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Sean HockingSean HockingJune 17, 2019
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12min970
Guest post by William McNichol Rutgers, The State University of New Jersey – Rutgers Law School

Patents play an important role in American business by encouraging innovation and investment. The Cannabis industry, which has obtained thousands of U.S. patents, is no exception. Over the last 20 years, the U.S. PTO has issued patents claiming strains of Cannabis, Cannabis extracts, blends of cannabinoids, methods of using or administering Cannabis or cannabinoids, devices for delivering Cannabis or cannabinoids, and methods of using Cannabis or cannabinoids to treat diseases. The Cannabis industry has attracted significant capital investment. This has ranged from multi-billion-dollar capital contributions from publicly-traded companies to small investments by individual investors. As is the case in other industries, investors who provide capital for the Cannabis industry place significant reliance on IP (including patents), to justify their investment and to set its price. The Cannabis industry also works to monetize its patents by pursuing licensing programs. For example, United Cannabis Corporation offers licenses under its worldwide patent portfolio on “terms that are customized to each licensee”

In light of all this, patent infringement disputes based on Cannabis patents are inevitable. Indeed, at least one Cannabis patent infringement action has been filed. (United Cannabis Corp. v. Pure Hemp Collective, Inc., Case No. 18-cv-01922(WJM-NYW) D. Colo.) 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 patents that claim Cannabis products or their use.

The US PTO has a longstanding policy of issuing patents claiming inventions that may be illegal under the Food Drug and Cosmetics Act (In Re: Brana, 51 F.3d 1560 (Fed Cir 1995)), the Federal Insecticide, Fungicide, and Rodenticide Act, or which may result in acts of unfair competition (Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, 1366-67 (Fed Cir 1999)). The PTO and the U.S. Court of Appeals for the Federal Circuit take the position that the PTO should defer to the regulatory and law enforcement agencies charged with responsibility in these areas to decide whether the products or uses claimed by these patents are illegal and to enforce the laws that are within their particular responsibilities. Thus, it is unsurprising that the PTO has issued patents on Cannabis products.

The PTO’s willingness to grant Cannabis patents is unlikely to be matched by a willingness of the Federal Courts to enforce Cannabis patents. Federal courts will not resolve disputes concerning the fruits of illegal activity, nor will they enforce rights or agreements in furtherance of a crime. As long ago as 1886 in Higgins et al. v. McCrea, 116 U.S. 671 the Supreme Court held that a court will not aid a party who founds his action on acts which are “illegal, criminal, and void … [in] a court whose duty it is to give effect to the law which the party admits he intended to violate.” The Higgins decision relied on earlier English decisions, including The Highwayman’s Case, where two highwaymen committed a series of robberies and one sued the other, claiming that he had been cheated out of his share of the proceeds. The Court refused to consider the suit, turned the highwaymen over to the sheriff, and fined their lawyers for bringing a suit “both scandalous and impertinent.” Higgins also relied upon Holman v. Johnson (1775) 1 Cowp. 341, where Lord Mansfield wrote that “If, from the plaintiff’s own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says that he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.”

This refusal to adjudicate disputes founded in illegality remains a robust feature of American jurisprudence. In 1961 U.S. v. Mississippi Valley Generating Co., 364 U.S. 520, (1961) the Supreme Court held that a contract made in violation of a criminal conflict of interest statute would not be enforced. In 1966, the Supreme Court held in U.S. v. Acme Process Equipment Co., 385 U.S. 138 (1966) reh. den. 385 U.S. 1032 that a contract made in violation of the criminal provisions of the Anti-Kickback Act would not be enforced. In 2001 in Formby-Denson v. Dept. of the Army, 247 F.3d 1366 (Fed. Cir 2001) the Federal Circuit (which has exclusive appellate jurisdiction over patent cases) refused to enforce a settlement agreement that would have required the parties to conceal criminal acts from law enforcement, which would itself be a crime (i.e. misprision of a felony).

In Gonzales v. Raich, 545 U.S. 1 (2005) the U.S. Supreme Court held that distribution and sale of Cannabis products remain crimes under Federal law, even in states that have repealed their own Cannabis laws or established Cannabis regulatory regimes. The plaintiff in a patent infringement action will be asking a Federal court to enforce the plaintiff’s exclusive right to commit certain crimes by protecting his criminal enterprise from the competition by another criminal enterprise. The inconsistency of this position will not be lost on a Federal judge who is also personally responsible for trying and sentencing defendants for distributing Cannabis products in violation of the Controlled Substances Act – perhaps the very parties who were involved in the patent infringement action. The conflict that would result from simultaneously enforcing the Controlled Substances Act and Cannabis patents will be made worse by the Federal Civil Forfeiture Act. The proceeds of a criminal enterprise that violates the Controlled Substances Act are forfeited to the U.S. government. Thus, not only would both the patent owner’s and the patent infringer’s profits be subject to forfeiture, but so also would any damages award that the patent owner might obtain – a plainly absurd, but probably unavoidable result. Rather than allow any of this to happen, the Federal Courts will likely treat Cannabis patent infringement actions as they would any other cause of action founded on criminal conduct and dismiss the case. The Federal Courts will likely remain closed to Cannabis patent infringement actions until the status of these products under the Controlled Substances Act is changed.

The unenforceability of Cannabis patents may come as a surprise to those in the Cannabis industry who have invested in portfolios of Cannabis patents. In truth, it should have been entirely expected. Federal Bankruptcy Courts have already closed their doors to bankrupt Cannabis businesses. (See, the 10th Circuit’s decision in In Re: Arenas.) The Bankruptcy Court will not have a bankruptcy trustee liquidate or reorganize a Cannabis business as this would require the trustee to violate the Controlled Substances Act. (The 9th Circuit has decided to allow individuals to go through personal bankruptcy, even if their employer is a Cannabis business. (See, Garvin v. Cook))

It is likely that the illegality of Cannabis products under the Controlled Substances Act will result in the closure of the Federal Courts to a variety of commercial disputes, not just patent infringement actions, and many will have to be resolved in state courts where state laws allow for such businesses. However, the inability to enforce U.S. patents in Federal Courts makes it impossible for patents to serve their traditional functions of incentivizing innovation and investment, at least for now.

 For a detailed examination of this subject, see the author’s recent article

The New Highwayman: Enforcement of U.S. Patents on Cannabis Products

101 J. Pat. & Trademark Off. Soc’y 24 (2019)

29 Pages Posted: 7 Jun 2019

William McNichol

Rutgers, The State University of New Jersey – Rutgers Law School

Date Written: February 20, 2019

Abstract
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 patents that claim Cannabis products or their use. This means that, with respect to the Cannabis industry, the U.S. patent system is unlikely to play its customary roles of incentivizing innovation and encouraging investment.

Keywords: patents, cannabis, enforcement, illegality

McNichol, William, The New Highwayman: Enforcement of U.S. Patents on Cannabis Products (February 20, 2019). 101 J. Pat. & Trademark Off. Soc’y 24 (2019). Available at SSRN: https://ssrn.com/abstract=3391803

Sean HockingSean HockingJune 17, 2019
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5min3550
Guest post by Steve Schain, Senior Attorney at Hoban Law Group

 

On May 13th New Jersey’s Department of Health (“DOH”) amended it Medicinal Marijuana Program Rules, N.J.A.C. 8:64 Et. Seq, establishing standards by which the DOH implements New Jersey’s Compassionate Use Medical Marijuana Act, N.J.S.A. 24:6I-1, Et. Seq, assimilating Governor. Phil Murphy’s Executive Order #6 tasking the DOH with reviewing all Medicinal Marijuana Program (“Program”) aspects to expand access and eliminate bureaucratic barriers.

Currently, the Program has 46,300 patients, 950 doctors and 1,850 caregivers and, according to DOH Commissioner Dr. Shereef Elnahal, “These rules solidify key program reforms to ensure greater patient access to this effective therapy” and enable the DOH “to add conditions more rapidly, remove barriers for minors and increase supply of product available.”

The Rules codify already in-effect changes:

– reducing qualifying patients and caregivers registration fee from $200 to $100;

– making seniors and military veterans “$20 reduced registration fee” eligible ;

– increasing qualifying patients’ designated primary caregivers from 1 to 2;

– adding of 7 “debilitating medical conditions” including PTSD by statutory enactment and 6 new conditions (anxiety, chronic pain of visceral origin, chronic pain related to musculoskeletal disorders, migraines, Tourette syndrome, and Opioid Use Disorder) by DOH’s petition decision;

– allowing physicians to “opt out” of “public participating physicians’ list inclusion”;

– elevating Program to division status within the DOH; and

– adding oil-based (i.e., vape cartridges) medical marijuana to the available list.

Additionally, rule changes include:

– creating a separate permitting system for cultivation, manufacturing and dispensing marijuana for medical purposes (increasing the available supply of, and patient access to, usable marijuana and allow for market specialization);

-streamlining “adding debilitating medical conditions petition process” by removing the requirement that petitions first be referred to Medicinal Marijuana Review Panel;

-emphasizing Medicinal Marijuana Review Panel’s advisory role to include providing guidance and recommendations to the DOH regarding the medical use of marijuana; and

– removing “psychiatric evaluation requirement” as a condition of physician certification of minors as qualifying patients.

 

The Rules changes are available at https://nj.gov/health/medicalmarijuana/program-rules/.

Steve Schain is a Senior Attorney to Hoban Law Group and admitted to practice in Pennsylvania and New Jersey. Steve represents entities, governments and individuals in choosing a structure, preparing and submitting license application, regulation, compliance and litigation, and drafting legislation. A nationally recognized consumer finance litigation, banking law and cannabis law expert, Steve is a The Legal Intelligencer and Cannabis Business Executive columnist, frequent Pennsylvania Bar Institute and National Bar Institute author and lecturer and serves as a court appointed judge pro tempore and arbitrator.

This article has been prepared for informational and general guidance purposes only; it does not constitute legal or professional advice. You should not act upon the information contained herein without obtaining specific professional advice. No representation or warranty (express or implied) is made to the accuracy or completeness of the information contained in this publication. Hoban Law Group, its members, employees, and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based thereupon.


Robert LakinRobert LakinJune 16, 2019
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3min1890

Israeli medical cannabis producer Breath of Life International Ltd. (BOL) cut its valuation for a pending Toronto Stock Exchange initial public offering by about 17%. According to a Canadian regulatory filing on June 14, the company is seeking to list 14% of its shares at a fully allotted valuation of CAD 1.02 billion (USD 827 million), compared to a previous valuation estimate of about $1.19 billion, following its May 23, 2019 prospectus.

Breath of Life produces medical cannabis and cannabis products — including 99%-pure cannabinoids — distributed primarily through pharmacies. The company currently supplies 48 pharmacies from its single facility in the southern Israel kibbutz of Revadim. It is targeting export markets in the E.U., Canada and Australia.

According to the prospectus, BOL showed revenue of $3.5 million in 2018, up from $3 million in 2017, and posted a net loss of $29.3 million, compared with a $6.4 million loss a year earlier. The IPO proceeds will be used to expand operations to Portugal resulting in an annual manufacturing capacity of more than 870,000 kilograms of dried cannabis in Israel and Portugal combined by the end of 2020, the prospectus said.

BOL set a price range of CAD 27-32 per share (USD 20-USD 23.80). Underwriters are BMO Nesbitt Burns Inc., Cowen and Company LLC, and Scotia Capital Inc.

BOL expects to take advantage of recent changes in Israel’s medical cannabis regulatory framework, which went into effect in late April. Under the changes to the country’s long-established medical cannabis program, there is no longer a fixed limit on the number of patients who can be prescribed medical cannabis; the number of physicians allowed to prescribe medical cannabis has been expanded; and, all pharmacies can be certified to distribute medical cannabis.

As a result of the framework changes, BOL forecasts that the number of approved medical cannabis patients in Israel will quadruple to 120,000 by 2022, from 30,000 last year. Earlier in the year, the government approved the export of processed and finished medical cannabis product.

The Israeli government sees a significant economic opportunity in medical cannabis. Various published forecasts peg the sector to be worth from $260 million to as much as $1.1 billion by 2022. In the last year the government committed the equivalent of more than USD $3 million to more than a dozen studies on boosting medical cannabis growing and cultivation.

 

 

 


AvatarMark TaylorJune 16, 2019
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5min2010

If you wish to re-publish this story please do so with the following accreditation
AUTHOR: Mark Taylor
PUBLISHER:  CANNABIS LAW REPORT

The Netherlands’ on-off love affair with cannabis has taken another twist as three of its largest cities have backed out of a government experiment to end the legal grey areas that exist around the country’s famous coffee shops.

The weed experiment, or Wietexperiment, would allow 10 licensed producers to legally grow and distribute cannabis to Netherlands coffeeshops, which would then sell and serve their customers without fear of sanction.

However, Amsterdam, Rotterdam and The Hague have all dismissed the plans and pulled out of the project, leaving just Utrecht to sign up. Despite their willingness to go ahead, officials in Utrecht have also complained of the plan to force all of its coffee shops to take part, however.

Under existing Netherlands law, cannabis can be legally sold, but not cultivated. This ensures coffeeshop owners work on a semi-illegal basis to acquire product and the authorities look the other way, a situation known as the “backdoor problem”.

A total of 26 municipalities signed up for the government’s experiment, but with none of the major cities on board, it may go back to the drawing board.

The list of interested municipalities was not published, but RTL reports that in addition to Utrecht, cities like Breda and Tilburg also registered to participate.

Between six and ten municipalities will eventually run the project, selected by an independent advisory committee.

Mayor Paul Depla of Breda told media it was “a shame” that Amsterdam, Rotterdam and The Hague do not want to take part in the experiment. “But with 26 interested municipalities, I think there are plenty to chose from”, he said.

In a statement, Mayor of Eindhoven John Jorritsma joined The Hague and Amsterdam in rejecting the terms and conditions of the government plan. Jorritsma originally expressed interest when the trial was announced, but pulled out when the details were outlined.

Concerns were raised that the trial period, scheduled to last four years with no extension contingency, could force participating coffee shops back into the black market after four years of facilitating legal sales, something that holds little appeal for many businesses.

The experiment also requires the businesses to exclusively purchase from an assigned supplier, leaving the coffeeshops to face supply issues, lack of product variety and even plummeting sales.

Earlier this year, the Tweede Kamer, the lower house of Dutch parliament, approved the legislative proposal for the experiment with state-regulated cannabis. The deadline for being involved in the experiment was June 11, 2019, leaving efforts to legalize cannabis on ice.

The law makes it possible for designated growers to cultivate cannabis, which will then be delivered legally to coffee shops in participating municipalities.

Meanwhile, the Dutch government is gearing to issue a second license for medicinal cannabis production in an effort to meet growing demand.

The only firm authorized to produce cannabis for medical use is Bedrocan, in Emmeloord, which has upped its output fivefold in the last five years to 2,604 kilograms.

Bedrocan received its license 16 years ago from the Office of Medicinal Cannabis (BMC), which purchases the entire stock to distributes to hospitals and pharmacies. Almost half of this product is sold abroad to countries including Germany, Italy, and Poland.

An earlier attempt to issue a second license for medical cannabis was called off following objections.

Bedrocan produces five types of cannabis with different levels of THC and CBD.

Medicinal cannabis has much more consistency in strength and quality than the varieties grown for commercial use and found in the coffeeshops.


StaffStaffJune 14, 2019
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4min2380

CannaCraft had a dilemma as one of California’s largest cannabis producers and distributors.

California is the largest market for cannabis in the U.S. Unfortunately, the flip side is that, with strict child-safety packaging requirements, it also produces the most amount of cannabis waste.

As a company that works towards cannabis advocacy, sustainability, charity work, compliance and safety, CannaCraft felt compelled to take a step back and reimagine its regulatory compliance tactics through the lens of environmental protection.

The company’s strict compliance with state packaging regulations meant that it was contributing significantly to California’s waste problem. Worse, it was afraid that as other states looked to California for guidance, the amount of waste generated would multiply, creating a tidal wave of ongoing waste generated across the country — a major environmental crisis.

Cannacraft first focused on a new packaging strategy for its vape product. The two million vape cartridges produced by CannaCraft annually were being packaged in plastic, child-resistant tubes to comply with cannabis packaging regulations in California. CannaCraft created a new step to the manufacturing process which allows it to simply seal the vape cartridges themselves, making them inherently child-resistant without adding excessive, single-use plastic.

“Public safety is naturally a top concern for CannaCraft, but the excessive plastic waste was also troubling,” says Tiffany Devitt, CannaCraft’s Chief Compliance Officer. “With each plastic tube standing 5.5” tall, 1 years’ worth of CannaCraft’s child-resistant tubes would reach over 900,000 feet if stacked. Or 30 times taller than Mount Everest. That’s a lot of waste that we’ll be eliminating.”

Innovation has been a driving force behind CannaCraft’s success, and, with over one hundred unique products, the company has amassed one of the largest product portfolios in California.

Dennis Hunter, CannaCraft’s co-founder said the company is in the process of reviewing its entire product lineup and production standards to improve sustainability and decrease the carbon footprint of the industry.

As a major producer of plastic waste, the cannabis industry must continue to innovate and demand regulations that take the environment into account. Consumers can also do their part. First, when feasible, support marijuana producers and retailers who are using recyclable or compostable packaging. Second, make an effort to recycle the parts of cannabis packaging that are recyclable, like paper, glass or cardboard. Third, in states that mandate exit packaging, such as California, aim to reuse your exit bag for all your cannabis purchases (just like bringing your own reusable bag to the supermarket!). Finally, advocate at the government level so that regulations are enacted that protect both people and our precious environment.

 


StaffStaffJune 14, 2019
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5min2450

Doug Gordon, Executive Vice President and Head of LeafLink Financial, is a recognized leader and innovator with more than 10 years of experience in the financial technology sector. He is an expert at utilizing analytics and technology to create specialized products that meet the capital needs of various asset classes.  Since joining the LeafLink team in October 2018, Doug has overseen the development and implementation of a specialized payment and credit management platform that allows cannabis brands and retailers to transact through the LeafLink marketplace.

Prior to LeafLink, Doug co-founded and served as the Executive Vice President of Fundation, a leading small business digital lender backed by the likes of Garrison Investment Group, Goldman Sachs, and Sun Trust Bank. Fundation provides businesses with loans and lines of credit through partnerships with banks, B2B vendors, and online platforms. As Executive Vice President, Doug was directly responsible for driving the company’s growth efforts through large scale strategic partnerships and product innovations while publicly representing Fundation in the media and at industry events.

Doug studied Neuroscience and Economics at Bucknell University. 

 

Green Market Report Executive Spotlight Q&A:

Full birth name: Doug Gordon

Title: Executive Vice President & Head of LeafLink Financial

Company: LeafLink (https://leaflink.com/)

Time at current company: 8 months

Education profile:

Doug studied Neuroscience and Economics at Bucknell University.

Most successful professional accomplishment before cannabis: Doug co-founded Fundation as an undergraduate at Bucknell University and served as the company’s Executive Vice President for over 8 years as it grew to be one of the leading small business digital lenders backed by the likes of Garrison Investment Group, Goldman Sachs, and SunTrust Bank. Fundation provides businesses with loans and lines of credit through integrated partnerships with banks, B2B vendors, and online platforms. To this day, Fundation powers the small business lending programs of major banks and vendors throughout the country.

Company Mission: As the cannabis industry’s wholesale marketplace, LeafLink’s mission is to provide solutions that define how compliant cannabis companies do business.

Company’s most successful achievement: This week we announced that $1B in wholesale cannabis orders are placed through the LeafLink marketplace every year. This is a huge milestone for us because it means that we’re facilitating around 16% of all the wholesale cannabis commerce in the U.S., and making business easier for over 1,000 cannabis brands and 3,000 cannabis retailers.

Has the company raised any capital (yes or no): Yes

if so, how much?: We’ve raised $14M in venture capital to date. In March we also announced the launch of LeafLink International, a joint venture with Canopy Rivers bringing LeafLink’s technology to global cannabis markets. The deal came with a $2M investment from them.

Any plans on raising capital in the future?

We’re growing quickly and will continue to explore interesting deals with strategic partners that allow us to scale, like the deal with Canopy Rivers.

Most important company 5 year goal:

In 5 years, we will have digitized and streamlined the cannabis supply chain in every viable, legal cannabis market in the world. This includes providing tech-first payment and supply chain financing tools that enable cannabis companies to operate successful businesses.

 

 


Debra BorchardtDebra BorchardtJune 14, 2019
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4min10330

A forum called “Insights From The Front Lines Of The Cannabis Industry” was held on June 13 on a beautiful summer evening in New York City atop the Empire Hotel. New York was named the Empire state because it was considered to be the center of all business in America and it has become the center of cannabis investing even though the plant isn’t fully legal in the state. That could change soon.

The event was hosted by MGO, Ello, Wilson Elser, and Aon. The panelists included Kevin Murphy Chairman and CEO, Acreage Holdings (CSE: ACRG.U), Tiffany Liff Managing Director, Cresco Capital Partners, Evan Eneman CEO, MGO / ELLO Cannabis Alliance, Matt Markiewicz Managing Director, Innovation Shares, Eduardo Provencio General Counsel, Mary’s Brands, and Mitch Baruchowitz Managing Partner, Merida Capital.

New York’s legalization was discussed as Murphy said it is quickly changing. “Last week, I’d have said there was a 20% chance. Today I give it a 60/40 chance. I think on Wednesday it may happen,” he said. That sure sent a buzz through the crowd. He conceded that having former Speaker of the House John Boehner on the company’s board kept his company informed of political maneuverings. Murphy has also been actively working on the SAFE Banking Act. As a company with its roots in New York, he is keen to see changes at the state level.

Access To Capital

A key theme seemed to emerge among some of the panelists was the access to capital. “The industry has gone from basement growers who just wanted to have a bigger basement to getting a license. Now it is about the aggregation of licenses,” said Murphy. “Our biggest competition isn’t from each other but from the black market.”

Liff also noted that in the early days’ companies were forced to go public even if they weren’t really ready because there was no other way to access capital. “There are more options now,” she said. She also reiterated that she really focuses on backing the management team.

“Running a public company is not that awesome,” said Murphy. “There is an extra layer or two of accountability. Having said that, it gives us the opportunity to access capital.”

Baruchowitz pointed out that new companies often give themselves rich valuations based on angel investors and believe this should bring them more capital. “When your angel round is friends and family, that doesn’t justify certain valuations. They get shocked when they get asked the hard questions as they ask for more capital. A lot of the newcomers don’t know the grind.”

Illegal vs. Legal

Baruchowitz noted that since New York didn’t have the same ballot pressures that other states have, legalization could come easier. Having said that, the panelists noted that the quasi-illegal status has had some benefits. Baruchowitz said he believes the medicalization of cannabis is about to go on hyperdrive through legalization.

The illegality of cannabis has also caused some volatility in the cannabis company stocks. Markiewicz runs an ETF and noted that the volatility scares many advisors. He keeps an eye out for negative sentiment when reviewing his companies. The illegal nature attracts some less than savory players at times. Still, Murphy said that ETF’s provide liquidity for the stocks. “The more liquidity, the better for all of us,” he said.


Video StaffVideo StaffJune 14, 2019

6min1660

Harborside Inc. (CSE: HBOR) Co-founder and Chairman Emeritus Steve DeAngelo sat down with the Green Market Report’s Editor-in-Chief Debra Borchardt to discuss Harborside becoming a publicly traded company.

GMR Debra Borchardt

The company just went public this week on the Canadian stock exchange and it must be just super exciting because you are a pioneer in the industry.

Steve DeAngelo, Co-Founder Harborside Inc.

Yeah, it’s incredibly exciting. Harborside was one of the first six licensed cannabis businesses in the United States, that’s back in 2006. Today we’re growing to be seven dispensary’s, 200,000 square feet of grow space, 250 employees, and we’ve launched two brands that we’re pushing out into the marketplace.

GMR

You have about a 3% market share in California. What are your plans to increase that?

Steve DeAngelo

So two ways basically. Number one, we’re going to continue to increase our retail footprint. And two, we have developed these two brands, the Key brand, and the Harborside brand and we offer vape pens, we offer flowers, we offer edibles, a line of products in both of those two brands. And so, we’re in a hundred dispensaries now. We’ll be in three or four hundred dispensaries within several months.

GMR

What makes Harborside so special because there are so many dispensaries competing for business right now. Why is a consumer going to go in your door versus another door?

Steve DeAngelo

Well, it’s a values-based proposition. Harborside has a well-earned reputation for not just being after our own financial gain but also representing values. And so, we’re very committed to the values of diversity and building a cannabis industry that is diverse. We were very committed to the values of fairness and economic justice and we’re very committed to the values of sustainability and you can see those values in everything we do

GMR

You really have a reputation as caring for the customer, caring for the patient, because that’s really was where you guys made your name was caring so much for the patients that were coming to you.

Steve DeAngelo

You know, Harborside was a medical cannabis dispensary for most of our life. And so, we had to be very, very careful to make sure that we gave not just customer service but also patient care. And that has developed an ethic in our culture of really engaging with everybody who comes through our door. We like to say that we want everybody to come out of Harborside feeling better than they came in.

GMR

So let’s talk about the elephant in the room, which is that 280E case. We know you guys have been fighting and really fighting it for the whole industry. If that judgment goes against you, what amount of money do you expect you would have to pay and is that money already set aside?

Steve DeAngelo

The maximum amount of money that we could be liable to the IRS has already been accounted for and is available as needed but this is a long ongoing struggle. We’ve been in this litigation for about 10 years now. It’s not going to end for at least several more years. We did have an adverse ruling on the underlying case at the trial court but we won on the penalties phase and we’re now appealing to the Ninth Circuit Court of Appeals, the most favorable court in the country on cannabis. There’s also legislation pending in the Congress, which is going to resolve the 280E situation. So, it’s far from over. Harborside will keep doing what we always do. We stand up for the industry, we stand up for what we think is right, and we’ll keep on doing that until we either win the case or have exhausted all legal avenues.

GMR

A lot of people may not know that you were part of the Yippies, that you have a storied history associated with this plant. Did you ever in your wildest imagination think that this was going to happen? Did you think it was going to happen sooner or what has been the biggest surprise to you with this?

Steve DeAngelo

There has never been any doubt in my mind that we would see a respected, honored place for cannabis in our society because of the inherent properties of the plant, its value and its safety just make it necessary over time. What has surprised me and still surprises me is how long that it’s taking us to get there.

GMR

You have been working on this for many years and I’m so thrilled that you took the time to talk to us at the Green Market Report.


Video StaffVideo StaffJune 14, 2019

4min3530

Oregon passed an export bill but there are concerns that even if other states allowed this it’s just a way for the state to legally dump its oversupply of cannabis into other markets.

Harborside began trading this week on the CSE using the symbol HBOR. This company is led by a pioneer in the cannabis industry Steve D’Angelo and started one of the first dispensaries in California. The company commands a large market share in the state and plans on increasing that.

HEXO Corp reported its earnings late on Wednesday evening and no wonder, the sales of adult use and medical cannabis both fell sequentially from the second quarter to the third. The company has ambitious plans to double its revenue but right now it is going in the wrong direction.

In other poor earnings news, Neptune Wellness Solutions Inc. reported that its year-over-year revenue for the quarter declined from $7 million to $5.8 million. the Net loss increased from $4.8 million to a net loss of $12.4 million.

Cresco Labs was asked to provide more information regarding its Origin House acquisition to U.S. anti-trust authorities. The company is complying and doesn’t believe it will change the plans for the acquisition.

The beautiful and delicious Coda Signature chocolates raised $24 million in plans to expand the company.

Sparx Cannabis completed the Company’s Series A funding round with $10 million raised through private funding.

MJ Freeway raised another $2.2 million. The company is still on track to become a publicly traded company this summer. 

Tilray’s biggest shareholder Privateer Holdings will be releasing a large portion of the privately held Tilray shares. Many analysts have cited these privately held shares as a reason they won’t give a higher rating for the stock.  

Green Growth Brands has opened an astonishing 50 stores in four months in various malls and has plans to make that number 70 stores.

Jushi began trading on the NEO exchange in Canada using the symbol JUSH.


Sean HockingSean HockingJune 14, 2019
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8min1310

If you wish to re-publish this story please do so with the following accreditation

AUTHOR:  “Jordan Zoot.  “aBIZinaBOX Inc., CPA’s
PUBLISHER:  CANNABIS LAW REPORT

What do the following headlines have in common?

What does the acronym “CCC” mean?

CCC is our acronym for “California Chaos Causes” We cannot list all of the causes of problems in California’s cannabis industry. The list of causes becomes longer every day. Our CCC refers solely to major causes.

The Bureau of Cannabis Control (“BCC”), CalCannabis, which is a Division of the California Department of Food and Agriculture, and the California Department of Tax and Fee Administration (“CDTFA”) are the principal causes of this chaos. These three agencies are also responsible for the events that produced the headlines above.

The actions of BCC, CalCannabis and CDTFA created the circumstances that produced these headlines. The circumstances that produced the headlined events would not have existed if these three agencies had not been so inept. These three agencies are the sources of the judgmental errors that have created chaos for California’s cannabis industry.

We want to be completely fair to these three agencies. These three agencies are not solely responsible for the chaos. California’s cannabis industry was already a mess when the California Legislature tasked these three agencies with the principal responsibility for the administration of a regulatory system pursuant to the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”).

It took California twenty years to create the messy state that BCC, CalCannabis, and CDTFA were tasked with regulating. However, it has taken only two years for these three agencies to turn a messy set of laws and conflicting political and economic pressures into chaos. The headlined events prove our point.

Compare the Anza Valley eradication with the raid on Oaksterdam University and Richard Lee seven years ago. It made national news. The Anza Valley raids involved a ten-fold increase in the number of law-enforcement officers, dollars, locations, and cannabis. Has California made progress? Law-enforcement has changed from federal to State and local, but it is difficult to consider such a change as progress. A lack of interest in California’s cannabis industry by the federal government is a more likely explanation.

Five years ago, the Emerald Triangle produced twice as much cannabis as was consumed in California. Cannabis cultivation has increased dramatically in California over the past five years. Multiple regions in California now produce cannabis in amounts comparable to the Emerald Triangle. Look at the other headlines

Through bureaucratic ineptitude BCC, CalCannabis and CDTFA encouraged increased production throughout California; choked commercial cannabis distribution, and incompetently administered California’s two new sources of tax revenue. The judgmental errors of BCC, CalCannabis, and CDTFA in creating the administrative framework for California’s regulation of its cannabis industry places responsibility for the present chaos squarely on the doorsteps of these three agencies.

BCC is ultimately responsible for the chaos. BCC has supervisory responsibility for the administration of MAUCRSA. BCC is ultimately responsible for all of the failure in California’s regulation of its cannabis industry.

CalCannabis made the largest pro-active contribution to the chaos through its bureaucratic ineptitude in the roll-out of the regulation of cultivation. CalCannabis created systems, procedures, and forms in a vacuum. The staff of CalCannabis appears to have been devoid of knowledge of cannabis and of the evolution of California’s cannabis industry from the ‘60s. CalCannabis acted without knowledge or perspective. CalCannabis failed, although it seems blissfully unaware it has failed.

CDTFA merely failed to devote the attention to the two new taxes established by Proposition 64 that was required to develop appropriate procedures for administration. CDTFA failed to recognize the two new cannabis taxes were different in multiple respects from the taxes the agency already administered.

We said we would be fair to BCC, CalCannabis, and CDTFA. We will be fair. Most of the problems that have arisen in the regulation of California’s cannabis industry were inevitable. California had a well-established and successful but largely unregulated cannabis industry with a libertarian (or outlaw) mentality depending on your perspective. The regulation was never going to be simple or easy. Proposition 64 added legal adult-use cannabis to legal medical cannabis through an ill-conceived and poorly-drafted amendment to the California Constitution.

The California Legislation then cobbled together legislation to integrate the regulation of two partially inconsistent legal cannabis regimes into a single regulatory structure. Political pressure from groups with conflicting interests shaped MAUCRSA. Sorting out the conflicts created by MAUCRSA will provide employment for hundreds of California lawyers for the next ten years. This mess was turned over to BCC as a newly created bureau in the California Department of Consumer Affairs to administer.

We said we would be fair to BCC, CalCannabis, and CDTFA. These three agencies cannot be blamed for the mess. BCC, CalCannabis, and CDTFA are responsible for turning a mess into total chaos. BCC, CalCannabis, and CDTFA have created a showpiece of bureaucratic ineptitude out of a daunting challenge.

Can anything be done? BCC, CalCannabis, and CDTFA are both the cause and the solution to many of the problems. These agencies must stop trying to force square pegs into round holes. These agencies must change the shapes of the holes and help round the edges of the square pegs in order to ease all of California into a regulated cannabis industry.



About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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