As the California state legislature is back from summer recess, it is an apt opportunity to provide an overview of the pending legislation relating to cannabis trademarks, advertisement, packaging, and labeling. Unsurprisingly, child protection from cannabis products is one of the major drivers in these proposed bills. Additionally, the legislature’s regulations are designed to promote consumer safety and prevent overconsumption, require truth in advertising, and of course, preventing illegal distribution.

AB 64 — Licensure, Regulation, & Trademark

AB 64 creates the ability for cannabusinesses to obtain California state trademark registrations. As we discuss in our article “Cannabis IP Myths,” federal trademark registration is not permitted for products that violate the Controlled Substances Act, but federal protection is available for ancillary cannabis services that do not “touch the plant.” Even with this limitation, it is worth federally registering your brand. A federal registered mark appears on the United States Patent and Trademark Office database, where its very presence serves as a deterrent to others contemplating adoption of the same or a similar mark, and can be leveraged in enforcement efforts.

Aside from national federal protection, state trademark registrations grant rights to a particular mark within an entire state. This differs from common law (unregistered) rights, which only protects a mark in the specific geographic in which it is used. Most states where cannabis is regulated will grant state registrations for marks covering cannabis goods or services that touch the plant. Though California voluntarily follows the federal regime and will not register marks for cannabis goods or services. AB 64 would lift this ban and create two specific classes: Class 500 for goods that are cannabis or cannabis products and Class 501 for services that are related to cannabis or cannabis products.

Concern:

• This is an international trademark classification system with 45 classes for goods and services, used in countries all around the world. Creating two new classes outside the system is likely to cause confusion.

Status: Passed Assembly (71-1). In Senate, passed the Committee on Business, Professions, and Economic Development. Re-referred to Committee on Appropriations. Hearing scheduled for 8/21/17.

AB 76 — Marijuana Marketing

AB 76 prohibits an operator of an Internet website or mobile app, from knowingly marketing or advertising any marijuana, marijuana product, or marijuana business to a person who is under 21. Additionally, the bill prohibits an operator of an Internet website or mobile app from knowingly using, disclosing, compiling, or allowing a third party to use, disclose, or compile, the personal information of a person under 21 for marketing or advertising marijuana, marijuana products, or marijuana businesses.

Cannabis businesses should promptly and preemptively implement age verification tools on their website to ensure all visitors are 21+.

Status: Passed Assembly (77-0). In Senate, passed the Comm. on Business, Professions, Economic Development & Judiciary, now referred to Comm. on Appropriations with recommendation to Consent Calendar. Hearing scheduled for 8/21/17.

AB 175 — Packaging & Labeling Pre-Approval

As previously discussed in our blog post, AB 175 requires manufacturers of edible cannabis products to submit their packaging and labeling to the State Department of Public Health for pre-approval prior to distribution. The Department would review and determine whether the packaging and labeling are in compliance with MAUCRSA’s provisions, including whether the packaging is child resistant and not attractive to children. Once an application is submitted, the Department would have 60 days to determine whether the packaging and labeling is compliant. If the Bureau has not made a determination within 60 days, the Department must notify the applicant of the delay and identify a date within the next 30 days when the determination will be made. If the submitted packaging/labeling is denied, the applicant will have up to 60 days to redesign and submit revised packaging/labeling; then the Department has 30 days to determine if the redesign is compliant. If the applicant is denied again, they would have 30 days to file an appeal. We have no details on how long an appeals process could take.

Best case, edible manufacturers receive approval within 60-90 days. However, if the packaging/labeling is initially refused and the applicant resubmits a redesign, an edible manufacturer is looking at up to an additional 90 days for a determination. If applicant decides to appeal a “final” refusal, the appeal timeline is unknown.

Concerns:

• Subjectivity of what is “attractive to children”
• Administrative capacity for review and potential delay in getting products to market
• Required resubmission if manufacture makes a “material change” to its packaging—what is considered material?

Status: Passed Assembly (61-13). Passed Senate Comm. on Business, Professions, Economic Development, & Comm. on Health. Re-referred to Comm. on Appropriations. Hearing scheduled for 8/21/17.

AB 350 — Edibles Not Appealing to Children

AB 350 clarifies that a marijuana product shall be deemed to be appealing to children or easily confused with commercially sold candy if it is in the shape of a person, animal, insect, fruit, or in another shape normally associated with candy. AB 350 attempts to clarify MAUCRSA’s requirement that an edible cannabis products may not be appealing to children.

Status: Passed Assembly (78-0). In Senate, ordered to 3rd reading.

SB 162 — Branded Merchandise

Prohibits medical cannabis and recreational marijuana licensees from advertising using branded merchandise, including, clothing, hats, or other merchandise with the name or logo of the product. For a detailed discussion about this proposal, see our blog post.

Concerns:

• Definition of branded merchandise could include way more than clothing, g., paraphernalia, including, vaporizers, pipes, lighters, grinders, etc.
• Language specifies prohibition as to “product” marks, but is not clear as to “company” marks
• Prohibition is specified only as to state cannabis “licensee,” appearing to permit trademark licensing to third parties for the sale of such items
• Revised version of the bill eliminates the express exemption for non-commercial speech

Status: Passed Senate (40-0). In Assembly, passed Committee on Business & Professions. Amended & re-referred to Committee on Appropriations. Hearing scheduled for 8/23/17.

SB 175 — Marijuana County of Origin

As provided in MACURSA, SB 175 makes it unlawful for medical cannabis to be advertised, marketed, labeled, or sold as grown in a California county when it was not grown in that county. Also, unlawful to use the name of a California county, including any similar sounding name that is likely to mislead consumers as to the origin of the product.

SB 663 — Packaging & Labels Not Attractive to Children

SB 663 provides further guidance as to what the legislature would deem “attractive to children,” providing some guidance for cannabis businesses to comply with MAUCRSA. Packaging or labels for cannabis or cannabis products will be considered attractive to children if it has any one of the following characteristics:

• Contents displayed through transparent material
• A name/design that resembles un-infused candy, snack food, baked good, or beverage
• Statement, artwork, or design that would mislead children to believe that the package contains anything other than cannabis
• A cartoon, logo, or design that would make the package or label attractive to children
• A name or slogan that would appeal primarily to children

Concern:

• Reference to “Cannabis and cannabis products” is overbroad. There should be a distinction as to how non-edibles, g., topicals, are addressed. It is unlikely that children will be attracted to a topical product solely on the basis that the name/design is similar to a non-infused candy, snack food, baked good, or beverage.

Status: Passed Senate (39-0). Passed Assembly (77-0). Ordered back to Senate for concurrence of the Assembly amendments.

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