Friday, March 5, 2021

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Choosing the best location for your retail CBD business

(A version of this story appears in the February issue of Marijuana Business Magazine.) From mom-and-pop shops to corporate chains, everyone in the retail business knows that a carefully chosen location is key to success. The cannabis industry is no exception. Although regulatory requirements, license availability and market demand will vary from place to place, marijuana and hemp retailers on the hunt for a killer location might benefit from: Understanding both immediate local markets and regional trends. Creative thinking to find underserved locations—particularly for smaller players. Carefully considering the potential benefits and drawbacks of buying versus leasing. Identifying future markets before local officials start writing ordinances, then engaging early. Think local, but also regional Prospective cannabis store operators need to get intimately familiar with the area where they want to open, advises Michael Lord, chief operating officer at Colorado cannabis firm LivWell Enlightened Health, which operates 22 dispensaries across the state. “Google Earth does not articulate a true representation of boots on the ground,” Lord said. “I think a lot of people are siting (stores) in areas that perhaps they’ve never visited, putting locations (based on) just what looks good on a map. “It can vary in a neighborhood from street to street. … And I think that businesses, at the end of the day, still have to have a finger on the pulse of the communities that they operate in.” Stephanie Goodman, CEO of Michigan cannabis real estate brokerage Bricks and Mortar Group, also recommends doing regional market research in surrounding areas. “You might think you’ve got this great spot and they’re only going to issue two licenses in the city, but immediately next door, it’s unlimited (licenses),” she said. “Knowing those types of things helps you forecast for future sales.” That means doing your homework. “Know your market — population, demographics, regulations, etc.,” said Franny Tacy, CEO of Franny’s Farmacy, which has eight franchises in four states. “We have made choices to postpone development of Franny’s Farmacy CBD Dispensaries in certain states that do not allow smokable hemp flower because it is a top quantity sold product, revenue generator and driver to brick-and-mortar locations.” Carving out your own niche Elev8 Cannabis founder and CEO Seun Adedeji, who opened a single dispensary location in Oregon before expanding into Massachusetts, believes smaller, less-capitalized businesses can benefit from opening in smaller towns. Adedeji focused Elev8’s Massachusetts expansion on border towns near New Hampshire, New York and Vermont, where acquiring real estate is cheaper than in bigger cities. “The beauty is, because of the limitations of licenses, each of those small towns are only giving out two recreational licenses,” Adedeji said. “So your value still increases.” Smaller towns might have their charms, but a border strategy such as Adedeji’s can also work within cities. Erbn Green Cannabis Co., a small Canadian retailer that opened its first location in the competitive Toronto market in October, found a location in the uptown area of that city. It might not be a hot address compared to the city’s downtown core, but Chief Compliance Officer Farrell Miller said the location meets demand in an underserved market near two suburbs that opted out of allowing cannabis stores. Erbn Green’s second location is in Picton, Ontario, a small community with less competition for cannabis store licenses than in big cities such as Toronto or Ottawa. “This town is getting really known for wineries and tourism,” Miller said. “We eventually see cannabis aligning with those things.” To buy or to lease? Elev8’s Adedeji got burned when the landlord for his first Oregon store declined to renew the lease and he had to find a new location. As a result, Adedeji is a strong proponent of retail operators buying real estate instead of leasing. “For anybody looking to get into a leasing option, have a 10-year lease with an option of an additional 10 years,” he said. In Michigan, real estate broker Goodman said marijuana’s federal prohibition contributes to landlords’ hesitancy to lease to cannabis businesses. “We’re seeing more private funding on the purchasing side, and they’ll lease back to the operator,” Goodman said. For well-capitalized players, buying and then executing a leaseback deal can bring advantages. LivWell’s Lord said the company acquires some properties, then sells them to partners who will lease the locations back to the dispensary operator. “That allows us to go and execute and use that capital for continued expansion rather than having it tied up in the real estate itself,” he said. Tacy at Franny’s Farmacy, however, favors leasing. “Keep your capital and use your money to make money,” she said. “Landlords are more willing to negotiate leases now especially with the commercial real estate climate of COVID. I strongly encourage a short-term 3-5 year lease option with the ability to extend. “Even though hemp is federally legal, it is not business as usual for banking, advertising, credit card processing or for finding a great retail space. COVID has proven that cannabis is a more than just recession proof, it’s pandemic proof.” Get a head start Smaller players might score an advantage by identifying potential markets before regulators start offering licenses, then engaging local officials early, Goodman said. “In that scenario, I’d recommend that you start working with the city before they’ve written any ordinances and then work with them to get the ordinance written for what you want to do,” she said. “We’ve seen quite a few of those work out. They do like local businesses, but it’s a longer play. It might take six to 12 months to get that done.” Goodman also recommends spending time engaging with the local community. “We’ve worked in a lot of cities where the residents are completely terrified of cannabis businesses,” she said. “But once they start to get to know you, and there’s actually a face associated with the business that wants to come in, it’s different.” Ivan Moreno contributed to this report.

Judge: CBD company did not mislead investors

U.S. District Court for the Eastern District of New York Crediting the CBD company’s forthrightness, a federal judge in New York federal judge has dismissed a lawsuit against Massachusetts-based Curaleaf from investors who argued the company misled them about legality of its CBD products. The investors sued when Curaleaf’s share price fell in 2019 after the U.S. Food and Drug Administration sent the company a warning letter for claiming its CBD products could treat a variety of diseases. The suit was among a raft of class-action lawsuits in the past three years challenging CBD makers for allegedly misleading investors and making unfounded medical claims. The Curaleaf case was filed shortly after the FDA sent Curaleaf a warning letter. Judge Brian M. Cogan said in his ruling Tuesday that Curaleaf “publicly and repeatedly acknowledged” in its stock listing statement that the FDA had not yet approved its CBD products for any medical purpose. Cogan said the company also noted it could be subject to enforcement action for “promotion of an unapproved drug.” “The company clearly disclosed the risk that the FDA could act against it and that the FDA had done so to other companies selling similar products,” Cogan said. “Describing this risk in terms of potentiality rather than certainty – when certainty of enforcement could not be known anyway – does not violate securities law.” Law360 first reported on the decision. After the FDA’s letter to Curaleaf on July 22, 2019, the company discontinued many of the products regulators cited, and removed some of the claims it made about its products. Investors contended that the company did not explicitly say its products were illegal, but the judge rebuffed their argument. “There is no requirement that a company disclose its risk in any magic words preferred by plaintiffs,” the judge said in the ruling. An attorney for the investors told Law360 they were evaluating their next steps. The case was filed in U.S. District Court for the Eastern District of New York. “We look forward to focusing on the company’s growth and continuing to serve our customers and patients nationwide,” Curaleaf said in a statement after Cogan’s ruling. Curaleaf also sells high-THC marijuana products in states where they are legal. Cogan also noted Curaleaf’s forthrightness on its THC business activities. Caraleaf told investors in a 2018 Canadian filing that it “will derive a substantial portion of its revenues from the cannabis industry in certain states of the United States, which industry is illegal under United States federal law.”

Elixinol executive joins US Hemp Authority board

An executive from international CBD brand Elixinol has been appointed to the board of directors at the U.S. Hemp Authority — one of the industry’s self-regulatory bodies. “From the start, Elixinol has gone above and beyond when it comes to product efficacy and transparency,” Elixinol CEO for the Americas Tom Siciliano said about his appointment. “Our involvement with the Authority further solidifies our commitment to quality and higher standards.” Siciliano recently served as president of Nutritional High International Inc., a marijuana manufacturing and distribution company, and as president and CFO for Canna Security America. Prior to his work in the cannabis industry, Siciliano worked at startup companies, private equity firms and public Fortune 500 companies. Siciliano’s appointment is part of the Hemp Authority’s advocacy partnership with the U.S. Hemp Roundtable, where Siciliano is also a board member. Elixinol Global trades on the Australian Stock Exchange under the ticker symbol EXL and on U.S. over-the counter-markets as ELLXF.

Pennsylvania awarding grants to promote hemp sales, exports

Pennsylvania is awarding $253,000 to organizations with projects designed to increase sales and exports of hemp products. Pennsylvania’s Department of Agriculture is accepting applications for the grants until March 5, PennWatch reported. Projects aimed at promoting consumer awareness are also eligible. “Hemp has presented a unique opportunity to build an industry from the ground up, supplying seemingly limitless environmentally sustainable construction materials, industrial fiber and food products just to name a few,” said Agriculture Secretary Russell Redding. “These competitive grants can help cultivate the growth of the industry that once was a staple of Pennsylvania’s economy and could once again support new jobs and income for Pennsylvanians.” The projects must have started on or after July 1, 2020, and have to be completed by June 30, 2021. The grants will cover up to half of a project’s cost. The state’s Department of Community and Economic Development is processing the applications.

DEA asking applicants about hemp use before legalization

The U.S. Drug Enforcement Administration is asking job applicants whether they’ve used hemp before it was legalized in 2018, saying current and past drug use is taken into account in the hiring process. The DEA posted the updated questionnaire for applicants this month, asking prospective employees to “Please include any Hemp or Cannabidiol (CBD) use, if used before 12/20/2018,” Marijuana Moment reported. The date is when the hemp was legalized in the enactment of the 2018 Farm Bill. “The application of DEA’s drug use policy guidelines, in conjunction with a case-by-case analysis, will determine if an applicant’s prior drug usage or activity will result in the applicant’s non-selection for employment with the DEA,” the questionnaire states. The DEA also asks applicants whether they’ve used marijuana, including for medical use.

Drug possession charges against Minnesota hemp farmer dropped

Prosecutors have dismissed charges against a Minnesota hemp farmer whose plants had elevated THC levels, saying that they had trouble locating witnesses because of delays in the case. Fillmore County prosecutors filed felony possession charges against Luis Hummel  in March 2019 after seizing his plants. They tested at 3% THC, 10 times higher than the THC limit for legal hemp, which is 0.3%. The Duluth News Tribune reported prosecutors filed the notice of dismissing in December, saying that “essential witnesses will be unavailable to testify at trial.” The case was set for trial in April 2020, but the pandemic forced several postponements. Hummel told authorities that THC in his hemp products goes up when concentrated, according to the criminal complaint. Hummel allegedly said that he tries to make his hemp products seem like marijuana to “entice the buyer,” then he removes most of the THC.

USDA creating hemp germplasm collection, funding lab to study plant breeding

Dionne Toombs Researchers at the U.S. Department of Agriculture say they’re studying ways to boost hemp production and profitability for growers, and are collecting the first national statistics on domestic hemp production to be ready by next year. But Dionne Toombs, director for USDA’s Office of the Chief Scientist, gave no indication this week at the National Hemp Symposium by Oregon State University that nationwide hemp rules taking effect next month might be delayed or again reviewed, as some hemp operators are hoping. Toombs said that USDA hemp research includes working on standardizing THC and CBD testing and establishing a new collection of hemp germplasm with Cornell University. She said USDA scientists “have a proven track record of revolutionizing American agriculture and pioneering technology advancements to bring new commodity innovations to consumers.” “We have challenged ourselves to discover the next bold move in agriculture, and industrial hemp is positioned to achieve that same success,” she said. Toombs only briefly touched on the final rules for hemp production that the USDA released just hours before President Donald Trump left office. She said the regulations become effective March 22. President Joe Biden’s office immediately ordered a review of new rules from federal agencies. But there has been no indication that the latest word on hemp production is changing before the 2021 growing season. Toombs said little about the policy, instead talking up other research projects the USDA is working on, including: A new $66 million Agricultural Research Service lab where scientists will study hemp farming, fiber, and plant breeding. Developing software with Oregon State University to assist farmers in incorporating hemp into their crop rotation. Assisting plant breeders in enhancing fiber quality. Toombs said USDA scientists are also researching the genetic diversity of hemp and finding hemp post-production opportunities for new applications. “These are a few examples of how USDA science agencies are working together to propel industrial hemp production in the next era of American agriculture,” she said. Hemp is also getting a statistical boost. The crop will be included in the 2022 U.S. Census of Agriculture, the premier data source on agriculture production and indicators for economic and environmental welfare. The ag census is compiled by USDA’s National Agriculture Statistics Service but does not yet include hemp production itemization for producers. Ivan Moreno can be reached at [email protected]

Hemp operators interested in federal checkoff program, survey shows

A clear majority of hemp farmers and processors support establishing a federal program to promote the crop, according to a survey by two industry groups, but not everyone supports paying for it. The National Industrial Hemp Council and the Hemp Industries Association polled their members late last year on the question of having a checkoff program, joining the dozen or so U.S. agricultural commodities that already have one. Nearly eight out of 10 hemp growers and processors favor a checkoff program. “This is exciting news for our industry, and exciting that there is such wide consensus in our industry to support such a program,” said Patrick Atagi, Board Chairman of the National Industrial Hemp Council. The now-famous “Got Milk?” campaign grew out of a checkoff program, which also funds research and educational efforts. Atagi said a checkoff program would “fund much-needed research and educate consumers on the usefulness and versatility of hemp.” The USDA’s Agricultural Marketing Service currently promotes 21 different agricultural industries with checkoffs. Federal marketing programs, once in place, are mandatory assessments. The industry groups will now form a panel of representatives from the industry to discuss how the checkoff program would work. Alth0ugh there’s overwhelming interest for a hemp checkoff program, HIA and NIHC still need to convince more industry players to buy into the idea of paying for the program. Six out of 10 farmers and processors surveyed support paying an fee for the program. The USDA, which approves or denies checkoff programs, has said it will not institute one for hemp unless stakeholders at all levels of the supply chain are in favor. “It’s clear from the survey response that there is a broad level of excitement around the idea of a national hemp checkoff program, and significant interest in the potential return the hemp industry could see from an effective research and marketing program under USDA,” said HIA President Rick Trojan. HIA and NIHC said 270 hemp growers and processors completed the survey. Michael Lewis, the founder and former CEO of Sprig, a CBD beverage company, said he likes the idea of promoting the crop, noting that “it’s still shocking” how little people know about hemp. “I think the No. 1 challenge for the industry is still education and awareness,” he told Hemp Industry Daily. “So to me, those are the best investments that any stakeholder can make is, public education and awareness.” Ivan Moreno can be reached at [email protected]

Time to invest in cannabis in Mexico is now, attorneys say

Mexico is moving ahead on medical marijuana regulation — and all hemp and marijuana companies that envision doing business there in the future should start preparing now, lawyers say. The Mexican government has begun setting a regulatory structure for medical cannabis in the country, making it possible for companies to start applying for research licenses to bring products to market. The move comes as the country is still working on approving hemp and adult-use marijuana. Attorneys who have been following developments in the country say entering the medical market now will be positioned to quickly launch in the recreational market when it becomes a reality, noting that was the case in the U.S. and Canada. “Any person or corporation that wants to get into the cannabis industry in Mexico, that’s the starting point,” said Roberto Ibarra Lopez, an attorney with Lawgic in Guadalajara, Mexico. Mexico’s congress is under an April 30 deadline to legalize cannabis for all uses – a directive from the country’s supreme court, which concluded the plant’s prohibition was unconstitutional. That legalization effort has already been delayed several times, but a path for doing business on the medical side started opening Jan. 12, when federal regulators published regulations for implementing the law. It’s been legal to apply for cultivation licenses for medical cannabis for some time, but it’s been impossible to do anything. That’s because although Mexico legalized cannabis for medicinal use in 2017, it took the federal government three years to publish its regulations. Those are still being tweaked, but attorneys expect the federal government to start issuing licenses by June. Not overnight It will take time to see products on the market, however. Cannabis products, including hemp with up to 1% THC, have to go through clinical trials before they’re sold and growing and harvesting on an industrial scale to supply the medical market. Imports are limited to finished goods and only pharmaceutical companies can do it. Cultivation licenses can be obtained anywhere in Mexico but must be used in the state listed on an application, which requires proof of ownership of the land where cannabis will grown. “The universe of activities is open,” Lopez said. Although the congressional measure contains limits on foreign investment, the medical regulations don’t. The department of agriculture will oversee cultivation and tracing requirements with a couple of other agencies, as well registering and importing seeds. Mexico’s equivalent of the Food & Drug Administration is in charge of labeling and prescriptions, and will have oversight of doctors and clinical research. The only advertising allowed is between pharmaceutical companies and the doctors who prescribe cannabis. The regulations don’t include a lot of detail on processors or manufacturers and hemp is an afterthought without rules governing its production, although it’s allowed. “You have the right. The problem is you are unable exercise that right because it’s not regulated,” said Adrian Cisneros Aguilar, the lead cannabis attorney in Mexico with Harris Bricken. Supporters of industrial hemp hope to have standalone regulations for the plant in the coming months, rather than having it be included in the cannabis legalization bill lawmakers are considering. Congress returned to work on that proposal this week. Despite the perpetual delays, attorneys are optimistic lawmakers will eventually legalize all uses of cannabis this year. “You’re not going to apply for everything at once, but by 2023 everything is going to be open. The market is going to be fully legal,” Aguilar said. Ivan Moreno can be reached at [email protected]

New Mexico judge repeals hemp regulations that revoked licenses without notice

A New Mexico district court has invalidated the state’s hemp production rules that allowed regulators to revoke or suspend licenses without notice and imposed strict testing requirements. Santa Fe District Court Judge Bryan Biedscheid said the New Mexico Department of Health’s rules were invalid because the agency failed to consult with the Medical Cannabis Advisory Board as required by state law. The ruling came in response legal action from New Mexico cannabis company Ultra Health, cannabis news site The Candid Chronicle first reported. Duke Rodriguez, the company’s president, said the judge’s ruling shows “the department may not attempt to promulgate any rules it wishes without fully consulting stakeholders and providing substantial evidence for such changes.” He said the state must issue rules that keeps prices low for medical cannabis patients.

New USDA hemp rules: Find out what you need to know to succeed

The U.S. Department of Agriculture kicked off 2021 with the release of federal regulations that will govern hemp production going forward. Find out the key elements of the new rules with a free webinar with leading industry professionals who will provide an overview of what hemp operators need to succeed. There is still time to register for the webinar, which takes place Friday, Feb. 5 at 1 p.m. ET/10 a.m. PT. Register for the webinar here. Hemp Industry Daily‘s distinguished guests, Shawn Hauser, partner and chair of Vicente Sederberg’s hemp and cannabinoids department, and Marne Coit, faculty member at North Carolina State University’s Department of Agriculture and Resource Economics, will provide insights on: New harvesting and THC testing timelines. Sampling and testing requirements. Plan to allow farmers to sell hemp that fails THC inspections. Whether the Biden Administration’s freeze on new regulations will impact the USDA’s rules. And so much more! Download our free report, “USDA Hemp Rule: Update for Hemp and CBD Businesses” and email questions before the event to [email protected].

Despite pandemic, Midwest hemp producers build regional database to spot best cultivation practices

Want to know the best time to plant hemp in the Midwest? Or what cultivar consistently produces a crop below 0.3% THC? Researchers in the Midwest have successfully pooled that information despite the pandemic, creating a database designed to give farmers an idea of what to expect from their hemp cultivars in 2021 and beyond. Last summer, researchers at the University of Illinois and the University of Wisconsin-Madison invited growers in their states to submit certain information about their crop for the database in exchange for a discount on cannabinoid sampling. The result is the Midwestern Hemp Database, which also includes participants from Michigan State University, Purdue University and growers in their respective states. “We wanted to work together to stop working in silos all the time and share information across the region, not just within our own state, and figure out what’s working and what’s not for our growers,” said Phillip Alberti, educator for commercial agriculture at the University of Illinois Extension. “Also very importantly, what sources of genetics, what varieties out there might be more suited to their environment for performance issues or ultimately (THC) compliance, which of these varieties are going to produce a compliant crop.” First-ever data sharing The database includes information on: When a particular cultivar was planted. When it started flowering. When it was harvested. A cultivar’s CBD and THC profile. Collectively, the data also provides growers an idea of how high CBD levels can get before the plants exceed 0.3% THC, for example, or what soil type is being used most (silt loam), and what planting method is most popular (transplants from seed). Alberti said the database also helps get a picture of when is the best time to test plants for THC. “Because that ultimately determines compliance,” he said. “What is kind of the peak window that growers can expect they’re going to be busier, that they really need to be paying attention to cannabinoid levels.” Alberti said growers pay $30 for cannabinoid testing – about half the normal cost – per sample at Rock River Laboratory, Inc., in Watertown, Wisconsin. “Cannabinoid profiling is very expensive,” he said. “It’s kind of the scariest thing growers have to deal with because in order to harvest their material, they have to show compliance.” Success through the pandemic Covid-19 restricted agriculture officials’ ability to collect data from the field last year, so having growers submit their own information was a good way to get data despite the pandemic, said Shelby Ellison, an associate professor of horticulture at the University of Wisconsin-Madison. “It was great that we were able to get participation across the number of different states,” she said. Paul Grethey Jr., owner of Simple Livin’ Farms in Groveland, Illinois, was among the growers who shared information for the database last year. “What’s really cool about the hemp database is now you can actually compare what you grew against what other farmers grew, compare your soils, your nutrients…and you can see what’s going yield best in your type of soil,” he said. The universities plan to continue collecting data again this year and hope to add participants from other states. Ellison advises farmers not to focus on one factor when analyzing the database, but instead look for the bigger picture. “Really look at the trends that you’re observing to inform you for both agronomic practices and cultivar decisions for the next year.” Ivan Moreno can be reached at [email protected]

Pennsylvania awards innovation grants for hemp animal research, hemp construction

Pennsylvania awarded $1.3 million in agricultural research grants, including funding for projects looking at hemp use in construction materials and animal medicine. The state’s agriculture secretary, Russell Redding, said the projects being funded can spur innovation in medicine, clean water, healthier soil and a safer food supply. “Meeting the challenges of feeding a growing population amid rapid changes in climate, technology and animal and plant diseases demands investment in research and development,” Redding said. The University of Pennsylvania School of Veterinary Medicine received $14,432 to analyze cannabinoids in bovine serum and hemp seed samples. Coexist Build, meanwhile, received $4,500 for regenerative farming featuring hemp-based construction.

FTC officials weigh in on CBD crackdown on false ads, urge caution

Federal regulators that go after companies for false advertising recently weighed on sanctions against CBD companies, with one urging the agency to focus on opioid manufacturers and another warning against a chilling effect on legitimate cannabis research. Rohit Chopra and Christine S. Wilson, two of five members on the Federal Trade Commission, recently published statements in response to enforcement action against six CBD sellers, Cannabis Wire reported. It was the first CBD enforcement that resulted in monetary judgments. Chopra said in his statement that while he supports the actions taken against the CBD companies, “Going forward .. the FTC will need to refocus its efforts on health claims by targeting abuses in the substance use disorder treatment industry, shifting attention toward large businesses, and making more effective use of the FTC’s Penalty Offense Authority.” He said he is “concerned that we have largely ignored Congressional concerns about unlawful opioid treatment practices.” Wilson, meanwhile, said the FTC must be cautious with enforcement action so it doesn’t “chill” the new industry. “The Commission should be careful to avoid imposing an unduly high standard of substantiation that risks denying consumers truthful, useful information, may diminish incentives to conduct research, and could chill manufacturer incentives to introduce new products to the market,” Wilson said.

Thailand legalizes hemp production for all uses

Thailand’s public health minister has approved regulations legalizing hemp production beginning Friday. The new rules allows hemp cultivation for commercial, medicinal, and research purposes, the Bangkok Post reported. Public Health Minister Anutin Charnvirakul approved the rules Thursday. The regulations will allow both exports and imports and the plant can be cultivated for extracts, beverages, cosmetics, and other products.

DEA asks judge to toss lawsuit from hemp operators challenging extraction rule

The U.S. Drug Enforcement Administration is asking a federal judge to dismiss a lawsuit from the Hemp Industries Association over an extraction rule that meany fear will wrongly criminalize temporary byproducts of the plant during production. The DEA says in a filing Tuesday that HIA is challenging “a hypothetical regulation or policy concerning manufacturing byproduct” of hemp, and the case belong in an appeals court, not a U.S. district court. Law 360 first reported the development. At issue is whether the DEA is simply updating its policies to comply with the 2018 Farm Bill, which removed low-THC cannabis from the Controlled Substances Act, or whether the DEA is making an illegal power grab by saying that hemp extracts are Schedule 1 controlled substances during a portion of the extraction process when the plant’s THC levels spike above what’s allowed. South Carolina CBD maker RE Botanicals is also a plaintiff in the lawsuit. Last month, a federal judge ruled against HIA and RE Botanicals on their request to force the DEA to clarify how it intends to enforce its policy over temporary hemp byproducts.

Swiss CBD company accuses Juul of stealing patent

A Swiss CBD company is accusing e-cigarette maker Juul of infringing on one of its patents. SwissX alleges in a lawsuit that Juul pods copy a nicotine vapor delivery system that SwissX bought the rights to last year, according to Law 360. The lawsuit was filed in Delaware federal court. SwissX, which is owned by billionaire Alki David, alleges in the lawsuit that Juul has known about the patent since at least March 2018. The U.S. Patent and Trademark Office issued the patent in May 2016 to inventor Robert Safari, who assigned it SwissX. The patented system combines an e-liquid chamber and vaporization chamber into a single component.

Want to promote hemp’s health benefits? Here’s how to do it without getting in trouble

Hemp businesses walk a fine line when describing the health benefits of their products: Make a claim without evidence or wording that misleads consumers, and soon the legal fees will pile up. The U.S. Food and Drug Administration has guidelines for acceptable claims to make on labels for dietary supplements – the closest fit for certain hemp products, although the FDA does not currently consider CBD or any other hemp extracts a dietary supplement. Claims by dietary supplement makers often fall under what are called “structure/function” claims. Saying “calcium builds strong bones” is an example of a structure/function claim, according to the FDA. Another example would be, “Vitamin C supports a healthy immune system.” “Structure/function is essentially when you would like to make a claim about how the ingredient or product affects a structure or function of a human being,” said Douglas Kalman, vice president of Scientific Affairs at Nutrasource, a company that helps brands with health product development and market entry. But just because structure/function claims are allowed, it doesn’t mean companies get to fudge the truth. The U.S. Federal Trade Commission, which oversees advertising and marketing, says “claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based.” The agency has already gone after CBD companies that claimed their products treated diseases including cancer, high blood pressure and Alzheimer’s. Steering clear of legal action Kalman, who spoke recently on a webinar on labeling claims, has this advice for companies to make sure what they say about their product can withstand legal scrutiny: Have a scientifically backed study so the results can be translated into structure/function claims, with substantiated evidence. Not every company can afford to conduct a study, or a finished product to do the study on, so promoting the effects of a particular ingredient using established research might be best option available. Still, Kalman urges companies to work with an attorney and any relevant agency to vet the claims before putting them on labels. Work with an accounting firm that understands the IRS tax codes that can be utilized by dietary supplement companies, including ingredients. Kalman said there are research and development tax credits available to help with certain expenses, such as salaries or equipment. When making a structure/function claim, products must have a disclaimer reading: “This statement has (or These statements have) not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” “The disclaimer must appear in bold type on the same display panel as the structure/function claim,” according to the American Herbal Products Association’s guidance. Legal victory The importance of proper labeling and research to substantiate a claim was highlighted this month in a federal case where a customer sued Target Corp. over a vitamin called biotin, which the retailer sold under its private label Up & Up. Biotin was marketed as supporting healthy hair and skin. The plaintiff in the case bought it to help with hair loss, but he said he received no benefit. The 9th Circuit Court of Appeals ruled in Target’s favor, with one judge writing that, “Simply put, manufacturers may make structure/function claims about a nutrient’s general role on the human body without disclosing whether the product will provide a health benefit to each consumer.” Further, the court found that the claim regarding biotin was not misleading and that it was backed by scientific evidence and contained the proper disclaimer, according to Natural Products Insider, which reported the decision. “This is a big win for the industry,” said Erica Stump, an attorney whose law firm represents food and dietary supplement companies. “Now the 9th Circuit is out there saying that these are valid structure/function claims and they have been substantiated by competent, reliable, scientific evidence. It doesn’t matter that it didn’t work on this one person.” Ivan Moreno can be reached at [email protected]

Restrictions on shipment of vaping products could impact hemp industry

Companies selling vaping products online, including those with CBD cartridges, will be forced to find an alternative to the U.S. Postal Service to ship their products and will face additional regulations come this summer. That’s because in late December, when Congress approved another appropriations bill to keep the government running, lawmakers also passed the “Preventing Online Sales of E-Cigarettes to Children Act,” which prohibits USPS from shipping vaping products. While the legislation clearly targets nicotine cigarettes, the law is so broadly defined that hemp businesses must prepare to comply. “The law, to be clear, doesn’t call out or even target the hemp industry. However, to the extent that they are participants in the industry who are selling vape products, then it absolutely affects them,” said Rod Kight, a cannabis attorney in Asheville, North Carolina. The legislation takes effect in late March – 90 days after its signing – but then the USPS must issue its rules within the next 120 days. According to Kight, sellers of vaping products must comply with: Registering with the U.S. Attorney General. Implementing an age-verification system. Shipping through private companies, such as UPS or DHL, that require a signature upon delivery. FedEx has already said it won’t ship vaping products. “A lot of them are doing age verification already,” Kight said. “So I think for some, this is going to be a larger project to take on.” The term “electronic nicotine delivery system” in the law is used broadly to include any product that “delivers nicotine, flavor, or any other substance to the user inhaling from the device.” Industry impacts The CEO of the Blinc Group, a New York-based company that develops and supplies cannabis vaping hardware, called the new restrictions “another attempt by the government to ‘demonize’ nicotine vaping.” “That said, the most important concept about this part of the bill is its intent: and that is to curb nicotine vaping, not cannabis,” said Blinc Group co-founder and CEO Arnaud Dumas de Rauly. “The bill refers to a ban of vaping products and includes the wording ‘or any other substance,’ which is too broad to have any legal value. Additionally, as cannabis still remains federally illegal, we don’t foresee how this ban can be applicable.” Still, Kight said companies that sell vaping products must be aware of the law and understand its requirements. Vaping companies also have to know the state and local taxes that will be applicable with online sales. Gregory Conley, the president of the American Vaping Association, said his organization lobbied Congress to find an alternative to prohibiting shipments of vaping products through the USPS but “were met with total resistance to that idea.” “Now you have an extremely broad definition that can capture CBD liquids as well as vaping products that don’t contain any nicotine whatsoever,” Conley said. Preparing for the change The punishment for violating the law can include three years in prison, but Conley said a more likely scenario is that a company faces steep fines and gets shut down. Conley said business should be prepared to hire lawyers and consultants to navigate the regulations. He said how big of an impact the rules have will depend on how strictly they are enforced. “Because this industry, especially the CBD side, is full of renegades and renegades oftentimes don’t follow the law to the letter,” Conley said. “So there are going to be the more corporate, the more risk-averse companies that are going to follow the law and they’re going to incur extra costs and potentially drive their profits down. “Meanwhile, there will be fly-by-night companies everywhere, not obeying the law, particularly, I believe, in the CBD space because many state regulators don’t even realize that the products could fall under their regime.” “For nicotine vaping products, which will get the majority of the enforcement, this is very bad,” he said. Ivan Moreno can be reached at [email protected]

NIHC chairman appointed to board advising US on trade policy

The chairman of the National Industrial Hemp Council, Patrick Atagi, will serve on the U.S.’s Agricultural Technical Advisory Committee for Trade in Tobacco, Cotton and Peanuts. Members of the committee provide guidance and recommendations on trade policies to the U.S. Department of Agriculture and the Office of the U.S. Trade Representative.

Clint Eastwood files third suit against CBD companies, saying they’re falsely claiming endorsement

Clint Eastwood has filed a third lawsuit alleging CBD companies are falsely claiming he’s endorsing their products. The legal action is the second the legendary actor has filed against Los Angeles-based Norok Innovation Inc. and its CEO Eric Popowicz but includes a different set of defendants, according to Law 360, which first reported the case. “Like many of his most famous characters, Mr. Eastwood is not afraid to confront wrongdoing and hold accountable those that try to illegally profit off his name,” the lawsuit filed in California federal court says. It accuses Norok and other entities of hiding his name in metadata tags to draw online traffic to their CBD stores. “With rare exception, Mr. Eastwood reserves the exploitation of his personality rights and the goodwill associated therewith for his motion pictures and other entertainment related projects, and for business ventures in which he is personally involved,” Eastwood’s attorneys say in the lawsuit. Eastwood sued Norok and Popowicz in July but voluntarily dropped the lawsuit in November. That lawsuit made similar allegations. In a separate lawsuit filed last summer, Eastwood accuses three other CBD companies of creating articles and emails that portrayed him as an endorser of their products. That lawsuit is still pending in California federal court.

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