California Redefines Volatile Manufacturing

Posted by Margolin & Lawrence on December 1, 2017

Our Los Angeles cannabis attorneys are often faced with questions about which substances count as "volatile solvents" when it comes to cannabis manufacturing. The state has added clarity in the new regulations released on November 17th, which define the solvents for volatile and nonvolatile manufacturing of cannabis extract. You can read the full set of regulations here: regulations on Manufactured Cannabis Safety.

The distinction between “volatile” and “nonvolatile” is relevant to the process of cannabis manufacturing because there are different license types for each type, and some jurisdictions allow one but not the other. Additionally, the zoning and sensitive-use requirements can be different for the two types of cannabis manufacturing.

Cannabis-infused products like marijuana edibles, tinctures, and oils comprise a large part of the legal cannabis industry’s sales, and are only increasing in popularity. A key ingredient of these products is cannabis extract – the pure, often high-THC-content cannabis distillate that can be combined with other products to create goods ranging from weed brownies to CBD bath soaps. To create this distillate, it’s necessary to use chemical solvents to extract the active ingredients from whole marijuana flowers. However, these solvents are often flammable, pressurized chemicals like butane, which, if used improperly during the extraction process, can be dangerous.

To limit potential dangers, California split the activity of cannabis manufacturing into two different categories, distinguished by whether or not they used “volatile solvents,” and placed differing restrictions on the two categories, with additional precautions required for manufacturing operations that used volatile solvents.  In June 2017’s Medicinal and Adult-Use Cannabis Regulation and Safety Act, a “volatile solvent” was defined as a solvent that “is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures.”

Cannabis manufacturers who use non-volatile solvents or no solvents at all (e.g. operations that only packaged or labeled goods, or that created cannabis-infused products using distillate purchased from a third party) are treated as “Level 1 Manufacturers,” while manufacturers who dealt with volatile solvents are “Level 2 Manufacturers.” To qualify for a Level 2 Manufacturer operating license, businesses would have to meet a much more strict set of criteria than the Level 1 Manufacturers would.

Since two of the most popular solvents used in the cannabis extraction process – butane and ethanol – counted as volatile solvents by this standard, and relatively few municipalities in California allow for Level 2 cannabis extraction, many were concerned that these regulations would make it too difficult for new small-scale extraction operations to get their businesses up and running. Additionally, some cannabis manufacturers argued that ethanol, a substance that’s food-safe, safe to handle, and is only ignitable as vapor in extremely high concentrations, shouldn’t be treated as “volatile” for the sake of cannabis manufacturing. By responding to these concerns and downgrading ethanol from “volatile” to “nonvolatile,” the Department of Public Health has taken an important step toward making cannabis extraction more accessible to California marijuana businesses.

Locally, the City of Los Angeles will be issuing cannabis licenses for both volatile and non-volatile cannabis manufacturing. Stay tuned for updates for updates, and contact us at info@margolinlawrence.com to speak with one of our LA Cannabis attorneys about the latest on Measure M.

Ask an LA Cannabis Attorney: So What's Happening in WeHo?

Posted by Margolin & Lawrence on November 9, 2017

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.

For more information or to set up a consultation with our Los Angeles cannabis lawyers, take a look at our guide to California's new marijuana laws or email us at info@margolinlawrence.com

California Dept. of Food & Agriculture Releases Cannabis Cultivation Checklist

Posted by Margolin & Lawrence on October 20, 2017

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.

Ask a Cannabis Trademark Lawyer: When Can I Get a State Trademark?

Posted by Margolin & Lawrence on October 17, 2017

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.

SEC. 2.

 Section 14235.5 is added to the Business and Professions Code, to read:

14235.5.

 (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. 

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.