Month: October 2019

Hemp-CBD Pet Foods Are Everywhere But Are They Legal?

According to recent reporting, pet industry spending is expected to reach $96 billion by 2020 with CBD as one of its fastest growing sections. Following the enactment of the Agricultural Improvement Act of 2018 (“2018 Farm Bill”), there has been a huge interest in the use of hemp-derived cannabidiol (“Hemp-CBD”) for our furry friends. Yet, public demand for Hemp-CBD pet products may be pushing the market ahead regardless of legal requirements.

While there are many Hemp-CBD pet products on the U.S. market, this blog post provides a brief overview of the regulatory framework surrounding Hemp-CBD pet foods.

FEDERAL POLICIES

Hours following the passage of the 2018 Farm Bill, Scott Gottlieb issued a statement in which the then-FDA Commission clarified that the federal legalization of the crop did not strip the agency of its regulatory authority over products containing hemp and its derived compounds, including Hemp-CBD pet foods.

Pursuant to Sections 301(ll) and 201(ff)(3)(B) of the Food, Drug and Cosmetic Act (“FD&CA”), food cannot contain an ingredient also found in an approved drug. Because the FDA approved CBD as an active ingredient in Epidiolex, a drug used in the treatment of epilepsy, for which substantial clinical investigations have been instituted, the FDA posits that it is unlawful to use CBD as an active ingredient in human and pet foods.

There is an exception to this rule if the substance was “marketed as” a conventional food before the new drug investigations were authorized; however, based on available evidence, FDA has concluded that this is not the case for CBD. Consequently, the sale and marketing of Hemp-CBD pet foods currently violates FDA policies.

The FDA has limited its enforcement actions against Hemp-CBD products for pets by issuing warning letters to companies that have been making unsubstantiated, egregious claims about the therapeutic value of their products. Therefore, if a company decides to enter the Hemp-CBD pet market regardless of FDA policy, it should, at a minimum, refrain from making any health claims.

STATE LAWS

Although the FDA prohibits the sale and marketing of Hemp-CBD pet foods in interstate commerce, several states have enacted legislation that expressly legalized the sale of these products. Oregon, for example, authorizes the manufacture, distribution and sale of Hemp-CBD pet foods, which are limited to “dog and cat” foods containing no more than 0.3 percent total THC. In addition, Hemp-CBD pet foods manufactured, sold and marketed in the Beaver State must meet other testing requirements imposed by the Oregon Health Authority, including but not limited to microbiological contaminants.

Other states have not taken a position on the sale of these products, rendering these products illegal at worse and unregulated at best.

So similarly to Hemp-CBD human foods, Hemp-CBD pet foods cannot lawfully be sold throughout the United States. As such, manufacturers, distributors and retailers of Hemp-CBD pet foods should consult with regulatory attorneys to understand and mitigate the risk of enforcement action by the FDA as well as state and local enforcement groups that prohibit the sale of these products.

For more information on this issue, please contact our hemp regulatory team.

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Hemp-CBD Across State Lines: Louisiana

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Each Sunday, we summarize a new state in alphabetical order. Today, we head to the bayou: Louisiana.

Louisiana lawmakers recently adopted House Bill 138 (HB 138) and House Bill 491 (HB 491) in light of the 2018 Farm Bill. HB 138 amends Louisiana’s definition of marijuana to exclude “industrial hemp that is in the possession, custody, or control of a person who holds a license issued by the Louisiana Department of Agriculture and Forestry, or is cultivated and processed in accordance with the U.S. Agriculture Improvement Act of 2018.” In turn, HB 138 defines industrial hemp as “the plant Cannabis sativa and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids and salts of isomers, whether growing or not, with a delta-9-tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis and cultivated and processed in accordance with the U.S. Agriculture Improvement Act of 2018, or the plan submitted by the Louisiana Department of Agriculture and Forestry that is in compliance with the U.S. Department of Agriculture rules.” In Louisiana, hemp is only legal if it meets the THC concentration outlined in the 2018 Farm Bill and also was cultivated and processed legally, either in Lousiana or elsewhere.

HB 491 lays out the details of Louisiana’s hemp cultivation plan. The Louisiana Department of Agriculture and Forestry (LDAF) oversees the program. LDAF issues the following licenses:

  • Grower License – authorizes the licensee to cultivate, handle and transport industrial hemp;
  • Processor License – authorizes the licensee to handle, process and transport industrial hemp;
  • Seed Producer – authorizes the licensee to produce, transport and sell industrial hemp seed; and
  • Contract Carrier – authorizes the licensee to transport industrial hemp (required when the transporter is not the licensed grower or processor of the plant material).

LDAF has not yet begun issuing these licenses as the USDA has yet to approve any state plan, including Louisiana’s. With regards to hemp cultivation, HB 491 tracks the farm bill closely. It is worth mentioning that any person transporting or delivering hemp in Louisiana must carry a dated invoice, bill of lading, or manifest which shall include the seller and purchaser’s name and address, the specific origin and destination, and the quantity of hemp. That’s important to note for anyone traveling through Louisiana with hemp.

HB 491 also covers Hemp-CBD products. No person may process or sell (1) any part of hemp for inhalation, (2) any alcoholic beverage containing CBD, or (3) any food product or beverage containing CBD unless the FDA approves CBD as a food additive. All Hemp-CBD products must be labeled and registered in accordance with Louisiana’s Food, Drug and Cosmetic Law (R.S. 40:601 et seq.). Hemp-CBD may not be marketed as a dietary supplement. In addition, Hemp-CBD labels must meet the following criteria and be approved by the Louisiana Department of Health:

  • Contain the following language: “This product has not been evaluated by the Food and Drug Administration and is not intended to diagnose, treat, cure, or prevent any disease.”
  • Contain no medical claim
  • Have a scannable bar code, QR code, or web address linked to a Certificate of Analysis (COA)

COAs for Hemp-CBD products in Louisiana must contain the following:

  • The batch identification number, date received, date of completion, and the method of analysis for each test conducted.
  • Test results identifying the cannabinoid profile by percentage of dry weight, solvents, pesticides, microbials, and heavy metals.

Retailer sellers of Hemp-CBD must (1) register with the Office of Alcohol Tobacco Control (OATC) and (2) meet the above specific labeling and testing requirements. Hemp-CBD may only be sold by businesses holding a CBD Dealer Permit from OATC, which requires a location in Louisiana where products are stored and/or sold. CBD Dealer Permit applicants must also have been residents of the state of Louisiana for two years prior to applying. These provisions make the online sale of Hemp-CBD in Louisiana impractical in most cases.

Stay tuned to the Canna Law Blog for developments on hemp and Hemp CBD in Louisana and other states across the country. For previous coverage in this series, check out the links below:

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CBD Products and False Advertising Under the Lanham Act

A few weeks ago, I wrote a Hemp/CBD litigation forecast in which I predicted that at some point a CBD company will make use of the Lanham Act by claiming that a competitor is engaging in false or misleading advertising. (See here). In that post I promised to go into the Lanham Act in further detail and address an important case on the United States Supreme Court’s docket this term. Here goes:

What is the Lanham Act?

The Lanham Act, also known as the Trademark Act of 1946, is the principal federal statute that governs trademarks, service marks, and unfair competition. Although the Lanham Act is generally thought of as a trademark statute, the Lanham Act also protects businesses against unfair competition from competitors who use false or misleading advertising or labeling. Notably, consumers do not have standing under the Lanham Act.

The statutory language providing for false or misleading advertising claims is found in 15 U.S.C. § 1125(a)(1):

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

The Lanham Act’s stated goal is “protecting persons engaged in commerce within the control of Congress against unfair competition.” In a seminal Lanham Act case in 2014 (Lexmark International, Inc. v. Static Control Components, Inc) the Supreme Court explained that the concept of “unfair competition” has long been “understood to be concerned with injuries to business reputation and present and future sales.” The Supreme Court ruled persons with standing to bring Lanham Act claims include any plaintiff who can “allege an injury to a commercial interest in reputation or sales.”

What are the elements of a false or misleading advertising claim under the Lanham Act?

To prevail on a Lanham Act claim, a plaintiff must plead and prove that their competitor made (1) a false or misleading statement, (2) in connection with commercial advertising or promotion, that (3) was material, (4) was made in interstate commerce, and (5) damaged or will likely damage the plaintiff.

The false or misleading requirement is shown if either (a) the challenged advertisement is literally false, i.e., “false on its face,” or (b) the advertisement, while not literally false, is nevertheless likely to mislead or confuse customers. Literal falsity, however, may be proven by implication—where the words or images, considered in context, necessarily imply a false message, the advertisement is literally false.

“Puffery” is not actionable under the Lanham Act. Puffery is quintessential “sales talk,” i.e. an exaggeration or overstatement expressed in broad, vague, and commendatory language. As one federal appellate court has stated, “The ‘puffing’ rule amounts to a seller’s privilege to lie his head off, so long as he says nothing specific.” Puffery differs from misdescriptions or false representations of specific characteristic of a product – which the Lanham Act forbids.

The “in connection with commercial advertising or promotion” element has been subject to various interpretations. Generally speaking, it means any widespread communication through print or broadcast media (and includes the internet) made for the purpose of influencing consumers to purchase the defendant’s goods or services. Some courts have held this includes dissemination of information at trade shows or to wholesalers that were not actual consumers of the products.

Keep in mind that there is a multitude of cases interpreting and applying the Lanham Act and each of its elements. Don’t just assume you have claim – the law in the Ninth Circuit may not be the same in the Second Circuit and exacting research is often required.

What remedies are available under the Lanham Act?

A Lanham Act claim plaintiff may seek an injunction against the false or misleading advertising, monetary damages and, in some cases, attorneys’ fees. This is another area in which careful jurisdiction-specific research is needed before rushing to court. Injunctions—i.e. a court order compelling the defendant to stop the false or misleading advertising—are a typical remedy.

The court may also “in its discretion” award (a) defendant’s profits resulting from the false or misleading advertising (a/k/a disgorgement), (b) any damages sustained by the plaintiff caused by the false or misleading advertisment, and (c) costs for a “willful violation.” Critically, a plaintiff must show a causal relationship between the false advertisement and a decline in the plaintiff’s projected profits. This is often very difficult. When seeking disgorgement, however, the plaintiff need only rely on defendant’s profits and plaintiffs often find this easier to prove. (But see below re the Supreme Court).

Another twist on remedies is that the Lanham Act permits the court to order the defendant to engage in “corrective advertising.” This may mean the defendant has to retrain its sales personnel or spend money to “fix” the damage done by the misleading or false ads. Courts are more inclined to consider this remedy where a defendant is making false claims about its products that bear on the public health. (See here, here, here and here for the many reasons why making health claims about your CBD products is a bad idea, and add potential liability under the Lanham Act to the list).

What is the Lanham Act case before the Supreme Court about?

In a word: damages. A split emerged in the past decade whether the remedy of disgorgement requires establishing willfulness on the part of the defendant. The case is Romag Fasteners, Inc. v. Fossil, Inc. (Supreme Court Docket No. 18-1233). The question presented is “Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a), id. § 1125(a).” The federal appellate courts are split starkly: the Third through Seventh Circuit and the Federal Circuit do not require a plaintiff to establish willfulness for disgorgement of profits, the remaining circuits do.

Although the question appears (by using the term “infringer”) confined to trademark cases brought under the Lanham Act, most commentators expect the Supreme Court’s decision to apply to false advertising claims as well because section 1125(a) applies to false advertising claims. A ruling that willfulness is required for disgorgement would work to the disadvantage of plaintiffs, a ruling willfulness is not would create more risk for defendants. Our international team of intellectual property attorneys will be keeping a close eye on this case so stay tuned.

Should you bring a Lanham Act lawsuit against a competitor making false or misleading claims about their CBD products?

Unfortunately, I’ll have to trot out the trope of “it all depends.” That answer is especially true here because whether a Lanham Act claim is a good value proposition for your business decision depends on the egregiousness of the false or misleading advertising, the difficulty of proving your lost profits, the pending Supreme Court decision on disgorgement, and your willingness to incur attorneys’ fees that you may not recover. claims. If your goal is to stop a CBD industry competitor from gaining market share based on false claims about its products, consider issuing a cease-and-desist letter that raises the specter of a Lanham Act lawsuit as a first step.

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Hemp-CBD Across State Lines: Kentucky

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Each Sunday, we summarize a new state in alphabetical order. Today, we turn to Kentucky. This might come as a surprise to some readers, but Kentucky is one of the more hemp friendly states in the U.S.

Kentucky’s definition of industrial hemp mirrors the definition in the 2014 Federal Farm Bill. The Kentucky Department of Agriculture (“KDA”) oversees the state’s Industrial Hemp Research Pilot Program (the “Program”). Per the program, licenses are required to cultivate, handle, process, and market hemp. The application period this year for cultivators, as well as processors and handlers, has already closed.

To legally grow hemp, a cultivator must apply with KDA. Kentucky, unlike many other states, has robust regulations and requirements for hemp cultivators. Kentucky includes express provisions for hemp pesticide use, and requires all hemp cultivators to enter into a hemp grower licensing agreement with KDA. This is much more comprehensive than some other states that have little oversight over hemp cultivators.

Kentucky also imposes strict licensing requirements on hemp processors and hemp handlers. Hemp licensees must follow strict hemp manufacturing, testing, and labeling requirements . There are even animal feed requirements. Hemp in its wholesale form also may not be sold to non-licensees within Kentucky.

In Kentucky, Hemp CBD products are lawful, but certain hemp products are clearly prohibited including the following:

  • Hemp cigarettes;
  • Hemp cigars;
  • Chew, dip, or other smokeless material consisting of hemp leaf material or hemp floral material; and
  • Hemp leaf material or floral material teas.

In addition, only hemp license holders may possess or distribute whole hemp buds, ground hemp floral material, ground hemp leaf material, or any hemp product with more than 0.3 delta-9-THC.

As we’ve written previously, Kentucky is one of the few states that actually prohibits smokeable hemp, in spite of its pretty lax standards when it comes to the sale of Hemp CBD (in stark contrast to states like California or even the FDA, which claim that many Hemp CBD products are unlawful but say nothing about smokeable hemp). Though the regulations are not quite as clear on vapor products, given the current climate around vapor products generally and Kentucky’s position on other smokeable hemp products, Kentucky is not a good state in which to distribute any smokable hemp products.

Stay tuned to the Canna Law Blog for developments on hemp and Hemp CBD in Kansas and other states across the country. For previous coverage in this series, check out the links below:

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Oregon Hemp Webinar: Join Us Today at 12:30 PST!

It can be difficult forecasting your business’ future in the rapidly evolving hemp industry. From the signing of 2018’s Farm Bill legalizing industrial hemp at the federal level, to the rise of CBD as a purported wündercure, hemp has rapidly become the hottest commodity around. But between the big headlines, hemp industry players have grappled with unclear legal frameworks and a spate of million-dollar lawsuits.

Oregon has been a champion of the hemp industry since first legalizing industrial hemp at the state level back in 2015. The state continues to roll out new regulations and refine its regime. In a very impressive public-private commitment, Oregon State University announced it would be launching the United States’ largest hemp research facility this June.

So how do you keep up with the changes and protect your business? How do new entrepreneurs catch a ride on the relentless hemp-CBD train without getting steamrolled? Stakeholders in the industry at every level should join Harris Bricken this afternoon for a free, one-hour webinar about leveraging Oregon hemp for local and national success.

Portland-based corporate lawyers Vince Sliwoski and Nathalie Bougenies will be joined by litigation colleagues Jesse Mondry and Jihee Ahn to present this webinar just in time for harvest season. These lawyers represent a wide array of hemp businesses, from local family farms to national retail conglomerates. The format of their upcoming webinar covers:

  1. The legal framework of Oregon hemp, including CBD, and anticipated changes;
  2. The federal laws that continue to inform and affect Oregon hemp, CBD and related products;
  3. The rise of industry lawsuits, and the issues at play; and
  4. Your questions, which will be welcome throughout the webinar.

Register Here to join us today, October 3rd at 12:30 p.m. Pacific.

And if you cannot attend, feel free to register and submit questions prior to the event. Our Oregon hemp team will do all our best to field all of them, and we will post a recording afterward.

We hope to see you soon!

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