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Global Cannabis Marketplace

The United States is viewed as the land of opportunity, prosperity, and innovation. Americans take pride in the country’s historically progressive policies and contributions to advancements in medicine, technology, and science. However, when it comes to cannabis, the U.S. federal government is lagging behind the international marketplace. Over the past decade, individual states have made great progress in creating momentum for legalization of cannabis in America. Currently, 29 states and the District of Columbia allow access to medical cannabis, and more will follow suit. Yet, for the next four years (at least), the outlook on federal legalization is extremely bleak, especially given the key players in the Trump administration, specifically, Attorney General Jeff Sessions. On multiple occasions, Sessions has consistently re-affirmed he is not in favor of legalizing cannabis and has stated that he does not want the Department of Justice (DOJ) restricted from enforcing the Controlled Substances Act. But the administration has not explicitly overturned the Cole Memo . . . at least for now. Bottom line—despite best efforts, federal legalization in America is not likely coming anytime soon. The inability to transport cannabis across state lines and national borders stifles the development of national cannabis brands, and also puts American cannabis businesses at a significant disadvantage internationally. International medical cannabis trade has already begun, and is expected to expand rapidly. In 2017, Germany, Greece, and Poland joined Austria, Britain, Croatia, the Czech Republic, Denmark, Finland, France, Ireland, Italy, Macedonia, the Netherlands, Portugal, Romania, Slovenia, Spain, and Sweden on the list of European countries to have legalized medical cannabis in some form. Additionally, the Prime Minister of Luxembourg...

Proposed California Bill to Ban Cannabis-Branded Merchandise Under SB 162 (Update)

Updated to reflect the Assembly amendments made on July 20, 2017. (Revisions to this previously posted article are in bold or in red.) On June 27, California Governor Jerry Brown signed SB 94 into law effectively repealing MCRSA and AUMA, combining regulations governing medical and adult-use cannabis under the Medical and Adult-Use Cannabis Regulation Safety Act (MAUCRSA)—that’s a mouthful. Despite the synthesis of these laws, other cannabis-related bills remain pending before the California legislature. For example, SB 162 incorporates a range of restrictions aimed at reducing children’s exposure to cannabis advertising including language already implemented in SB 94 for the regulation of ads in broadcast, cable, radio, print, and digital mediums, requiring that at least 71.6% of the audience be at least 21 or older. However, as written, SB 162 also proposes to ban state-licensed cannabis businesses from advertising “medical cannabis or medical cannabis products through the use of branded merchandise, including but not limited to clothing, hats, or other merchandise with the name or logo of the product.” The Senate unanimously passed this measure in June and it is currently moving through the Assembly committees. On July 20, 2017, the Assembly amended SB 162. In part, it added legislative findings to support the constitutionality of the restrictive language in the bill. The legislative findings provide background on similar prohibitions enacted as to the tobacco industry, and cited studies that indicate “adolescents who are exposed to advertising of cannabis were more likely to report using cannabis or say they planned to use the substance in the future.” In addition to providing further context to the purpose for the proposed...

Is an IP Holding Company Right for Your Business?

A “holding company” is a business organizational structure that is set up as a corporation or limited liability company for the sole purpose of owning and maintaining particular assets. It is common to set up holding companies to manage and license intellectual property (IP) assets, i.e., patents, trademarks, copyrights, and trade secrets. IP holding companies may be attractive due to tax advantages. Additionally, an IP holding company may function as a structural shield to protect valuable assets. Legally, a holding company is considered a wholly separate entity from its parent corporation (or other affiliated companies). In the event the parent company is sued, the IP assets owned by the holding company are protected from creditors and such creditor would only be able to recover from the assets wholly owned by the parent company. Consider the following hypothetical: Company ABC Inc. is a cannabis dispensary and owns valuable intellectual property rights in the trademark “ABC” including a federal registration for ancillary services, a California state registration for ancillary services, and common law (unregistered) rights for the ABC mark in connection with the dispensary and its own line of cannabis products. (The trademark registrations are for ancillary services because the federal and California state trademark offices will not issue registrations for marks in connection with goods/services that “touch the plant.”) ABC Inc. elects to form an IP holding company called ABC Holdings LLC to own and license its trademarks. ABC Inc. then assigns all its trademark rights, both statutory and common law, to ABC Holdings LLC. Subsequently, the IRS challenges ABC Inc. for failing to properly report income and the court...