the industry. The Bureau, the government agency tasked with regulating California’s cannabis industry, announced the proposed emergency regulations ahead of the highly anticipated January 2018 start date.

The Bureau also published helpful fact sheets and overview documents, providing a good snapshot of the major requirements for different types of licenses. Here are some of the key takeaways:

Temporary licenses will allow businesses to operate for 120 days while their annual license application is being processed. Not surprisingly, local jurisdictions have considerable autonomy. Getting a license seems to be contingent on first getting local approval to operate. According to Josh Drayton, communications and outreach director at the California Cannabis Industry Association (CCIA), working with local governments will be crucial to making progress. “Now that the Brown Administration has created the framework for medical and adult use cannabis, the main challenge we face as an industry is getting local municipalities to move forward with regulations,” says Drayton. “California has a dual licensing process which means that cannabis operators must receive a local permit/license/authorization before being able to apply for a state license. A majority of California cities and counties have yet to finalize their regulations which will delay state licensing.”

The initial reactions to these proposed regulations seem positive, given that this is a culmination of efforts over several years. “The California Cannabis Industry Association welcomes the release of the emergency regulations,” says Drayton. “These regulations represent years of hard work and collaboration between the administration, the regulating departments, and the cannabis industry.”

License Distinctions

A-type licenses are for businesses in the adult-use market, while M-type licenses are for the medical market. Laboratory licenses don’t have this distinction, as they can test both medical and adult-use products.

The record keeping and security requirements seem relatively straightforward, requiring normal surveillance measures like 24-hour video, commercial-grade locks and alarm systems. The rules also lay out guidelines for disposing of waste, including securing it on the premises and not selling it.

Distributors

Distributor licenses appear to have a number of compliance documentation requirements, such as arranging for all product testing, quality assurance and packaging and label accuracy. “Cannabis and cannabis products must pass through a distributor prior to being sold to customers at a retail establishment,” reads the overview the Bureau published. There is also a transport-only distributor license option. Those regulations appear to be more comprehensive than others, with a number of regulations pertaining to appropriate transportation and security measures.

Everything has to be packaged before it gets to retail; Retailers are not allowed to package or label cannabis products on premises. Microbusiness licenses will be available, which should be an exciting new development to follow as the market matures.

Labs

The state will require ISO 17025 accreditation for testing labs. A provisional license is required for a lab to operate in the short term, expiring after 12 months. Laboratory personnel are required to go in the field and do the sampling. Documentation requirements, sample sizes, sampling procedures and storage and transportation rules are also laid out.

Testing labs are required to test for cannabinoids, foreign material, heavy metals, microbial impurities, mycotoxins, moisture content and water activity, residual pesticides, residual solvents and processing chemicals and terpenoids (terpenes). Infused and edible products are required to be tested for homogeneity in THC and CBD concentrations as well. Drayton and the CCIA welcome these new testing regulations, hoping it might improve overall public safety. “We believe that these regulations will address public health issues by mandating the testing of all cannabis products,” says Drayton. “The evolution of the cannabis industry will continue, and we will continue to advocate for good policy that creates solutions for the problems that arise. I believe that we will be visiting and revisiting cannabis regulations for many years to come.”

Certificates of analysis (COA) will be required, showing whether a batch passes or fails testing requirements. Harvest batches that fail testing can be processed for remediation. “Testing laboratories are required to develop and implement a quality assurance program that is sufficient to ensure the reliability and validity of the analytical data produced by the laboratory,” reads the statement on QA and QC.

The Bureau, at the end of their regulatory overview document, lays out some possible enforcement actions, disciplinary actions and citations that could come from noncompliance. “These emergency regulations create a framework for both medical and adult use consumers,” says Drayton.  “January 1, 2018 will be the first date that adults 21 years and older will be able to purchase cannabis without a medical card.”

In the coming weeks, we’ll be breaking down and analyzing the other proposed emergency regulations that the state released. Stay tuned for a breakdown of the California Department of Food & Agriculture (CDFA) regulations on cannabis cultivation, as well as The California Department of Public Health (CDPH) cannabis manufacturing regulations.

Enforcement of Intellectual Property Rights for Cannabis Put to Test in Federal Court

By Dr. Travis Bliss
6 Comments

A number of cannabis businesses have pursued federal intellectual property protection for their cannabis-related innovations, such as U.S. patents that protect novel cannabis plant varieties, growing methods, extraction methods, etc. Enforcement of such federal IP rights requires that the IP owner file suit in federal court asserting those rights against another cannabis company. However, given that cannabis is still illegal under federal law, the industry is uncertain about whether a federal court will actually enforce cannabis-related IP rights. This question might be answered soon.

The potential impact of this case goes way beyond the two parties involvedOrochem Technologies, Inc. filed a lawsuit in federal court in the Northern District of Illinois on September 27, 2017, seeking to assert and enforce trade secret rights against Whole Hemp Company, LLC. According to the complaint, Orochem is a biotechnology company that uses proprietary separation methods to extract and purify cannabidiol (CBD) from industrial hemp in a way that produces a solvent-free and THC-free CBD product in commercially viable quantities.

The complaint goes on to say that Whole Hemp Company, which does business as Folium Biosciences, is a producer of CBD from industrial hemp and that Folium engaged Orochem to produce a THC-free CBD product for it. According to the allegations in the complaint, Folium used that engagement to gain access to and discover the details of Orochem’s trade secret method of extracting CBD so that it could take the process and use it at their facility.

The complaint provides a detailed story of the events that allegedly transpired, which eventually led to an Orochem employee with knowledge of the Orochem process leaving and secretly starting to work for Folium, where he allegedly helped Folium establish a CBD production line that uses Orochem’s trade secret process. When Orochem learned of these alleged transgressions, it filed the lawsuit, claiming that Folium (and the specific employee) had misappropriated its trade secret processes for extracting and purifying CBD.

While the particular facts of this case are both interesting and instructive for companies operating in the cannabis industry, the potential impact of this case goes way beyond the two parties involved.

If it moves forward, this case will likely provide a first glimpse into the willingness of federal courts to enforce IP rights that relate to cannabis. Orochem is asserting a violation of federal IP rights established under the federal Defend Trade Secrets Act (DTSA) and is asserting those rights in federal district court. As a result, the federal district court judge will first need to decide whether a federal court can enforce federal IP rights when the underlying intellectual property relates to cannabis.

If the court ultimately enforces these federal trade secret rights, it could be a strong indication that other federal IP rights, such as patent rights, would also be enforceable in federal court. Since the outcome of this case will likely have a far reaching and long lasting impact on how the cannabis industry approaches and deals with intellectual property, it’s a case worth watching.

Are You Ready For an Inspection?

By Maureen McNamara, Lezli Engelking
1 Comment

Would you be proud to have your customers and patients tour your production facility? When health inspectors or enforcement personnel arrive at your location is there sense of panic or pride?

When you have detailed systems in place, inspections should be informative, not stressful. Keep in mind that in the cannabis industry, products are often created for patients. Patients may have a compromised immune system and thus are more susceptible to food borne illnesses, pesticides and other contaminants.

Are you and your team doing everything you can to produce a wholesome and safe product?

According to the World Health Organization, Good Manufacturing Process (GMP) “is a system for ensuring that products are consistently produced according to quality standards.”

GMP is the proactive part of quality assurance. It is designed to minimize the risks involved in all steps of the manufacturing process. A basic tenant of GMP is that quality cannot be tested into a product. It must be built into each batch of product during all stages of the manufacturing process.

GMPs involve much more than most people think. A common misconception is that GMP only covers the process of manufacturing itself. GMPs actually cover all aspects of the production process:

  • Materials
  • Premises
  • Equipment
  • Storage
  • Record Keeping
  • Staff Training to Hygiene
  • How Complaints Are Handled

GMP & The Cannabis Industry

In most industries, agencies that control licensing for the manufacture and sale of a product recommend GMPs, or guidelines to business owners. These guidelines provide minimum requirements that a manufacturer must meet to assure that products are of high quality and do not pose any risk to the consumer or public. The guidelines generally become the basis of regulation for that industry.

In the United States, the Food and Drug Administration (FDA) recommends guidelines for anything food, drug or pharmaceutical related.

Because cannabis still remains illegal at the federal level, none of the federal agencies that would normally develop good manufacturing guidelines have done so. This has left state lawmakers and business owners on their own to navigate this new and rapidly developing industry.

The Foundation of Cannabis Unified Standards (FOCUS) has developed standards with a mission to protect public health, consumer safety and safeguard the environment by promoting integrity in the cannabis industry.

The comprehensive implementation of cannabis specific good manufacturing practices, like the FOCUS standards, across all aspects of the industry will assist business owners and regulators alike, addressing quality proactively at every step in the process, which is critical to protecting consumer safety and public health – and the overall success of a nascent and divisive industry like cannabis.

The FOCUS standards are completing the final phase of development, a thirty-day public review and comment period before being released for use in the marketplace in June. These voluntary consensus-based standards are built on GMPs drawn from agriculture, food production, chemical management, OTCs, pharmaceuticals, and other relevant industries. In addition, the standards draw best practices from the cannabis industry, as well as those published in OSHA, FDA, FTC, CDC, ISO, code of federal regulations and various state-level cannabis regulations.

There are many aspects of creating and implementing GMPs. Here are three to be aware of:

  1. Get the facility design right from the start: It’s much easier to be GMP compliant if the design and construction of the facilities and equipment are right from the start. It is important to embody GMP principles and use GMPs to drive every decision. 
  1. Document what you do and do what you document: Having good procedures in place to ensure a controlled and consistent performance is an essential part of GMP. Procedures should be clear, concise, logical, and available to everyone.
  1. Keep good records: Keeping accurate records is an essential part of GMP. It helps convey that you are following procedures and demonstrates that processes are known and under control. If it’s not written down, it did not happen.

Standards and quality programs in any industry are dynamic by nature. Nothing is static. Standards must constantly be updated to reflect ever-changing market conditions. This is why it is so crucial that regulations are based on them.

To be a standard, there are certain core principals that must be present. However, the goal of a standard is to guide an industry without impeding or controlling it. This is why there is so much inherent value in implementing standards. They bring enough structure to help reduce costs and increase efficiency, but not so much control that individual nuances or creativity is affected.

It is much less expensive to be proactive. Recovering from a recall or contaminated product can not only be costly, it is a massive hit to the company’s reputation. It may take years for sales to recover, and for consumers to trust the product again. Where could you and your team enhance your standards and processes?