After Jeff Sessions’ January 4 Memo on Marijuana Enforcement, many property owners and business people are wondering if federal asset forfeiture could become a growing problem. The asset forfeiture laws allow the federal government to seize assets (e.g., bank accounts, cash, vehicles, homes, or other buildings) that the government alleges are tied to the distribution or production of controlled substances, including cannabis. They remain a problem for all cannabis businesses, although some recent reforms have reduced the impact of asset forfeiture.
As of January 1st, 2018, the long wait is over: cannabis business owners can apply for California state trademarks. The application form can be obtained here: http://bpd.cdn.sos.ca.gov/ts/forms/tm-100.pdf. Because cannabis is still federally illegal and cannabis products themselves cannot be trademarked, this is a viable avenue for many California cannabis brands that will protect your business marks within the state. You can read our prior post about USPTO Trademarks here.
According to the website for the Office of the California Secretary of State:
“Beginning January 1, 2018, customers may register their cannabis-related Trademark or Service Mark with the California Secretary of State's office so long as:
1.The mark is lawfully in use in commerce within California; and
2.Matches the classification of goods and services adopted by the United States Patent and Trademark Office.
If the application submitted to register a Trademark or Service Mark is found deficient, the application will be returned to the registrant for correction.
Note: Not all cannabis-related products can be registered under current law due to the inability to meet federal classifications.”
This means that in order to obtain your state marks, you must be lawfully using the marks in commerce at the time of the application. Therefore, you will need to be licensed in compliance with SB 94, both at the local and state level, before you’re eligible for trademark approval. Otherwise, if you claim an unlicensed use, you may run into issues with the Secretary of State. Further, once your license is obtained, you must also show that you’re making actual, bona fide use of the trademarks on your products in the stream of commerce. That means that customers are identifying you by your brand when they purchase your goods or services in the marketplace.
2018 is here, and there is a lot of confusion in Los Angeles about the new cannabis laws. The question causing the most confusion is whether existing operators can stay open. Under Measure M, existing dispensaries with BTRCs who comply with Proposition D still have limited immunity until they are licensed. Under state law, a retailer needs a state and local license in order to conduct commercial cannabis activity. The City is currently holding a press conference on the issue and we will update our blog as this issue develops. Our LA cannabis attorneys give their opinion on the matter below.
Update: At 1pm today, the City confirmed via a press conference that EMMD cannabis retailers in Los Angeles can remain open through the licensing process.
For years under California state law, commercial marijuana activity has been limited to medical dispensaries and cultivation sites organized as non-profit collectives or cooperatives. The City of Los Angeles has allowed medical marijuana dispensaries to operate in the City under various sets of rules, most recently under Proposition D, which passed in 2013 and provided immunity from a general ban on commercial cannabis activity to a specific group of medical marijuana dispensaries that have been in operation since 2007 and met various other requirements.
Under California’s Proposition 64, which passed in 2016, starting January 1, 2018, Californians are allowed to commercially grow, distribute, and sell both medical and non-medical marijuana, but only to the extent allowed by local governments (cities, or for those in unincorporated areas, counties). The City of Los Angeles has a new system for regulating commercial cannabis activity, Measure M and portions of the Los Angeles Municipal Code implementing Measure M, which will allow for both medical and non-medical commercial cannabis. It is expected that Los Angeles will begin open up its applications on January 3, and begin issuing licenses within a few weeks after that. Under the terms of Measure M, the provisions of Proposition D were repealed beginning January 1, 2018.
Many have asked whether existing commercial cannabis businesses are allowed to continue operating under the old system of rules, until they are able to secure licenses in the new system. Existing commercial marijuana dispensaries will retain their legal protection under state and local law, so long as they submit their applications for the new system within the time window provided by the City. Los Angeles has announced that, for the first 60 days after opening its applications, only existing commercial cannabis businesses will be able to apply for licenses, in a “priority” round, and after this 60-day period, new commercial cannabis businesses will be eligible to apply for licenses. Measure M makes clear that existing medical dispensaries can continue operation after January 1, 2018, and need not shut down before applying for licenses, as long as they operate as non-profit collectives, follow all the rules set forth in Proposition D, and submit their applications for licenses within the 60-day priority period.
Measure M describes this protection as follows: “An existing medical marijuana dispensary (“EMMD”) that is operating in compliance with the limited immunity provisions (Los Angeles Municipal Code Section 18.104.22.168) and tax provisions (Los Angeles Municipal Code Section 21.50) of Proposition D, may continue to operate within the City at the one location identified in its original or amended business tax registration certificate until such time that the EMMD applies for and receives a final response to its application for a City permit or license for commercial cannabis activity being conducted at that location. The City's designated licensing or permitting agency shall give priority in processing applications of EMMDs that can demonstrate to the City’s designated licensing or permitting agency that the EMMD has operated in compliance with the limited immunity and tax provisions of Proposition D. To avail itself of the terms of this Section, including the priority processing, an EMMD must apply for a City permit or license within sixty calendar days of the first date that applications are made available for commercial cannabis activity. If the City issues the EMMD a license or permit for commercial cannabis activity, the EMMD shall continue to operate at its location within the City in accordance with the rules and regulations set forth by the City."
California state law also provides that the provision giving legal protection to medical marijuana patient collectives and cooperatives, Health & Safety Code section 11362.775, will sunset one year after the State begins issuing cannabis licenses. Until this law goes away, patients will still receive protection under state law for non-profit, collective cannabis activity.
Accordingly, existing medical marijuana dispensaries in Los Angeles may continue operating under California’s medical marijuana non-profit collective laws, and Los Angeles’s Proposition D, as long as they submit their applications for licenses during the 60-day priority period.
For medical marijuana cultivators, manufacturers, and distributors not located at one of the Proposition D dispensaries, there is no explicit protection under Los Angeles law for continued operation pending licensing. Los Angeles has, however, provided a priority licensing system for these existing non-retail businesses that have been around since before 2016 and supplying a Proposition D dispensary since before 2017. This suggests that the City does not intend to prosecute such businesses in current operation, but until these businesses retain licenses from Los Angeles, they face some risk of being prosecuted.
Yesterday the LA City Council passed three ordinances that will regulate recreational cannabis sales, manufacturing, cultivation, distribution, delivery, and microbusiness in the city of LA. The council also voted on the Social Equity Program and cannabis zoning, including the setbacks from sensitive-use areas that will be required of licensed cannabis businesses. Volatile cannabis manufacturers, for example, will have to be not only 600 feet away from schools, but also at least 200 feet away from any residential parcel.
The city is also imposing caps on the number of licenses granted per neighborhood, so licensing will be a competitive process in some areas; if you haven’t already, now is the time to start preparing your cannabis business for licensure. The city has rigorous requirements for proof of operation in compliance with Prop D if your business is a pre-ICO, as well as strict safety and environmental regulations for marijuana cultivators and manufacturers.
The new regulations passed by the city can be found here:
If you are a cannabis operator with an existing marijuana business in the city of LA, email us at email@example.com to speak with one of our cannabis attorneys. We can advise you on the next steps for your operation as Los Angeles enters a new era for cannabis.
Cannabis attorney Allison Margolin addressing the LA City Council on the new zoning regulations on Monday:
Today the LA City Council will vote to determine all of the City's. the city's new restrictions on where a cannabis business may be located. The current California cannabis law requires that cannabis businesses be located more than 600 feet from all schools.
On top of that, LA's most recent draft of its location ordinance required businesses intending to conduct on-site retail sales to be located 750 feet away from sensitive-use areas, including schools, public parks, libraries, and drug treatment facilities, as well as any existing marijuana retail business.
While this is a more lenient approach to sensitive-use areas than LA's previous zoning restrictions, which called for an 800-foot buffer zone, some cannabis businesses and marijuana advocates, including our Los Angeles Cannabis lawyers, argue that introducing two different distancing standards will only complicate the already-opaque standards for marijuana zoning.
The City Council's vote will take place at 10 A.M. tomorrow, December 5th, at 200 N. Spring St.
On November 5th, the City Council of West Hollywood put an end to a long period of speculation about the future legal status of cannabis in their jurisdiction, moving to allow recreational and medical marijuana dispensaries, delivery services. In particular, the WeHo City Council approved of allocating 8 licenses per type of cannabis activity (Adult-Use retail, Consumption Areas with On-Site Adult-Use retail, Delivery Services, and Medical-Use dispensary,) and confirmed this decision on the morning of November 8th. These activity types are of interest in themselves: Allowing retail spaces to provide an area for on-site consumption means WeHo might soon be the home of hip, Amsterdam-style marijuana cafés.
While this explains quite a bit about West Hollywood's approach, some aspects of the city's regulations remain unclear. For instance, the exact selection process for the 8 licenses per activity has not been decided by the City Council. Moreover, the zoning regulations for marijuana businesses have also not been finalized by the city. To address these questions, the City Council of West Hollywood will meet again on November 20th to discuss zones and grading criteria for licenses. The City Council has given itself a deadline of December 6th to resolve these issues, which it hopes to meet before the new laws come into effect on January 1st.
As it stands, what our cannabis lawyers know about the future process for license application selection is as follows: The top eight applications will be issued licenses based on merit. Some of the criteria in consideration for "merit" will include compliance with the city's social equity program, operating a pre-existing cannabis business that's in good standing in WeHo, or previous experience with a cannabis business elsewhere in the state. Again, these criteria have been merely discussed and not approved. Once the criteria are fixed, the city will essentially grade each application based on the standards they establish.
Since relatively few licenses will be granted, it is imperative for any marijuana business applicant in West Hollywood to not only meet the criteria set out by City Council, but also to provide adequate reasoning for why its merits qualify it to be chosen over the other applicants. The application period will be open in January 2018 for a period of 30 days; since the timeframe is so short, if you're interested in starting a cannabis business in WeHo, it's important to get started on the application process now.
As California prepares to start issuing cannabis cultivation licenses on January 1, 2018, the state is becoming more transparent regarding the exact requirements for legal cultivation under the new regulatory regime. Our cannabis lawyers are often asked how you can prepare for licensing - here is your answer. The California Department of Food & Agriculture’s just released a full checklist of requirements for the Cal. Cannabis cultivation application, now available in .pdf form on their website.
These requirements represent an important shift in the state’s attitude when it comes to cannabis cultivation – in particular, the checklist shows that California plans for far more robust cooperation between state and local regulatory authorities than has existed in the past. As Merry Jane writes in an article about the checklist, “Unlike the current cat and mouse games canna-businesses play with local municipalities under the wild west rules of Prop 215, California’s new system will see increased coordination between state and local governing bodies by requiring licenses for cannabis operations at both levels.” Our Los Angeles cannabis attorneys have witnessed both the wild west and the implementation of the new system as cities and counties around California issue their own permits and licenses.
This two-level licensing structure also means that the process of applying for a cultivation license will be an arduous one, with applicants required to jump through a long series of bureaucratic hoops in order to attain legal status. The full State requirements, as listed in the checklist, are as follows:
- An existing local cultivation permit (optional, but recommended)
- Proof of the applicant’s right to occupy the property used for cultivation
- Business formation documents filed by the California Secretary of State’s office
- California State Water Resources Control Board permits and verification of water source
- California Department of Fish and Wildlife’s 1602 permit or a waiver
- California Department of Toxic Substance’s hazardous materials record search via their EnviroStor data-management system
- California Department of Fee and Tax Administration’s seller’s permit
- Labor peace agreement (for operations that will employ more than 20 people)
- Surety bond valued at $5,000
- California Department of Justice fingerprinting via its Live Scan service
The checklist also includes a list of local permits that may be required, including those issued by the municipality’s Building Department, Public Works Department, and Sheriff’s Office. The takeaway is clear; while Jan 1, 2018, may seem very soon to aspiring cannabusiness owners, getting a legal license to cultivate cannabis won’t be possible without a lot of paperwork.
Maybe you’ve heard about a bill going around the California Senate right now that would create a state trademark registration system for cannabis. That’s right, Assembly Bill No. 64 for “Cannabis: Licensure and Regulation” was introduced on December 12, 2016 by Assembly Members Rob Bonta (Dist. 18 - Oakland), Ken Cooley (Dist. 8- Sacramento), Reggie Jones-Sawyer (Dist. 59 - LA), Tom Lackey (Dist. 36 – LA/Kern) and Jim Wood (Dist. 2 – Humboldt-Mendocino). On June 1, 2016, the bill passed through the Assembly with 71 Aye votes and just one Nay (Travis Allen, Dist. 72-Orange Co.).
The bill has been amended four times already, and has bounced around several committees in the State Senate. Recently, it arrived before Appropriations Committee, where it currently sits being “held under submission.” That means it could still be a while before the bill makes it to a final version (or survives at all). As recently as September 1, it cleared the suspense file, where bills that cost the public more than $150,000 in a single fiscal year are often sent. Before that, AB-64 had already made it through the Committees on Public Safety and Business Professions and Economic Development. Appropriations has estimated a fiscal impact of one-time costs of $50,000 to taxpayers and $90,000 per year for the Secretary State’s Office to process trademark applications for cannabis products.
According to the authors of the bill, its purpose is “to address a series of policy and technical changes that remain following the passage of SB 94. Each of these issues are of critical importance to stakeholders in the cannabis space… [including] preserving intellectual property[.]” Assemblyman Bonta and his co-sponsors acknowledge the current situation and emphasize the importance of establishing a process by which cannabusiness owners can register their trademarks (in California, at least). The Senate Committee on Business Professions and Economic Development recognizes this as well, commenting that “Medical cannabis businesses have been developing innovative brands, but are unable to protect their intellectual property with trademarks because cannabis is prohibited by federal law. AB 64 allows the Secretary of State to issue state trademarks for cannabis and cannabis products.”
Here’s the relevant section of the California bill on cannabis trademarks as it currently stands:
(4) Existing law, the Model State Trademark Law, provides for the registration of trademarks and service marks with the Secretary of State and requires the classification of goods and services for those purposes to conform to the classifications adopted by the United States Patent and Trademark Office.
This bill, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, would, notwithstanding those provisions, authorize the use of specified classifications for marks related to medical cannabis and nonmedical cannabis cannabis, including medicinal cannabis, goods and services that are lawfully in commerce under state law in the State of California.
Section 14235.5 is added to the Business and Professions Code, to read:
(a) Notwithstanding Section 14235, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, the following classifications may be used for marks related to medical cannabis and nonmedical cannabis cannabis, including medicinal cannabis, goods and services that are lawfully in commerce under state law in the State of California:
(1) 500 for goods that are medical cannabis, medical cannabis products, nonmedical cannabis, or nonmedical cannabis products. cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.
(2) 501 for services related to medical cannabis, medical cannabis products, nonmedical cannabis, or nonmedical cannabis products. cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.
(b) For purposes of this section, the following terms have the following meanings:
(1)“Medical cannabis” and “medical cannabis products” have the meanings provided in Section 19300.5.
(2)“Nonmedical cannabis” and “nonmedical section, “cannabis,” “cannabis products,” medicinal cannabis,” and “medicinal cannabis products” have the meanings provided for “marijuana” and “marijuana products,” respectively, in Section 26001.
As you can see, the language has already been revised several times, and will likely undergo more changes before the bill reaches its final form – so stay tuned. In the meantime, contact us or consult our guide to California cannabis law for more information.