Tag Archives: publish

June 8, 2020

Here’s How to Run Compliant Digital Cannabis Ads

By Brett Konen

Advertising your cannabis brand isn’t as easy as it should be—but then again, neither are most things about working in the modern cannabis industry. Here’s the good news: Today there are more avenues available for compliantly advertising your cannabis brand than ever before, particularly online.

So why don’t more cannabis brands run compliant digital ads? Generally speaking, it’s an issue of awareness. Since cannabis brands are currently disallowed from running their advertising campaigns through the modern digital advertising mainstays of Facebook, Instagram, and Google, most business owners believe that digital advertising as a whole is not allowed, and thus most cannabis companies are either underutilizing or completely overlooking their digital ad options.

In fact, the rules barring cannabis brands from advertising with Google and Facebook are specific to those platforms. While Facebook and Google—together known as “the Duopoly”—currently account for approximately half of digital advertising dollars spent in the U.S., the other half of the digital advertising pool—including sites like ESPN, HuffPost, Newsweek, Politico, Barstool Sports, and USA Today—is increasingly open to accepting ad buys from compliant digital cannabis and CBD advertisers. More publishers are opening their doors to cannabis ads every day, and many advertising professionals speculate that the COVID-19 pandemic may speed up the process, as publishers begin to look for new streams of ad revenue in order to weather the economic storm.

Where Can Cannabis Be Advertised?

Today, cannabis industry advertisers can easily run ads across hundreds of mainstream websites using programmatic advertising technology. This is true for both cannabis brands and CBD brands, though they use different programmatic platforms to do so: CBD brands (which we’ll address in more detail later) can use mainstream “demand-side platforms” (such as The Trade Desk) to run their ad campaigns, while cannabis brands can use new cannabis-specific platforms (such as Safe-Reach) created to address the unique compliance needs of the legal cannabis industry.

For those unfamiliar with the term, programmatic advertising refers to the automated buying and selling of online ad space using programmatic technology. In a nutshell, advertisers and their ad agencies use demand-side platforms (DSPs) to set the parameters of “bids” for certain ad impressions based on relevant attributes of the ad space and the viewer who will see it. Publishers put their ad space up for auction via supply-side platforms (SSPs), and ad exchanges play matchmaker to sell the ad impression to highest bidder in the time it takes the web page in question to load.

This CBD product ad can be found on Thesaurus.com

Cannabis-specific DSPs work with other cannabis industry leaders to develop sets of data relevant to cannabis advertisers; they then open these data sets within their platforms to help cannabis advertisers reach known cannabis consumers. These known consumers may be, for example, people who’ve downloaded apps like Leafly on their phones.

A key thing to note is that the cannabis ads themselves no longer need to be shown exclusively on these endemic cannabis sites and apps. In the past, digital cannabis advertisers were generally restricted to buying space on industry-specific sites like Leafly, High Times, and Weedmaps, which pushed prices up due to inventory limits and ran through ad budgets quickly. Ad networks like Mantis attempted to compile this inventory to make the buying process more scalable, but because cannabis has been (and remains) the fastest-growing industry in the United States since 2015, it’s no surprise that endemic cannabis ad inventory has been insufficient to meet demand.

Now, the data sets available through programmatic advertising technology allow ads to be shown to the same cannabis enthusiasts across any website, endemic or not. This makes digital advertising far more affordable for cannabis marketers, and allows for more advanced advertising techniques like building look-alike audiences, cross-device advertising, first-party data onboarding, and ad retargeting. These techniques can be used across all modern digital ad formats, including display, mobile, native, video and digital audio.

Still, even those marketers who are already aware that they can advertise digitally outside of Facebook, Google and endemic cannabis sites may struggle with knowing what they can say and show in their digital ads, particularly if they intend to run those ads in multiple locations or across multiple channels. The broadly applicable rules for running compliant digital cannabis ads are what we’ll discuss now.

Rules for Cannabis Ad Compliance

Thanks to cannabis’s continued federal classification as a Schedule I drug, current digital advertising regulations are governed by state cannabis laws, so they vary depending on where your business operates. This can become particularly confusing if you want to run digital advertisements visible to customers across multiple states (which some states allow—for those who don’t, cannabis ad tech will let you keep your ads within state or local borders too).

Both Ivyside and Weedmaps are featured on this page

Luckily, most cannabis bills are crafted to resemble those that have been passed successfully before them, which means that state laws can be boiled down to a handful of broadly applicable guidelines no matter where you intend to show your ads. The current best practices for advertising cannabis are as follow:

No claims of health or medical benefits
No elements that could appeal to children (cartoon characters, etc.)
No false or misleading statements, including those made about competitors’ products
No testimonials or endorsements (e.g. recommendations from doctors)
No depiction of product consumption
No pricing information, potency statements, or promotional offers
Ads for infused products must state “For Adult Use Only”

Using these guidelines, cannabis marketers can more easily create ads to be approved for use in a variety of settings. A few states have their own additional rules: In Florida, a state approval process for ad creative also applies. In Alaska, Arkansas, California, Maryland, Massachusetts, Nevada, Ohio, Oregon and Washington, additional state-specific copy is required in the ad creative.

Note that it’s always important to double-check your state’s most recent requirements, as local rules may change over time. If you’re working with an advertising agency that specializes in the cannabis industry, they can help you with this process; cannabis-specific programmatic platforms like Safe-Reach will also check your ad creative against local requirements as part of their approval process.

Why Advertise Cannabis Digitally?

Prior to the advent of modern, cannabis-specific digital advertising technology, cannabis marketers were light years behind their mainstream industry counterparts in terms of the advertising channels they leveraged to get their message out. Traditional advertising tactics like billboards and print ad buys were popular among cannabis businesses early on due to the lack of digital ad publishers willing to work with them.

The problem with these traditional tactics is one of targeting, measurement, and reporting: It’s impossible to know who has seen your ads, how many of those viewers went to your website or dispensary after seeing them, and what your return on ad spend (ROAS) was. The fact that you can neither know nor control who will see your ad in a print newspaper or on a billboard is why most states have treaded cautiously with their advertising restrictions to avoid ads being seen by minors. In Washington state, for instance, no advertisement is allowed “within one thousand feet of the perimeter of a school grounds, playground, recreation center or facility, child care center, public park, library, or a game arcade admission to which it is not restricted to persons aged twenty-one years or older; on or in a public transit vehicle or public transit shelter; or on or in a publicly owned or operated property.”

With programmatic advertising, digital identity data allows advertisers to show their ads exclusively to an appropriate audience—for instance, adults ages 21 and over who live within state borders. Digital advertising also addresses the issues of measurement and reporting, which is why mainstream brands have already shifted en masse to choosing digital over physical ads: You can learn, down to the cent, the return on your digital ad investment, which makes the choice of continuing to advertise an easy one as long as ROAS remains positive. As of 2019, digital ad spending surpassed traditional (TV, radio, print, etc.) for the first time in history, and in 2020, eMarketer estimates that $151 billion will be spent on digital marketing versus $107 billion on traditional. By 2021, 70 percent of all digital ads—and 88 percent of display ads—will be bought and sold using programmatic technology.

As the fastest-growing industry in the United States, cannabis should also be one of the fastest-growing segments in digital advertising, but so far cannabis advertising efforts have been far off pace with the industry’s progress as a whole. However, that is beginning to change as savvy cannabis brands begin to understand and leverage their digital marketing options.

What About CBD Advertising?

The 2018 Farm Bill legalized hemp-derived CBD products in the United States, but did not offer guidance on selling, marketing or advertising them. Most CBD products are thus sold and marketed in a legal gray area, which is only made more confusing by Facebook’s and Google’s policies of rejecting these as “illegal drug” ads (a policy both platforms enforce irregularly). Although CBD brands should still try for approval, and some ads (especially those for hemp-derived CBD topicals) may be approved, CBD advertisers cannot rely on Facebook and Google for ongoing traffic, and ads may be taken down after initial approval regardless of legality.

That said, CBD business owners already have an even more extensive range of digital advertising options available outside of search and social than cannabis brands do. Some websites that do not yet accept cannabis ads will accept CBD ads, and mainstream ad tech platforms like The Trade Desk allow CBD ad buys as long as ad creative meets their internal guidelines for approval. Thus, the de-facto rules and regulations governing CBD advertising today are made by the platforms and publishers running their advertisements. To ensure ad approval on programmatic platforms like The Trade Desk, CBD brands should follow the same guidelines listed for cannabis brands above.

To sum up the current state of digital advertising compliance in the cannabis industry, cannabis and CBD brands should know that there are far more digital advertising options out there than most people realize, and that creating compliant ads is relatively straightforward as detailed above. That said, brands considering an investment in digital advertising should also keep in mind that the current window of opportunity for getting a head start on the competition is already closing day by day as brands begin to realize all the ways they can run compliant cannabis digital ads.

Suggested Readings

Programmatic Advertising: A Close Look at Cannabis (IAB)

White Paper: Digital Ads for Cannabis & CBD (PrograMetrix)

September 16, 2019

Unique Issues With Cannabis-Related Patents & Their Enforcement

By Michael Annis, Liam Reilly

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While enforcement of cannabis patents through litigation is common, there are other alternatives to litigation. Here we discuss some of the unique cannabis-related issues that could arise before the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO).

The growth and evolution of the cannabis industry in the U.S. are not slowing. However, the cannabis industry – with its tremendous upside – is still beset with uncertainty and limited legal guidance curbing its full potential. Intellectual property law, including patent protection, has emerged from the murky legal and regulatory landscape as a reliable business strategy with developing certainty.

A pioneering cannabis patent case in Colorado has progressed without any indication that cannabis patents are to be treated differently than other patents. Relatedly, PTAB recently upheld the validity of a cannabis-related patent as part of a post-grant proceeding. However, although the courts and the USPTO are not discriminating against cannabis patents because of their illicit subject matter, the true strength of these newly issued patents could be suspect.

The fledgling nature of cannabis businesses and the fact that cannabis is just now emerging from its statutorily imposed dormancy combine to highlight certain weaknesses of the USPTO and its mechanisms meant to strike spurious patents.

For several reasons, it is possible that applicants are propelling cannabis patent applications of questionable validity through prosecution beyond the point that similar applications could proceed. The USPTO’s experience with cannabis patents is limited. The universe of prior art available to patent examiners is also limited. There are only about three thousand active cannabis patents, which would only account for 0.6 percent of the total issued patents in 2015. The legal status of cannabis has also likely deterred the broadcasting of public use as prior art, and enabling publications or other public disclosures covering cannabis (e.g., published scientific studies) are limited as well. Taken together, patent examiners considering applications for cannabis patents are at a disadvantage compared to other applications that the USPTO considers in other fields.

Additionally, the post-grant proceedings before PTAB established to review issued patents of questionable validity are not designed to handle the historical context and unique issues of cannabis patents. The difference in the procedural rules and requirements of two common inter partes mechanisms for challenging issued patents, post-grant reviews (PGRs) and inter partes reviews (IPRs), creates a gap in coverage that is particularly salient to cannabis patents.

Although the cannabis patent case in Colorado is first of its kind, we can expect more to follow in its wake.Where a PGR petitioner is free to challenge an issued patent on effectively any ground, an IPR petitioner is limited to validity claims for lack of novelty or non-obviousness based solely on patents and printed publications. However, the PGR petitioner must be diligent, because it only has nine months from the issue date of the challenged patent to file a PGR petition. After those nine months, the challenger will have to rely on litigation or an IPR, with its limited basis for invalidity.

What this means for a cannabis patent is that unless a challenger – likely, a competitor in the cannabis space – can timely file a petition for a PGR, the basis for challenging the patent before PTAB are limited to those types of prior art that are especially rare in the cannabis space: patents and printed publications. What is more, meeting the nine-month requirement to file a PGR is no trivial task. The cost and time required to research and prepare a petition for PGR are particularly problematic for the cannabis industry with its lack of access to traditional forms of business financing.

As a result, it is reasonable to question the validity of contemporary cannabis patents. Further, because of PTAB’s enforcement gap, a patent challenger will likely have to resort to litigation to bring its invalidity arguments unrelated to claims of lack of novelty and non-obviousness based on patents and printed publications. Such broader invalidity arguments could include lack of patentable subject matter – which is an appealing challenge for patents that stem from naturally occurring plants or products, such as cannabis – or lack of novelty and non-obviousness based on other prior art.

Although the cannabis patent case in Colorado is first of its kind, we can expect more to follow in its wake. And, because of the weaknesses at the USPTO and PTAB, invalidity arguments in these early cases will likely be of increased strategic importance than in typical patent cases.

August 22, 2019

Who’s Afraid of Biotech Institute LLC?

By Brett Schuman, Daniel Mello, Nicholas Costanza, Olivia Uitto

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While cannabis patenting activity is still in its infancy, relatively speaking, a lot has been written already about the cannabis patenting activity of an entity called Biotech Institute LLC (BI) of Westlake Village, California.¹ BI is building a sizable portfolio of utility and plant patents covering various aspects of the cannabis plant. According to some commentators, BI’s patents have “many in the cannabis industry concerned.”²

But how concerned should members of the cannabis industry really be about BI’s patents? Generally, patents are susceptible to numerous challenges in multiple fora. From 2012-2016, approximately 80% of challenged patents were invalidated by the Patent Trial and Appeal Board (PTAB) each year.³ The PTAB was created in 2011 by the Leahy-Smith America Invents Act, 35 U.S.C. § 6, to create a process for eliminating improvidently issued patents. And the statistics suggest that the process may be working as intended by Congress.

BI may be building its portfolio by taking advantage of some unique challenges in the cannabis patenting area. First, even though cannabis has been cultivated and consumed by humans for thousands of years, there is a relative lack of published prior art available to patentees and patent examiners examining patent applications.⁴ Second, patent examiners are not as familiar with cannabis patent applications as they may be with other types of patent applications.

So, we examined carefully BI’s earliest and arguably broadest utility patent, U.S. Patent No. 9,095,554, and concluded that maybe the cannabis industry need not be so concerned about this and some of BI’s other utility patents. Although the ’554 patent is lengthy – 247 columns of text and over an inch thick when printed in hardcopy – there appears to be little if any novelty to the claimed invention. Alternatively, the patent appears to be obvious in light of the available prior art.

In a patent, the claims define the metes and bounds of the patentee’s intellectual property. Claim 1 of the ’554 patent recites:

A hybrid cannabis plant, or an asexual clone of said hybrid cannabis plant, or a plant part, tissue, or cell thereof, which produces a female inflorescence, said inflorescence comprising:

a BT/BD genotype;
a terpene profile in which myrcene is not the dominant terpene;
a terpene oil content greater than about 1.0% by weight; and
a CBD content greater than 3%;
wherein the terpene profile is defined as terpinolene, alpha phelladrene, beta ocimene, careen, limonene, gamma terpinene, alpha pinene, alpha terpinene, beta pinene, fenchol, camphene, alpha terpineol, alpha humulene, beta caryophyllene, linalool, cary oxide, and myrcene, and wherein the terpene oil content is determined by the additive content of the terpenes in the terpene profile; and wherein the terpene contents and CBD content are measured by gas chromatography-flame ionization detection (GC-FID) and calculated based on dry weight of the inflorescence; wherein a representative sample of seed producing said plants has been deposited under NCIMB Nos. 42246, 42247, 42248, 42249, 42250, and 42254.

While claim elements define the metes and bounds of the invention, typically only certain claim elements are intended to distinguish the claimed invention from the prior art. Other claim elements merely help to describe the invention. For example, the preamble in the ‘554 patent, or the part of the claim before subpart (a), describes the flowering part of the cannabis plant. This is not intended to describe anything novel about the claimed invention, but rather it simply describes the part of the cannabis plant that is relevant to the invention.

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

Before the priority date of the ’554 patent, it was known in the prior art that B_T/B_Dgenotypes produce nearly equal amounts of THC and CBD (both are dominant; one is not recessive).⁵ Thus, it is not unexpected to have a CBD content greater than 3% in a genotype that can produce large amounts of CBD (known references state as high as 21% in CBD-dominant strains and 3%-15% in B_T/B_Dgenotypes).⁶ Further, it was known in the prior art that terpenes generally constitute more than 1.0% percent by weight (usually between 2-4%) of the flower.⁷

As these databases continue to grow and studies of cannabis are publicly disclosed, cannabis patents like BI’s ’554 patent will become more and more susceptible to patent challenges and invalidation.Claim element (b), reciting a terpene profile in which myrcene is not the dominant terpene, appears to be one of – if not the only – claimed element of novelty of the BI invention. Terpenes are aromatic compounds produced in plants, and the cannabis plant has more than 100 different terpenes. Claim element (e) simply lists the most abundant terpenes in the cannabis plant. A majority of cannabis strains express high levels of myrcene; however, there are known prior art strains that express high levels of other terpenes, such as caryophyllene, limonene, pinene, etc. Additionally, it is well known in the art that terpenes have different therapeutic effects. For example, pinene and linalool are known to have antidepressant activity.⁸ Thus, a prior disclosure of a B_T/B_Dgenotype that has a terpene profile where myrcene is not the dominate terpene very likely invalidates this claim. And even assuming there is any novelty to a high-CBD strain where myrcene is not the dominant terpene, there is a motivation to breed for a dominant terpene besides myrcene.

Because cannabis has been and remains a Schedule I drug under the Controlled Substances Act, previously known and used strains generally have not been chemically characterized, studied, researched, and the subject of publications that can be used as prior art for purposes of challenging cannabis patents. But that is changing. For example, the Open Cannabis Project (OCP) attempted to characterize and publish chemical details of cannabis plants. Even though OCP closed as of May 31, 2019, is database is still publicly available. Another example is CANNA, a non-profit initiative of the CANNA Espana Fertilizantes SL company, which carries out studies and conducts research on cannabis and its active compounds.⁹ In one study,¹⁰ CANNA found that some strains have terpene profiles where myrcene is not the dominant terpene, which could be relevant to a novelty-based or obviousness challenge to claim 1 of the ‘554 patent. As these databases continue to grow and studies of cannabis are publicly disclosed, cannabis patents like BI’s ’554 patent will become more and more susceptible to patent challenges and invalidation.

References

See, e.g.,Amanda Chicago Lewis, The Great Pot Monopoly Mystery, GQ (August 23, 2017), https://www.gq.com/story/the-great-pot-monopoly-mystery; Brian Wroblewski, Utility Patents on Marijuana? Who is BioTech Institute LLC?, The National Marijuana News, https://thenationalmarijuananews.com/utility-patents-marijuana-biotech-institute-llc/; Eric Sandy, Biotech Institute Has Applied for Patents on 8 Individual Cannabis Cultivars, Cannabis Business Times(June 24, 2019), https://www.cannabisbusinesstimes.com/article/biotech-institute-cannabis-patent-applications/.
Nicole Grimm, George Lyons III, and Brett Scott, Biotech Institute’s Growing Patent Portfolio — U.S. Patent No. 9,095,554 and the Path Forward, JD Supra (November 17, 2017), https://www.jdsupra.com/legalnews/biotech-institute-s-growing-patent-17433/.
World Intellectual Property Organization, An overview of patent litigation systems across jurisdictions,World Intellectual Property Indicators 2018, https://www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2018-chapter1.pdf.
Brett Schuman et al., Emerging Patent Issues In The Cannabis Industry, Law360(February 20, 2018), https://www.goodwinlaw.com/-/media/files/publications/emerging-patent-issues-in-the-cannabis-industry.pdf.
Chandra, et al. Cannabis sativa L. – Botany and Biotechnology, pages 142-144, Springer, 2017 (citing de Meijer, Genetics163: 225-346 (2003)). See alsoMolecular Breeding (2006) 17:257-268, doi/10.1007/s11032-005-5681-x.
American Journal of Botany 91(6): 966:975 (2004). doi.org/10.3732/ajb.91.6.966; See e.g., Jikomes, Peak THC: The Limits on THC and CBD Levels for Cannabis Strains, https://www.leafly.com/news/science-tech/peak-thc-cbd-levels-for-cannabis-strains.
PLoS One. 2017; 12(3): e0173911. doi: 10.1371/journal.pone.0173911. See also, Fischedick J. T., Hazekamp A., Erkelens T., Choi Y. H., Verpoorte R. (2010). Phytochemistry712058–2073 (2010). 10.1016/j.phytochem.2010.10.001
J Ethnopharmacol. 2012 Sep 28;143(2):673-9. doi: 10.1016/j.jep.2012.07.026. Epub 2012 Jul 31.
Retrieved from https://www.fundacion-canna.es/en/about-us, on August 6, 2019.
Retrieved from https://www.fundacion-canna.es/en/variations-terpene-profiles-different-strains-cannabis-sativa-l, on August 6, 2019.

December 17, 2018

Aphria Fights Shortseller Allegations Of Insider Double Dealing

By Marguerite Arnold

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Two reports published by short selling stock firm Quintessential Capital Management and forensic investor research firm Hindenburg Research on December 3, charges that Canadian LP Aphria, has bought overinflated assets in Latin America and in Florida from shell companies owned by company insiders. Added to the lingering controversy is the purchase of the German Nuuvera this spring (a company also partly owned by Aphria brass), and the reports went over like a bombshell. Globally.

However, the story has already spread far beyond one company. And the response in the market has rocked the industry for most of December.

Aphria’s shares tanked, and dragged everyone down with them. Several class action law firms in the United States began promptly looking for aggrieved shareholders.

The response by the firm? A promise of an immediate line-by-line rebuttal, due out in the second week of December. So far, however, despite news of an additional Aphria purchase in Paraguay, the rebuttal report has not been issued.

Why Is This So Damaging? Or Is It?

Aphria’s stocks promptly took a dive that halved their value although they began to recover after Aphria management appointed an independent third party firm to review the claims.

Worse, however, the entire industry saw a hit too. This report affected investor confidence across the industry. And although the hit appears to be temporary, the unfolding scenario is a perfect example of why volatility in the market is scaring away not only more conservative female retail investors but larger institutional ones that the industry is now courting assiduously as medical cannabis begins to be integrated into health systems particularly in Europe.

Why?

Bottom line? As the big cannabis companies are listing on the larger, foreign exchanges, including the NYSE and Deutsche Börse, the scrutiny is getting more direct and granular.Despite the stratospheric market caps of all the major Canadian LPs in particular, not to mention enormous expenditures for the last several years (on property and other acquisitions), the revenue picture, as other stock analysts and publications such as the normally neutral Motley Fool recently pointed out, at least so far does not justify the same. Bulk sales to a hospital, establishing a cultivation or processing facility or even getting import licenses may set one up to do business however, but it is not an automatic route to ongoing and expanding sales. And that is the key to high valuations that are rock solid and beyond the scope of such allegations.

For the moment, that pressure, particularly in global medical markets, is falling first on patients if not doctors. Not the industry.

That said, this has been a major building year. Recreational cannabis has just become legal in Canada. And in Europe, reform is still in the process of happening.

It is also a charge if not frustration that has been growing, however, against all the public cannabis companies as valuations shoot into the stratosphere. Forensic and investigative firms, particularly in Europe and the United States have been focusing on the industry for close to a year now. As a result even when firms successfully rebut charges of fraud, they are looking at different valuations from analysts at least in the short term.

Bottom line? As the big cannabis companies are listing on the larger, foreign exchanges, including the NYSE and Deutsche Börse, the scrutiny is getting more direct and granular.

Are “Short Seller” Reports Unbiased?

For all of the focus on short seller reports in this industry, however, no matter the accuracy of some of their claims, here is the next issue:

Short sellers make money by betting against not only individual firms but the industry itself. They benefit financially in other words, from volatility in the market and arbitraging even small changes in price. Even if their reports cause the same.

Such reports as a result are also not “unbiased” as industry coverage in the press is supposed to be, no matter how much more time sometimes goes into the reporting and preparation of the same.

And no matter that this industry is now going into its fifth year, there is still lingering scepticism that, in the case of Aphria, has so far not only fallen on the individual firm in question, but then rebounds across the industry, unfairly hurting all firms in this space.

March 6, 2018

The Ever-Growing Importance of Protecting Cannabis Extraction Innovations

By Alison J. Baldwin, Brittany R. Butler, Ph.D., Nicole E. Grimm

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With legalization of cannabis for medicinal and adult use occurring rapidly at the state level, the industry is seeing a sharp increase in innovative technologies, particularly in the area of cannabis extraction. Companies are developing novel extraction methods that are capable of not only separating and recovering high yields of specific cannabinoids, but also removing harmful chemicals (such as pesticides) from the concentrate. While some extraction methods utilize solvents, such as hydrocarbons, the industry is starting to see a shift to completely non-solvent based techniques or environmentally friendly solvents that rely on, for example, CO₂, heat and pressure to create a concentrate. The resulting cannabis concentrate can then be consumed directly, or infused in edibles, vape pens, topicals and other non-plant based consumption products. With companies continually seeking to improve existing extraction equipment, methods and products, it is critical for companies working in this area to secure their niche in the industry by protecting their intellectual property (IP).

Comprehensive IP protection for a business can include obtaining patents for innovations, trademarks to establish brand protection of goods and services, copyrights to protect logos and original works, trade dress to protect product packaging, as well as a combination of trade secret and confidentiality agreements to protect proprietary information and company “know-how” from leaking into the hands of competitors. IP protection in the cannabis space presents unique challenges due to conflicting state and federal law, but for the most part is available to cannabis companies like any other company.

Federal trademark protection is currently one of the biggest challenges facing cannabis companies in the United States. A trademark or service mark is a word, phrase, symbol or design that distinguishes the source of goods or services of one company from another company. Registering a mark with the U.S. Patent and Trademark Office (USPTO) provides companies with nationwide protection against another company operating in the same space from also using the mark.

As many in the industry have come to discover, the USPTO currently will not grant a trademark or service mark on cannabis goods or services. According to the USPTO, since cannabis is illegal federally, marks on cannabis goods and services cannot satisfy the lawful use in commerce requirement of the Lanham Act, the statute governing federal trademark rights. Extraction companies that only manufacture cannabis-specific equipment or use cannabis-exclusive processes will likely be unable to obtain a federal trademark registration and will need to rely on state trademark registration, which provides protection only at the state-level. However, extractors may be able to obtain a federal trademark on their extraction machines and processes that can legitimately be applied to non-cannabis plants. Likewise, companies that sell cannabis-infused edibles may be able to obtain a federal trademark on a mark for non-cannabis containing edibles if that company has such a product line.

Some extraction companies may benefit from keeping their innovations a trade secretSince the USPTO will not grant marks on cannabis goods and services, a common misconception in the industry is that the USPTO will also not grant patents on cannabis inventions. But, in fact, the USPTO will grant patents on a seemingly endless range of new and nonobvious cannabis inventions, including the plant itself. (For more information on how breeders can patent their strains, see Alison J. Baldwin et al., Protecting Cannabis – Are Plant Patents Cool Now? Snippets, Vol. 15, Issue 4, Fall 2017, at 6). Unlike the Lanham Act, the patent statute does not prohibit illegal activity and states at 35 U.S.C. § 101 that a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”

For inventions related to extraction equipment, extraction processes, infused products and even methods of treatment with concentrated formulations, utility patents are available to companies. Utility patents offer broad protection because all aspects related to cannabis extraction could potentially be described and claimed in the same patent. Indeed, there are already a number of granted patents and published patent applications related to cannabis extraction. Recently, U.S. Patent No. 9,730,911 (the ‘911 patent), entitled “Cannabis extracts and methods of preparing and using same” that granted to United Cannabis Corp. covers various liquid cannabinoid formulations containing very high concentrations of tetrahydrocannabinolic acid (THCa), tetrahydrocannabinol (THC), cannabidiol (CBD), THCa and cannabidiolic acid, THC and CBD, and CBD, cannabinol (CBN), and THC. For example, claim 1 of the ‘911 patent recites:

A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is tetrahydrocannabinolic acid (THCa).Properly crafted non-disclosure agreements can help further ensure that trade secrets remain a secret indefinitely.

Although the ‘911 patent only covers the formulations, United Cannabis Corp. has filed a continuation application that published as US2017/0360745 on methods for relieving symptoms associated with a variety of illnesses by administering one or more of the cannabinoid formulations claimed in the ‘911 patent. This continuation application contains the exact same information as the ‘911 patent and is an example of how the same information can be used to seek complete protection of an invention via multiple patents.

An example of a patent application directed to solvent-based extraction methods and equipment is found in US20130079531, entitled “Process for the Rapid Extraction of Active Ingredients from Herbal Materials.” Claim 1 of the originally filed application recites:

A method for the extraction of active ingredients from herbal material comprising: (i) introducing the herbal material to a non-polar or mildly polar solvent at or below a temperature of 10 degrees centigrade and (ii) rapidly separating the herbal material from the solvent after a latency period not to exceed 15 minutes.

Claim 12, covered any equipment designed to utilize the process defined in claim 1.

Although now abandoned, the claims of this application were not necessarily limited to cannabis, as the claims were directed to extracting active ingredients from “herbal materials.”

Other patents involve non-toxic extraction methods utilizing CO₂, such as Bionorica Ethics GMBH’s U.S. Patent No. 8,895,078, entitled “Method for producing an extract from cannabis plant matter, containing a tetrahydrocannabinol and a cannabidiol and cannabis extracts.” This patent covers processes for producing cannabidiol from a primary extract from industrial hemp plant material.

There have also been patents granted to cannabis-infused products, such as U.S. Patent No. 9,888,703, entitled “Method for making coffee products containing cannabis ingredients.” Claim 1 of this patent recites:

A coffee pod consisting essentially of carbon dioxide extracted THC oil from cannabis, coffee beans and maltodextrin.

Despite the USPTO’s willingness to grant cannabis patents, there is an open question currently regarding whether they can be enforced in a federal court (the only courts that have jurisdiction to hear patent cases). However, since utility patents have a 20-year term, extractors are still wise to seek patent protection of the innovations now.

Another consideration in seeking patent protection for novel extraction methods and formulations is that the information becomes public knowledge once the patent application publishes. As this space becomes increasingly crowded, the ability to obtain broader patents will decline. Therefore, some extraction companies may benefit from keeping their innovations a trade secret, which means that the secret is not known to the public, properly maintained and creates economic value by way of being a secret. Properly crafted non-disclosure agreements can help further ensure that trade secrets remain a secret indefinitely.

Regardless of the IP strategy extractors choose, IP protection should be a primary consideration for companies in the cannabis industry to ensure the strongest protection possible both now and in the future.

February 12, 2018

Head of German Police Union Calls for Official Decriminalization of Cannabis

By Marguerite Arnold

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Facing the same conundrum as police everywhere after the start of a medical market only this time with federal authorization, the head of the German police union has called for recreational use of cannabis to also be decriminalized.

On the first Monday of February, the head of the BDK – the Association of German Criminal Officers told The Bild (sort of like the New York Post but a national “tabloid” here) that his group, the largest organized union of German police officers, favoured a change in German cannabis laws. Andre Schulz argued that the current laws stigmatized those charged with minor amounts and created opportunities for “criminal careers to start.”

“The prohibition of cannabis has historically been seen as arbitrary and has not yet been implemented in an intelligent and effective manner,” says Schulz. “My prediction is that cannabis will not be banned for long in Germany.”

Why this sudden pronouncement? It is actually not all that sudden and has been long in the offing. One of the largest contingents at both the ICBC and the IACM last year (the biggest cannabis-focussed business and medical conferences in Germany) were police officers from California and Deutschland. And all were singing the same tune.

However beyond a realistic assessment of changing political reality, there are actually several other concrete reasons for not only the statement but the timing of it. In a country where patients can now pick up bud cannabis from the local apotheke (which is that easy for some, although it is still hard for most), the police have the unappetizing prospect of potentially arresting patients. On top of that, the idea of someone being arrested for CBD flower (rather than THC) gives the German polizei plenty of pause. Not to mention that they face this possibility at a time when many of them potentially could be patients themselves (or their families). The idea of arresting an activist in this situation is also one the police do not relish. Legalization rallies here get formal police protection when they march. Ask the average beat cop what they think about cannabis legalization and they tend to roll their eyes.

Then there is this: In stark contrast to the wars over prescribing medical cannabis at a state level in California in the late 90’s, here in Germany, there is a cultural commitment to the concept of sick people having a moral and civil right to obtain the medication they require. The idea of the police arresting them in the process of obtaining the same or because they might be recreational users, is as antithetic to core German sensibilities as the concept of Donald Trump as U.S. President. So is the idea of branding someone a “criminal” if not “drug user” for possession of a drug that is now used as medicine in Germany.

As has been rumoured for some time now, one of the few things that all political parties in Berlin can agree on is a change on the current cannabis laws.As a result, the very idea of both arresting the sick or labelling someone for the rest of their life with a police record for a drug “crime” that nobody considers as such anymore, causes a shock to the system. In many ways, German culture is far more conservative than the U.S. On another, there is a deeply humanistic, liberal strain to German life that also allows nudity, alternative healthcare and lifestyles to flourish (and not just all in Berlin). The current situation over cannabis, in other words, is becoming a political and legal embarrassment even to the beat officers who have to implement such laws.

And then of course there is this: One of the country’s top judges, Andreas Müller, a man well-known to the senior level of BDK, has recently written a book about the horrible situation that faces his own brother because of drug laws in Germany called “Kiffen und Kriminalität.”

Cannabis also falls into this crevice of cultural questioning if not the national zeitgeist of the moment, in multiple ways. It is, beyond the stigma, a natural medicine that is now federally recognized as such and one that the statutory health insurers (public healthcare) is required to cover. No matter that only 64% of submitted rezepts have been formally approved 11 months into Germany’s foray into this world. There are doctors writing them. And there are insurers picking up the tab.

It also means that there are at least 10,000 legal medical cannabis patients that der polizei have no wish to bother. And 10,000 German patients, who look the same as anyone else, are already too many legal users for current laws to stay in place.

Decriminalization, Cultivation & Changing Culture

There are some who say that Europe is “backwards” if not slower than the United States. Certainly those who experience German culture as Auslanders are struck by the procedural requirements of everyday life. Things do move slower here.

However when things do move, they are determinative shifts. Right now, it is impossible to live in the country and not be aware that Kiffen – a slang term for pot auf Deutsch – is legalizing in the U.S., Canada, the rest of Europe and of course other places. Further, Germans with their distrust of bureaucracy and authority and certainly currently rebellious mood, are looking to a way forward for the country in a sea of uncertainty both locally and regionally not to mention globally on any issue, no matter how “symbolic.”

As has been rumoured for some time now, one of the few things that all political parties in Berlin can agree on is a change on the current cannabis laws. The idea of decriminalization, now suggested by one of the country’s top cops, is a natural solution to political deadlock, if not a changing society.

The idea that other countries are also moving on this topic, from the now Brexiting UK to France next door, not to mention all the cultivation focused reform in many European countries, seems to indicate that decriminalization and even recreational reform are coming and now officially on the schedule, and not just to Germany but the entire continent.

January 18, 2018

Mainstream Media Picks Up On Cannabis

By Marguerite Arnold

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The British online newspaper, The Guardian, has just begun to cover cannabis. The regular feature, part of their “society” section, is clearly attempting to cover cannabis a bit more consistently and regularly as the California rec market begins to gain (legal) steam.

The writer now helmed to lead this effort is Alex Halperin, a business journalist in the U.S., who landed the gig apparently on the success of Weedweek – a highly cryptic weekly summary blog of mostly U.S.-based industry events and updates.How the Guardian will cover the industry and related issues will be interesting to follow.

This is also not The Guardian’s first foray into the topic. The media outlet, which got its start in the 1800’s in Northern England and expanded dramatically to reach a global digital audience over the past decade, has covered cannabis legalization on a fairly regular basis for the last four years. This new focus also comes at an interesting time. Apart from events in the U.S., Canada is moving forward with recreational this summer. And in Europe, the medical discussion continues apace. That said, it appears the Guardian is going to focus on the U.S. market, at least initially.

It will be interesting to see if that focus shifts (and if they allow other journalists outside of the U.S. to participate in the expanded coverage). While California might well be the largest state economy in general, the Canadian market is already larger and more developed, being regulated nationally across multiple provinces.

Another Mainstream Media Cannabis Column?

This is hardly news. The Guardian is actually treading on ground established already by most of the big news and business publications – including niche publications, blogs and of course, the trade press.

How the Guardian will cover the industry and related issues will be interesting to follow.

The purpose of the column apparently is to spark an “adult conversation” about cannabis – and how it is “changing modern life.” The initial focus on the U.S. market (and California in particular) may have seemed to make sense to a media outlet looking for outrageous stories. But as everyone knows, the U.S. is only one market – and further one still without federal protection.

However, the Guardian is also now competing with other business and mainstream publications that are already in this space. Main Street, the online business ‘zine helmed by Jim Cramer, created one of the first mainstream specialty cannabis sections almost four years ago with the coincidence of the Colorado rec market. Other notable publications and media outlets have significantly increased their coverage of cannabis as well. CNN has been reporting consistently on cannabis topics like legalization and U.S. federal reform efforts for some time now. Business Insider and Forbes have covered ongoing and growing investments and the financial side of things for several years. The Denver Post has its own entirely cannabis-focused subsidiary, The Cannabist.

And as public companies, in both the U.S. and elsewhere have begun to move through the legal thickets of legalization, business-focussed journals and blogs are even beginning to cover cannabis stocks. Starting with Motley Fool and Seeking Alpha (although again, most of this coverage is of companies outside the United States). Specialty publications are also of course, flourishing online, particularly with the beginning of an advertising market that is also beginning to establish itself, albeit around some still thorny regulatory issues.

In general, although the Guardian has a reputation as critical of the British monarchy, with strong left-leaning tendencies, its coverage of the industry has been fairly mainstream – so far at least.

Will that begin to change? And what will really be tackled and covered? And while the ostensible focus is what is going on in the world of cannabis in California (and presumably other foreign markets) could the Guardian’s ostensible new feature also be geared to drive reform at home? The U.K. has yet to even approach the topic of criminalization.