On September 26 in Fox Rothschild’s New York City office, the American Foreign Law Association will host a special program, “The Legalization of Marijuana in Canada and the Future of Cannabis Law in the United States.”

The program, featuring Fox partner Matthew Kittay and Gordon Cameron from Stikeman Elliott LLP, will explore the Canadian framework for legalized marijuana and the burgeoning domestic and international market for Canadian cannabis as well the patchwork of laws and regulations in the United States, including an understanding of the U.S. federal government’s ever-evolving approach to marijuana regulation.

Find out more about the program, including registration options, on the AFLA website.

A federal district court in the District of Connecticut recently granted summary judgment to a plaintiff who brought a claim against an employer that withdrew a job offer due to the plaintiff’s positive drug test for marijuana.  This case offers lessons for businesses wading into this new and developing area of employment law.

Cannabis and the law
Copyright: jirkaejc / 123RF Stock Photo

In Noffsinger, the plaintiff was registered under Connecticut’s medical marijuana program and used marijuana to treat post-traumatic stress disorder. Noffsinger initially received a job offer, but it was withdrawn after she informed the employer that she was a medical marijuana user, and later tested positive for THC on a pre-employment drug test. She filed suit, and last year, the district court denied the employer’s motion to dismiss. After discovery, both sides moved for summary judgment on plaintiff’s claim under the Connecticut Palliative Use of Marijuana Act (PUMA).

The court first held there was an implied private right of action under the PUMA, and ultimately that plaintiff established her claim as a matter of law. The Court rejected several of the employer’s arguments in favor of its decision to withdraw the job offer, including that hiring Noffsinger would place the employer in violation of the Drug Free Workplace Act and the Federal False Claims Act due to its status as a federal contractor. Finally, the Court rejected the employer’s argument that while the PUMA protects Plaintiff’s status as a medical marijuana user, it does not specifically protect her use of medical marijuana.

The case is Noffsinger v. SSC Niantic Operating, No. 3:16-cv-01983 (D. Conn.). If you are interested in reviewing a copy of the Opinion, please contact me.

Lessons from the Decision

When dealing with employees who are qualified users under a state-sanctioned medical marijuana program, employers should first and foremost engage the employee in the interactive process to determine if an accommodation for the off-site use of medical marijuana is feasible. This decision must be deliberative and well-documented. Any such decision should not be based on the employee’s “status” as a marijuana user, but rather on the hardship in accommodating the use of marijuana, due to legal, safety, or employee performance concerns.

Fox Rothschild recently published a comprehensive guide for employers entitled Employment Compliance in the Age of Legalized Marijuana where we discuss this topic in more detail and provide employers with more takeaways and best practices.

Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or jmcnelis@foxrothschild.com.

Construction siteAll employers face challenges in navigating issues surrounding legalized marijuana. For construction industry employers, the challenges are particularly difficult given the necessary emphasis on safety.

Last week, my colleague Jeff Polsky, co-chair of Fox’s Labor and Employment Department, recorded a 90-minute webinar for Lorman addressing the issues construction employers face in jurisdictions that have legalized medical or recreational marijuana. Jeff discussed developments in state law, conflicts between state and federal laws, drug testing, maintaining a drug-free workplace, and responding to employees’ requests for accommodation of marijuana-related disabilities. You can purchase the webinar here.

John Shaeffer writes:

Light bulb symbol composed of cannabis, illustrating concept of cannabis-related patentsOn July 30, 2018, United Cannabis Corporation (“UCNN”) filed a lawsuit in Federal District Court in Colorado against Pure Hemp Collective Inc. (“Pure Hemp”) alleging that Pure Hemp infringed U.S. Patent No. 9,730,911 (“the ‘911 Patent”), which is entitled Cannabis Extracts and Methods of Preparing and Using Same.  The ‘911 Patent issues on August 15, 2017, based on an application filed on October 21, 2015.

As is typical in a patent case, the complaint tells us little.  The ‘911 Patent, however, describes its invention as “relat[ing] to the extraction of pharmaceutically active components from plant materials, more particularly [a] botanical drug substance (BDS) … comprising cannabinoids … extracted from cannabis.”  ‘911 Patent at 1:14-17.  The ‘911 Patent’s claims are limited to formulations of what is extracted.  For example, Claim 1 of the ‘911 patent is “[a] liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is terahydrocannabinolic acid.”  ‘911 Patent at 18:29-31.  For UCNN to prove that Pure Hemp infringes Claim 1 of the ‘911 Patent, UCNN must prove that Pure Hemp makes, sells, or uses a product that is or contains this specific formulation.

Now patent law does not protect anything discovered.  Specifically, Section 101 of Patent Act provides:

Whoever invents or discovers any new and useful … composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. § 101.  The United States Supreme Court has “long held that this provision contains an important implicit exception[:] Laws of nature, natural phenomena, and abstract ideas are not patentable.” Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66, 70 (2012). (internal quotation marks and brackets omitted).  In a fairly well-known case, the United States Supreme Court held that the discovery of the location and sequence of genes that dramatically increased a woman’s risk for developing breast cancer was not patentable because all that was discovered is something that already exists in nature. Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 590 (2013).

While there may be something unique and inventive about the way UCNN extracts cannabinoids from cannabis, the ‘911 patent does not claim any such method, even though methods are described in the patent’s specification.  During the examination of the application that matured into the ‘911 Patent, its examiner initially rejected its claims as being not patentable because all that was claimed were compounds already found in the cannabis.  Counsel who prosecuted the ‘911 Patent overcame the examiner’s rejection by arguing that the ‘911 Patent claims a liquid and the compounds in the cannabis are a resin.  While the examiner found this distinction significant enough to allow the ‘911 Patent to issue, we should expect that Pure Hump will argue that what the ‘911 Patent claims are simply a natural phenomena and not entitled to patent protection.  Simply that the distinction between the natural resin form and a liquid is not sufficiently significant to warrant awarding a patent here.  So even if UCNN can prove that Pure Hemp infringing one or more claims of the ‘911 Patent, Pure Hemp can still prove the patent invalid because it does not claim a patentable invention.

In addition to the requirement that the invention claimed in the ‘911 Patent be protectable under Patent Law, Pure Hemp has other roadblocks it can raise in an effort to stop the patent’s enforcement.  Patent Law requires that the patent specification include a written description of the invention and explain how to make – enable – the invention.  Pure Hemp has some strong arguments that the ‘911 Patent fails in both respects.  While the specification of the ‘911 Patent describes a variety of ways to extract all cannabinoids from cannabis, each of its claims assert specific concentrations of particular cannabinoids – e.g. “[a] liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is terahydrocannabinolic acid.  The specification fails to describe how to achieve any of the specific concentrations claimed.  The reason for this disconnect may stem from the fact that during the prosecution of this patent, the examiner argued that the methods for extracting cannabinoids described in the patent were already well-know.  The examiner rejected all the claims based on a generic composition of such extracts as being obvious and/or anticipated.  To overcome, this objection, the patent’s claims were amended to claim specific concentrations of specific cannabinoids even though the specification failed to describe how to obtain such concentration.  This disconnect means that the reader of the patent is not told how to make the invention and raises question as to whether the inventor could so isolate extracted cannabinoids – i.e.  the invention is not enabled and lacks and adequate written description.

John Shaeffer is a partner in the firm’s Litigation Department, based in its Los Angeles office.

Florida’s medical marijuana regulations and laws have been the subject of repeated litigation ever since Amendment Two was passed by voters in 2016.  A recent Florida Court Opinion has ruled in favor of Plaintiffs seeking to expand Florida’s restrictive vertical license law (which requires the license holder to grow, distribute and sell medical marijuana).

Leon County Circuit Judge Charles Dodson ruled that the cap on the number of “medical marijuana treatment centers, (MMTC)” ran afoul of Amendment Two which had no limitation on MMTCs in the Amendment text.

Judge Dodson ruled that the restrictions set forth in the regulations and laws implementing Amendment Two

Directly undermine the clear intent of the amendment, which by its language seeks to prevent arbitrary restriction on the number of MMTCs authorized to conduct business in the state. The amendment mandates the availability and safe use of medical marijuana by qualifying patients.

Additionally, Judge Dodson found that the vertical license model implemented by Florida is unconstitutional because it requires license holders to cultivate, process, and dispense medical marijuana as opposed to providing licenses to those that just want to engage in one part of the medical marijuana process.  Specifically, Judge Dodson found that the language of Amendment Two utilized an “or” when defining MMTCs and Florida’s legislature used an “and” when writing the law defining MMTCs.

Finally, Judge Dodson ruled that limited number of licenses provided by Florida law improperly restricted who could get licenses.  The law ordered health officials to grant licenses to operators who were already up and running in Florida or who were involved in litigation as of January 1, 2017.  Florida’s medical marijuana law also required that a black farmer receive a license and set aside license preferences for the citrus industry (both of these carve outs have been subject to other litigation as well).  Judge Dodson found these restriction amounted to an impermissible “special law”.

Notwithstanding, the dramatic Court Opinion, Judge Dodson declined the Plaintiffs’ request for a temporary injunction.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

E-Book Cover: Employment Compliance in the Age of Legalized MarijuanaThough cannabis is illegal under federal law, at least 30 states and the District of Columbia have legalized cannabis for medical use and nine states, as well as D.C., have legalized it for recreational use—a dichotomy that presents a unique and complex challenge for employers. In a new e-book, Fox attorneys Joseph A. McNelis III, Lee Szor, William Bogot and Joshua Horn provide an overview of federal and state marijuana laws, discuss specific aspects of the employment relationship affected by the legalization of marijuana in certain states, and offer practical guidance for employers on how to navigate this new and developing area of the law.

We invite you to download a PDF of the e-book.

Entrepreneurs looking to enter Massachusetts’ newly minted recreational marijuana market can sleep a bit easier tonight after a statement from U.S. Attorney Andrew Lelling (the top federal prosecutor for the state) regarding his enforcement priorities surrounding marijuana sales.

Cannabis and the law
Copyright: jirkaejc / 123RF Stock Photo

As many in the industry are aware, federal prosecutors for years were guided by the “Cole Memo,” which endorsed a hands-off approach to enforcement against businesses operating where marijuana had been legalized under a state-sanctioned program. But this January, Attorney General Jeff Sessions rescinded the Cole Memo and issued his own Memorandum instructing federal prosecutors to “follow well-established principles that govern all federal prosecutions” in actions involving cannabis-related businesses.

While this announcement initially sent shockwaves through the industry, we counseled companies to cautiously continue business as usual and keep a lookout for statements from individual U.S. Attorneys regarding their enforcement priorities. Massachusetts got such a statement last week. In his Statement, U.S. Attorney Lelling noted that while he cannot, “immunize the residents of the Commonwealth from federal marijuana enforcement,” his office’s resources will be focused on the following:

(1) unauthorized out-of-state marijuana sales

(2) targeted sales to minors

(3) organized criminal groups which use illicit drug sales to fund their activities

According to MassLive, the Chairman of the Massachusetts Cannabis Control Commission, Steven Hoffman, said the statement from the U.S. Attorney was “good news” for the industry and provided “clarity” for businesses entering the market. You can review the full Statement from U.S. Attorney Andrew Lelling here.

Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or jmcnelis@foxrothschild.com.

Nevada legalized the recreational adult-use of marijuana on July 1, 2017 and the state has generated millions in tax revenue as a result. Nonetheless, the Nevada Regulation and Taxation of Marijuana Act (the “Act”) provides that until November 2018, only registered marijuana certificate holders may apply for recreational retail marijuana establishment licenses. The Nevada Department of Taxation (the “Department”) ceased accepting applications at 2017 year’s end.

Nevada state flag on cannabis backgroundThe Act further provides that at least once a year, the Department will determine whether additional marijuana establishments are necessary to support the demand in the state. It was anticipated the Department would begin accepting recreational retail marijuana establishment licenses again in November 2018.

On July 6, 2018, the Department issued a notice of its intent to begin accepting applications for recreational retail marijuana establishment licenses. The notice came sooner than expected, but there’s a catch! The Department is accepting applications under two (2) conditions: (1) the applicant must be a registered medical marijuana establishment certificate holder; and (2) the applicant must be in “good standing” with the Department. The plus side is that such applicants may apply for one (1) or more recreational retail marijuana establishment licenses.

For those prospective applicants meeting the two (2) foregoing conditions, they must act fast. The application acceptance period lasts only ten (10) days – from September 7-20, 2018 (excluding weekend days).

In addition, prospective applicants should not expect to be open for business anytime soon. The application review period begins September 7, 2018 and extends to December 5, 2018. The Department will award conditional licenses no later than December 5, 2018.

There’s another catch! Conditional license holders must be fully operational no later than twelve (12) months following the issuance of a conditional license. If the establishment is not fully operational after twelve (12) months following the issuance of a conditional license, the establishment must surrender the license to the Department, unless an extenuating circumstance applies.

The application can be found on the Nevada Department of Taxation website.

In November 2018, the Department may open up the applicant pool to all persons interested in submitting an application to operate a recreational marijuana establishment – emphasis on may.

Florida’s citrus industry has been ailing and declining for years.  Florida’s recent medical marijuana regulations were designed to help, in part, by providing two medical marijuana licenses for the citrus industry to switch from growing oranges to marijuana.

As I’ve posted before, Florida medical marijuana licensing regulations have been the subject of repeated litigation challenges.  See posts here, here and here.  Now, the most recent challenge involves this citrus preference rule.

Louis Del Favero Orchids (“Orchids”) is challenging the rule.  The orchid company argues that the rule fails to carry out the law, which gives preference for up to two medical marijuana licenses to applicants who own “facilities” that were used to process citrus.

Orchids claims that the rule actually gives preference to applicants who simply own “property” that was once used for citrus-processing which is different than the requirement set forth in the law that preference be given to applicants who own “facilities” that were once used for citrus processing.

Orchids bought Florida property that included a facility once used to process orange juice in an effort to increase their chances to obtain a Florida medical marijuana license.

However, Florida’s Department of Health’s position is that there’s nothing in the law that requires a “facility” to be a structure.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.