Week in Review: Marijuana RICO case victory, MedMen eyes ‘cannabis’ trademark & CA issues first full annual permits

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A Colorado marijuana grower wins a milestone racketeering case, MedMen seeks a trademark for the word “cannabis,” and California issues its first full annual MJ business licenses.

Here’s a closer look at some notable developments in the marijuana industry this week.

Big legal victory

Legal experts said marijuana growers can rest a little easier after a major victory in a racketeering lawsuit.

The suit alleged a Colorado MJ cultivator created a “noxious odor” and other nuisances that depressed neighboring property values.

The jury verdict in favor of Parker Walton, owner of CannaCraft, should ease concerns over the marijuana industry’s exposure to such lawsuits, according to Robert Mikos, a Vanderbilt University law professor who followed the case.

“I think this will curb the enthusiasm for bringing these lawsuits because it demonstrates the difficulty of winning on the merit of the claims,” Mikos said.

This was the first time that a suit filed under the Racketeer Influenced and Corrupt Organizations Act (RICO) against a marijuana business has gone to jury.

But similar claims are pending in federal courts in California, Massachusetts and Oregon.

Mikos made some additional observations in a blog posted Thursday:

  • The verdict and other court rulings highlight the high burden of proof plaintiffs must shoulder when filing suit.
  • Few property owners can probably meet that burden.
  • The verdict doesn’t eliminate the industry’s exposure. Every case and every set of facts is different.
  • Property owners may still file suits “merely on the hopes” of receiving a settlement.

Steve Schain, a cannabis attorney at Hoban Law Group, characterized the decision as a “sensible verdict consistent with the evidence placed before” the jury.

“A licensed agriculturist employing dozens of Coloradans and contributing to the tax base isn’t the ‘Mob Boss’ that RICO was designed to ensnare,” he wrote in an email to Marijuana Business Daily.

Who owns ‘cannabis’?

Eyebrows were raised in the marijuana industry over the news that California-based MedMen Enterprises wants to trademark the word “cannabis” for use on T-shirts.

But the case underscores a nagging problem for cannabis companies: They lack federal intellectual property protection.

Consequently, marijuana companies are seeking broad trademark protection in hopes of getting a better place in line for the day when those trademarks become more available to cannabis brands.

Miami attorney Frank Herrera believes the use of a trademark application can be a “paper tiger” to discourage competitors.

“They’re just getting something on file so they can tell people they have a pending application,” Herrera said of MedMen’s “cannabis” move.

A related case in point is that MedMen also previously trademarked the word “Woodstock” for a line of vape pens.

Meanwhile, a Denver CBD manufacturer, Cannoid, trademarked the phrase “entourage hemp” in 2016. It is now suing other hemp companies that describe products using the “entourage” moniker.

Trademarking common terms may sound silly. But it can give a company the right to challenge businesses that come later, said Kevin Fortin, a cannabis patent specialist at the Hoban Law Group.

That’s because U.S. law gives some deference to parties that show they’ve used a word or phrase in commercial activity.

“Half of the benefit of filing an application is that it publishes,” Fortin said. “It puts other parties on notice that you’re using the mark or intending to use the mark.”

California confusion

Now that California regulators have begun issuing full annual cannabis business permits, many stakeholders predict the industry faces further bumps in the road in coming months.

Blame it largely on unanswered questions about how the state’s inventory tracking system will work.

Since January, licensed marijuana companies in California have been operating under temporary business licenses. Consequently, they didn’t have to enter all their transaction details into Metrc, a track-and-trace software that California will be using to keep tabs on its legal commercial cannabis industry.

“I think it’s going to be a rough transition, and I don’t think we need a crystal ball for that,” said Kimberly Simms, a San Diego cannabis attorney.

Simms pointed to problems with Metrc in other states, including Maryland. She also predicted complications for businesses because regulators have yet to answer many logistical questions.

“I don’t think the supply chain is an issue. It’s more about the inability to get information and how this all comes together,” Simms said.

“We’ve been hearing for months that Metrc is ready to go. When we ask follow-up questions about that, we get crickets.”

Looking ahead, regulators could see a flood of updated annual applications in coming months if a broad, new ownership disclosure requirement proposed two weeks ago remains in place, Simms said. That could force applicants to update forms that, in many cases, were submitted months ago.

“Certainly every one of my clients will (have to update their annual license applications) – unless you’re a sole proprietor in a really small operation,” Simms said.

Terra Carver, executive director of the Humboldt County Growers Alliance, also noted that thousands of annual license applications are waiting to be processed by regulators. So she expects the licensing process will move at a snail’s pace.

Jeff Smith can be reached at jeffs@mjbizdaily.com

Kristen Nichols can be reached at kristenn@hempindustrydaily.com

John Schroyer can be reached at johns@mjbizdaily.com