February 28, 2024 • 44 mins
Explore the potential impact of cannabis rescheduling with Jay Kotzker, Managing Partner at Holon Law Group. From changes in legal landscapes to interstate commerce challenges, learn how this shift could reshape marketing strategies and legal compliance for cannabis businesses.
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Episode Transcript
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Music.
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Hi, everybody. Welcome to today's podcast episode of Party Like a Marketer,
the podcast dedicated to cannabis marketing, public relations,
and authentic storytelling.
I'm your host, Lisa Buffo, the founder and CEO of Cannabis Marketing Association.
CMA is the producer of this podcast, and the guests here are our members.
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If you are a cannabis marketer or looking to join the cannabis industry and
get into a marketing position, Consider joining the CMA membership where we
provide education, best practices, and community and events for cannabis marketers.
Our goal is to help marketers do their nine to five jobs better in this unique
and challenging and growing space.
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And the podcast is one way in which we can reach all of you.
But we also have more resources within the membership, including our Slack channel,
our regular webinars and events that we host, as well as downloadables and more
content and information in our online member portal.
Today's guest is Jay Kotzker. Jay is a managing partner at Holon Law Partners.
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Jay possesses 20 years of legal experience in all areas of intellectual property
and general business law, including brand development and protection, entity formation,
contract negotiation and drafting, and guiding clients through cannabis business
licensing and operational matters.
Jay routinely interfaces with governmental agencies and has extensive experience
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in regulatory compliance, risk management and training, and dispute resolution.
Jay, thank you so much for being here today. day.
Thanks so much, Lisa. I'm excited to be here. Yes. So tell our audience a little
bit about who you are, what you do, your background, and how you got into cannabis.
Absolutely. So I'm based here in Denver. I've been here for 18 years.
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I've been a practicing attorney for a little over 20.
And my primary focus during that time has been in intellectual property.
So primarily trademarks and copyrights and trade secrets.
Ultimately, that was how I was brought into the cannabis space well over a decade ago.
Prior to any adult use, I was working with a couple of medical operators who
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wanted a little more sophisticated branding.
They wanted something other than a pot leaf or a green cross in their window.
They wanted something that could convey some sort of sophistication or some
sort of elevated class other than what had been typically seen in the industry up to that point.
So I just kind of stumbled into it from a brand perspective,
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which is really opportune for this group here and the marketing association as a whole.
And that allowed me to kind of start seeing what was going on on the grassroots
level, especially for medical operators.
And through that time, I learned that there weren't a lot of attorneys working in this space.
And the ones who were, were more criminal defense, DUI possession type attorneys.
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They didn't have a lot of transactional knowledge. They didn't have a lot of
regulatory compliance knowledge, and they certainly didn't have a lot of intellectual
property knowledge, all of which was very applicable to operators at the time.
So that allowed me to kind of slide into a space that was underserved or not
served at all. and really start working with medical operators as they transitioned
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into the recreational market.
That allowed me to get seven of the very first 11 recreational dispensary license
in the world on behalf of clients here in Colorado, as well as the very first one ever.
So, you know, been in the space for a really long time. That allowed me to transition
into a general counsel role where, as you can imagine,
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I was exposed to a lot more on the cannabis side of things than I ever dreamed
aimed through, you know, license expansion and real estate issues and contractual
matters and mergers and acquisitions, bringing a company public,
which is a very exciting thing, as well as allowing them to kind of explore
what it really was like to be one of the very first multi-state operators and
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what the legal implications of something like that were, especially very early on and in adult use.
That has allowed me to, you know, really acquire a lot lot of knowledge about
the industry as a whole, I still very much remain, you know.
At the forefront of the branding part of things and the marketing part of things,
I love working with larger brands and helping them create strategies to bring
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those products and bring those brands to emerging markets,
to enter into partnership or licensing agreements with operators who are starting
in different jurisdictions,
as well as provide more just general business guidance and valuations and strategies
for expansion to operators all over the country.
I'm currently the managing partner, as you said, of Holon Law Partners.
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We've got 12 attorneys spread out around the United States, a number of different
practice groups within the firm.
One of them is IP and sports and entertainment, of which I'm the chair of that practice group.
We also have a very, very robust cannabis practice group made up of seven different
attorneys that have everything from real estate expertise to mergers and acquisitions
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to securities to folks that have worked in-house, Cresco Labs and others.
So they know large application writing processes, regulatory compliance,
and basically jurisdictional specific counseling and guidance that we provide
all over the country to operators. writers.
Awesome. Thank you for that background. And we're so excited to have a lawyer
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on the show because that's something marketers have lots of questions about.
All the things you talked about, compliance, licensing, IP, trademark.
So I'm excited to talk about all that with you.
But I do want to kick off and get started with the rescheduling discussion.
I know you and I have talked about it. It's something I've talked about on this show.
I've done some presentations on, that that's the thing that's sort of happening
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in the background from a political perspective that could have major implications for the industry.
For marketers, of course, if cannabis goes from Schedule 1 to Schedule 3 and
280E goes away, I mean, that changes everything for everybody.
But it means marketing becomes a legitimate business expense and can be written
off, which in theory should and can change budgets in the space.
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But as a lawyer and from a legal perspective, want to get your take on what's happening.
What are you talking to clients about? What do you see?
I know you've got some unique insight into this, but what do you see going on
and what's important for marketers to know about this process?
Yeah. I mean, it's still a kind of tumultuous time.
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Obviously, back at the end of 2023, we saw the Department of Health and Human
Services recommend to the DEA that marijuana be rescheduled.
It looks like the DEA is getting closer and closer to actually adopting those recommendations.
We don't know necessarily what that may look like. Certainly,
Congress could step in at any point as well and, from a legislative standpoint,
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change things dramatically, whether it's rescheduling or descheduling entirely.
Presuming, though, that we're going to be moving from a Schedule 1 to a Schedule
3, there's a whole host of legal issues that come with that.
Operators don't understand, what does this actually mean for me?
The first one is, look, cannabis is not going to all of a sudden be federally legal at this point.
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We're simply moving it from one classification, one schedule to another,
which carries with it slightly different and impactful for this industry, to be sure, changes.
All of a sudden, cannabis is not going to become legal in states that don't
authorize medical or adult use cannabis businesses.
We're not going to all of a sudden see publicly traded companies being listed on major U.S.
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Exchanges. changes, we may see regulatory agencies come in for the FDA and others
and start implementing new stringent requirements around products that fall under their purview.
And we can talk a little bit more about that later. And more importantly,
most importantly probably is this doesn't allow for any sort of interstate commerce necessary.
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We don't necessarily know what that's going to you look like.
But rescheduling, it could make the laws a little bit easier on interstate commerce,
but we don't necessarily know that to be sure.
And it's because cannabis is a little bit different than other products that
move from Schedule 1 to Schedule 3.
And by that, I mean, look, Schedule 3 drugs have gone through a review process.
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They still have to be prescribed by a a doctor, they're stringent dispensing
caps and things like that, that doesn't seem to fit very well within an industry
that we've already built.
It's not necessarily that we're going to have a doctor now needing to be prescribing
cannabis flower to somebody.
They would be more prescribing a treatment or a drug that maybe cannabis was
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contained within, right?
And there's only a handful of those, Epidiolex being one.
So how that actually works in practice is going to be very unique because we're
not talking about other Schedule 3 things such as Tylenol with codeine or OxyContin,
which is Schedule 2, right?
Which those are branded drugs, but they still very much need prescriptions.
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There's a cap on how much can be dispensed in a certain amount of time by various
doctors. So I don't know exactly how that's going to play out from moving schedules.
But as you alluded to, what the biggest deal is,
is that all of a sudden that move in schedules will remove cannabis from schedule
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one and then remove any sort of 280E requirements.
And obviously, that is a huge boon for cannabis operators.
The reports that I saw coming out from 2022 showed that cannabis operators paid
more than $1.8 billion in taxes, more than non-cannabis companies of similarly situated.
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That means they're getting taxed at a 70% greater tax rate than most legal businesses.
And all these operators know what that means. You know, your rent and your marketing
materials and your payroll and all of these things you can't normally deduct
all of a sudden would be lawfully, you know, lawful deductions, right?
And, you know, hopefully that allows operators to divert a lot more of that
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money into marketing into IP protection, into more robust regulatory compliance relationships,
perhaps, while at the same time allowing their businesses to grow and be able
to reap some of the real benefits of operating a legitimate company.
And you had mentioned, and thank you for clarifying, I should have mentioned exactly what 280E is.
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But for those who might not know, we've talked about it a lot.
It is the IRS tax code that does not allow cannabis businesses to deduct all
what would be normal business expenses the way others can, which leads to that 70% tax rate. Great.
So in addition to that changing budgets, sort of the way accounting happens,
one thing you and I had talked about was that it could possibly change,
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or I think it will change, the federal trademark registration.
Can you explain? Can you talk to the audience about that? What does that mean? Is that a yes?
Maybe? How should they be thinking about it?
Yeah, it's a maybe, but it's something that we should be thinking about and
talking about now, to be sure.
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It's generally assumed that the DEA is going to codify these recommendations, right?
And as a result, cannabis trademark owners should be able to more broadly claim
some sort of national trademark rights under federal law.
Currently, the way that it sits now, because of the Controlled Substances Act,
and because there is not a lawful use in commerce, And by that,
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the statute means lawful interstate commerce of these products.
Plant touching materials themselves
are not subject or not capable of obtaining federal registration.
Federal registrations are available currently for all sorts of other ancillary
goods and services, right?
All of the hats and the T-shirts and the stickers and the lighters and the rolling
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papers and things that you see sold at, you know, in dispensaries.
I've also had a number of clients that are able to protect consulting services
or educational services or things that are not necessarily contained THC.
What this will do, perhaps, and this is yet to be seen, is it will allow those
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products that do contain THC
above 0.3% on a dry weight basis to obtain federal trademark protection.
And as I mentioned a little bit before, there's evidence of this specifically
in the federal statutes that list some of the examples of drugs and preparations
that are contained within the schedules.
As I mentioned, OxyContin has a federal trademark and that's a Schedule II drug.
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You've got Tylenol with codeine. You've got other hormones and other testosterone-type
drugs that are contained within Schedule III that have federal trademark protection
and are allowed to be used.
Go across state lines, right? So presumably we would have that same ability
here. And that's huge for the industry, obviously.
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A caveat to that, which I think is a little interesting in that currently the
federal trademark office also won't accept applications for any hemp derived
products that are consumable,
whether or not they have less than 0.3% THC in them at all.
That would probably remain the same because it's contained under the Farm Bill
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and it's subject to the Food and Drug Administration and the Cosmetic Act.
So we may have a little bit of a split there where industrial hemp marks may
not be able to obtain federal registration, but THC-heavy products could potentially
obtain federal registration.
So we'll see how that shakes out as well.
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Would you expect the USPTO to tell us if it does get rescheduled,
would they say or how would we know?
Do we just try and see what happens? Yeah, it's really interesting in that going
back a decade now, I've seen the Patent and Trademark Office fluctuate on this several times.
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Way back in probably 2015 or 2016, there was a brief period,
and I mean like a week, where the Patent and Trademark Office started allowing
federal trademarks for cannabis-derived products.
And so all of a sudden, attorneys who happened to notice this started filing
all sorts of applications.
And then the Patent and Trademark Office very quickly realized what they had
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done and then closed off that avenue for registration.
I don't get the sense or the impression that they will come out and specifically
tell people, hey, we're all of a sudden accepting trademark applications for cannabis products.
The fact is, the trademark office is so inundated with new applications right now. Yeah.
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Historically, you filed an
application, the initial review would happen within six or seven months.
That timeframe now is you submit an application and you might get it initially
reviewed at the 12 or 13 month mark.
And that's just due to lack of staffing, more trademark applications being filed
post-COVID, and just the lack of the ability to kind of get through all of those.
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So I think the last thing that the trademark office wants right now is a tidal
wave of new applications, which leads me to believe they're not going to go
out there and publicly say, hey, all of a sudden we're now accepting these applications. Right.
Which means forward-thinking operators need to start having those discussions
now about, okay, presuming rescheduling, what does that mean for our brands?
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What does that mean for some of the products and the goods and services that we provide?
Are they capable of potentially being included in application later?
And then working with IP counsel that could help set the stage so that once
those prohibitions are eliminated, applications can be filed very quickly.
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Because as you can imagine, the word is going to get out really quickly that
the PTO is accepting these applications, and you're going to have a flood of
new applications coming, which in this industry is going to present a whole host of problems.
Problems because unlike typical brands that can get federal trademark protection,
you have a dispensary in Colorado that can brand it in Colorado and can protect
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it in the state of Colorado,
but without some sort of partnership or licensing agreement or other sort of
contractual relationship with another operator in a different state,
they really can't apply for federal application, right?
And their protection is limited to the state in which they're actually providing
those goods and services.
And what that means is you could potentially have Bob's dispensary in Colorado.
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You could have a Bob's dispensary in California. You could have a Bob's dispensary
in Nevada and moving eastward into these emerging markets.
All of them can generally operate lawfully under the Mark Bob's dispensary in those states.
And they can't prevent the You know, the Colorado dispensary couldn't prevent
the California dispensary from operating under that name.
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All of the goods and services, perhaps the ancillary items, the smokers articles
and the hats and the t-shirts could be protected by one of those Bob's dispensaries
and maybe preclude others from being able to sell those.
But the core service of the dispensary itself can't be protected outside the state.
And so when federal registration is allowed, it's going to be a race to the
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Patent and Trademark Office to see who can get an application filed first.
Because under federal trademark law, it doesn't matter who was using the mark
first commercially with respect to who gets the registration.
So you could potentially, and I had a client that just experienced this the
other day, they've had Bob's Dispensary has been operating in Colorado, let's say, since 2016.
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They don't file any applications. They're protected in the state and they're operating fine.
All of a sudden, the Patent and Trademark Office opens the doors for federal
applications, brand new Bob's Dispensary in Florida files an application.
And regardless of the fact that they're brand new and Bob's in Colorado has
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been operating since 2016, Bob's in Florida could potentially get the federal
registration and supersede Bob's Dispensary in Colorado.
Now, there's all sorts of legal minutiae about how that plays out and who has
what rights, and a seasoned trademark attorney can walk those operators through those nuances.
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But it could lead to a situation where Bob's in Colorado couldn't expand into
some other states because Bob's Dispensary in Florida now has a federal trademark,
and that gives you national rights to exclude others, whether or not Bob's is
operating in all of these other states around the country.
Yeah, I could see that. Thank you for clarifying. And that makes a lot of sense.
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And I did not realize it had gone from I knew six or seven months.
I did not realize it was now as long as 12, which makes a lot of sense.
So, like, are you saying in theory that if rescheduling happened tomorrow and
there was a flood of applications of people who knew this and were anticipating this,
they wouldn't even know or have real guidance for possibly up to a year unless
the USPTO, like, whether they got the applications or not, or it was approved? Right.
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Right. And so, you know, presumably we wouldn't see this wave of new applications
being filed unless we had some sort of certainty that says now with this rescheduling,
interstate commerce is lawful.
So we would have some sort of certainty that the registrations could be issued,
but you wouldn't have any certainty of that for at least 12 or 13 months. Absolutely.
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I see. So it is, it hinges on the interstate commerce issue. Yeah.
That's right. And that's the function of federal trademark law.
In order to get a federal trademark registration, which allows you to exclude
everyone else nationwide from using something identical or confusingly similar
to that mark, you have to show that you're engaging in lawful interstate commerce.
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And we know that that's not possible right now. Got it. Okay.
Thank you for clarifying that. That clarifies for me as well.
Let's kind of go to the beginning of this process for marketers who may be listening
or business owners who are in the early stages who are maybe maybe they are
the bobs in Colorado that hasn't protected their brand yet or they're considering
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starting a new business, launching in a new state.
What are some of the things that you would, what's the checklist for marketers in the beginning?
What do you see, what do you do with your clients in that sense?
And also maybe what are some of the common mistakes that folks who don't engage
with the lawyer, you kind of end up cleaning that up?
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Like what's the first step that they should know about from a brand protection?
So let's start with the common mistakes because this I see more times than not,
and it's big on the branding and the marketing side of things,
then these are things that can be fixed very early on.
And the primary one is get an attorney involved early, a trademark attorney,
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an IP attorney that can help you, one, identify, is your mark distinctive enough?
Because there's not only is it, there's a standard of review that says,
is it confusingly similar to something else that's been filed or approved, but is it distinctive?
Or is it really just descriptive descriptive of the product or the service?
And is it geographically descriptive, right?
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If it's Denver Bud Shop, right?
Maybe that's not descriptive, not distinctive enough to allow for federal registration, right?
So let's take a look at your brand and say, is it distinctive enough.
Or are there some things that we need to change to the market itself to make
it a little bit more distinctive so that it's capable of this brand protection at the federal level?
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And what that really involves is, let's have a conversation about what the brand
is, the proposed brand is, and let's conduct a search.
And that search is going to be nationwide.
And we do this very regularly for clients. they'll come to us at the infancy
and they'll say, hey, we have three or four or five different names for a new
product line or a new dispensary or whatever the case may be.
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And we can very quickly do a knockout search and say, these three, definitely not.
These two probably require a little bit more in-depth of an analysis.
But at least that gives marketers the ability to not not focus their resources
on things that are not going to be fruitful in the end of the day.
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I've had a client come to me not long ago who had spent $20,000 building a beautiful
brand for a new dispensary in New York City and very excited about it.
And it incorporated a lot of subway map type things and really cool New York
specific brand elements.
But the word mark they wanted to use, they never went through the process of
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saying, is there anybody else using this in the space now?
And within 15 minutes, I was able to get back to them and say.
There is an identical brand in Ohio, there's an identical brand in Florida,
there's an identical brand in Nevada, and there's one in California,
which for a company that has aspirations of,
expanding outside the state of New York was a huge problem for them.
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And then further search revealed that the California company had already applied
for federal trademark registration for the hats and the t-shirts and the stickers
and the sunglasses and all of the ancillary products.
So even if the New York company didn't want to move out of the state of New
York, they weren't going to be able to put their brand on all of these ancillary
products that build brand recognition out in the community.
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And despite not wanting to give them that reality and that check,
they had to go back and start from scratch with an entirely new brand,
which the membership knows is very time consuming, very expensive,
and certainly not something you want to go back to your executives with and
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say, we got to start from scratch.
So conducting a search and having a discussion with IP counsel early on is absolutely imperative.
And that doesn't go just just for word marks, that's taglines or slogans that
a company might use, as well as design elements.
I was just going to ask that those are separate things, right?
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It's the word, what is your company name, but also the logo.
All of that needs to be checked out before you run with any of it.
Absolutely. Yeah. And sometimes the logo turns out to be just fine because it
doesn't necessarily contain the wordmark of the brand itself, right?
And so there's ways that we can work with brand designers and graphic designers.
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I mean, honestly, Obviously, some of the most productive relationships I have
with clients on the brand development and protection standpoint are because
their graphic designers have the forethought to say,
let's get an attorney involved now while we're still in the tinkering around
and playing around phase so that we can get a lot more guidance on how to navigate
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potential obstacles in our way.
So that when we get to a finished product or a finished design element,
we know that one, it's distinctive enough. Two, it's something that we can protect.
And three, we can exclude other people and monetize it in some way,
which ultimately, if you're going to spend this much building brands, you want to be able to do.
Yeah. Okay. So in summary, start early, working with an attorney early,
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do your searches and check with counsel before you lock in on a design or a name.
Anything else from the early stages of what else marketers should be thinking
about when it comes to branding, brand protection, and or compliance?
Yeah. And I think part of the discussion I like to have with folks early on
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is outside of your very core good or service, right?
Like if you're a dispensary, you're a retail outlet.
What other things could you be providing that we could use as a branding opportunity?
Right. Instead of waiting for rescheduling so that we can protect your brand and on a federal level,
you know, are there educational pamphlets you can provide, you know,
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at the point of sale that have your branding on it about safe consumption or
safe handling or safe storage or, you know, whatever the case may be.
Are there community engagement pieces that you can put branding on that allows
us to go to the federal level and get you at least an application submitted so that, look,
it's community engagement, it's education materials about consumption of cannabis
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or about the safe handling of cannabis.
That gets you a lot closer to the prize than the t-shirts or the stickers or the hats, perhaps.
So that when these floodgates do open, when there's rescheduling of some sort,
perhaps your application that's already sitting there will be used as the basis
to refuse others that are filed after you because it's so close in similarity
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to what the real prize is. Does that make sense?
Yeah, so it's kind of like creating a proactive or offensive strategy in addition to defense.
That's exactly right. I like to akin it to creating a moat around the prize
with the castle in the middle being the cannabis product itself that we can't
yet protect on the federal level.
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But if we can connect all these other pieces, we effectively build a defensive
moat around the cannabis product itself so that somebody else couldn't slip
in later on and get a registration for that one thing because all of your other
applications or registrations will be cited as a basis for refusal against them.
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Cool. Okay. And then can you speak to what are the consequences of not doing this?
I know you have a little bit, but just so folks really know the importance,
what does that mean when you don't protect your brand and you run into that
situation with the dispensaries or someone else who's got it in these other products first?
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Right. And ultimately, it's going to come down to time and expense and capital
expenditure to try to clean up these messes.
If we go back to the Bob's dispensary model, we're going to see all the Bob's
dispensaries at some point be fighting about who has priority,
who can move into states that maybe there's not a Bob's dispensary in already.
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Already filing an application early, even if it's for these ancillary products
or services, puts that application in a public database.
And whether that's filing a state trademark registration for the dispensary
services or the actual cannabis products themselves, or it's filing a federal
application for all these ancillary things that we've been talking about,
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it creates a public record.
So that when new brand is starting to develop,
presumably they're hiring a trademark attorney to help them navigate this space,
that trademark attorney should locate these applications and steer their clients
away from something that's confusingly similar.
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So it acts as another defensive strategy.
It puts the nation on notice effectively, right?
That you're claiming trademark rights in these specific goods and services so
that it may prevent others from trying to adopt something very similar.
And secondarily to that, the more that you can protect now, the more licensing
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opportunities it allows you, right?
You can turn around and monetize that IP by licensing those brands into other
states, whether that's through partnership arrangements or solely license agreements
and things like that. Yeah.
Another downside could potentially be, look, going back to the Bob's Dispensary model,
if you've got Bob's Dispensary who has aspirations of expanding outside of their
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jurisdiction and they've done nothing to protect themselves other than in the state,
they're going to run into a lot of problems of trying to determine who has seniority,
who has priority between all of these competing dispensaries.
And as you can imagine, that becomes very time-consuming and very expensive.
The last data that I saw was a federal trademark infringement lawsuit,
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which is brought in federal court, on average costs about $250,000 to prosecute.
So the last thing you want to do is get into a trademark infringement battle
that you could have avoided early on by taking some of these proactive steps.
Yeah, that's a lot of money. So if you had messed up and someone wanted to pursue
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you and they were insistent on seeing it through, you just have to deal with that at that point.
Right. I mean, yeah. Part of the trademark law requires brand owners to police
and enforce their marks or they risk losing their right to that mark.
And so, you know, whether you like it or not, you know, brand owners are going
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to have an obligation to go out there and find infringers or find people that
started using the mark after them.
And they're going to have to engage in these kind of legal analyses of what
are our rights? What are our obligations?
Do we have to enforce this mark? Is there potentially a way that we could enter
into a coexistence agreement or a licensing agreement?
But those are all things people are going to have to think about as some of
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these interstate commerce walls fall down and all of these products all of a
sudden start traveling across state lines.
So in that case, I guess for non-cannabis products or non-cannabis clients,
do you do Do you do regular maintenance where maybe once a year you're doing
proactive searching to see if anyone has violated?
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I don't even do it once a year. I do it once a week. All of your clients?
All of our trademark clients are set up on automatic watch services on our end.
And that watch service will provide me with updates every week on anything that's
filed with the Patent and Trademark Office that could potentially be confusing.
And that gives us the ability to advise the client.
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We can then take steps once this application gets reviewed to either oppose
it or try to cancel it or reach out to that operator and say,
hey, we're Bob's dispensary and wherever.
We view this as a conflict. We want you to drop this application now.
So it's a great point that you brought up. Watch services are incredibly important
for existing brand owners.
(33:25):
Very similar to the way many marketers, I'm sure, use Google Alerts to alert
them when someone's using their brand online.
These trademark watch services that we provide to our clients do something very
similar, but very specifically on the trademark side.
Okay. Interesting. So if you're already already working with an IP lawyer and
you haven't asked about this, make sure that there's some level of watch and
(33:49):
proactive enforcement involved. Okay.
And weekly. Okay. Good to know.
I'd have to say every brand has an issue pop up weekly, but my reports run that
regularly so that nothing is ever going to fall through the cracks.
That makes sense. Okay.
So we've covered some in brand protection, and I want to talk a little bit about
(34:13):
cannabis marketing compliance,
legal compliance, a little bit of the other side of that as far as campaigns
and other ways in which there's an intersection of legal and compliance in cannabis
businesses, but from that marketing and communication standpoint,
what are some of the things that I think it's easy to say marketers need to be compliant.
(34:36):
You need to understand what you're doing. You need to know know what you're
putting out and you need to do it everywhere where you're putting out content.
And then it's another to actually do that in practice. And I also think there's
a level of, if it's not so bad, like if we're, if we're not doing the big two red flags, right?
Like making marketing, sorry, making health claims or marketing to children
(34:58):
that like we're generally okay.
What advice do you have or what do you see come up that might get lost in that conversation and,
And or what do marketers need to be considering from a compliance perspective
that maybe they wouldn't think about unless an attorney told them from the non-brand
protection standpoint?
(35:18):
Right, right. And I mean, a big part of that is the fact that the advertising
and marketing regulations vary so much between jurisdictions, right?
So for a single brand in one jurisdiction.
What may not be incredibly daunting of understanding what the regulations are
in the state of Colorado, the minute you want to start expanding your brand
(35:42):
to other jurisdictions,
you all of a sudden have to relearn all of that. And there's nuance.
And as operators in this space know, especially in Colorado,
the minute new rules are released, the red lines for the next round are constantly coming, right?
So having someone stay on top of what is not necessarily what is the rule now,
(36:03):
but what is the rule going to be or what are the discussions around rule change
is going to be and how does that impact our branding and marketing strategy
eight months, 12 months down the road, right?
Right. I mean, especially in Colorado, we're given a pretty big,
you know, heads up on, hey, here's the red lines where we're considering adopting.
(36:24):
We'll have policy groups, there'll be informational sessions,
and then it'll say, OK, we're adopting them and they go into effect,
you know, whenever it is down the road.
But we routinely work with with folks on the marketing and branding side to
say, here's what's coming down the pipe, not only in your state,
but all of these other states that you have some sort of interest in.
And here's what those changes could potentially mean for your business,
(36:47):
not necessarily just from a compliance, marketing compliance standpoint,
but just operational standpoint as a whole.
Yeah, that's, that's really helpful. And I know, like, at least for us,
we'll, we'll see it on, you know, you can get on the MED's newsletter.
There's different ways where those bodies will actually give you direct communication,
but that's really helpful to know that you guys monitor it, not just from that
(37:10):
marketing and brand protection standpoint, but everything in relation to how
you run your business, because there is, there is so much with that. Right.
And again, on the advertising and marketing specifically, you've got brand and
marketing folks that are working.
What my suggestion is, is make those relationships with compliance folks,
(37:33):
whether they're in-house compliance folks or outside or outside attorneys,
make that a regular relationship.
That communication needs to be constantly open.
It shouldn't be a reactive discussion of, oh, the rule just changed or the law
just changed. Can we do this now?
It should be much more of, we're thinking about doing these things.
(37:56):
Is this something that's going to be available to us down the road?
If so, what changes do we need to make internally to make sure that we can now
advertise in this channel?
I mean, unlike traditional products, media channels like television and radio
and print and billboards, I mean,
they're all over the map in cannabis on what's allowed and what's not.
Sometimes it's very local jurisdiction specific as well.
(38:19):
So, you know, making sure that you've got really good open dialogue with compliance
folks and or attorneys for those compliance regulations, I think is paramount.
Thank you for that. Okay, so last two questions.
So I know at least when I work with lawyers, I'm like, tell me what I need to
know. Tell me what I don't know.
(38:40):
But what can marketers or business owners, what should they be asking their lawyers?
How can we be proactive about it and working with folks like you?
Right. And like I said, part of it is all about what's coming, right?
And how can we set ourselves up for success now, understanding what the regulations
are going to be down the road.
(39:01):
And that comes from everything from consumer privacy and data protection.
I mean, we've got, what are the legal requirements that dispensaries have to
engage in to store customer data or patient data?
How do they comply with some of these data protection laws that are being rolled
out in the country and around the world?
What are your contractual agreements and what do they say as far as liability?
(39:25):
And will that change when regulations
change, having an attorney reviewing these through a lens of...
Not here's what the rule is now, but here's what the rule or the statute could be down the road.
And being able to provide guidance to operators about how we could potentially
change their contracts to limit that liability or to bring into more risk management
(39:48):
functionality is incredibly helpful. helpful.
And that's my biggest thing is, you know, we like to work with folks,
not necessarily as just a service provider.
Like we really do embrace kind of the community of it.
We want to be people that have an open dialogue with our clients constantly.
We don't want it to be a, like I said, they got in trouble because they,
(40:09):
they hit a marketing problem and now the MED is involved and you know,
we're cleaning up a mess.
Certainly there's plenty of that, but we like to work with folks on an ongoing
basis to ensure that those mistakes don't happen.
And part of that, like I said before, was what are the emerging legal issues?
What are the trends that we're seeing in some of these emerging markets?
(40:30):
Can we make those recommendations to these more established markets?
Do we see that maybe we didn't have it all right the first time?
While most of these other states have adopted a lot of what these established
jurisdictions have done, they have have made a number of changes as a result
of looking back and saying, that's not working.
And so how can we take some of those concepts and start introducing them into
(40:55):
more established markets so that we can allow operators in those more established
markets a little bit more leeway and a little bit more opportunity at success?
Yes. And you guys have been very good about engaging with the community.
You've been really generous and helpful and answered our our questions as well.
So, all right. So last question, what it would be, and I think you've been very
(41:16):
clear, so maybe you've already answered this, but what would be your number
one piece of advice for cannabis marketers or business owners today,
if it's different than anything you've said?
Yeah. And it's really just be proactive and not reactive.
You know, one, you're going to save money. Two, you're going to set yourself
up for much greater success if you have an understanding of what the market
(41:40):
regulations are going to be like down the road.
And you're making those changes incrementally now as opposed to,
oh crap, now the rule has changed.
How does this impact us? And you're scrambling to all of a sudden change your
marketing content or the advertising channels or things like that.
So just being proactive, understanding that this is an industry that is not stagnant.
(42:04):
It's constantly changing and it's changing at such a rapid pace that that having
those relationships with compliance experts, with attorneys,
is paramount. Absolutely.
And is there anything else we haven't mentioned today that you want to say before
we wrap up to the audience?
Not really. Just understanding that there's a lot that you can do now to protect
(42:30):
yourselves and set yourself up for success later.
And whether that's, like I said, on the compliance side of things,
or that's more on the IP strategy side of things, the discussions we're having
with forward-thinking operators now, they're not thinking about what's the market
going to look like in a year.
To thinking about what's it going to look like in three or four or five,
and how can we set the building blocks now to ensure we're positioned in a favorable
(42:55):
way down the road, which not only helps you from an operational success standpoint,
it makes your company much more attractive for an exit.
If you've got all of your IP buttoned up, you've got exclusivity around the
country, there's not a million other Bob's dispensaries that you're now dealing
with because you didn't do the proper searching initially,
(43:15):
that sets a company like that up for huge success when ultimately they want
to exit and they have a huge IP portfolio and they've got a marketing strategy
that's compliant and forward-thinking.
That's really good advice.
Okay, Jay, well, how can our audience get a hold of you? Is there any website, email?
How can they find you? LinkedIn? Anything you want to share?
(43:38):
We'll also include it in the show notes, but if you want to let them know, feel free.
Absolutely. So you can check out our website. It's holonlaw.com,
H-O-L-O-N, or they can reach me directly at jkotzker at Holon Law.
And my office number is 303-529-0112.
(43:58):
We're happy to talk to operators all the time about any sort of compliance questions they may have,
strategies they may be implementing going forward,
or giving them an audit of what what they have in place currently and making
recommendations on ways to tighten that up a little bit more or give them a
pat on the back and say, you're doing it right, kid. Keep going.
(44:21):
Nice. Nice. Okay. Well, Jay, thank you so much for taking the time and joining
us on the show. I really appreciate everything you've shared with us today.
Absolutely, Lisa. It's been my pleasure. Thank you, everybody.
You can connect with Jay on LinkedIn and you can connect with us on social media
at Canna Marketing and on our website, thecannabismarketingassociation.com to
(44:42):
learn more about membership,
join the community, and perhaps even join us as a guest. We'll see you next week.
Music.
Music.
(00:12):
Hi, everybody. Welcome to today's podcast episode of Party Like a Marketer,
the podcast dedicated to cannabis marketing, public relations,
and authentic storytelling.
I'm your host, Lisa Buffo, the founder and CEO of Cannabis Marketing Association.
CMA is the producer of this podcast, and the guests here are our members.
(00:33):
If you are a cannabis marketer or looking to join the cannabis industry and
get into a marketing position, Consider joining the CMA membership where we
provide education, best practices, and community and events for cannabis marketers.
Our goal is to help marketers do their nine to five jobs better in this unique
and challenging and growing space.
(00:54):
And the podcast is one way in which we can reach all of you.
But we also have more resources within the membership, including our Slack channel,
our regular webinars and events that we host, as well as downloadables and more
content and information in our online member portal.
Today's guest is Jay Kotzker. Jay is a managing partner at Holon Law Partners.
(01:17):
Jay possesses 20 years of legal experience in all areas of intellectual property
and general business law, including brand development and protection, entity formation,
contract negotiation and drafting, and guiding clients through cannabis business
licensing and operational matters.
Jay routinely interfaces with governmental agencies and has extensive experience
(01:38):
in regulatory compliance, risk management and training, and dispute resolution.
Jay, thank you so much for being here today. day.
Thanks so much, Lisa. I'm excited to be here. Yes. So tell our audience a little
bit about who you are, what you do, your background, and how you got into cannabis.
Absolutely. So I'm based here in Denver. I've been here for 18 years.
(02:00):
I've been a practicing attorney for a little over 20.
And my primary focus during that time has been in intellectual property.
So primarily trademarks and copyrights and trade secrets.
Ultimately, that was how I was brought into the cannabis space well over a decade ago.
Prior to any adult use, I was working with a couple of medical operators who
(02:21):
wanted a little more sophisticated branding.
They wanted something other than a pot leaf or a green cross in their window.
They wanted something that could convey some sort of sophistication or some
sort of elevated class other than what had been typically seen in the industry up to that point.
So I just kind of stumbled into it from a brand perspective,
(02:42):
which is really opportune for this group here and the marketing association as a whole.
And that allowed me to kind of start seeing what was going on on the grassroots
level, especially for medical operators.
And through that time, I learned that there weren't a lot of attorneys working in this space.
And the ones who were, were more criminal defense, DUI possession type attorneys.
(03:05):
They didn't have a lot of transactional knowledge. They didn't have a lot of
regulatory compliance knowledge, and they certainly didn't have a lot of intellectual
property knowledge, all of which was very applicable to operators at the time.
So that allowed me to kind of slide into a space that was underserved or not
served at all. and really start working with medical operators as they transitioned
(03:26):
into the recreational market.
That allowed me to get seven of the very first 11 recreational dispensary license
in the world on behalf of clients here in Colorado, as well as the very first one ever.
So, you know, been in the space for a really long time. That allowed me to transition
into a general counsel role where, as you can imagine,
(03:46):
I was exposed to a lot more on the cannabis side of things than I ever dreamed
aimed through, you know, license expansion and real estate issues and contractual
matters and mergers and acquisitions, bringing a company public,
which is a very exciting thing, as well as allowing them to kind of explore
what it really was like to be one of the very first multi-state operators and
(04:08):
what the legal implications of something like that were, especially very early on and in adult use.
That has allowed me to, you know, really acquire a lot lot of knowledge about
the industry as a whole, I still very much remain, you know.
At the forefront of the branding part of things and the marketing part of things,
I love working with larger brands and helping them create strategies to bring
(04:30):
those products and bring those brands to emerging markets,
to enter into partnership or licensing agreements with operators who are starting
in different jurisdictions,
as well as provide more just general business guidance and valuations and strategies
for expansion to operators all over the country.
I'm currently the managing partner, as you said, of Holon Law Partners.
(04:52):
We've got 12 attorneys spread out around the United States, a number of different
practice groups within the firm.
One of them is IP and sports and entertainment, of which I'm the chair of that practice group.
We also have a very, very robust cannabis practice group made up of seven different
attorneys that have everything from real estate expertise to mergers and acquisitions
(05:14):
to securities to folks that have worked in-house, Cresco Labs and others.
So they know large application writing processes, regulatory compliance,
and basically jurisdictional specific counseling and guidance that we provide
all over the country to operators. writers.
Awesome. Thank you for that background. And we're so excited to have a lawyer
(05:35):
on the show because that's something marketers have lots of questions about.
All the things you talked about, compliance, licensing, IP, trademark.
So I'm excited to talk about all that with you.
But I do want to kick off and get started with the rescheduling discussion.
I know you and I have talked about it. It's something I've talked about on this show.
I've done some presentations on, that that's the thing that's sort of happening
(05:59):
in the background from a political perspective that could have major implications for the industry.
For marketers, of course, if cannabis goes from Schedule 1 to Schedule 3 and
280E goes away, I mean, that changes everything for everybody.
But it means marketing becomes a legitimate business expense and can be written
off, which in theory should and can change budgets in the space.
(06:21):
But as a lawyer and from a legal perspective, want to get your take on what's happening.
What are you talking to clients about? What do you see?
I know you've got some unique insight into this, but what do you see going on
and what's important for marketers to know about this process?
Yeah. I mean, it's still a kind of tumultuous time.
(06:42):
Obviously, back at the end of 2023, we saw the Department of Health and Human
Services recommend to the DEA that marijuana be rescheduled.
It looks like the DEA is getting closer and closer to actually adopting those recommendations.
We don't know necessarily what that may look like. Certainly,
Congress could step in at any point as well and, from a legislative standpoint,
(07:06):
change things dramatically, whether it's rescheduling or descheduling entirely.
Presuming, though, that we're going to be moving from a Schedule 1 to a Schedule
3, there's a whole host of legal issues that come with that.
Operators don't understand, what does this actually mean for me?
The first one is, look, cannabis is not going to all of a sudden be federally legal at this point.
(07:30):
We're simply moving it from one classification, one schedule to another,
which carries with it slightly different and impactful for this industry, to be sure, changes.
All of a sudden, cannabis is not going to become legal in states that don't
authorize medical or adult use cannabis businesses.
We're not going to all of a sudden see publicly traded companies being listed on major U.S.
(07:54):
Exchanges. changes, we may see regulatory agencies come in for the FDA and others
and start implementing new stringent requirements around products that fall under their purview.
And we can talk a little bit more about that later. And more importantly,
most importantly probably is this doesn't allow for any sort of interstate commerce necessary.
(08:16):
We don't necessarily know what that's going to you look like.
But rescheduling, it could make the laws a little bit easier on interstate commerce,
but we don't necessarily know that to be sure.
And it's because cannabis is a little bit different than other products that
move from Schedule 1 to Schedule 3.
And by that, I mean, look, Schedule 3 drugs have gone through a review process.
(08:40):
They still have to be prescribed by a a doctor, they're stringent dispensing
caps and things like that, that doesn't seem to fit very well within an industry
that we've already built.
It's not necessarily that we're going to have a doctor now needing to be prescribing
cannabis flower to somebody.
They would be more prescribing a treatment or a drug that maybe cannabis was
(09:04):
contained within, right?
And there's only a handful of those, Epidiolex being one.
So how that actually works in practice is going to be very unique because we're
not talking about other Schedule 3 things such as Tylenol with codeine or OxyContin,
which is Schedule 2, right?
Which those are branded drugs, but they still very much need prescriptions.
(09:28):
There's a cap on how much can be dispensed in a certain amount of time by various
doctors. So I don't know exactly how that's going to play out from moving schedules.
But as you alluded to, what the biggest deal is,
is that all of a sudden that move in schedules will remove cannabis from schedule
(09:49):
one and then remove any sort of 280E requirements.
And obviously, that is a huge boon for cannabis operators.
The reports that I saw coming out from 2022 showed that cannabis operators paid
more than $1.8 billion in taxes, more than non-cannabis companies of similarly situated.
(10:14):
That means they're getting taxed at a 70% greater tax rate than most legal businesses.
And all these operators know what that means. You know, your rent and your marketing
materials and your payroll and all of these things you can't normally deduct
all of a sudden would be lawfully, you know, lawful deductions, right?
And, you know, hopefully that allows operators to divert a lot more of that
(10:37):
money into marketing into IP protection, into more robust regulatory compliance relationships,
perhaps, while at the same time allowing their businesses to grow and be able
to reap some of the real benefits of operating a legitimate company.
And you had mentioned, and thank you for clarifying, I should have mentioned exactly what 280E is.
(11:02):
But for those who might not know, we've talked about it a lot.
It is the IRS tax code that does not allow cannabis businesses to deduct all
what would be normal business expenses the way others can, which leads to that 70% tax rate. Great.
So in addition to that changing budgets, sort of the way accounting happens,
one thing you and I had talked about was that it could possibly change,
(11:25):
or I think it will change, the federal trademark registration.
Can you explain? Can you talk to the audience about that? What does that mean? Is that a yes?
Maybe? How should they be thinking about it?
Yeah, it's a maybe, but it's something that we should be thinking about and
talking about now, to be sure.
(11:47):
It's generally assumed that the DEA is going to codify these recommendations, right?
And as a result, cannabis trademark owners should be able to more broadly claim
some sort of national trademark rights under federal law.
Currently, the way that it sits now, because of the Controlled Substances Act,
and because there is not a lawful use in commerce, And by that,
(12:11):
the statute means lawful interstate commerce of these products.
Plant touching materials themselves
are not subject or not capable of obtaining federal registration.
Federal registrations are available currently for all sorts of other ancillary
goods and services, right?
All of the hats and the T-shirts and the stickers and the lighters and the rolling
(12:32):
papers and things that you see sold at, you know, in dispensaries.
I've also had a number of clients that are able to protect consulting services
or educational services or things that are not necessarily contained THC.
What this will do, perhaps, and this is yet to be seen, is it will allow those
(12:55):
products that do contain THC
above 0.3% on a dry weight basis to obtain federal trademark protection.
And as I mentioned a little bit before, there's evidence of this specifically
in the federal statutes that list some of the examples of drugs and preparations
that are contained within the schedules.
As I mentioned, OxyContin has a federal trademark and that's a Schedule II drug.
(13:20):
You've got Tylenol with codeine. You've got other hormones and other testosterone-type
drugs that are contained within Schedule III that have federal trademark protection
and are allowed to be used.
Go across state lines, right? So presumably we would have that same ability
here. And that's huge for the industry, obviously.
(13:42):
A caveat to that, which I think is a little interesting in that currently the
federal trademark office also won't accept applications for any hemp derived
products that are consumable,
whether or not they have less than 0.3% THC in them at all.
That would probably remain the same because it's contained under the Farm Bill
(14:05):
and it's subject to the Food and Drug Administration and the Cosmetic Act.
So we may have a little bit of a split there where industrial hemp marks may
not be able to obtain federal registration, but THC-heavy products could potentially
obtain federal registration.
So we'll see how that shakes out as well.
(14:25):
Would you expect the USPTO to tell us if it does get rescheduled,
would they say or how would we know?
Do we just try and see what happens? Yeah, it's really interesting in that going
back a decade now, I've seen the Patent and Trademark Office fluctuate on this several times.
(14:47):
Way back in probably 2015 or 2016, there was a brief period,
and I mean like a week, where the Patent and Trademark Office started allowing
federal trademarks for cannabis-derived products.
And so all of a sudden, attorneys who happened to notice this started filing
all sorts of applications.
And then the Patent and Trademark Office very quickly realized what they had
(15:08):
done and then closed off that avenue for registration.
I don't get the sense or the impression that they will come out and specifically
tell people, hey, we're all of a sudden accepting trademark applications for cannabis products.
The fact is, the trademark office is so inundated with new applications right now. Yeah.
(15:29):
Historically, you filed an
application, the initial review would happen within six or seven months.
That timeframe now is you submit an application and you might get it initially
reviewed at the 12 or 13 month mark.
And that's just due to lack of staffing, more trademark applications being filed
post-COVID, and just the lack of the ability to kind of get through all of those.
(15:52):
So I think the last thing that the trademark office wants right now is a tidal
wave of new applications, which leads me to believe they're not going to go
out there and publicly say, hey, all of a sudden we're now accepting these applications. Right.
Which means forward-thinking operators need to start having those discussions
now about, okay, presuming rescheduling, what does that mean for our brands?
(16:16):
What does that mean for some of the products and the goods and services that we provide?
Are they capable of potentially being included in application later?
And then working with IP counsel that could help set the stage so that once
those prohibitions are eliminated, applications can be filed very quickly.
(16:37):
Because as you can imagine, the word is going to get out really quickly that
the PTO is accepting these applications, and you're going to have a flood of
new applications coming, which in this industry is going to present a whole host of problems.
Problems because unlike typical brands that can get federal trademark protection,
you have a dispensary in Colorado that can brand it in Colorado and can protect
(17:02):
it in the state of Colorado,
but without some sort of partnership or licensing agreement or other sort of
contractual relationship with another operator in a different state,
they really can't apply for federal application, right?
And their protection is limited to the state in which they're actually providing
those goods and services.
And what that means is you could potentially have Bob's dispensary in Colorado.
(17:27):
You could have a Bob's dispensary in California. You could have a Bob's dispensary
in Nevada and moving eastward into these emerging markets.
All of them can generally operate lawfully under the Mark Bob's dispensary in those states.
And they can't prevent the You know, the Colorado dispensary couldn't prevent
the California dispensary from operating under that name.
(17:49):
All of the goods and services, perhaps the ancillary items, the smokers articles
and the hats and the t-shirts could be protected by one of those Bob's dispensaries
and maybe preclude others from being able to sell those.
But the core service of the dispensary itself can't be protected outside the state.
And so when federal registration is allowed, it's going to be a race to the
(18:13):
Patent and Trademark Office to see who can get an application filed first.
Because under federal trademark law, it doesn't matter who was using the mark
first commercially with respect to who gets the registration.
So you could potentially, and I had a client that just experienced this the
other day, they've had Bob's Dispensary has been operating in Colorado, let's say, since 2016.
(18:37):
They don't file any applications. They're protected in the state and they're operating fine.
All of a sudden, the Patent and Trademark Office opens the doors for federal
applications, brand new Bob's Dispensary in Florida files an application.
And regardless of the fact that they're brand new and Bob's in Colorado has
(18:57):
been operating since 2016, Bob's in Florida could potentially get the federal
registration and supersede Bob's Dispensary in Colorado.
Now, there's all sorts of legal minutiae about how that plays out and who has
what rights, and a seasoned trademark attorney can walk those operators through those nuances.
(19:17):
But it could lead to a situation where Bob's in Colorado couldn't expand into
some other states because Bob's Dispensary in Florida now has a federal trademark,
and that gives you national rights to exclude others, whether or not Bob's is
operating in all of these other states around the country.
Yeah, I could see that. Thank you for clarifying. And that makes a lot of sense.
(19:38):
And I did not realize it had gone from I knew six or seven months.
I did not realize it was now as long as 12, which makes a lot of sense.
So, like, are you saying in theory that if rescheduling happened tomorrow and
there was a flood of applications of people who knew this and were anticipating this,
they wouldn't even know or have real guidance for possibly up to a year unless
the USPTO, like, whether they got the applications or not, or it was approved? Right.
(20:05):
Right. And so, you know, presumably we wouldn't see this wave of new applications
being filed unless we had some sort of certainty that says now with this rescheduling,
interstate commerce is lawful.
So we would have some sort of certainty that the registrations could be issued,
but you wouldn't have any certainty of that for at least 12 or 13 months. Absolutely.
(20:28):
I see. So it is, it hinges on the interstate commerce issue. Yeah.
That's right. And that's the function of federal trademark law.
In order to get a federal trademark registration, which allows you to exclude
everyone else nationwide from using something identical or confusingly similar
to that mark, you have to show that you're engaging in lawful interstate commerce.
(20:50):
And we know that that's not possible right now. Got it. Okay.
Thank you for clarifying that. That clarifies for me as well.
Let's kind of go to the beginning of this process for marketers who may be listening
or business owners who are in the early stages who are maybe maybe they are
the bobs in Colorado that hasn't protected their brand yet or they're considering
(21:13):
starting a new business, launching in a new state.
What are some of the things that you would, what's the checklist for marketers in the beginning?
What do you see, what do you do with your clients in that sense?
And also maybe what are some of the common mistakes that folks who don't engage
with the lawyer, you kind of end up cleaning that up?
(21:33):
Like what's the first step that they should know about from a brand protection?
So let's start with the common mistakes because this I see more times than not,
and it's big on the branding and the marketing side of things,
then these are things that can be fixed very early on.
And the primary one is get an attorney involved early, a trademark attorney,
(21:53):
an IP attorney that can help you, one, identify, is your mark distinctive enough?
Because there's not only is it, there's a standard of review that says,
is it confusingly similar to something else that's been filed or approved, but is it distinctive?
Or is it really just descriptive descriptive of the product or the service?
And is it geographically descriptive, right?
(22:14):
If it's Denver Bud Shop, right?
Maybe that's not descriptive, not distinctive enough to allow for federal registration, right?
So let's take a look at your brand and say, is it distinctive enough.
Or are there some things that we need to change to the market itself to make
it a little bit more distinctive so that it's capable of this brand protection at the federal level?
(22:39):
And what that really involves is, let's have a conversation about what the brand
is, the proposed brand is, and let's conduct a search.
And that search is going to be nationwide.
And we do this very regularly for clients. they'll come to us at the infancy
and they'll say, hey, we have three or four or five different names for a new
product line or a new dispensary or whatever the case may be.
(23:03):
And we can very quickly do a knockout search and say, these three, definitely not.
These two probably require a little bit more in-depth of an analysis.
But at least that gives marketers the ability to not not focus their resources
on things that are not going to be fruitful in the end of the day.
(23:24):
I've had a client come to me not long ago who had spent $20,000 building a beautiful
brand for a new dispensary in New York City and very excited about it.
And it incorporated a lot of subway map type things and really cool New York
specific brand elements.
But the word mark they wanted to use, they never went through the process of
(23:48):
saying, is there anybody else using this in the space now?
And within 15 minutes, I was able to get back to them and say.
There is an identical brand in Ohio, there's an identical brand in Florida,
there's an identical brand in Nevada, and there's one in California,
which for a company that has aspirations of,
expanding outside the state of New York was a huge problem for them.
(24:13):
And then further search revealed that the California company had already applied
for federal trademark registration for the hats and the t-shirts and the stickers
and the sunglasses and all of the ancillary products.
So even if the New York company didn't want to move out of the state of New
York, they weren't going to be able to put their brand on all of these ancillary
products that build brand recognition out in the community.
(24:36):
And despite not wanting to give them that reality and that check,
they had to go back and start from scratch with an entirely new brand,
which the membership knows is very time consuming, very expensive,
and certainly not something you want to go back to your executives with and
(24:57):
say, we got to start from scratch.
So conducting a search and having a discussion with IP counsel early on is absolutely imperative.
And that doesn't go just just for word marks, that's taglines or slogans that
a company might use, as well as design elements.
I was just going to ask that those are separate things, right?
(25:18):
It's the word, what is your company name, but also the logo.
All of that needs to be checked out before you run with any of it.
Absolutely. Yeah. And sometimes the logo turns out to be just fine because it
doesn't necessarily contain the wordmark of the brand itself, right?
And so there's ways that we can work with brand designers and graphic designers.
(25:42):
I mean, honestly, Obviously, some of the most productive relationships I have
with clients on the brand development and protection standpoint are because
their graphic designers have the forethought to say,
let's get an attorney involved now while we're still in the tinkering around
and playing around phase so that we can get a lot more guidance on how to navigate
(26:02):
potential obstacles in our way.
So that when we get to a finished product or a finished design element,
we know that one, it's distinctive enough. Two, it's something that we can protect.
And three, we can exclude other people and monetize it in some way,
which ultimately, if you're going to spend this much building brands, you want to be able to do.
Yeah. Okay. So in summary, start early, working with an attorney early,
(26:28):
do your searches and check with counsel before you lock in on a design or a name.
Anything else from the early stages of what else marketers should be thinking
about when it comes to branding, brand protection, and or compliance?
Yeah. And I think part of the discussion I like to have with folks early on
(26:48):
is outside of your very core good or service, right?
Like if you're a dispensary, you're a retail outlet.
What other things could you be providing that we could use as a branding opportunity?
Right. Instead of waiting for rescheduling so that we can protect your brand and on a federal level,
you know, are there educational pamphlets you can provide, you know,
(27:10):
at the point of sale that have your branding on it about safe consumption or
safe handling or safe storage or, you know, whatever the case may be.
Are there community engagement pieces that you can put branding on that allows
us to go to the federal level and get you at least an application submitted so that, look,
it's community engagement, it's education materials about consumption of cannabis
(27:36):
or about the safe handling of cannabis.
That gets you a lot closer to the prize than the t-shirts or the stickers or the hats, perhaps.
So that when these floodgates do open, when there's rescheduling of some sort,
perhaps your application that's already sitting there will be used as the basis
to refuse others that are filed after you because it's so close in similarity
(28:00):
to what the real prize is. Does that make sense?
Yeah, so it's kind of like creating a proactive or offensive strategy in addition to defense.
That's exactly right. I like to akin it to creating a moat around the prize
with the castle in the middle being the cannabis product itself that we can't
yet protect on the federal level.
(28:21):
But if we can connect all these other pieces, we effectively build a defensive
moat around the cannabis product itself so that somebody else couldn't slip
in later on and get a registration for that one thing because all of your other
applications or registrations will be cited as a basis for refusal against them.
(28:42):
Cool. Okay. And then can you speak to what are the consequences of not doing this?
I know you have a little bit, but just so folks really know the importance,
what does that mean when you don't protect your brand and you run into that
situation with the dispensaries or someone else who's got it in these other products first?
(29:04):
Right. And ultimately, it's going to come down to time and expense and capital
expenditure to try to clean up these messes.
If we go back to the Bob's dispensary model, we're going to see all the Bob's
dispensaries at some point be fighting about who has priority,
who can move into states that maybe there's not a Bob's dispensary in already.
(29:25):
Already filing an application early, even if it's for these ancillary products
or services, puts that application in a public database.
And whether that's filing a state trademark registration for the dispensary
services or the actual cannabis products themselves, or it's filing a federal
application for all these ancillary things that we've been talking about,
(29:47):
it creates a public record.
So that when new brand is starting to develop,
presumably they're hiring a trademark attorney to help them navigate this space,
that trademark attorney should locate these applications and steer their clients
away from something that's confusingly similar.
(30:07):
So it acts as another defensive strategy.
It puts the nation on notice effectively, right?
That you're claiming trademark rights in these specific goods and services so
that it may prevent others from trying to adopt something very similar.
And secondarily to that, the more that you can protect now, the more licensing
(30:28):
opportunities it allows you, right?
You can turn around and monetize that IP by licensing those brands into other
states, whether that's through partnership arrangements or solely license agreements
and things like that. Yeah.
Another downside could potentially be, look, going back to the Bob's Dispensary model,
if you've got Bob's Dispensary who has aspirations of expanding outside of their
(30:52):
jurisdiction and they've done nothing to protect themselves other than in the state,
they're going to run into a lot of problems of trying to determine who has seniority,
who has priority between all of these competing dispensaries.
And as you can imagine, that becomes very time-consuming and very expensive.
The last data that I saw was a federal trademark infringement lawsuit,
(31:15):
which is brought in federal court, on average costs about $250,000 to prosecute.
So the last thing you want to do is get into a trademark infringement battle
that you could have avoided early on by taking some of these proactive steps.
Yeah, that's a lot of money. So if you had messed up and someone wanted to pursue
(31:37):
you and they were insistent on seeing it through, you just have to deal with that at that point.
Right. I mean, yeah. Part of the trademark law requires brand owners to police
and enforce their marks or they risk losing their right to that mark.
And so, you know, whether you like it or not, you know, brand owners are going
(31:58):
to have an obligation to go out there and find infringers or find people that
started using the mark after them.
And they're going to have to engage in these kind of legal analyses of what
are our rights? What are our obligations?
Do we have to enforce this mark? Is there potentially a way that we could enter
into a coexistence agreement or a licensing agreement?
But those are all things people are going to have to think about as some of
(32:21):
these interstate commerce walls fall down and all of these products all of a
sudden start traveling across state lines.
So in that case, I guess for non-cannabis products or non-cannabis clients,
do you do Do you do regular maintenance where maybe once a year you're doing
proactive searching to see if anyone has violated?
(32:42):
I don't even do it once a year. I do it once a week. All of your clients?
All of our trademark clients are set up on automatic watch services on our end.
And that watch service will provide me with updates every week on anything that's
filed with the Patent and Trademark Office that could potentially be confusing.
And that gives us the ability to advise the client.
(33:05):
We can then take steps once this application gets reviewed to either oppose
it or try to cancel it or reach out to that operator and say,
hey, we're Bob's dispensary and wherever.
We view this as a conflict. We want you to drop this application now.
So it's a great point that you brought up. Watch services are incredibly important
for existing brand owners.
(33:25):
Very similar to the way many marketers, I'm sure, use Google Alerts to alert
them when someone's using their brand online.
These trademark watch services that we provide to our clients do something very
similar, but very specifically on the trademark side.
Okay. Interesting. So if you're already already working with an IP lawyer and
you haven't asked about this, make sure that there's some level of watch and
(33:49):
proactive enforcement involved. Okay.
And weekly. Okay. Good to know.
I'd have to say every brand has an issue pop up weekly, but my reports run that
regularly so that nothing is ever going to fall through the cracks.
That makes sense. Okay.
So we've covered some in brand protection, and I want to talk a little bit about
(34:13):
cannabis marketing compliance,
legal compliance, a little bit of the other side of that as far as campaigns
and other ways in which there's an intersection of legal and compliance in cannabis
businesses, but from that marketing and communication standpoint,
what are some of the things that I think it's easy to say marketers need to be compliant.
(34:36):
You need to understand what you're doing. You need to know know what you're
putting out and you need to do it everywhere where you're putting out content.
And then it's another to actually do that in practice. And I also think there's
a level of, if it's not so bad, like if we're, if we're not doing the big two red flags, right?
Like making marketing, sorry, making health claims or marketing to children
(34:58):
that like we're generally okay.
What advice do you have or what do you see come up that might get lost in that conversation and,
And or what do marketers need to be considering from a compliance perspective
that maybe they wouldn't think about unless an attorney told them from the non-brand
protection standpoint?
(35:18):
Right, right. And I mean, a big part of that is the fact that the advertising
and marketing regulations vary so much between jurisdictions, right?
So for a single brand in one jurisdiction.
What may not be incredibly daunting of understanding what the regulations are
in the state of Colorado, the minute you want to start expanding your brand
(35:42):
to other jurisdictions,
you all of a sudden have to relearn all of that. And there's nuance.
And as operators in this space know, especially in Colorado,
the minute new rules are released, the red lines for the next round are constantly coming, right?
So having someone stay on top of what is not necessarily what is the rule now,
(36:03):
but what is the rule going to be or what are the discussions around rule change
is going to be and how does that impact our branding and marketing strategy
eight months, 12 months down the road, right?
Right. I mean, especially in Colorado, we're given a pretty big,
you know, heads up on, hey, here's the red lines where we're considering adopting.
(36:24):
We'll have policy groups, there'll be informational sessions,
and then it'll say, OK, we're adopting them and they go into effect,
you know, whenever it is down the road.
But we routinely work with with folks on the marketing and branding side to
say, here's what's coming down the pipe, not only in your state,
but all of these other states that you have some sort of interest in.
And here's what those changes could potentially mean for your business,
(36:47):
not necessarily just from a compliance, marketing compliance standpoint,
but just operational standpoint as a whole.
Yeah, that's, that's really helpful. And I know, like, at least for us,
we'll, we'll see it on, you know, you can get on the MED's newsletter.
There's different ways where those bodies will actually give you direct communication,
but that's really helpful to know that you guys monitor it, not just from that
(37:10):
marketing and brand protection standpoint, but everything in relation to how
you run your business, because there is, there is so much with that. Right.
And again, on the advertising and marketing specifically, you've got brand and
marketing folks that are working.
What my suggestion is, is make those relationships with compliance folks,
(37:33):
whether they're in-house compliance folks or outside or outside attorneys,
make that a regular relationship.
That communication needs to be constantly open.
It shouldn't be a reactive discussion of, oh, the rule just changed or the law
just changed. Can we do this now?
It should be much more of, we're thinking about doing these things.
(37:56):
Is this something that's going to be available to us down the road?
If so, what changes do we need to make internally to make sure that we can now
advertise in this channel?
I mean, unlike traditional products, media channels like television and radio
and print and billboards, I mean,
they're all over the map in cannabis on what's allowed and what's not.
Sometimes it's very local jurisdiction specific as well.
(38:19):
So, you know, making sure that you've got really good open dialogue with compliance
folks and or attorneys for those compliance regulations, I think is paramount.
Thank you for that. Okay, so last two questions.
So I know at least when I work with lawyers, I'm like, tell me what I need to
know. Tell me what I don't know.
(38:40):
But what can marketers or business owners, what should they be asking their lawyers?
How can we be proactive about it and working with folks like you?
Right. And like I said, part of it is all about what's coming, right?
And how can we set ourselves up for success now, understanding what the regulations
are going to be down the road.
(39:01):
And that comes from everything from consumer privacy and data protection.
I mean, we've got, what are the legal requirements that dispensaries have to
engage in to store customer data or patient data?
How do they comply with some of these data protection laws that are being rolled
out in the country and around the world?
What are your contractual agreements and what do they say as far as liability?
(39:25):
And will that change when regulations
change, having an attorney reviewing these through a lens of...
Not here's what the rule is now, but here's what the rule or the statute could be down the road.
And being able to provide guidance to operators about how we could potentially
change their contracts to limit that liability or to bring into more risk management
(39:48):
functionality is incredibly helpful. helpful.
And that's my biggest thing is, you know, we like to work with folks,
not necessarily as just a service provider.
Like we really do embrace kind of the community of it.
We want to be people that have an open dialogue with our clients constantly.
We don't want it to be a, like I said, they got in trouble because they,
(40:09):
they hit a marketing problem and now the MED is involved and you know,
we're cleaning up a mess.
Certainly there's plenty of that, but we like to work with folks on an ongoing
basis to ensure that those mistakes don't happen.
And part of that, like I said before, was what are the emerging legal issues?
What are the trends that we're seeing in some of these emerging markets?
(40:30):
Can we make those recommendations to these more established markets?
Do we see that maybe we didn't have it all right the first time?
While most of these other states have adopted a lot of what these established
jurisdictions have done, they have have made a number of changes as a result
of looking back and saying, that's not working.
And so how can we take some of those concepts and start introducing them into
(40:55):
more established markets so that we can allow operators in those more established
markets a little bit more leeway and a little bit more opportunity at success?
Yes. And you guys have been very good about engaging with the community.
You've been really generous and helpful and answered our our questions as well.
So, all right. So last question, what it would be, and I think you've been very
(41:16):
clear, so maybe you've already answered this, but what would be your number
one piece of advice for cannabis marketers or business owners today,
if it's different than anything you've said?
Yeah. And it's really just be proactive and not reactive.
You know, one, you're going to save money. Two, you're going to set yourself
up for much greater success if you have an understanding of what the market
(41:40):
regulations are going to be like down the road.
And you're making those changes incrementally now as opposed to,
oh crap, now the rule has changed.
How does this impact us? And you're scrambling to all of a sudden change your
marketing content or the advertising channels or things like that.
So just being proactive, understanding that this is an industry that is not stagnant.
(42:04):
It's constantly changing and it's changing at such a rapid pace that that having
those relationships with compliance experts, with attorneys,
is paramount. Absolutely.
And is there anything else we haven't mentioned today that you want to say before
we wrap up to the audience?
Not really. Just understanding that there's a lot that you can do now to protect
(42:30):
yourselves and set yourself up for success later.
And whether that's, like I said, on the compliance side of things,
or that's more on the IP strategy side of things, the discussions we're having
with forward-thinking operators now, they're not thinking about what's the market
going to look like in a year.
To thinking about what's it going to look like in three or four or five,
and how can we set the building blocks now to ensure we're positioned in a favorable
(42:55):
way down the road, which not only helps you from an operational success standpoint,
it makes your company much more attractive for an exit.
If you've got all of your IP buttoned up, you've got exclusivity around the
country, there's not a million other Bob's dispensaries that you're now dealing
with because you didn't do the proper searching initially,
(43:15):
that sets a company like that up for huge success when ultimately they want
to exit and they have a huge IP portfolio and they've got a marketing strategy
that's compliant and forward-thinking.
That's really good advice.
Okay, Jay, well, how can our audience get a hold of you? Is there any website, email?
How can they find you? LinkedIn? Anything you want to share?
(43:38):
We'll also include it in the show notes, but if you want to let them know, feel free.
Absolutely. So you can check out our website. It's holonlaw.com,
H-O-L-O-N, or they can reach me directly at jkotzker at Holon Law.
And my office number is 303-529-0112.
(43:58):
We're happy to talk to operators all the time about any sort of compliance questions they may have,
strategies they may be implementing going forward,
or giving them an audit of what what they have in place currently and making
recommendations on ways to tighten that up a little bit more or give them a
pat on the back and say, you're doing it right, kid. Keep going.
(44:21):
Nice. Nice. Okay. Well, Jay, thank you so much for taking the time and joining
us on the show. I really appreciate everything you've shared with us today.
Absolutely, Lisa. It's been my pleasure. Thank you, everybody.
You can connect with Jay on LinkedIn and you can connect with us on social media
at Canna Marketing and on our website, thecannabismarketingassociation.com to
(44:42):
learn more about membership,
join the community, and perhaps even join us as a guest. We'll see you next week.
Music.
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