IP and Cannabis: The New Grey Area Is Green

Legalization of cannabis has been a controversial topic for years with heated debates arguing for and against. Even though on a federal level, the marijuana is still illegal, most of the states are slowly moving towards legalization.

In 2018, Canada became only the second country in the world to legalize marijuana, Uruguay did so in 2013. In doing so Canada became the first G7 member to do so, which will undoubtedly lead to ramifications here in the US.

Trouble In Paradise?

Not surprisingly, the young cannabis industry (the legal part of it is young at least) is experiencing some growing pains. It is plagued with copyright lawsuits and a patent race which some view as a power grab by specific companies to eventually push out smaller, local growers.

Who could allege a copyright issue with a cannabis company you might ask. What copyright can a weed dispensary possibly infringe upon?

Real-Life IP Case

Hershey’s Co. has found a few offenders. Yes, we are referring to the famous chocolate candy maker of the beloved Hershey Bars and Jolly Ranchers — Jolly Ranchers were the ones at the heart of the problem.

Recently Hershey’s sent cease and desist orders to two California based cannabis-related companies, a dispensary (Harborside) and en edibles company (Good Girl Cannabis) for copyright infringement. The chocolate candy giant claimed that the branding of these two companies looked too similar to their own products.

For example, in their notice to Harborside, they alleged that Harborside sold edibles made by a company cold “Jolly Meds” and these edibles looked a little too similar to Hershey’s well-loved  Jolly Ranchers. Even though Harborside fought back, it’s clear that this won’t be the last time these types of claims are brought forward as the companies find their stride in a market flooded with edible (non-cannabis related) goodies.

Patent Issues

A patent race is another issue the industry is facing.

As the industry grows, we are just beginning to learn all the medicinal properties the cannabis plant has to offer. It’s no wonder that various pharmaceutical companies are racing to secure their ideas for possible medical applications in a patent form. In May of 2018 alone, five companies filed for patents and secured intellectual agreements while their patents are pending.

The patent race can spell trouble to the local, smaller growers as different strains of pot are being patented. One might argue that a living plant that has been known to civilization for 5,000 years and grows naturally in the wild cannot be patented. And, indeed, how can it be?

In a Diamond vs. Chakrabarty court case, U.S. Supreme Court Chief Justice Warren Burger issued a landmark opinion that in a patent situation what matters is whether or not the applicant was able to alter the plant strain enough, so it became a non naturally occurring strain.

Insurance and Cannabis

As with any legitimate business, whether you are a dispensary, manufacturer, or cultivator you need insurance protection. Aside from the usual insurance policies such as liability, property, and workers compensation, it is essential to consider intellectual property (IP) insurance.

This type of insurance will protect you from lawsuits alleging you are infringing on someone’s patent or protect your patented products from others replicating them. Even though IP policies can get expensive, fighting an IP lawsuit can get even costlier.

Your general liability policy will typically exclude any patent-related claims, so without appropriate insurance, you could be looking at thousands of dollars to defend yourself in court. Moreover, with companies securing patents left and right for anything cannabis-related, it’s not a stretch to assume that eventually you might get hit with a lawsuit.

Recommended Cannabis Insurance Coverage

Aside from an IP policy, your cannabis business will need the typical insurance policies other businesses have, with unique sets of coverages. Depending on your situation you might need the following policies:

• General liability: Protects cannabis companies against basic business risks
• Property: Reimburses cannabis companies for direct property losses
• Workers’ Compensation: Covers employees if they are injured on the job and can no longer work
• Employment Practices Liability: Protects cannabis companies against employment-related lawsuits
• Professional Liability: Protects cannabis companies against lawsuits of inferior work or service

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.