New Mexico

12,023

Total number of cannabis plants in production in New Mexico during Q1 2017.

Source: New Mexico Department of Health

6,109

Total number of cannabis plants harvested in New Mexico during Q1 2017.

Source: New Mexico Department of Health

1.5 million

Approximate number of units sold in New Mexico during the first quarter of 2017. One unit is one gram of dried flower or 200 milligrams of processed THC product.

Source: New Mexico Department of Health

$4.7 billion

Amount cannabis would take away from pharmaceutical companies in 2018 if the United States legalized medical marijuana for cannabis-treatable conditions.

Source: New Frontier Data

11%

Average reduction in prescription drug use in states that have legalized cannabis.

Source: New Frontier Data

$18.52 billion

Reduction in prescription drug spending if 11 percent of patients replaced pharmaceuticals with cannabis.

Source: New Frontier Data

$60-$80 million

Estimated amount of money invested in cannabis startups in Oregon in the past six months, according to State Sen. Floyd Prozanski.

Source: Oregon Public Broadcasting

12.8%

Past-month cannabis use rate in Vermont, the state with the highest incidence of past-month cannabis use.

Source: Substance Abuse and Mental Health Administration

7%

National average rate of past-month cannabis use.

Source: Substance Abuse and Mental Health Administration

Douglas Brown is a longtime journalist who now runs Contact High Communications, a public relations firm in Boulder, Colo. Among other things, Brown works closely with BDS Analytics, using the company's GreenEdge market research tool to tell data-rich stories about the blossoming commercial cannabis marketplace.

Kerrie and Kurt Badertscher are co-owners of Otoké Horticulture, LLC and authors of “Cannabis for Capitalists.” They have worked with large-scale cannabis producers for more than five years. Kerrie has been involved with plants her entire lifetime and earned certification as a Professional Horticulturist by the 100-year-old American Society for Horticulture Sciences. Kurt brings his 34 years of corporate experience and operations management skills to bear on the business challenges of cannabis cultivation.

Crystal Oliver is co-owner/founder of Washington’s Finest Cannabis, an outdoor cannabis farm licensed by the Washington State Liquor and Cannabis Board since August 2014. She also serves as executive assistant for Washington NORML and sits on the Cannabis Farmers Council Executive Board. She has been an advocate for small business and family farm-friendly regulations in Washington State, and has represented cannabis farmers' interest as a member of the Washington State Building Code Council’s Cannabis Issues Technical Advisory Group, Spokane Clean Air’s Marijuana Advisory Committee, and Spokane Conservation District’s Voluntary Stewardship Program.

Dr. Lindsay Moore is the CEO of KLM Inc., a strategic planning and branding consultancy in Colorado that also specializes in the management of intellectual property assets for companies. Dr. Moore is a former Adjunct Professor of Law at George Washington University Law School in Washington, D.C. She is also the co-author of "Intellectual Capital in Enterprise Success-Strategy Revisited," published by John Wiley & Sons, 2008.

Jonathan Katz, owner of JSK Communications, is a freelance writer with more than 15 years of experience in the publishing industry. He was editor for Industry Week magazine for seven years, and former associate editor for Lawn & Landscape magazine. Prior to starting JSK Communications, Katz served as a client services manager for Content4Demand, a content marketing agency.

Kenneth Morrow has been writing cannabis-related articles and books for more than 20 years. He owns Trichome Technologies, a cannabis R&D company. Morrow also is an award-winning grower and breeder. Has made contributions to many of today's extraction methodologies and holds multiple patents. He consults on all cannabis-related subjects. Find him on Facebook at: Trichome Technologies or Instagram: TrichomeTechnologies.

Jolene Hansen is a freelance writer based in Wisconsin’s Driftless Area. A former horticulture professional, she is a frequent contributor to the Horticulture Group publications owned by Cannabis Business Times’ parent company, GIE Media.

Rino Ferrarese is the COO of Connecticut Pharmaceutical Solutions, one of four licensed producers in the state. He has experience as a compliance officer working in FDA-regulated industries under the guidelines of current Good Manufacturing Practices (cGMP) for the production of prescription, Over-The-Counter (OTC) and homeopathic human drug products. He is a certified Six Sigma Black Belt and ISO auditor. Ferrarese also works with Elite Cannabis Enterprises developing and submitting competitive medical marijuana license applications for clients across the United States. Thomas Schultz is president of Connecticut Pharmaceutical Solutions. He is a Wall Street lawyer and investment banker turned pharmaceutical executive. In 1996, Schultz completed an IPO-oriented merger of the last major producers of witch hazel, the EE Dickinson Company and the TN Dickinson Company. He assumed leadership of Dickinson Brands Inc., the resulting firm, until 2014. By 2003, Schultz had led the buyout of the EE Dickinson interests and managed the acquisition of Humphreys Pharmacal Inc., a company that marketed witch hazel to Central and South American markets.

The cannabis industry breathed a sigh of relief on May 5 when President Trump signed the current federal budget bill, which included an extension of the Rohrabacher-Farr Amendment’s coverage—forbidding the use of federally appropriated funds to interfere with state-authorized medical marijuana programs—through September.

That sigh turned into a gasp mid-June as Attorney General (AG) Jeff Sessions called on congressional leaders to reconsider their support of the amendment. Sessions wrote in a letter to party leaders: “I write to renew the Department of Justice’s [DOJ] opposition to the inclusion of language in any appropriations legislation that would prohibit the use of [DOJ] funds or in any way inhibit its authority to enforce the Controlled Substances Act (CSA).”

Session’s letter, not surprisingly, made clear his anti-marijuana stance, as he blurred the line between licensed and illegal businesses, and suggested state-legal cannabis businesses (and their owners) are “causing harm” in their communities.

Fortunately, some state legislators are putting up early fights. Pennsylvania Governor Tom Wolf immediately wrote a letter to the AG, saying: “Given the bipartisan and medical consensus for medical marijuana in Pennsylvania and many other states, I am disturbed to know that you are actively pursuing a change in federal law to go after medical marijuana suppliers. We do not need the federal government getting in the way of Pennsylvania’s right to deliver [those who are suffering] relief through our new medical marijuana program.” Gov. Wolf also promised legal action if Sessions interfered with those rights.

Adult-use legalization has been in question as well, with White House Press Secretary Sean Spicer saying at a press briefing earlier this year, “... I believe that [the Department of Justice is] going to continue to enforce the laws on the books with respect to recreational marijuana.”

To put up their own fight against that prospect, Representatives Dana Rohrabacher, Earl Blumenauer, Don Young and Jared Polis launched a bipartisan Congressional Cannabis Caucus to try to “do everything we can to try to keep the momentum going that we’ve established ...,” said Rohrabacher in a press briefing.

Mason Tvert, Marijuana Policy Project’s director of communications, responded to Spicer’s comments in a statement, saying, “It is hard to imagine why anyone would want marijuana to be produced and sold by cartels and criminals rather than tightly regulated, taxpaying businesses.”

In an interview with CBT, Tvert added he believes that the end of recreational marijuana is not near. He also suggested cannabis business owners contact their representatives to urge them to support legislation that would resolve the state-federal conflict, including the Respect State Marijuana Laws Act of 2017.

So one thing is clear: AG Sessions and any other White House efforts to oppose state-legal marijuana laws are facing a momentous fight from Congress, the public and the cannabis industry.

While business booms into the tens of billions of dollars in the legal marijuana industry, the most successful companies are handicapped by their inability to obtain federal trademark protection for their brands and worthwhile patents for their inventions. These companies find themselves in a very unusual position: Because their business violates federal law, they are deemed to have “unclean hands” before federal courts, and so they cannot benefit as other business do from federal laws surrounding banking, bankruptcy and intellectual property.

Intellectual property is of great strategic value in winning in the marketplace and against competition, and of substantial monetary value in terms of corporate valuation and business capitalization. In the total U.S. economy, trademark and patent portfolios account for up to 65 percent of the market capitalization of large companies such as those found in the S&P 500. And intellectual property, in all of its forms, is the major determinate in delivering intellectual capital to these companies.

Importantly, each kind of intellectual property is a different sort of legal entity, and each are regulated by a different body of law. In gaining a sustainable advantage in the marketplace, it is important to understand the particular laws and to have a strategic plan in place that optimizes each kind of intellectual property to make it a strategic asset for the company. Every kind of intellectual property is valuable, but the two most obvious forms for the marijuana industry are trademarks and patents. The good news is that with careful strategic thinking, there are strategies that can allow marijuana companies to obtain measured success at obtaining intellectual property and enjoying many of the benefits of owning both trademarks and patents. However, the strategies we refer to are complex in both their theory and their successful execution, and for this reason, we speak of “threading the intellectual property needle”—it can be done, but it isn’t always easy, and there are some imperfections that cannot be overcome.

Trademarks

A trademark is the legal protection granted for a brand name, stylized logotype, design and other markings, and it allows its holder to prevent another business from using any marks that are “confusingly similar,” or trade on their equity for the same goods and services for so long as the mark is in continuous use and good standing. Trademarks never expire if they are managed properly.

Interestingly, it is not possible to get a Federal Trademark Registration from the U.S. Patent & Trademark Office for a marijuana product or service because cannabis is illegal under federal law. Under the Lanham Act, trademarks may only be issued to ‘a lawful business’ that is ‘engaging in interstate commerce.’ Therefore, the marijuana industry loses out on federally registered trademarks for two reasons: 1) that cannabis isn’t legal under federal law; and 2) that cannabis can’t be sold across state lines.

Nevertheless, trademark protection may be available under state laws or, in some cases in virtue of common law protection. A state registration is essential if it can be obtained, even though it is limited to the issuing state. As well, state law in many cases will provide holders of state trademark registrations with statutory remedies against trademark infringement.

The first company to adopt a mark has a common-law duty to prevent others from using the same or a confusingly similar mark that could confuse consumers as to the source of the respective goods or services. One hopes that each business will choose non-similar marks as their brand, but the bigger the market becomes, the more likely it is that one or more other company may use the same brand without even knowing they are infringing the rights of the first user. Those who have trademarks must remain vigilant to protect their rights, and those who are adopting a mark need to be careful not to choose a mark that another company is already using.

A company should pick its brands and taglines carefully to ensure that it is highly differentiated and will provide its enterprise or its products and services with what is called “secondary meaning.” Secondary meaning is a term of law that refers to marks that are “suggestive,” “arbitrary,” or “fanciful.” Marks that are generic or “merely descriptive” are not protectable under the law. For example, generic terms that refer to a general class of items like “marijuana” or “sativa” can never be protected under the law and cannot be owned by a single party. As well, marks that are “merely descriptive” that only describe a product or service, such as “green bud” for marijuana are not protectable either. “Suggestive” marks can be protected and owned under the law because they evoke a quality or attribute of the respective product or service, such as “caterpillar” for tractors. In addition, marks that are “arbitrary” or meaningless and have no relation to the product or service with which they are used like “Apple” for computers, or “Venus” for pencils can be protected under the law. “Fanciful” marks are coined terms that also have no specific meaning, such as Kodak or Exxon and thus are highly distinctive and can be protected under the law.

All trademarks should be searched by an attorney or a person who is experienced at trademark searching to make sure that a proposed trademark doesn’t violate a protected trademark, either in the marijuana industry or outside the industry. There have been instances where a cannabis company was sued from outside the industry for trademark infringement. A well-known example was the “Reefers” peanut butter cup, which was sued for violating the famous trademark of Hershey’s Reese’s Peanut Butter Cups. Also, with an eye to the future, a check against the Federal Register of Trademarks is a wise move to gain a bigger-picture perspective. If one day federal law should change and allow the sale of cannabis products at the national level, it would be important to have picked a state trademark that would stand a chance of also being issued as a federal Trademark Registration. If the existing state mark couldn’t be extended to the national level, the company could have to abandon the mark to avoid infringing a company on the national stage, and find a new name after already having built valuable brand equity in its state mark.

In addition, it is important to have a copyright strategy in place to support trademarked products and services. The trade dress (characteristics of appearance), logos and design aspects of a business should be protected with copyright protection, even though it remains uncertain if the copyrighted content can be asserted or defended in a federal courtroom.

These limitations and complications with “threading the needle” often predispose cannabis companies to discount the importance of building strong brands, and thus undermine their efforts to compete effectively. However, with or without trademark registration or legal protection, good brands are central to successful businesses as they provide a recognizable identity, differentiation of goods and services in the marketplace, engender product loyalty, repeat sales and build monetary brand equity that becomes very important when a business is seeking capitalization or becomes involved in a merger, acquisition or a public stock offering.

In the economy as a whole, brands are the most valuable intellectual property across all business sectors. Indeed, during 2016, Apple, the most valuable brand in the world, was valued at $154 billion, and many of the top 10 most valuable brands were worth more than their annual revenue in brand valuation. While there are no brands in the marijuana industry approaching that order of magnitude, trademarks and branding are alive, well and growing rapidly.

Every business should realize that there are important ways to thread the needle of trademark protection and should have a brand and whatever legal protection they can obtain. Given the competitive advantage and substantial brand equity that can be developed with a well-managed trademark, the standard cost of $3,000 to $5,000 for a trademark registration may be a very good investment.

Dr. Lindsay Moore CEO of KLM, Inc.—a strategic planning and branding consultancy in Colorado that also specializes in the management of intellectual property assets for companies. Dr. Moore is a former Adjunct Professor of Law at George Washington University Law School in Washington, D.C. and the co-author of “Intellectual Capital in Enterprise Success–Strategy Revisited,” published by John Wiley & Sons, 2008. lmoore@klminc.com.