Tag Archives: regulations

A Playbook for Growth: Start with a True Cloud ERP as Your Foundation

By David Stephans
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Cannabis businesses have become a driving force for economic growth in the United States. We’ve all heard the statistics. In 2018, the industry accounted for approximately $10.4 billion in revenue and is slated to grow to $21 billion by 2021.

But with growth comes pressure to produce more, enhance quality and optimize operations. However, managing a cannabis business without modern, capable tools can hinder growth and leave opportunities on the table. That’s why fast-growing cannabis businesses are looking to the proven benefits of a true cloud Enterprise Resource Planning (ERP) platform to help manage production, provide insights and improve business operations. When we add in the complexity and ever-changing nature of regulation, the need for a robust operational system becomes even more critical.

David Stephans will be speaking during CIJ’s October 9th webinar, “Driving Strategic Advantage for your Cannabusiness through Process Efficiency, Quality & Compliance” Click here to learn more and register for free.Cannabis business leaders may want to develop their own “playbook” to differentiate themselves in the market. But before they start to engineer their forward-thinking approach, they should start with a cloud ERP as their foundation. This can help with everything from the most basic of needs to more sophisticated strategies. In this article, we’ll review some key cannabis business goals and tactics, and how ERP can help lay the groundwork for success.

Drive growth and expansion.

Business growth often translates into operational expansion, meaning more facilities, staff and compliance requirements to manage. A cloud ERP supports these functions, including the launch of new products, expanding pricing schedules and increasing production to meet demand. Having the ability to track and manage growth is crucial, and a cloud ERP can provide the real-time reporting and dashboards for visibility across the entire business. This includes not just operational visibility, but also a look into a company’s sales, finances and supply chain.

Foster exemplary customer experience.

Cannabis companies need to streamline processes from the moment an order is placed to when it arrives at the customer’s door. In the mind of consumers, cannabis businesses compete against the likes of Amazon. They must be able to provide a similar experience and level of service, with customers receiving orders in a couple of business days. Cloud ERP can help automate processes. And when things go wrong, it can also help with resolution, especially when it’s paired with a customer relationship management (CRM) system on the same cloud platform. For the B2B market, cloud ERP empowers account management to review past orders to better meet future customer needs.

Stay a step ahead of the game.

In the industry, change is a constant. The future will likely bring about shifts in products, regulations and suppliers. A cloud ERP can modify workflows, controls and process approvals on the fly, so companies can adapt to new requirements. It offers security against emerging risks and easy integration with other systems cannabusinesses may need. An advanced cloud ERP will also provide cutting-edge capabilities, such as AI insights and data-capture from Internet-of-Things (IoT) devices.

Ensure quality product for raving fans and avoid flags on the field through airtight compliance.

Many cannabis companies are passionate about delivering the highest-quality cannabis products. Auditability is key to both quality and compliance. Complete traceability, with lot and serial number tracking, will record comprehensive audit trails from seed to sale. A cloud ERP will incorporate RFID tags down to the plant, lot and product levels to assist in this process. As cannabis goods move through their lifecycle, the cloud ERP will append appropriate tracking to purchasing receipts, inventory as it moves between locations, products as they’re packaged and sales orders as they’re fulfilled.

As a heavily regulated industry, cannabis business is also subject to burdensome compliance standards. A cloud ERP can support the rigorous testing that’s required to assure potency and safety. It easily facilitates Good Manufacturing Practices (GMP) and Good Production Practices (GPP), which ensures products are consistently produced according to quality standards. Many regulatory agencies require digital reporting; cloud ERP can facilitate this requirement through integration with Metrc, Health Canada and the FDA. Compliance can be a costly endeavor, and this type integration saves time, money, and effort.

As you can see, a cloud ERP helps efficiently balance compliance and regulatory requirements, with operational efficiency and customer service – key strategies in any cannabusiness playbook.

Alcaliber Spinoff Linneo Health Gets Greenhouse GMP Certification In Spain

By Marguerite Arnold
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As the industry faces what is undoubtedly a watershed moment for the international cannabis vertical, a new Spanish firm steps into the market with its own EU GMP certification license. Linneo Health is also helmed by the ever eloquent and highly experienced Jose Antonio de la Puente – a tall drink of water with a conscience, a brain and an admirable mission statement.

As Cannabis Industry Journal broke in our last story, a lack of international standards in Europe have been on trial of late. The same day that the CannTrust scandal began to blow in Canada and as Danish authorities rang global alerts, the only qualified packager in Holland was issued a new EU GMP cert. That is a government decision, not a commercial one.

This also implies, at minimum, government lack of coordination and agreement on EU GMP cert even between European nations, for a nascent industry while also trying to avoid the thorny issue of patient home grow. See also the trials and travails of the erstwhile German cultivation bid and its reconstituted Frankenstein-esque bigger if younger sister. In fact, this contretemps is almost certainly involved if not indirectly to blame.

Not All Is Entirely Rosy On Cannabis Europe’s Eastern Front

Almost simultaneously to Linneo Health’s announcement, however, the news came that in Poland, authorities had suspended the pending product registration process. Will this be on hold until after the October election?

In this environment it is almost impossible to know.

Here is one thing to consider. These almost simultaneous developments in Spain and Poland and the newest announcement about further certification of the Dutch recreational system under a new pending “recreational trial” are almost directly related.

That said, even such political maneuverings are not new – and far from limited to any single company. Both Germany and Poland have been wracked by reform stuttered by short term gain and market entry strategies executed by most of the biggest players in the room. Aurora, for example, announced their first import into Poland the same day the Polish government changed the law last fall. Aurora uses Germany as its breakpoint distribution center for Europe.

A Stamp of Authenticity That Is Sorely Needed

Beyond the pharma and market entry politics, however, this Alcaliber-helmed project creates a ring of authority to the same that creates at least one cannabis brand the European medical community can see the certification for.

For now at least, certainly among the ranks of the upper echelons of the international cannabis industry, there must surely be a sigh of relief.

EU GMP certifications (in other words, the authorization to produce product bound for a medical, pharma market) do not happen overnight. On the European front, this is surely at least a step in the right direction for an industry embattled by scandals, particularly of the securities, production, certification and accounting kind right now.

In this case, however, it is also clear that no matter the egregious oversteps and potentially illegal and certainly dubious behaviour of some members of the industry, there are also clearly those within it, and at high levels, who have tried to do the right thing. And further, from the beginning of the nascent industry here as of 2015.

Who Is Alcaliber?

Alcaliber is one of the world’s largest opioid manufacturers. Unlike American counterparts, the company decided several years ago to invest in and back ideas of the opioid-to-cannabinoid therapy model. Linneo Health is a 60% subsidiary of Alcaliber and 40% owned by a Spanish family office called Torreal, S.A.

This is, as a result, one of the most important GMP licenses in Europe at the moment if not the world. It means that within a pharmaceutical environment, the first widespread research and production of plants and therapies for those suffering from both chronic pain, plus neurological and oncological conditions that cause or are related to the same, will be put on a fast track long in the offing. Certainly in Europe.

And that for one, is a positive development that will have widespread implications elsewhere. Particularly given the news that the opioid epidemic in the United States finally has a name, and culpable parties.

What Else Is Unusual About This Project?

GMP certification is a vastly misunderstood concept at the moment. It is also a highly thorny one because of a still standardizing set of agreements. The regulatory environment is in place, in other words, but there are many, many gaps, as well as shifting rules and underlying treaties.

GMPHowever, on top of this, there is also an amazing lack of innovation in interpretation, in part because of many misadvised consultants who are actually seeking to “save” production costs for their clients, or because they do not know any better. Or because producers are scared of doing the wrong thing.

The new project in Spain is unusual because it is a greenhouse grow that got EU GMP cert – although look for more of this in the future. It means that with careful, standardized, pharma production, not all regulated cannabis grows, even for the medical market, have to use huge amounts of energy in repurposed post-industrial developments. It is also certainly cleaner than growing outside. And, when done right, saves huge amounts of water.

Cleantech, in other words, has finally hit the cannabis industry in Europe. As well as a pharmaceutical company invested in the cannabinoid treatment of (at least) chronic pain.

That is an overdue and hugely positive development. No matter what else can be said for shenanigans engulfing the rest of the industry at the moment.

How to Properly Store Plastic Cannabis Packaging

By Danielle Antos
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Your plastic cannabis packaging has a big responsibility. It contains and protects your product, communicates pertinent product information and delivers the first brand impression to your consumers. In order for plastic packaging to fulfill these important roles, you must take care to store and handle it properly.

Following storage condition requirements for plastic bottles helps protect your cannabis product, your company and your customers. It doesn’t matter if your cannabis packaging is HDPE (high density polyethylene), PP (polyethylene) or PET (polyethylene terephthalate), proper storage is imperative to maintain the integrity of the product until you’re ready to fill it.

Bottle and closure storage conditions such as time, temperature and humidity can have an effect on plastic containers. The exposure and age of a sample can also affect shrinkage, impact properties and the stress crack resistance of the container. Not to mention the potential threat of contamination to your cannabis product and the poor impression of your brand in the eyes of your consumers.

You may be wondering how to obtain storage information. The best place to start is with your cannabis packaging partner. Your supplier should be ready and willing to share all vital storage information with you. The best suppliers realize that there is more to a business relationship than just the financial transaction of buying packaging. The first step in proper storage is to identify the type of material that was used to manufacture your bottles and closures.

Know Your Bottle Material Type – HDPE

If you are utilizing HDPE for your cannabis packaging, the storage time should be minimal and a strict first-in-first-out inventory should be maintained. Many end users will re-approve bottles after two or three years to ensure they are damage-free.

In addition, elevated storage temperatures allow plastic containers to further shrink and harsh conditions can actually cause severe distortion. The degree of distortion and shrinkage depends on the design and how the bottles have been stored. Higher storage temperatures also accelerate the aging process of the container. A moderate storage temperature should be provided to safeguard consistent bottle dimensions and properties. It is routinely reported that HDPE bottles can withstand temperatures of 110°F/33°C for brief periods.

Although humidity itself will not degrade the plastic container, a humid environment can have a direct impact on the secondary packaging, such as the cardboard cartons used for shipping. If you use stretch wrap and/or control warehouse conditions, secondary packaging problems can be alleviated.

HDPE bottles and closures should be kept as clean as possible – it is best to leave them in the original sealed cartons. The storage area should be kept clean, dry and dust, odor, insect, and rodent-free. Following this rule will help to build consumer trust in your brand. No one wants to purchase cannabis products in dirty, dusty contaminated packages.

Using PET Bottles?

PET bottles should also be used in a first-in-first-out system to limit the time in storage. Long-term storage should be accomplished using a sealed polyethylene plastic bag or lined drums, totes, bins, Gaylord containers, supersacks or seabulks. The plastic liner will help prevent dust and dirt from entering the bottles.

Elevated storage temperatures (above 100°F/38°C) allow empty PET bottles to shrink, mainly due to relaxation of the oriented and partially oriented regions of the bottle. Extreme temperature conditions (above 131°F/55°C) can cause severe distortion of the amorphous areas of the bottle, including the finish and neck. Moderate storage temperature should be maintained to ensure consistent bottle dimensions and properties.

To help protect PET bottles from contamination, the storage area should be kept clean, dry and dust, odor, insect, and rodent-free. Additionally, the storage area should be approved for food storage. PET bottles should not be stored in direct sunlight, and aromatic materials such as spices, solvents, ink, cleaning supplies and disinfectants should not be stored in the same area.

When empty PET bottles are shipped to or through areas where the outdoor temperature may exceed 90°/32°C, it is recommended that a temperature-controlled container or trailer capable of maintaining a temperature of 80°F/27°C or lower be used.

Polypropylene (PP) Closures

Closures are also an important part of your cannabis packaging. The storage time of unlined closures should be minimized. As with bottles, a strict first-in-first-out inventory should be maintained.

Elevated storage temperatures allow unlined PP closures to further shrink. Harsh conditions can actually cause severe distortion. The degree of distortion and shrinkage depends on the closure design and storage conditions. High storage temperatures accelerate the aging process of the closure; moderate storage temperatures should be provided to ensure consistent closure dimensions and properties. Like HDPE bottles, this type of closure can withstand temperatures of 110°F/43°C for brief periods.

When stored in humid conditions, pay attention to the integrity of the cardboard cartons the closures are stored in. The use of stretch wrap and/or controlling warehouse conditions will help alleviate damage to the cardboard. Just like their bottle counterparts, PP unlined closures should be kept as clean as possible and it is best to store in original sealed cartons.

Proper Storage Supports Your Bottom Line

Storing plastic bottles improperly can reduce the integrity of the plastic, therefore making it unsuitable to contain your cannabis product. Poor storage can also be detrimental to filling lines and cause production problems, which can result in reduced efficiencies and added costs.

Product recalls can also be a by-product of poor storage due to increased chances of product contamination. If plastic bottles and closures are not properly stored before using, distortion and shrinkage can damage the bottle labels used to identify your product. Shrinkage of your plastic closures result in a poor sealing surface which is detrimental to the freshness of your cannabis product. All of these side-effects can be very damaging to your brand image, from which it’s hard to recover. Consumers will lose confidence in your brand – leading to reduced profits for your bottom line.

Whether your cannabis business is in the early start-up stages or established with loyal customers, properly storing your plastic packaging will help protect your brand, decrease the risk of product recalls and increase your profitability.

Biros' Blog

Tuesday, September 24th is National Voter Registration Day

By Aaron G. Biros
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In an interview with HeadCount back in 2012, Bob Weir, founding member of the Grateful Dead, discussed the importance of registering to vote. “Just register, study up and vote. It’s your future. Don’t let people take that from you,” says Weir. “Cause in years to come you’ll be wishing you had.”

Tuesday, September 24th is National Voter Registration Day and we want to remind our readers to register to vote. If you subscribe to our newsletter, read our articles, news stories, columns and features, then chances are that you support legal cannabis. If you are supportive of legal cannabis, then you should consider voting for candidates that support the same cause. Cannabis legalization is about more than just creating a legal marketplace; it’s about social justice, equality, civil rights and more. If you can heal the symptoms, but not affect the cause, it’s quite a bit like trying to heal a gunshot wound with gauze.

Bob Weir, founding member of the Grateful Dead
Image: jgullo, Flickr

The 2020 election is approaching faster than you think and choosing candidates that support legal cannabis is a quick and easy way to help. We really like what the Cannabis Voter Project (CVP) is up to. CVP is a nonprofit initiative started by HeadCount, an organization that promotes voter registration and participation in democracy through the power of music. This past summer, CVP went on tour with Dead & Co., engaging with concertgoers about registering to vote. Headcount has helped about 600,000 people register to vote so far. Bob Weir sits on their board of directors. Bands like Phish, Jay-Z, Dave Matthews, Pearl Jam have also helped get the word out about registering to vote as a part of HeadCount’s campaign.

You can register to vote or check your voter registration status by clicking here. You can also text CANNA to 40649 to contact your lawmakers and ask where they stand on cannabis. Once in a while you get shown the light, in the strangest of places if you look at it right. At the CVP’s website, you can check out their database of congress, organized state-by-state, with each members’ stance on cannabis.

Their advisory board features cannabis companies like CannaCraft, Terrapin Care Station, Harvest, Sal Pace Consulting, 1906 and Vicente Sederberg. They went on tour with funk band Lettuce to educate the band’s fans about what’s going on with cannabis policy in their state and how they can use their vote to impact cannabis policy.

Cannabis is a bipartisan issue. The cannabis voting bloc is bigger than you think and we have the power to make change happen by making our voices heard. “HeadCount is not so much political, it’s nonpartisan,” says Weir. “What we’re trying to do is get kids to register, pay attention to what candidates are saying, pay attention to the politics of the moment, and react with their hearts and minds.”

The cannabis legalization movement has made serious progress recently, but we still have to just keep truckin’ on.

A2LA Accredits First Labs in Tennessee and Oklahoma

By Cannabis Industry Journal Staff
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According to a press release published earlier this week, A2LA announced the accreditation of two separate cannabis laboratories in two separate states; both are the first cannabis testing labs accredited in their states. Demeter Laboratory, based in Oklahoma City, Oklahoma, and Galbraith Laboratories, based in Knoxville, Tennessee, achieved the ISO 17025:2017 accreditation.

According to Cassy VanTassel, M.S., quality manager at Demeter Laboratory, Oklahoma is still developing and defining their regulatory framework for cannabis testing requirements. “Even though the State of Oklahoma is still establishing regulations and legislation, Demeter will always strive to meet the highest quality standards, so our customers know they are getting the best quality testing,” says VanTassel. “Demeter chose A2LA as its Accreditation Body due to their reputation in the industry, their diverse clientele, and the quality of their assessors.”

In Tennessee, Galbraith Labs is looking to aid the hemp industry in product safety testing. Christy Myers, customer service manager at Galbraith Laboratories, says they want to help farmers produce safe hemp products. “We are proud of our commitment to stay current within our industry and achieve the high standards set by A2LA,” says Myers. “Adding cannabis testing to our line of services was a great opportunity for Galbraith Laboratories to serve the community by helping farmers produce safe and legal hemp.”

Galbraith Labs was founded in 1950 as a contract lab in Knoxville serving many industries. With their newly established accreditation, they hope to aid the cannabis industry in Tennessee with hemp testing. Demeter Laboratory is the first medical cannabis lab in Oklahoma. Their goals include “advancing quality controls in medical cannabis, supporting safe consumption of cannabis and ensuring the transparency of the cannabis community.”

Fungal Monitoring: An Upstream Approach to Testing Requirements

By Bernie Lorenz, PhD
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Mold is ubiquitous in nature and can be found everywhere.1 Cannabis growers know this all too well – the cannabis plant, by nature, is an extremely mold-susceptible crop, and growers battle it constantly.

Of course, managing mold doesn’t mean eradicating mold entirely – that’s impossible. Instead, cultivation professionals must work to minimize the amount of mold to the point where plants can thrive, and finished products are safe for consumption.

Let’s begin with that end in mind – a healthy plant, grown, cured and packaged for sale. In a growing number of states, there’s a hurdle to clear before the product can be sold to consumers – state-mandated testing.

So how do you ensure that the product clears the testing process within guidelines for mold? And what tools can be employed in biological warfare?

Mold: At Home in Cannabis Plants

It helps to first understand how the cannabis plant becomes an optimal environment.

The cannabis flower was designed to capture pollen floating in the air or brought by a pollinating insect.

Photo credit: Steep Hill- a petri dish of mold growth from tested cannabis

Once a mold spore has landed in a flower, the spore will begin to grow. The flower will continue to grow as well, and eventually, encapsulate the mold. Once the mold is growing in the middle of the flower, there is no way to get rid of it without damaging the flower.

A Name with Many Varieties

The types of spores found in or around a plant can make or break whether mold will end with bad product.

Aspergillus for example, is a mold that can produce mycotoxins, which are toxic to humans2. For this reason, California has mandatory testing3for certain aspergillus molds.

Another example, Basidiospores, are found outside, in the air. These are spores released from mushrooms and have no adverse effects on cannabis or a cannabis cultivation facility.

Fungi like powdery mildew and botrytis (PM and Bud Rot) typically release spores in the air before they are physically noticed on plants. Mold spores like these can survive from one harvest to the next – they can be suspended in the air for hours and be viable for years.

How Mold Travels

Different types of spores – the reproductive parts of mold – get released from different types of mold. Similar to plants and animals, mold reproduces when resources are deemed sufficient.

The opposite is also true that if the mold is under enough stress, such as a depleting nutrient source, it can be forced into reproduction to save itself.4

In the end, mold spores are released naturally into the air for many reasons, including physical manipulation of a plant, which, of course, is an unavoidable task in a cultivation facility.5

Trimming Areas: A Grow’s Highest Risk for Mold

Because of the almost-constant physical manipulation of plants that happen inside its walls, a grow’s trimming areas typically have the highest spore counts. Even the cleanest of plants will release spores during trimming.

Best practices include quality control protocols while trimming

These rooms also have the highest risk for cross contamination, since frequently, growers dry flower in the same room as they trim. Plus, because trimming can be labor intensive, with a large number of people entering and leaving the space regularly, spores are brought in and pushed out and into another space.

The Battle Against Mold

The prevalence and ubiquitous nature of mold in a cannabis facility means that the fight against it must be smart, and it must be thorough.

By incorporating an upstream approach to facility biosecurity, cultivators can protect themselves against testing failures and profit losses.

Biosecurity must be all encompassing, including everything from standard operating procedures and proper environmental controls, to fresh air exchange and surface sanitation/disinfection.

One of the most effective tactics in an upstream biosecurity effort is fungal monitoring.

Ways to Monitor Mold

Determining the load or amount of mold that is in a facility is and always will be common practice. This occurs in a few ways.

Post-harvest testing is in place to ensure the safety of consumers, but during the growing process, is typically done using “scouting reports.” A scouting report is a human report: when personnel physically inspect all or a portion of the crop. A human report, unfortunately, can lead to human error, and this often doesn’t give a robust view of the facility mold picture.

Another tool is agar plates. These petri dishes can be opened and set in areas suspected to have mold. Air moves past the plate and the mold spores that are viable land on the dishes. However, this process is time intensive, and still doesn’t give a complete picture.

Alternatively, growers can use spore traps to monitor for mold.

Spore traps draw a known volume of air through a cassette.6 The inside of the cassette is designed to force the air toward a sticky surface, which is capable of capturing spores and other materials. The cassette is sent to a laboratory for analysis, where they will physically count and identify what was captured using a microscope.

Spore trap results can show the entire picture of a facility’s mold concerns. This tool is also fast, able to be read on your own or sent to a third party for quick and unbiased review. The information yielded is a useful indicator for mold load and which types are prevalent in the facility.

Spore Trap Results: A Story Told

What’s going on inside of a facility has a direct correlation to what’s happening outside, since facility air comes infromthe outside. Thus, spore traps are most effective when you compare a trap inside with one set outside.

When comparing the two, you can see what the plants are doing, view propagating mold, and understand which of the spore types are only found inside.

Similar to its use in homes and businesses for human health purposes, monitoring can indicate the location of mold growth in a particular area within a facility.

These counts can be used to determine the efficacy of cleaning and disinfecting a space, or to find water leaks or areas that are consistently wet (mold will grow quickly and produce spores in these areas).

Using Spore Traps to See Seasonality Changes, Learn CCPs

Utilizing spore traps for regular, facility-wide mold monitoring is advantageous for many reasons.

One example: Traps can help determine critical control points (CCP) for mold.

What does this look like? If the spore count is two times higher than usual, mitigating action needs to take place. Integrated Pest Management (IPM) strategies like cleaning and disinfecting the space, or spraying a fungicide, are needed to bring the spore count down to its baseline.

For example, most facilities will see a spike in spore counts during the times of initial flower production/formation (weeks two to three of the flower cycle).

Seasonal trends can be determined, as well, since summer heat and rain will increase the mold load while winter cold may minimize it.

Using Fungal Monitoring in an IPM Strategy

Fungal monitoring – especially using a spore trap – is a critical upstream step in a successful IPM strategy. But it’s not the only step. In fact, there are five:

  • Identify/Monitor… Using a spore trap.
  • Evaluate…Spore trap results will indicate if an action is needed. Elevated spore counts will be the action threshold, but it can also depend on the type of spores found.
  • Prevention…Avoiding mold on plants using quality disinfection protocols as often as possible.
  • Action…What will be done to remedy the presence of mold? Examples include adding disinfection protocols, applying a fungicide, increasing air exchanges, and adding a HEPA filter.
  • Monitor…Constant monitoring is key. More eyes monitoring is better, and will help find Critical Control Points.

Each step must be followed to succeed in the battle against mold.

Of course, in the battle, there may be losses. If you experience a failed mandatory product testing result, use the data from the failure to fix your facility and improve for the future.

The data can be used to determine efficacy of standard operating procedures, action thresholds, and other appropriate actions. Plus, you can add a spore trap analysis for pre- and post- disinfection protocols, showing whether the space was really cleaned and disinfected after application. This will also tell you whether your products are working.

Leveraging all of the tools available will ensure a safe, clean cannabis product for consumers.

References

  1. ASTM D8219-2019: Standard Guide for Cleaning and Disinfection at a Cannabis Cultivation Center (B. Lorenz): http://www.astm.org/cgi-bin/resolver.cgi?D8219-19
  2. Mycotoxin, Aspergillus: https://www.who.int/news-room/fact-sheets/detail/mycotoxins
  3. State of California Cannabis Regulations: https://cannabis.ca.gov/cannabis-regulations/
  4. Asexual Sporulation in Aspergillus nidulans (Thomas H. Adams,* Jenny K. Wieser, and Jae-Hyuk Yu):  https://pdfs.semanticscholar.org/7eb1/05e73d77ef251f44a2ae91d0595e85c3445e.pdf?_ga=2.38699363.1960083875.1568395121-721294556.1562683339
  5. ASTM standard “Assessment of fungal growth in buildings” Miller, J. D., et al., “Air Sampling Results in Relation to Extent of Fungal Colonization of Building Materials in Some Water Damaged Buildings,” Indoor Air, Vol 10, 2000, pp. 146–151.
  6. Zefon Air O Cell Cassettes: https://www.zefon.com/iaq-sampling-cassettes

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.

Soapbox

Stemming the Cannabis Black Market

By Matthew Zandi
3 Comments

On July 18, 2019, the Riverside County Sheriff’s Department in California served search warrants at 56 illegal cannabis cultivation sites. This operation was spearheaded by 390 law enforcement personnel, whose mission was to combat the ongoing problem of illegal cannabis cultivation sites throughout California.

The raids resulted in:

  • 47,939 marijuana plants confiscated
  • 2,132 pounds of processed cannabis
  • 47 tons of cannabis plants disposed
  • 2 Butane Honey Oil Labs located
  • 71 firearms
  • 49 arrests

The target of the operation was illegal cultivation sites. Individuals or licensed businesses with permits to grow cannabis legally were not affected.

Illegal cultivation is far from just a California problem. For example, if Oregon halted cannabis production today, the state would not experience a shortage as it has a six-year surplus.

The fear for investors and legal growers is that, if some growers turn to the black market to unload excess inventory, federal enforcement will come into play, which will set back the legal cannabis industry to the stone age. Oregon is currently making moves to limit licensure for legal production, but some active licenses may also need to be revoked, which would leave those licensees with vast investment losses. In other words, legalized cannabis’s massive economic market is not without financial problems of its own.

Don’t Make a Federal Case Out of It

Several states have legalized recreational cannabis with the intention of reimagining this vast underground market as an above-board business that bolsters the state’s economy via transparent dealings. To date, however, the federal government has refused to budge regarding cannabis’s status as an illegal Schedule 1 substance. This classification puts cannabis on a par with opioids. As such, those states that have legalized recreational cannabis are extremely motivated to keep these businesses on the up and up and not to pique federal interest.

Black Market Vulnerability

One of the tenets of legalizing cannabis is stemming the proliferation of black-market suppliers and minimizing the negative effects that the “war on drugs”has had in minority communities. These positive impetuses have yet to flourish. As a result of the illegal status of cannabis at the federal level, cannabis-legal states are forced to operate as islands.

Generally, taking legally purchased cannabis across state lines – from a legal to an illegal state – is illegal, and this is not only confusing but is also a recipe for complications. This leaves cannabis-legal states vulnerable to black market activity. These pockets of legal recreational cannabis that are popping up around the country loosen the constraints of the cannabis movement while the legality of this movement remains problematic. The results are an environment that’s extremely hospitable to black market activity.

Supply and Demand

The reality is that – due to supply and demand – cannabis costs about half as much in cannabis-legal states as it does in states in which it’s illegal. Black market growers in legal states destabilize the market. Those legit companies which remain above board, pay their taxes and jump through every legal hoop, cannot compete with black market interlopers who eschew such niceties.

The point made by detractors of legal cannabis isn’t lost on the rest of us – the black market is burgeoning.States that have legalized production have inadvertently made it easier for illegal producers to hide in plain sight, and the line between legal and illegal operations can become blurred. This creates new frustrations for law enforcement and naturally cuts into the legal cannabis trade. The situation has left some opponents to legalization demanding new crackdowns – others characterize such suggestions as amounting to a new war on drugs.

No Going Back

Detractors of legalized cannabis claim the somewhat chaotic effects related to the current patchwork approach to legalization are a result of opening the gates to legalization in the first place. However, putting the genie of legalized recreational cannabis back in the bottle simply isn’t feasible for operational, financial and political reasons. With the proliferation of attendant illegal operations, however, it is becoming more and more clear that leveling the playing field – via some form of federal legalization – is inevitable. The current state-by-state solution leaves too much wiggle room for the illegal transport of cannabis from those states with looser restrictions to those states with tighter protocols. If politics is choosing between the disastrous and the unpalatable, the billion-dollar cannabis conundrum is a great example. The question may no longer be should we legalize cannabis but, instead, how do we legalize cannabis.In other words, we need to find a path forward, and focusing only on the pitfalls that we’ve experienced so far isn’t going to get us where we need to be.

A Tale of Two Choices

The point made by detractors of legal cannabis isn’t lost on the rest of us – the black market is burgeoning. As such, we have an important decision to make. A blanket prohibition of cannabis may no longer be practicable, so we’re left to choose between legal and overt practices across the board or a hodgepodge of semilegal practices with covert ops in tow. Fostering illegal activity is rarely in our nation’s best interests, which leaves legalizing cannabis at the federal level as possibly the most practicable solution.

Protecting Public Health

As more states embrace the legalization of recreational cannabis, public health concerns remain an issue. Many of these illegal cultivators use chemicals that are banned in the United States and do not properly dispose of chemicals or waste products that destroy the environment, contaminate drinking water and have the potential to harm or even kill residents and domestic animals. Not only is this activity harmful, growers often steal electricity and water from surrounding residents.

Cobbling together a pastiche of laws, however, inevitably bolsters black market activity and does nothing to help protect public health. Even the staunchest proponents of legalizing cannabis don’t want minors involved in the equation. Additionally, few debate that unchecked usage is a healthy option. Quasi-legislation at the state level (and on a state-by-state basis), however, provides neither a check nor a balance.

Onward and Upward

The most likely next step for safeguarding public health, for stemming black-market activity, and for generating maximum revenues is toward thoughtful and comprehensive national legalization that comes sooner rather than later. In the meantime, law enforcement should protect the public, legal operations, investors, and the environment from the black market.

The opinions expressed are those of the author and do not necessarily reflect the views of Guidepost Solutions or its clients.

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Does Germany Have a Gray Market Problem?

By Marguerite Arnold
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Tilray just did something very interesting. In addition to announcing that it was shipping product to German distributor Cannamedical via its Portuguese facility, it also announced that it had begun outdoor cultivation.

Groovy.tilray-logo

Even more intriguing: the company is claiming that somehow, via its proprietary technology (apparently), this kind of crop will be legit for distribution within the EU medical system.

There is only one problem with this. Outdoor growing does not sound remotely GMP-certified.

Here is the next bit of exciting news. Tilray, apparently, is not the only large Canadian cannabis company now operating in Europe that appears to be trying to get around GMP certifications for medical market penetration. Or appear oblivious to the distinctions in the international (and certainly European market).

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Photo: Ian McWilliams, Flickr

And things are a bit smelly on that front, not only in Denmark post CannTrust, but in truth even in Germany, the supposed “Fort Knox” of regulatory consumer and pharmaceutical standards.

In fact, at least according to insiders, there is apparently quite a bit of gray market product sloshing around in the Teutonic medical market. Even though so far, at least not publicly punished for the same, nobody has been caught. Or at least publically reprimanded.

And who is on the hot seat at least according to most of the licensed if not just pre-licensed indie producers and distributors who were contacted for this story? Sure, there are dark horse “start-up” indie violators, but they are not the only problem. Many who talked to CIJ named big public Canadian companies too. And potentially Bedrocan beyond that.

Who Is Who And What Is What?

Part of the problem, beyond any kind of deliberate flouting of regulations on the part of many companies who are at least trying to understand them, is that global standards are different. “GMP certifications” of every country, even within a region like Europe, are in fact, not uniform. That is why, for example, the new EU-US MRA agreement had to be signed first regionally and then on a state-by-state level across the EU.

Beyond Germany of course, there are other problems that are coming to the fore.In the medical cannabis space, in particular, right now, that is causing problems simply because many with pharma experience are not hip to the many risks in the cannabis industry itself. On the Canadian, Australian and American side, there is also a lot of bad advice, in particular, coming from consultants who should know better.

To be properly EU and German GMP-certified, one of the required steps is to have German inspectors walk your production floor. It is also not good enough to have “pesticide-free” or national organic certification at the crop cultivation site, and add GMP cert at time of “processing.” That piece of misadvise has been showing up not only in Canada, but Australia too. And creates a nasty reality if not expensive retooling upon entering the legitimate market in Europe, for starters.

These Issues Affect Everyone In The Industry

German Parliament Building

In an environment where ex-im is the name of the game, and even the big guys are short of product, compliance is getting granular as smaller players step up to the plate – and many if not most hopeful Canadian producers (in particular) now looking to Europe for sales are not (yet) up to speed.

A big piece of the blame also lies in the lack of proper administration at the federal and state level too – even auf Deutschland. To get a distribution license, a company must actually get three licenses, although there are plenty in the market right now who begin to describe themselves as “distributors” with less than the required certs.

The lack of coordination and communication, including which certs to accept as equivalent and from where is creating a market where those who know how to game the system are.

For example, several people who contacted CIJ, claimed that uncertified product was making its way into Germany via Central and Latin America, through Canada, picking up “GMP cert” along the way. In other words, not actually GMP-certified but labelled fraudulently to make it appear that way.

The same claims were also made by those with on-the-ground industry knowledge in South Africa (Lesotho).

Beyond Germany of course, there are other problems that are coming to the fore. As CIJ recently learned, a firm authorized by the Dutch government to provide cannabis packaging, including for exports, was not GMP certified until July 2019 – meaning that all product they shipped internationally even within Europe before that date potentially has labelling issues. Cue domestic importers. If not regulators.

Grey Market Product Is Making Its Way In Through Official Channels

For those who are taking the time to actually get through the legal registration and licensing process, it is infuriating to see others who are apparently fairly flagrantly buying market position but are in no position to fulfil such obligations. It is even more infuriating for those who intend to meet the requirements of the regulations to realize that the vast amounts spent in consulting fees was actually money paid for inaccurate information.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.German distributors are so aware of the problem that they are starting to offer gap analysis and specific consulting services to help their import partners actually get compliant.

Government agencies also might be aware of the problems, but they have been reluctant to talk about the same. CIJ contacted both BfArM and the local Länderauthorities to ask about the outdoor grow in Portugal and the lack of GMP cert for a Dutch packager. After multiple run-arounds, including sending this reporter on a wild rabbit chase of federal and state agencies (who all directed us back to BfArm) and an implication by the press officer at BfArM that the foreign press was not used to talking to multiple sources, CIJ was redirected back to state authorities with a few more instructions on which bureau to contact. The state bureau (in Berlin) did not return comments to questions asked by email.

Here is the bottom line that CannTrust has helped expose this summer: the entire global cannabis industry is trying hard to legitimize. Not every company is shady, and there are many who are entering it now who are playing by the rules. But those who are hoping to exploit loopholes (including “name” if not “public” companies) are also clearly in the room.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.

Editors Note: This is a developing story. CIJ has been contacted by the Dutch Cannabis Agency as it investigates what appears to be an intra-government debate over qualification of EU-GMP cert, acceptance of audit documents and other matters within European countries that appear to have caused much of this confusion with regards to Bedrocan and its packager Fagron. Many reputable, licensed sources within the industry spoke to us on deep background, out of concern that they too would be held liable. That said, so far, nobody can explain why the only licensed Dutch packager, was issued a new EU GMP cert document on July 9, 2019, the same day that Danish authorities halted CannTrust product entering Denmark. That is a government decision. Further it is also still unclear why rival cannabis companies would attempt to contact the cannabis media with a certain (and misguided) spin on this situation.

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From CannTrust To Canopy: Is There A Connection To Current Cannabis Scandals?

By Marguerite Arnold
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As Europe swooned under record-breaking heat this summer, the cannabis industry also found itself in a rather existential hot seat.

The complete meltdown at CannTrust has yet to reach a conclusion. Yes, a few  jobs have been lost. However, a greater question is in the room as criminal investigatory and financial regulatory agencies on both sides of the US-Canada border (plus in Europe) are getting involved.

As events have shown, there is a great, big, green elephant in the room that is now commanding attention. Beyond CannTrust, how widespread were these problematic practices? And who so far has watched, participated, if not profited, and so far, said nothing?

Who, What, Where?

The first name in the room? Canopy Growth.Canopy_Growth_Corporation_logo

Why the immediate association? Bruce Linton, according to news reports, was fired as CEO by his board the same day, July 3, 2019, that CannTrust received its first cease and desist notice from Health Canada.

Further, there is a remarkable similarity in not only problematic practices, but timing between the two companies. This may also indicate that Canopy’s board believed that Linton’s behaviour was uncomfortably close to executive misdeeds at CannTrust. Not to mention, this was not the first scandal that Linton had been anywhere close to around acquisition time. See the Mettrum pesticide debacle, that also broke right around the time Canopy purchased the company in late 2016 as well as the purchase of MedCann GmbH in Germany.

Reorg also appears to be underway in Europe as well. As of August, Paul Steckler has been brought in as “Managing Director Europe” and is now based in Frankfurt. Given the company’s history of “co-ceo’ing” Linton out the door, is more change to come?

What Went Down At Canopy?

Last year, Canopy announced its listing on the NYSE in May. To put this in context, this was two months after the first German cultivation bid went down to legal challenge. By August 15, 2018 with a new bid in the offing, the company had closed the second of its multi-billion dollar investments from Constellation.

Bruce Linton, former CEO of Canopy Growth
Photo: Youtube, TSX

Yet by late October, after Bruce Linton skipped a public markets conference in Frankfurt where many of the leading Canadian cannabis company execs showed up to lobby Jens Spahn (the health minister of Germany) about the bid if not matters relating to the Deutsche Börse, there were two ugly rumours afoot.

Video showing dead plants at Canopy’s BC facility surfaced. Worse, according to the chatter online at least, this was the second “crop failure” at the facility in British Columbia. Even more apparently damning? This all occurred during the same  time period that the second round of lawsuits against the reconstituted German cultivation bid surfaced.

Canopy in turn issued a statement that this destruction was not caused by company incompetence but rather a delay in licensing procedures from Health Canada. Despite lingering questions of course, about why a company would even start cultivation in an unlicensed space, not once but apparently twice.  And further, what was the real impact of the destruction on the company’s bottom line?

Seen within the context of other events, it certainly poses an interesting question, particularly, in hindsight.

Canopy, which made the finals in the first German cultivation bid, was dropped in the second round – and further, apparently right as the news hit about the BC facility. Further, no matter the real reason behind the same, Canopy clearly had an issue with accounting for crops right as Canadian recreational reform was coming online and right as the second German cultivation bid was delayed by further legal action last fall.

Has Nobody Seen This Coming?

In this case, the answer is that many people have seen the writing on the wall for some time. At least in Germany, the response in general has been caution. To put this in true international perspective, these events occurred against a backdrop of the first increase in product over the border with Holland via a first-of-its kind agreement between the German health ministry and Dutch authorities. Followed just before the CannTrust scandal hit, with the announcement that the amount would be raised a second time.

German health authorities, at least, seem doubtful that Canadian companies can provide enough regulated product. Even by import. The Deutsche Börse has put the entire public Canadian and American cannabis sector under special watch since last summer.

Common Territories

By the turn of 2019, Canopy had announced its expansion into the UK (after entering the Danish market itself early last year) and New York state.

And of course by April, the company unveiled plans to buy Acreage in the U.S.

Yet less than two weeks later, Canopy announced not new cultivation facilities in Europe, but plans to buy Bionorica, the established German manufacturer of dronabinol – the widely despised (at least by those who have only this option) synthetic that is in fact, prescribed to two thirds of Germany’s roughly 50,000 cannabis patients.

By August 2019, right after the Canopy Acreage deal was approved by shareholders, Canopy announced it had lost just over $1 billion in the last three months.

Or, to put this in perspective, 20% of the total investment from Constellation about one year ago.

What Happened At CannTrust And How Do Events Line Up?

The current scandal is not the first at CannTrust either. In November 2017, CannTrust was warned by Health Canada for changing its process for creating cannabis oil without submitting the required paperwork. By March of last year however, the company was able to successfully list on the Toronto stock exchange.

Peter Aceto arrived at CannTrust as the new CEO on October 1 last year along with new board member John Kaken at the end of the month. Several days later the company also announced that it too, like other major cannabis companies including Canopy, was talking to “beverage companies.” It was around this time that illegal growing at CannTrust apparently commenced. Six weeks later, the company announces its intent to also list on the NYSE. Two days later, both the CEO and chair of the board were notified of the grow and chose not to stop it.

Apparently, their decision was even unchanged after the video and resulting online outrage about the same over the destroyed crops at the Canopy facility in BC surfaced online.

On May 10, just over a week after the Bioronica purchase in Germany, the first inklings of a scandal began to hit CannTrust in Canada. A whisteblower inside the company quit after sending a mass email to all employees about his concerns. Four days later, the company announced the successful completion of their next round of financing, and further that they had raised 25.5 million more than they hoped.

Six weeks later, on June 14, Health Canada received its warning about discrepancies at CannTrust. The question is, why did it take so long?

Where Does This Get Interesting?

The strange thing about the comparisons between CannTrust and Canopy, beyond similarities of specific events and failings, is of course their timing. That also seems to have been apparent at least to board members at Canopy – if not a cause for alarm amongst shareholders themselves. One week after Health Canada received its complaint about CannTrust, shareholders voted to approve the Canopy-Acreage merger, on June 21.

Yet eight days after that, as Health Canada issued an order to cease distribution to CannTrust, the Canopy board fired Bruce Linton.

One week after that, the Danish recipient of CannTrust’s product, also announced that they were halting distribution in Europe. By the end of August, Danish authorities were raising alarms about yet another problem – namely that they do not trust CannTrust’s assurances about delivery of pesticide-free product.

Is this coincidence or something else?

If like Danish authorities did in late August 2019, calling for a systematic overhaul of their own budding cannabis ecosystem (where both Canadian companies operate), the patterns and similarities here may prove more than that. Sit tight for at least a fall of more questions, if not investigations.

Beyond one giant cannabis conspiracy theory, in other words, the problems, behaviour and response of top executives at some of the largest companies in the business appear to be generating widespread calls – from not only regulators, but from whistle blowers and management from within the industry itself – for some serious, regulatory and even internal company overhauls. Internationally.

And further on a fairly existential basis.

EDITOR’S NOTE: CIJ reached out to Canopy Growth’s European HQ for comment by email. None was returned.

Correction: This article has been updated to show that the Danish recipient of Canntrust’s product announced they were halting distribution one week after Bruce Linton’s firing, not one day.