Overlooked Provisions of Prop. 64 and Geographic Cannabis Branding

As of today, Alaska, Colorado, Oregon and Washington are the only states that have legalized nonmedical cannabis use, possession, and growing. A national movement to legalize is burgeoning. On November 8, 2016, California voters will decide whether or not to join those states, when they vote on Proposition 64: the “Adult Use of Marijuana Act.”

If Prop. 64 is passed, adults 21 years of age and over would be able to legally use, possess, and grow marijuana for nonmedical purposes, with some restrictions; the state would regulate nonmedical marijuana businesses; growing and selling marijuana would be taxed; and tax revenues would be directed to state youth education programs, environmental programs, and law enforcement.

If Prop. 64 is not passed, the current law would remain in effect. Nonmedical use, possession, and growing marijuana would remain illegal to everyone throughout the state. Licensed medical marijuana practices would remain legal.

In addition to the main changes Prop. 64 would affect, the Act also incorporates the following policies: 

·     Sale might still be banned in certain areas. Individual cities and counties may adopt local bans. The purpose is to allow communities to locally regulate.

·     If a business sells tobacco or alcohol products, it is not eligible to sell nonmedical cannabis.

·     Nonmedical cannabis sellers can deliver—literally. Delivery services will not be prevented on public roads.

·     An area's natural water supply determines whether or not, and how many, new marijuana plants can be grown. Each plant is required to have a unique identifier (like a bar code) in order for the government to “track-and-trace” marijuana production. If a “watershed” does not have sufficient water for new cultivation, “no new plant identifiers will be issued, as to that watershed.”

·     Non-medical sellers might not be able to sell “edibles.” One provision prohibits products “easily confused with commercially sold candy or foods that do not contain marijuana.”

·     Promo items are not allowed. Licensed sellers cannot give away marijuana and marijuana-related merchandise as a promotional activity.

·     Big growers are prohibited until 2023. Prop. 64 will not license growers with more than one acre of outdoor grow space or 22,000 square feet of indoor canopy until January 1, 2023, in an effort to prevent anticompetitive industry monopolization.

·     Advertising is severely restricted. The anti-legalization community urges that Prop. 64 would allow cannabis advertising aimed at children. Prop. 64 requires that advertising “in broadcast, cable, radio, print and digital communications shall only be displayed where at least 71.6% of the audience is reasonably expected to be 21 years of age or older, as determined by reliable, up-to-date audience composition data.” This rule seems to mimic a self-imposed guideline used by the alcoholic beverage industry (e.g., alcohol websites’ pop-ups requiring users to confirm they are over 21 years old). To comply with Prop. 64, cannabis businesses will be required to advertise according to, and spend substantial sums on, reliable audience demographic data reports, like Nielsen Ratings. And in some social media advertising venues—like Instagram—this determination might not even be ascertainable; Instagram requires only a minimum age of 13 (rather than asking a person to impute his or her exact age) to create an account, and any user could potentially find the ad.

Geographical Cannabis Branding Under Prop 64

Some regions in California have become well known as producing particularly high quality cannabis products (so far only available as medical cannabis), like Humboldt and Mendocino Counties. People claim that the “cannabis terroir,” or the character cannabis takes on from the soil it grows in, is responsible for making these regions’ cannabis so special.

Prop. 64 contains provisions ensuring that growers outside those areas don’t try to cash in on their (famous) names through clever branding. Similar to wine labeling laws, Prop. 64 requires that only cannabis grown in a specific region can use the name of that region on labels, packaging, and marketing materials. Cannabis or cannabis products grown outside of a particular region cannot contain “any statement, design, device, or representation which tends to create the impression that the marijuana originated in [that] particular place or region.” However, interestingly enough, Prop. 64 does not require the “cannabis terroir” to be maintained to be considered a part of a particular region; cannabis is not required to be grown outdoors or in any specific (regional) soil to qualify as cannabis from some region.

For prospective non-medical marijuana growers, trademarking your cannabis products should be a top priority—being the first to register on your trademark with the State of California ensures that other junior users won’t be able to infringe your name. And given Prop. 64’s geographic labeling requirements, you might be interested in cashing in on a mark bearing your special region’s name.

Luckily, California trademark law mimics Prop. 64’s geographic labeling standards. In California, a mark is not a registerable trademark for particular goods or services if it is “primarily geographically descriptive” or “deceptively misdescriptive” of them. A “primarily geographically descriptive” mark (1) conveys to a meaningful segment of its consumers, primarily or immediately, a geographical connotation; and (2) those consumers are likely to think the goods or services in fact come from that place. A mark is “geographically deceptively misdescriptive” if the misdescribed geographical origin would be a material factor to consumers in making their purchasing decision. Currently, non-medical marijuana products are not trademarkable, but if Prop. 64 passes, it will be open range for (accurate) location branding that will give a regional grower’s products the luster and fame they deserve.

If you are in the cannabis industry and are looking to prepare for the effects of Proposition 64, we are happy to help you navigate the new waters.  Please give us a call at (650) 271-9395 or email us at info@blgtrademarks.com.

 

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.