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5 Key Issues Raised In Most CBD Product Class Actions

As popular as cannabis has become as a recreational and medicinal agent, that popularity and the nascent nature of the cannabis industry have created a difficult scenario whereby manufacturers and sellers of these products are being sued with increasing frequency. Without a doubt, the legal and regulatory landscape for cannabis is complex. Several dozen states have legalized marijuana for medicinal and/or recreational purposes, but marijuana remains a Schedule I drug at the federal level. The Agricultural Improvement Act of 2018 (more commonly known as the 2018 Farm Bill) removed hemp (defined as cannabis products containing less than 0.3% THC on a dry weight basis) from the Controlled Substances Act. This means that CBD products derived from hemp are no longer controlled narcotics. However, the same is not true for CBD products derived from marijuana (defined as cannabis containing more than 0.3% THC on a dry weight basis). Added to this situation, the U.S. Food and Drug Administration has refused to deem…

Welcome to Our Podcast Series – Episode 1 – On the Cannabis Industry in Africa

Welcome to the Global Cannabis Compliance Podcast Series. Because we have received so many requests from readers for more information about the topics we have been covering, we have decided to start a podcast series featuring in-depth discussions with experts. Like the blog, the podcast series will cover all aspects of cannabis compliance including existing laws and proposed legislation in various countries and U.S. states, significant court cases and judicial decisions, enforcement trends, and best practices in compliance. If you have any suggestions for podcast topics, please let us know. Episode 1 – On the Cannabis Industry in Africa Countries throughout the world are de-criminalizing the medical and recreational use of cannabis. Africa is no exception. Governments across the African continent are hoping that cannabis will help them diversify their economies and generate transactions in hard currency. In this initial podcast, Darryl Bernstein, a partner in Baker’s Johannesburg office, talks about the cannabis industry in Africa – where it is, where…

The Boulder Alternative Care Case, Section 280E, and the SAFE Banking Act

The cannabis industry operates at a disadvantage vis a vis other industries because Section 280E of the Internal Revenue Code prohibits business expense deductions for businesses that “traffic” in federally controlled substances, including cannabis. As a result, cannabis companies pay taxes on gross rather than net profits. In the latest defeat for cannabis companies in the Tax Court, Boulder Alternative Care, LLC (“Boulder”), a Colorado dispensary, lost its bid to obtain ordinary business expense deductions for its legal operations (Docket No. 16495-16). Boulder argued that it was entitled to those deductions because Colorado, not federal, law controls. Boulder’s position was that “[s]ince Colorado law controls, state legal marijuana sales cannot be considered ‘prohibited’ under federal law.” In other words, Boulder argued (unsuccessfully) that because Colorado law permits the sale of marijuana for medical purposes, those sales are exempted from the Controlled Substances Act, and by extension, section 280E. The Tax Court disagreed, citing a long history of Supreme Court and Circuit…

Going Dutch: Lessons from a First Mover (Part 2)

The Netherlands’ “coffee” shops are retail stores where the Dutch government tolerates cannabis sales for personal consumption. In our prior post, we explained the basic legal framework around cannabis in the Netherlands. Here, we will discuss how the country has implemented its coffee shop system. Through the Tolerance Policy we previously described, the government allows coffee shops to sell cannabis under strict conditions and will not prosecute them if those conditions are met. In order to open a coffee shop in the Netherlands, the owner needs both an operating licence and a Declaration of Tolerance (and a license to deviate from zoning regulations to the extent applicable). The operating licence, if mandated by the locality where the coffee shop will be located, is governed by local General Bye-Laws. Because coffee shops will sell cannabis, a prohibited List II soft drug pursuant to the Opium Act, they also must obtain a “Declaration of Tolerance,” which indicates that the municipal government and…

High Times Ahead: New Laws Restrict Marijuana Drug Testing In Recruiting + Hiring

Beginning in 2020, Nevada and New York City will restrict an employer’s ability to screen job applicants for marijuana use. As marijuana legalization spreads across the country, other jurisdictions will likely follow suit. Employers, especially those that recruit in Nevada and NYC, should review their drug testing and hiring practices now to stay compliant. What it means for you Marijuana use by employees is for the first time protected in some jurisdictions, increasing the risk of discrimination claims by applicants and employees. Employers that hire in Nevada and NYC should consider whether their current recruitment and hiring practices may unlawfully discriminate by screening out applicants who have used marijuana. Here is an overview of the new laws: Nevada Starting on January 1, 2020, employers in Nevada are prohibited from failing or refusing to hire a prospective employee because a drug screen reveals the presence of marijuana. The new law, AB 132, exempts certain positions from its mandate, and employers may still…

Courts are Unlikely to Enforce Cannabis Patents

Patents play an important role in American business by encouraging innovation and investment. The Cannabis industry, which has obtained thousands of patents, is no exception. At least one owner of Cannabis patents has filed a patent infringement action to enforce those patents against a competitor (United Cannabis Corp. v. Pure Hemp Collective, Inc., Case No. 18-cv-01922(WJM-NYW) D. Colo., filed July 30, 2018). Unfortunately, under a long line of authorities going back to The Highwayman’s Case in 1725, the illegality of the use, possession, and distribution of these products probably creates an insurmountable barrier to the enforcement of most Cannabis product or use patents. The US PTO has issued patents on Cannabis products, despite Cannabis’ status as a Schedule 1 controlled substance. The PTO has a longstanding policy of issuing patents claiming inventions that may be illegal under federal laws, including the Food Drug and Cosmetics Act (In Re: Brana, 51 F.3d 1560 (Fed Cir 1995)) and the Federal Insecticide, Fungicide, and…

Status of Cannabis Legalization in Mexico

Two recent rulings by the Supreme Court of Justice of Mexico (“SCJN”) represent a significant milestone in legal cannabis consumption in Mexico. On October 31, 2018, the First Courtroom of the SCJN, under Minister Norma Lucía Piña Hernández, approved the Amparos en Revisión No. 547/2018 and 548/2018, which declared that the prohibition on recreational cannabis was unconstitutional. These two rulings are binding precedent, which all courts in Mexico must follow when ruling in similar cases. The rulings are ad personam, meaning that individuals seeking a judicial declaration related to cannabis must initiate an action in a competent court to obtain “authorization to consume.” In the same rulings, the SCJN also instructed the COFEPRIS (Federal Commission for the Protection against Sanitary Risk) to authorize the consumption of cannabis, but not the commercialization or consumption of other substances. In response to the rulings, however, the COFEPRIS announced its own position, stating that it lacks the authority to issue the necessary permits and regulations.…

Navigating Marijuana In The Workplace

The legalization of medical marijuana in several jurisdictions throughout the US presents employers with the difficult task of reconciling their anti-drug policies with those state statutes authorizing marijuana use for medical purposes. Adding an additional layer of complexity to this already uncertain landscape, is the growing number of states that have also legalized marijuana for recreational use. As state marijuana laws continue to grow and develop, employers must stay attune to how they approach employees’ off-duty marijuana use for both medical and recreational purposes. Medical Marijuana and the Duty to Accommodate Perhaps the most common issue employers now face is whether they must accommodate an employee’s use of medical marijuana for a disability. Because marijuana continues to be an illegal drug under federal law, the Americans with Disability Act does not require employers to accommodate an employee’s off-duty use of medical marijuana, even when condoned under state law. Several states that have legalized medical marijuana, including California, Colorado, Georgia, Michigan, Montana,…

Welcome to the Baker McKenzie Global Cannabis Compliance Blog

By any measure, cannabis has become a major industry, and global financial markets anticipate big profits in the future. The first Canadian regulated, licensed, publicly traded cannabis producer went public on May 24, 2018, and, less than a year later, is already a USD $15 billion company. Another Canadian producer has tripled in market capitalization since its July 2018 IPO and is now valued at nearly USD $7 billion. Governments are also recognizing the potential to generate needed revenue from taxing cannabis transactions. For example, in the United States, Colorado and Washington, which were the first two U.S. states to legalize recreational use, collected nearly $250 million and $320 million respectively in cannabis-related taxes and fees in 2017. However, to reach their potential, these companies, their investors, and any that follow their lead will have to overcome a regulatory environment determined to make it as difficult as possible. To say that cannabis law is complicated and inconsistent would be an understatement.…