Week in Review: MMJ death sentence in Montana, Denver caps & cannabis patent wars

Did you miss the webinar “Women Leaders in Cannabis: Shattering the Grass Ceiling?” Head to MJBiz YouTube to watch it now!

By John Schroyer and Omar Sacirbey

Montana’s medical cannabis industry gets hit with a knockout punch, Denver approves new business caps, and concerns arise over the possibility of legal issues tied to patents for marijuana strains.

Here’s a closer look at several notable developments in the marijuana industry over the past week.

RIP, Montana MMJ

Montana’s medical marijuana industry is about to disappear before our very eyes.

On Monday, the Montana State Supreme Court ruled that dispensary owners have until Aug. 31 to call it quits, the latest (and apparently last) twist in a long-running legal battle over whether such businesses are permitted under the law.

The industry could eventually rise from the ashes, as the Montana Cannabis Industry Association aims to get a ballot measure before voters in November to legalize dispensaries.

But the ruling does mean the state’s MMJ industry – which netted an estimated $6 million-$10 million in sales last year, according to the Marijuana Business Factbook – will cease to exist for at least a year, and likely longer.

“It’s pretty much impossible to restart at the level we’re operating at right now,” said Misty Carey, the owner of Kanna Kare dispensary in Bozeman.

Given the time frame, she said, the 50-60 dispensaries currently operating in the state would have to get rid of their crops.

If Montana residents vote to save the industry, dispensary owners would have to wait before they could reopen their doors, as the state would first have to establish a licensing system. Businesses would then have to apply for and win licenses.

This entire process has taken many months – even years – in other states. Add in the time it takes to get to the first harvest, and it would likely be awhile before dispensaries are up and running again.

Some MMJ business owners aren’t interested in waiting around to see what happens.

Carey is thinking about moving back to California and opening a yoga studio. A number of growers, she said, have already left Big Sky Country for Oregon’s new cannabis market.

Still, many might be willing to give it another shot if the laws change.

“A lot of people will leave the industry, and some people will leave the state,” Carey said. “But a lot of people are dyed-in-the-wool Montanans, and they’re not planning on moving. They’ll stay here and stick it out.”

Forced out, priced out, or both?

Denver City Council members this past week capped the number of marijuana retail and cultivation sites that can operate inside the Mile High City.

That may seem like a major setback for Colorado’s marijuana industry – particularly newbies wanting to enter the Denver market.

But consultant Nic Easley sees opportunity in the numerical caps, at least for new cultivators and infused product makers.

The businesses could set up shop in a lot of places outside city limits but then ship their goods to the Denver market.

“What we’ve noticed is that it’s sparked a new dialogue among cultivators: ‘Maybe we don’t need to do the status quo and should look for alternate locations where it’s less expensive to produce.'” Easley said.

“If you were to go two counties north of Denver to rent out a 20,000-square-foot facility, it’s probably going to be half the cost that it would be in Denver,” he added.

Easley predicts Denver’s decision will force entrepreneurs to look elsewhere. In doing so, they’ll realize they can make more money by growing or making cannabis products in other parts of the state.

For example: Easley pointed to a 332-acre cultivation site in the southern part of the state, near Pueblo, that will lease space to growers in the near future.

“Those are the models that are the game-changing models,” Easley said.

Patent puzzles

Vice News reports the marijuana industry is headed towards a deluge of patent lawsuits involving innovative cannabis strains.

But one cannabis and patent specialist reckons the prediction is overblown, saying that relatively few growers are experimenting with plant genetics and seeking protections for their new plants – and the names they give them.

“We’ll see an uptick in these types of cases, but not much,” Robert McVay, an attorney with the Harris Moure law firm in Seattle, predicted.

The U.S. Patent and Trade Office (USPTO) is allowed to give patents for new marijuana plants, but not trademarks, which are harder to receive because of marijuana’s federally illegal status.

The USPTO issued its first patent for a cannabis plant to a group of California cultivators in 2015.

But patents protect the genetics of a plant, not the name, noted McVay. So theoretically, if those California growers called their strain “California Dreaming,” nobody else could cultivation that strain. Someone could, however, grow another strain and call it “California Dreaming.”

The only way a grower could stop another business from using the name of a strain is through state trademark protection. However, you can only get trademark protection in the state in which you’re selling your product.

So if you’re a grower in California and develop and name a new strain, you can only protect that name in California. If you’re also growing and selling that strain in other states, then you’d need to get trademark protection in those states, too.

The cost of trademark registration varies among states, from a few hundred to a few thousand dollars.

“To build a brand, that’s where trademarks come in,” McVay said. “For most businesses, they’ll find getting a trademark is worthwhile.”

Patents, not so much – unless you’ve invented a new strain.

John Schroyer can be reached at johns@mjbizdaily.com

Omar Sacirbey can be reached at omars@mjbizdaily.com