With so much happening in the cannabis industry we thought we’d take this time to highlight some of the industry’s most recent happenings.

  • Increasing Support for Decriminalization of Marijuana (Federal): On April 20, 2018, Senate Minority Leader Chuck Schumer of New York said he’ll introduce a bill taking marijuana off the federal list of controlled substances — in effect decriminalizing its use at the federal level. The bill is expected to be similar to the one proposed by Senator Cory Booker (D-NJ) in 2017. In a tweet to his Twitter followers Chuck Schumer stated: “The time has come to decriminalize marijuana. My thinking – as well as the general population’s views – on the issue has evolved, and so I believe there’s no better time than the present to get this done.”

FDA Approves Marijuana-Derived Drug (Federal): On April 19, 2018, advisers for the Food and Drug Administration unanimously supported the first-ever government approval of a medication made from cannabis. The drug, Epidiolex, is made from a purified ingredient in cannabis called cannabidiol, or CBD. It is intended to treat severe seizures in children caused by rare forms of epilepsy called Lennox-Gastaut and Dravet syndromes.

Cole Memorandum Update (Federal): On January 5, 2018, we discussed the rescission of the Cole Memorandum by the federal government. The Cole Memorandum outlined the federal government’s general policy prohibiting federal prosecutors from pursuing cases against people following marijuana laws in states that have legalized the drug. The rescission of the Cole Memorandum created much concern and confusion at the state level. In a change of direction, President Donald Trump stated on April 13, 2018, that he will support legislation protecting the marijuana industry in states that have legalized the drug. Republican Sen. Cory Gardner (D-CO) said that President Trump made the assurance to him during a conversation. “President Trump assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all,” Gardener said in a statement.

Marijuana Key Issue in Governorship Race (New York): In February 2018, we discussed Governor Cuomo’s statement during his annual budget address that New York should undertake a study of the possible impacts of legalizing recreational marijuana. The issue of legalization recreational marijuana at a state level is becoming a key issue for his campaign, especially in light of Cynthia Nixon’s recent comments. Ms. Nixon, who is challenging Governor Cuomo in a Democratic primary for the governorship, supports the decriminalization of marijuana. “I believe it’s time for New York to follow the lead of eight other states and D.C. and legalize the recreational use of marijuana,” says Ms. Nixon in a video she posted to Twitter.

New Medical Marijuana Dispensaries Poised to Open (New York): In Medical Marijuana 102 we reviewed New York medical marijuana dispensaries and the issuance by the NYS Department of Health (“DOH”) of licenses to five new companies in addition to the original five companies chosen by the DOH to manufacture and sell medical cannabis. The five new companies will be opening up a total of six New York City dispensaries, one of which will be in Manhattan, bringing the total number of medical marijuana dispensaries to nine.

Number of Certified Patients and Practitioners Continues to Rise (New York): In Medical Marijuana 103, we noted that 1,184 practitioners had registered with the DOH for the purpose of certifying patients for medical marijuana use and that 28,077 patients had been certified for such use. That number has grown exponentially since then – the DOH reports that as of April 17, 2018, there are now over 1,500 registered practitioners and over 50,000 certified patients.

As we’ve discussed in previous blog posts, marijuana, whether used for medicinal or recreational purposes, is classified as a Schedule 1 drug under the Controlled Substances Act (CSA). The CSA prohibits the manufacturing, distributing, dispensing or possession of certain controlled substances, including marijuana and marijuana-based products and services. In addition, the CSA makes it unlawful to sell, offer for sale or use any facility of interstate commerce to transport illegal substances, including marijuana.

In August 2017, U.S. Senator Cory Booker (D-NJ) and Representative Barbara Lee (D-CA) introduced bills to both chambers of Congress – the Marijuana Justice Act of 2017 – that seek to remove marijuana completely from the list of controlled substances, making it legal at the federal level.

Last year U.S. Senator Ron Wyden (D-CA) was the first senator to co-sponsor the Marijuana Justice Act. On Wednesday, February 14, 2018, New York Senator Kirsten Gillibrand announced that she is also co-sponsoring the Marijuana Justice Act to end the federal prohibition on marijuana.

“Legalizing marijuana is a social justice issue and a moral issue that Congress needs to address, and I’m proud to work with Sen. Booker on this legislation to help fix decades of injustice caused by our nation’s failed drug policies,” Gillibrand said in a statement.

The Marijuana Justice Act aims to implement a number of reforms relating to marijuana. The most significant reform would be the removal of marijuana from the list of controlled substances in the CSA. Such a reform would effectively end the federal criminalization of marijuana.

Other reforms proposed by the Marijuana Justice Act include: (1) providing incentives to states to reduce racial disparities in connection with arrests made for marijuana; (2) expunging federal convictions relating to marijuana possession; (3) allowing individuals serving time in federal prison for marijuana-related offenses to petition the court for resentencing; and (4) developing a community reinvestment fund to invest in communities most impacted by the failed War on Drugs, such as by providing in-job training programs, educational opportunities, public libraries and community centers.

There is growing support for removal of marijuana as a Schedule I drug under the CSA, especially as courts have recently held that only the Drug Enforcement Agency (“DEA”) can make such a change.

Most recently, on February 26, 2018, U.S. District Judge Alvin Hellerstein in Manhattan ruled dismissed a lawsuit seeking to overturn the United States’ prohibition of marijuana on the grounds that the ban was unconstitutional. Judge Hellerstein ruled that the lawsuit must be dismissed because the plaintiffs had failed to use administrative procedures within the DEA to challenge the ban. Judge Hellerstein said his decision “should not be understood as a factual finding that marijuana lacks any medical use in the United States,” but, rather, that the authority to make that decision lies with the DEA, not with the court.

As of now the Marijuana Justice Act has not seen much movement in Congress. Since its introduction it has been read twice and then referred to the Committee on the Judiciary. It will be interesting to see if additional senators act to support the Marijuana Justice Act as the debate over the decriminalization of marijuana continues.

As discussed in our January 5th blog post, the Cole Memorandum was rescinded by Attorney General Jeff Sessions on January 4th of this year.   The Cole Memorandum had served to formally announce the DOJ’s policy that it would not interfere with medicinal marijuana legalized under state law, despite marijuana’s continued illegality for all purposes under federal law. With the rescission of the Cole Memorandum, federal prosecutors are now free to determine to what extent they will enforce federal law against the state-legalized medical marijuana industry.

However, the effect of the change in policy reaches further than to just the cultivators, manufacturers and distributors of medicinal marijuana products. Pursuant to the Controlled Substances Act, not only is it illegal to manufacture, distribute or dispense marijuana for any purpose – but it is also illegal to aid someone in doing so. Therefore, the DOJ is now free to prosecute anyone “aiding” in a medical marijuana business, for example, giving legal advice.

Probably of greater practical concern to attorneys than criminal prosecution is the tremendous amount of uncertainty as to how the change in policy will impact the ethics surrounding the representation of medical marijuana clients. Most, if not all, states have ethical rules that specifically prohibit a lawyer from assisting a client in illegal conduct. These rules do not distinguish between conduct that is illegal under federal law but expressly permitted under state law.

New York Rule of Professional Conduct 1.2 provides that “[a] lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, except that the lawyer may discuss the legal consequences of any proposed course of conduct with a client.” While it is generally undisputed that an attorney may advise a client about what state law provides – for example, filing requirements – an attorney arguably would be violating the Rules of Professional Conduct by, for example, assisting a client in negotiating a marijuana distribution contract.

Ethics boards in some states, including New York, have used the Cole Memorandum as the decisive factor to conclude that providing legal advice related to legalized medical marijuana businesses does not violate ethics rules. To a lesser extent, some states, including New York, have also relied on the theory that state ethics rules are intended to promote state policy – and by approval of the state medicinal marijuana law, a state has expressed its state policy on the matter, yielding no ethical violation.

It remains to be seen what impact the rescission of the Cole Memorandum will have on the ethics opinions of various states that are based heavily upon the prior policy of federal non-enforcement. For now, we can still find comfort in the Rohrabacher-Blumenauer amendment to the federal budget, which currently continues in effect until February 8 and maintains that federal funds (including those allocated to the DOJ) cannot be used to prevent states from “implementing their own state laws that authorize the use, distribution, possession or cultivation of medical marijuana.”

Despite numerous states having legalized medical marijuana, and a handful of others having legalized marijuana for recreational use, it still remains impossible to obtain a U.S. federal trademark registration for marijuana products or related goods or services.

The U.S. Patent and Trademark Office (USPTO) is the federal agency charged with granting U.S. patents and registering trademarks. The USPTO registers trademarks based on the commerce clause of the Constitution (Article I, Section 8, Clause 3) and registration is governed under various rules of practice and federal statutes.

The USPTO Trademark Manual of Examining Procedure (TMEP) Section 907 explains that under Trademark Rule of Practice 2.69, “[u]se of a mark in commerce must be lawful use to be the basis for federal registration of the mark. . . . Generally, the USPTO presumes that an applicant’s use of the mark in commerce is lawful and does not inquire whether such use is lawful unless the record or other evidence shows a clear violation of law, such as the sale or transportation of a controlled substance.”

As we’ve discussed in previous blog posts, marijuana, whether used for medicinal or recreational purposes, is classified as a Schedule 1 drug under the Controlled Substances Act (CSA). The CSA prohibits the manufacturing, distributing, dispensing or possession of certain controlled substances, including marijuana and marijuana-based products and services. In addition, the CSA makes it unlawful to sell, offer for sale or use any facility of interstate commerce to transport illegal substances, including marijuana.

As a result of the CSA, U.S. trademark applications related to marijuana or marijuana related goods and services will be refused registration under TMEP Section 907. TMEP Section 907 further provides that “[r]egardless of state law, the federal law provides no exception to the above-referenced provisions for marijuana for ‘medical use.’” Recent decisions issued by the USPTO continue to deny the federal registration of trademarks relating to marijuana and related goods and services despite the legality of such products and services under state law.

Trademarks that reference marijuana but that are used in commerce on lawful products, such as clothing, may be registered with the USPTO. For example, the trademark “MARIJUANAMAN” was registered by the USPTO as the mark will be used in connection with books about cannabis. Similarly, the trademark THE MARIJUANA COMPANY was approved in connection with the mark’s use on clothing.

Since federal registration is not permitted for trademarks that cover the sale or transportation of marijuana, such trademark applicants must rely on state trademark filings for the registration of their trademarks. This has become an important issue since so many states have now enacted legislation legalizing the medical – and in some cases, recreational – use of marijuana.

State trademark registrations are more limited in scope than federal trademark registrations as they don’t offer national protection or afford a registrant a presumption of ownership and validity of the underlying trademark on a national level. They are relatively inexpensive to obtain, however, and can afford the registrant at least certain benefits under state law. States like Washington, Oregon, Nevada and Colorado already allow for the registration of cannabis-related marks.

Nevada, for example, enacted legislation governing the use of names, logos, signs and advertisements by medical marijuana establishments. Pursuant to NAC 453A.402, any such names, logos, signs and advertisements must be approved by the Administrator of the Division of Public and Behavioral Health. In addition, Nevada has established guidelines which provide design guidelines for medical marijuana establishments. The guidelines specify, among other things, that the overall appearance of the mark or advertisement must not be appealing to minors; not contain cartoon-like figures or illustrations; not contain humor and must avoid script, decorative or gimmicky fonts. The use of of marijuana slang in the mark or advertisement, such as pot or weed, is also strictly prohibited.

Most recently, as of January 1st, 2018, customers may also register cannabis-related marks with the California Secretary of State. In order to register the mark California requires that (1) the mark be lawfully in use in commerce within California; and (2) the mark match the classification of goods and services adopted by the USPTO. To be lawfully using the mark in commerce within California requires that the registrant be licensed by California to provide the goods and services for which he or she is seeking protection and that such goods and services have already been sold to the public. Unlike registration of a trademark at a federal level, California does not have an intent-to-use trademark application. As such, the mark must be in use prior to registering the mark with the Secretary of State.

New York has not yet enacted any special legislation or guidelines relating to the registration of marijuana-related trademarks with the New York Secretary of State. That may soon change, however, as more and more states start to allow state registration of marks relating to marijuana and marijuana-related goods and services.