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CannaBeat – March 24, 2023

CannaBeat is a curated biweekly selection of top news stories impacting business, research, and culture in the cannabis industry, crafted by Emerge Law Group.

Emerge’s Hot Take

With Cannabis Cultivator Cap Lifted, Growers Face New Jersey’s Challenges

After a short and fast 2-year state license cap, there is no longer any limit on the number of cultivation licenses in New Jersey. As the industry continues to expand, New Jersey cannabis operators face the same hurdles as operators in other states. First, and what seems to be a problem across many states, a majority of municipalities have “opted out” of permitting cannabis businesses. This fuels the next issue: real estate. With few jurisdictions permitting operators, there are very limited spaces to set up their operations and sell product. Lastly, one of the original and biggest hurdles: raising capital. Many investors have seen the roller coaster of the cannabis industry in other states and can be hesitant to invest in this new market. Unfortunately, it looks like deja vu. California, for example, faces very similar issues; a majority of jurisdictions have banned commercial activity, the market is limited, and capital is hard to come by. After 27 years since the first legalization of medical cannabis, operators are fighting harder than ever to stay afloat. Emerge shareholder Duncan Delano of New Jersey opines: “Challenges are inevitable. But I continue to be impressed by the tenacity and resourcefulness of our clients in New Jersey and New York, as their options open up. The industry here is developing at light speed.”

Other Noteworthy News

Treasury Secretary Says Regulators Are “Looking For Solutions” to Marijuana Banking Problem As Schumer Recommits To Addressing the Issue
As Senate Majority Leader Chuck Schumer (D-NY) renews his commitment to tackling marijuana banking reform this year, the head of the U.S. Treasury Department says that regulators are also exploring options to address the issue. During a hearing before the Senate Finance Committee on Thursday, Sen. Michael Bennet (D-CO) pressed Treasury Secretary Janet Yellen about the fact that the cannabis industry lacks access to traditional financial services under prohibition. The senator argued that marijuana as a commodity is more “stable” than cryptocurrency, yet banking regulations have allowed for large investments in the latter that ultimately contributed to the collapse of at least one bank this month. Yellen replied by saying that, “as you pointed out, in the case of marijuana, it is against federal law, and that’s a barrier, unfortunately, to appropriate banking services for the industry.” “It’s something the regulators have been looking for solutions to,” she said…….
Coalition Sues NY Marijuana Regulations To Open Licensing Process
A coalition of medical marijuana license holders and recreational market hopefuls have filed a lawsuit in state Supreme Court seeking to force New York’s Office of Cannabis Management to open the retail licensing process “for all applicants immediately.”
The slow rollout of licensing for entrepreneurs beyond those with a documented marijuana conviction in their family has angered small business owners who thought they would have an earlier shot at one of the state’s first retail sales licenses, including those defined under the law as “social equity” applicants. It has also frustrated large companies that entered the market early but are still permitted to sell only to certified medical patients. The challengers argue that equal access to the first recreational licensing process should have been available to them under the state’s 2021 cannabis law, which specifies that “the initial adult-use cannabis retail dispensary license application period shall be opened for all applicants at the same time.” The lawsuit, filed in Albany, claims that by creating limited, “conditional” licensing categories that opened prior to the general process, regulators have “overstepped their rule-making authority” and subverted legislators’ intent. The agency’s “arbitrary and capricious foray into legislative policymaking has harmed those individuals the (cannabis law) was designed to benefit ... and diverted (regulators’) attention from the enforcement tasks” that the law requires, according to the court petition…….
Kentucky Senate Passes Bill to Legalize Medical Marijuana
The Kentucky Senate voted Thursday to legalize medical marijuana in the state, delivering a breakthrough endorsement after years of resisting access to cannabis for people suffering from a series of debilitating illnesses. The measure was passed by the Senate on a 26-11 vote, sending it the House, which has supported medical cannabis measures in the past. Republicans have supermajorities in both chambers. “This is one of those issues where you take out the ledger and you list the pros and cons,” said Republican Sen. Stephen West, the bill's lead sponsor. "And it’s a long list on both sides. But for me personally, the pros outweigh the cons.” Republican Sen. Gary Boswell opposed the bill, referring to cannabis as “a drug, not a medicine.” He said the qualifying medical categories listed in the measure are “too broad.” The dramatic vote came before lawmakers started an extended break to give Gov. Andy Beshear time to consider signing or vetoing the stacks of bills sent to him. The House can take up the medical marijuana proposal in late March, when lawmakers will reconvene for the final two days of this year's legislative session…..
Las Vegas Unveils Unusual First Cannabis Residency
Adult freedom and indulging in multiple pleasures have been Las Vegas themes ever since gambling was legalized again in Nevada on March 19, 1931. Gambling had been outlawed in 1910 after being a legal activity, but Sin City has enjoyed 92 years of living on the edge since gaming became legal again. Las Vegas Convention and Visitors Authority in 2020 adopted a new variation of its former catchphrase "What Happens Here, Stays Here," which Sin City began promoting in one of marketing's most successful advertising campaigns in 2003. The new slogan for tourism adopted in January 2020 is: "What Happens Here, Only Happens Here." The catchphrase might suggest anything goes in Sin City, but among the vices remaining illegal on Las Vegas Strip are prostitution, though sex-for-hire is legal in some parts of Nevada, and smoking pot. You can't legally smoke pot in public in Las Vegas, though you can possess cannabis and legally smoke it in a private residence.
Cannabis Brands Products Steeped In Nostalgia Aim To Attract Generational Consumers
Products Steeped In Nostalgia Aim To Attract Generational Consumers
https://mjbizdaily.com/cannabis-brands-products-steeped-in-nostalgia-aim-to-attract-generational-consumers/
Cannabis companies nationwide are infusing a heavy dose of nostalgia in their products and building brands based on fond memories, good times and the soundtracks of some of our formative years. Resurrecting defunct record labels, rock-band encores and cult-classic throwbacks are all part of the remix. Other forms of entertainment are finding wild success and new audiences with blasts from the past, evident at the box office and streaming services. “Top Gun: Maverick,” a near carbon copy of the original, was nominated for five Academy Awards, including Best Picture after grossing nearly $1.5 billion. Metallica’s 1986 masterpiece, “Master of Puppets,” the title track of the band’s third album, climbed into Spotify’s Top 10 most-played songs last year after playing a key element in the popular Netflix series “Stranger Things,” which introduced throngs of younger listeners to the metal icons. The comedy duo Steve Martin and Martin Short, who first paired up in the 1986 movie “Three Amigos!” have hit streaming gold on Hulu’s “Only Murders in the Building,” joining other contemporaries of that era finding new life in the digital era, including another comeback story for the Karate Kid in Netflix’s “Cobra Kai.” Nostalgia not only evokes positive memories, belonging and coming of age, research has shown it affects consumer behavior and increases purchases……

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CannaBeat is a weekly brief on news, business, and culture in the cannabis industry curated by members of Emerge Law Group's distinguished Cannabis Industry Group.
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PsychedeLinks – March 17, 2023

PsychedeLinks is a curated selection of top news stories impacting business, research, and culture in the psychedelics ecosystem, crafted by Emerge Law Group’s groundbreaking Psychedelics Group.

 Emerge’s Hot Take

Oregon Closer to Magic Mushroom Therapy, But Has Setback
Last week, more than 100 future Oregon facilitators graduated from InnerTrek’s psilocybin facilitator training program. Congrats to those students! Soon enough those facilitators will be licensed by the Oregon Health Authority (OHA) and ready to provide psilocybin services to clients. But without any currently licensed OHA services centers or manufacturers, there are no clients for facilitators to guide and no psilocybin products to administer. It’s a classic chicken and egg scenario. It isn’t clear yet how many service centers will be licensed and operational by the end of the year and many facilitators may be without a job for longer than initially anticipated. “The service center to facilitator ratio may be out of whack for quite some time. So, facilitators will be forced to wait it out, apply for service center licenses of their own to address the bottleneck, or maybe even turn (or return) to the underground,” says Emerge attorney Kaci Hohmann.

 Other Noteworthy News

Psychedelics Could Revolutionize Couples Therapy
“Proponents of psychedelic use expect the U.S. Food and Drug Administration (FDA) to approve MDMA as a treatment for post-traumatic stress disorder (PTSD) within the next two years. If that happens, it could potentially open the door to other therapeutic uses of the drug—possibly including couples therapy. Research on MDMA in couples therapy is limited, but the practice has a long history. Some therapists legally used MDMA in couples counseling in the 1970s and 1980s. Effective as they can be, though, experts say it’s a mistake to think that psychedelics offer a one-way ticket to marital bliss.”
Vermont Legislators File Four Bills that Would Legalize Psychedelics and Decriminalize All Drugs
“Four major drug reform bills have been introduced in the Vermont State Legislature to decriminalize simple possession of all drugs, expand harm reduction services, remove criminal penalties for using and selling psilocybin and decriminalize certain psychedelic plants and fungi. Nearly a third of their 150-member House of Representatives have co-sponsored H.423, an all-drug decriminalization legislation sponsored by Reps. Logan Nicoll (D) and Taylor Small (P/D). Rep. Vyhovsky (P/D) has joined forces with ten other senators on the S.119 companion bill, making Vermont on its way to becoming the promised psychedelics land. H.439, sponsored by Rep. Brian Cina (P/D), would completely decriminalize psilocybin, mescaline and peyote in Vermont by removing them from Vermont's definition of hallucinogenic drugs. S.114 ,the other proposed bill by Sen. Martine Gulick (D) would not only remove the famed psilocybin mushroom from Vermont's drug classification, but also take an entire step above her colleague's effort to create a working group dedicated to studying the potential physical and mental health benefits of these substances. The specific psilocybin bill has been assigned to the Senate Health and Welfare Committee for deliberation, while all other related bills have been referred to their respective chamber's judiciary committee.”
Washington Senate Approves Scaled-Down Psilocybin Bill to Prepare State for Future Psychedelic Services
“The Washington State Senate has approved a bill to create a task force promoting research into psilocybin and developing a pathway for legal access to the psychedelic.
The legislation from Sen. Jesse Salomon (D)—which was effectively gutted in an earlier Senate committee to exclude original regulated access provisions—cleared the full chamber in a 41-7 vote on Tuesday. It now heads to the House. Senate Democrats cheered the passage, but advocates remain disappointed about the extent to which the bill was watered down in committee. That 81-page bill was reduced to an eight-page bill mandating the formation of a task force to explore regulatory pathways for the psychedelic in the future. It’s possible, of course, that House lawmakers may seek to further amend it in their chamber.”
Colorado’s Proposition 122: Too Soon for the Mushroom Boom?
“Is Colorado's passage of Prop. 122 a bridge too far for federal law enforcement? We have yet to see what the federal government's enforcement position will be with regard to legalizing magic mushrooms, much less DMT or Mescaline. Will the Department of Justice sit back and allow states to continue to legalize other Schedule 1 Controlled Substances without some federal interference? Alternatively, will Merrick Garland's Department of Justice issue a "mushroom memorandum" akin to the now-rescinded Cole Memorandum of 2013 for cannabis? As they say, history is often bound to be repeated. While Psilocybin may have a faster federal legalization trajectory than cannabis has, Colorado is wise to create a robust regulatory framework to stave off possible federal enforcement of the Controlled Substances Act. Industry participants need to understand the potential risks, and armed with a hefty dose of risk tolerance, seriously address compliance with state law. Is it too soon for a mushroom boom? We will have to wait and see.”
Vancouver Company Inks MDMA and Psilocybin Distribution Agreement in Australia
“Vancouver-based drug manufacturer and formulator Optimi Health has signed a distribution agreement to supply the Australian market with its MDMA formulation and psilocybin capsules. The products will be exported to Australia by July 1, 2023, when authorized psychiatrists can begin prescribing MDMA and psilocybin for specific mental health conditions. The distribution agreement is with Mind Medicine Australia (MMA), a leading charitable organization and patient advocacy group seeking to expand access to legal psychedelic-assisted therapies, and marks Optimi Health’s first international MDMA and psilocybin sale. All products destined for the Australian market will be manufactured, encapsulated and packaged inside Optimi’s facility under GMP-compliant protocols, and will follow Health Canada’s controlled substances export laws. To provide equitable access to its products, Optimi will allocate a percentage of product sales towards a fund managed by MMA to assist low-income earners and others who face systemic barriers to access, with those details to be announced in the coming weeks.”

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PsychedeLinks is a curated selection of top news stories impacting business, research, and culture in the psychedelics ecosystem, crafted by Emerge Law Group’s groundbreaking Psychedelics Group.
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CannaBeat – March 10, 2023

CannaBeat is a curated biweekly selection of top news stories impacting business, research, and culture in the cannabis industry, crafted by Emerge Law Group.

Emerge’s Hot Take

Emerald Triangle Communities Were Built On Cannabis. Legalization Has Pushed Them To the Brink

Legalization in California seemed like a dream come true for the cannabis industry, home of the Emerald Triangle. Abide by the rules and regulations in exchange for the opportunity to have a legal business. Six years later, and the price of cannabis is unbelievably low, businesses are closing, and the illegal market is flourishing. According to coverage by HighTimes and Forbes, cannabis sales declined in 2022, and many believe it wasn’t because people were consuming less.

The Emerald Tringle seems to be hit the hardest as cannabis is a base for much the community’s economy. Farmers in Humboldt reported that even though they sold all their product, they come in at loss for the year. Farm closures reverberate throughout Trinity County. Local businesses that depended on the patronage of the famers and their employees are laying people off and cutting hours. Some have lost so much revenue that they may close. In Mendocino, it is estimated that nearly 70% of operators might not remain in the legal market.

Besides overregulation, two major culprits are said to be the roots of the larger issues within the industry: high taxes and lack of shelf space. In attempt to fix the first problem, the State eliminated the cultivation tax in July of 2022. As for shelf space, 56% (302/539) of California jurisdictions still do not allow any type of commercial cannabis operations. There are only about 1000 licensed dispensaries serving 40 million residents. Delia Rojas of Emerge Law Group says that “the power local jurisdictions hold is frustrating, especially when residents of communities where a majority voted in favor of prop 64 haven’t experienced the product of their vote. Fear still runs rampant in much of the state. Education and advocacy continue to be important to wipe away the stigma surrounding this plant.”

Other Noteworthy News

Mendocino Growers Ask California To Address County’s Cannabis Licensing
A trade association representing cannabis growers in California’s Mendocino County has asked the state government for an “urgent intervention” in the county’s licensing process, citing concerns that many farmers’ license applications won’t be processed by a July 1, 2023, deadline. The Mendocino Cannabis Department and local government have failed to “establish a process capable of moving good-faith cannabis operators towards state annual licensure,” the Mendocino Cannabis Alliance (MCA) claims in a Feb. 8 letter to California Gov. Gavin Newsom and state Department of Cannabis Control Director Nicole Elliott. The letter charges that by the July deadline, the Mendocino Cannabis Department (MCD) will have licensed only 256 “prioritized” marijuana operators in the county, “implying that nearly 70% of Mendocino’s 841 current operators have no path forward to remain in the legal market,” according to an accompanying news release. “Further, among over 500 ‘deprioritized’ operators, MCA has found that a substantial number have been deprioritized incorrectly based on demonstrably false claims of tax delinquency or lack of state licensure.” MCA Executive Director Michael Katz said Mendocino County has “no functional permit program in Mendocino, and no plan to create one.”
Oklahoma Voters Reject Marijuana Legalization Ballot Initiative
Oklahoma voters have rejected a ballot initiative that would have legalized marijuana for adult use in the state on Tuesday. For most counties across the state, the cannabis reform measure—State Question 820—was the only proposal on the ballot, a unique scenario in the history of the legalization movement. Advocates tried to put the reform on the November 2022 ballot, but delays in signature verification by officials and the state Supreme Court’s subsequent decision in litigation meant that it missed the window to qualify for that cycle. In October, Gov. Kevin Stitt (R) called a special election for the cannabis measure that took place on Tuesday.
UConn Launches New Cannabis Cultivation Minor
The University of Connecticut announced a new minor in Cannabis Cultivation for students receiving specialized training in this growing field. “Since we launched the nation’s first cannabis horticulture course, UConn has been a leader in cannabis education and research,” says Indrajeet Chaubey, dean of the College of Agriculture, Health and Natural Resources. “We are thrilled to add another mechanism for students to formalize the skills, knowledge, and expertise in cannabis studies that they gain while at UConn.” Led by professors of plant science Gerald Berkowitz and Matthew DeBacco, the 15-credit minor was formalized in the spring 2023 semester. It provides training in the propagation, cultivation, commercial production, maintenance, processing, and potential markets for and uses of one species of cannabis, Cannabis sativa. As part of the minor, students can receive credit for approved internships with growers and companies to provide students with experiential learning opportunities and exposure to jobs.
Justice Department Website Opens Portal For Those Seeking Presidential Pardon Certificates
After a several month delay, the Justice Department has opened the online application process for those persons eligible to receive certificates indicating that their marijuana-related convictions have been pardoned by the President. The website began accepting applications hours after a notice published in the Federal Register stated that the Office of the Pardon Attorney had “developed the subject form to collect information from potential pardon recipients.” In its notice, the Office estimated that as many as 20,000 people may apply to receive pardon certificates.

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CannaBeat is a weekly brief on news, business, and culture in the cannabis industry curated by members of Emerge Law Group's distinguished Cannabis Industry Group.
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DEA Takes a Rare Step Forward for Telehealth

Author: Matt Brockmeier, Emerge Of Counsel Attorney

The Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (the Act) amended the Controlled Substances Act (CSA) to help prevent the illegal distribution of controlled substances on the internet. The Act required an in-person medical evaluation before prescribing or otherwise dispensing controlled substances online. It also established seven exceptions to that requirement, allowing practitioners to prescribe medications for a patient without first evaluating that patient in person. One exception allowed DEA to waive the in-person requirement during the COVID Public Health Emergency (PHE). During the pandemic several companies began providing large volumes of controlled substances via telehealth under that exception, including ketamine and Adderall. However, the exception it is set to expire on May 11, 2023, threatening the future of the nascent telehealth prescription industry.

Falling within the Act’s definition of the ‘‘practice of telemedicine’’ is ‘‘a practitioner who has obtained from the [DEA Administrator] a special registration under [21 U.S.C. 831(h)].’’ 21 U.S.C. 802(54)(E) contemplates that the DEA must issue regulations to effectuate this special registration provision. In 2017, under President Trump, DEA was statutorily instructed to finalize a rule on the registration’s application process and procedures. Disappointingly, as of this writing, DEA has yet to promulgate “special registration” rules, despite pleas from patients, clinicians, and the medical and business communities.

Analysts familiar with DEA’s intransigence and stall tactics predicted that the expiration of the PHE declaration would devastate the ketamine telehealth industry. In a surprise to most, including this author, on March 1 DEA issued a notice of rulemaking that would authorize telemedicine where 1) the prescribing practitioner has not conducted an in-person medical evaluation with the patient; 2) the prescription was issued pursuant to a telemedicine encounter and 3) the telemedicine encounter results in a prescription for controlled medications. There are some limitations, including that prescribing practitioners could only issue telehealth prescriptions for up to a 30-day supply, and there are labeling and recordkeeping requirements. Nonetheless, this is an encouraging development from an agency with a reputation for being dilatory and obstructionist, especially when it comes to making regulated medicines available to patients in need.

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PsychedeLinks – March 3, 2023

PsychedeLinks is a curated selection of top news stories impacting business, research, and culture in the psychedelics ecosystem, crafted by Emerge Law Group’s groundbreaking Psychedelics Group.

 Emerge’s Hot Take

DEA Proposes New Telemedicine Regulations
The Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (the Act) amended the Controlled Substances Act (CSA) in an attempt to prevent the illegal distribution of controlled substances on the internet. Among other things, the Act required an in-person medical evaluation as a prerequisite to prescribing or otherwise dispensing controlled substances online. One exception allowed DEA to waive the in-person requirement during the COVID Public Health Emergency (PHE). During the pandemic a number of companies began providing a not insignificant volume of controlled substances via telehealth, namely ketamine and Adderall, subject to this exception. However, that exception is set to expire on May 11, 2023, thrusting a nascent industry into uncertainty over the past few months. Analysts familiar with DEA’s intransigence and stall tactics predicted that the ketamine telehealth industry would be devastated by the expiration of the PHE declaration. In a surprise to most, on March 1, 2023, DEA issued a notice of rulemaking that would authorize telemedicine where 1) the prescribing practitioner has not conducted an in-person medical evaluation with the patient; 2) the prescription was issued pursuant to a telemedicine encounter and 3) the telemedicine encounter results in a prescription for controlled medications. There are some limitations, including that prescribing practitioners will only be able to issue telehealth prescriptions for up to a 30-day supply of a controlled substance, and there are labeling and recordkeeping requirements. Some telehealth providers and advocates have concerns about some of the limitations in the DEA’s proposed rules, but for ketamine in general, “this is an encouraging development from an agency that has earned a reputation for being dilatory and obstructionist at times”, says Emerge Of Counsel attorney, Matt Brockmeier.

 Other Noteworthy News

Bill Seeks Personal Data Collection On People Who Use Legal Psilocybin in Oregon
“State Sen. Elizabeth Steiner, D-Portland, wants the state to monitor whether Oregon’s landmark law allowing the controlled use of psilocybin is working as intended — and not just for ‘rich white people.’ The Oregon Senate Health Committee on Monday heard her bill, Senate Bill 303, which would require psilocybin service centers to collect data on the health, education, race, income and other sensitive information of adults that use the hallucinogenic drug under their supervision. Steiner’s bill is in response to concerns that Oregon’s psilocybin program will only be accessible to those who can afford what could be hefty price tags service centers charge. It’s also meant to answer questions about the effectiveness of the first-of-its-kind program, which was pitched to voters as a means to address mental health and included a requirement that a report be issued on safety and efficacy after the first two years. Opponents of the bill argue it will mean another administrative burden that will further drive up the cost of psilocybin sessions. They also say its data collection requirement will have a chilling effect on people who may already be wary of using the federally illegal drug for its purported benefits.”
New Mexico Lawmakers Approve Psilocybin Study Bill
“New Mexico lawmakers advanced legislation on Wednesday to create a state body that would study the possibility of launching a psilocybin therapy program for patients with certain mental health conditions who could benefit from using the psychedelic. The House Health and Human Services approved the bill, sponsored by Rep. Christine Trujillo (D), in a unanimous voice vote. The measure now heads to the House Appropriations & Finance Committee. The legislation would establish an eight-member Psilocybin Advisory Group appointed by the governor that would be responsible for studying and making recommendations on the ‘feasibility’ of creating a psilocybin therapy program. Members would specifically need to consider policies to create a regulatory framework for psilocybin cultivation, manufacturing and dispensing, as well as ‘treatment guidelines for the use of psilocybin-derived products to treat certain mental health issues, including patient selection and provider training and certification.’”
More and More Psychedelic Reform Bills in the Pipeline Throughout United States
“2023 has already shown extensive advances in the realm of psychedelic policy reform. About a dozen states in the US have put forward legislation that would see multiple psychedelic substances from ketamine, MDMA, psilocybin, and more receive downgraded criminalization designations. In addition, lawmakers are as open as ever to the idea of psychedelics’ therapeutic potential. Special task forces or state-sponsored research bodies have been created or are set to be voted on which would seek to properly educate voters and state governing bodies on the possibilities associated with psychedelic therapy. With direct support from the Governor’s office, two new psychedelic research bills have been unanimously approved by Hawaii’s Senate Ways & Means Committee. While not exactly psychedelic policy, an important bill is brewing in Colorado’s state legislature. It would allow cities throughout the state to institute “overdose prevention centers”, similar to those seen in Europe, where citizens could use drugs regardless of their legality in a medically supervised environment.”
Untangling Anorexia: Psychedelics Offer Hope for a Neglected Condition
“Characterised by self-starvation, anorexia nervosa is a psychiatric disorder that mainly affects adolescent women, who become invested in restricting their food intake. A fear of weight gain can morph into a general fear of loss of control. In the past, clinicians have looked to pharmaceuticals for help, but several antidepressants, antipsychotics and nutritional or hormonal supplements have failed in clinical trials[4]. As a result, no medicine has been licensed. Another approach attempts to reset the outlook of a person with anorexia nervosa with psychedelics. Several clinical trials of psilocybin — the active ingredient in magic mushrooms — are underway. ‘If you experience that you can still have life, that you can still have hope, this helps to motivate the patient for further therapy,’ says Hubertus Himmerich, a clinician and researcher at King’s College London, who is leading a trial of psilocybin for anorexia, using ‘COMP360’ tablets of synthesized psilocybin manufactured by COMPASS Pathways. Two other trials of psilocybin therapy for anorexia nervosa are also ongoing.”

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PsychedeLinks is a curated selection of top news stories impacting business, research, and culture in the psychedelics ecosystem, crafted by Emerge Law Group’s groundbreaking Psychedelics Group.
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Critical Terms for Intellectual Property License Agreements (Part 2)

Author: Sean Clancy

An audit provision is a clause in an intellectual property license agreement that provides the right for the licensee (the party receiving the license) or the licensor (the party granting the license) to inspect the records of the other party to verify compliance with the terms of the agreement. This provision is included in intellectual property license agreements to ensure that both parties are complying with the terms of the agreement.

One common reason for an audit is to ensure that the licensee is paying the correct royalty fee. The license agreement will typically specify the amount of royalties that the licensee must pay for the use of the intellectual property. An audit provision gives the licensor the right to inspect the licensee’s records to ensure that the correct royalty fees are being paid. This helps to prevent the licensee from underreporting the amount of royalties owed, which would be a breach of the agreement.

Another reason for an audit is to ensure that the licensee is using the intellectual property in accordance with the terms of the license agreement. For example, if the license agreement restricts the use of the intellectual property to a certain geographic area or market segment, an audit provision can help to ensure that the licensee is not using the intellectual property outside that area. This helps to prevent unauthorized use of the intellectual property.

In addition to protecting the interests of both parties, an audit provision can also help to avoid disputes that may arise under the license agreement. For example, if the licensee disputes the amount of royalties owed, an audit provides a legal right for licensee to review royalty reporting without resorting to a lawsuit. Similarly, if the licensor believes that the licensee is using the intellectual property outside the terms of the agreement, an audit can provide evidence about whether or not a violation is occurring.

It is also important to consider limitations on the use of the audit provision. For example, the audit provision may specify that audits can only be conducted during business hours and with reasonable advance notice. Additionally, the frequency of audits may be limited to prevent excessive intrusion into the licensee’s business.

An audit provision is another critical component of an intellectual property license agreement. It provides a means for verifying compliance with the terms of the agreement, resolving disputes, and preventing unauthorized use of the intellectual property. The inclusion of an audit provision in an intellectual property license agreement helps to protect the interests of both parties and ensures that the license agreement is properly enforced.

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Trademark applicants – beware spoofed calls that impersonate the USPTO

Scammers have recently started calling trademark customers and falsely claiming to be an employee with the United States Patent and Trademark Office (USPTO). The scammers use a tactic called “spoofing,” where they trick phone networks into displaying a fraudulent name, number, and location. They’re trying to trick you into believing you’re talking to the USPTO, so they can steal money or personal information from you.

If you receive a call from someone you suspect is a scammer, do not give them any personal identifying or payment information. The USPTO will never ask for your personal or payment information over the phone.

If you ever have questions about the status of trademark applications or your trademark rights, reach out to Emerge Law Group intellectual property practice group chair, Sean Clancy.

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Emerge Attorneys Named on the Top 200 Global Psychedelic Lawyers and Policy & Regulatory Experts List

We are excited to share that two of our team members have been included in the Top 200 Global Psychedelic Lawyers and Policy & Regulatory Experts List by the Cannabis Law Report! Dave Kopilak and Sean Clancy are both shareholders at Emerge and have been driving forces in the psychedelics space.

Dave was the primary drafter of Oregon’s Psilocybin Services Act (“Measure 109”) which was approved by Oregon voters on November 3, 2020.  Dave was also an advisor to the Oregon Health Authority regarding IRC 280E and tax issues facing psilocybin businesses under Measure 109. As a seasoned corporate business attorney, he brings sharp insight and decades of legal experience to the numerous challenges that Oregon-licensed psilocybin businesses face.

Sean was also part of the small team of Emerge Law Group attorneys that researched and drafted Measure 109.  In September 2022, he served on an Oregon Health Authority Rules Advisory Committee, providing recommendations about the rules that will govern the Measure 109 program.  As a general business attorney who also specializes in intellectual property, Sean represents psychedelic clients on both routine and complex matters including high value brands and technology, plus all variety of contracts and strategic relationships.

As a full-service business law firm that has specialized in the cannabis space for many years, while also serving a variety of conventional industries, Emerge Law Group is familiar with the unique and complex issues that businesses and individuals face in an emerging and highly regulated industry. Emerge Law Group currently assists a variety of clients in connection with Oregon’s psilocybin law and the legal psychedelics space.

Learn more about our Psychedelics Practice Group here, and be sure to subscribe to our specially curated bi-weekly psychedelic news report, PsychedeLinks.

Join us in celebrating Dave & Sean!

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Emerge Law Group Announces New Shareholders

Emerge Law Group is pleased to announce that Jay Purcell and Duncan Delano have been promoted to shareholders at the firm, effective January 1, 2023.

Since Jay joined Emerge in March 2022, he has worked on transactions involving cannabis companies in Watsonville, Santa Cruz, Sacramento, Shingle Springs, Goleta, Cathedral City, Palm Springs and San Rafael; including a California drone company with European operations, a New York digital agency’s acquisition of a Brazilian target’s assets, an Oregon/Canada hemp company, a California social media startup, a Los Angeles digital agency focused on queer audiences and a Virginia/California solar energy startup. He works on financings, mergers/acquisitions and day-to-day corporate work.

Jay was a College Scholar at Cornell University’s College of Arts & Sciences, triple-majoring in Government, History, and Philosophy. He stayed at Cornell for a masters in Africana Studies, during which he was a Visiting Scholar at the University of KwaZulu-Natal in Durban. After graduating from Berkeley Law in 2011, his career began in Silicon Valley at Wilson Sonsini Goodrich & Rosati. At WSGR, he worked with small and growing tech companies as they negotiated investments, executive hiring/separation, equity incentives and exits. Jay also worked with the venture funds, angels, family offices, and banks who made and monitored investments in these companies. In 2016, Jay began focusing on cannabis businesses, first in Santa Rosa and San Francisco, and beginning in 2018, in Los Angeles and Southern California. He has worked with companies operating throughout California, including Humboldt, Sonoma, Napa, San Francisco, Alameda, Santa Cruz, Los Angeles, Riverside and San Bernadino counties. These companies include the entire range of licensees: nursery, cultivation, manufacturing, distribution, testing, storefront retail, and non-storefront retail. Jay has worked on both sides of social equity companies in San Francisco, Oakland, and Los Angeles.

Jay was elected to the Board of Directors of the Berkeley Law Alumni Association in 2014, serving as a Board Officer since 2018. For several years, he led or co-led its Outreach Committee, responsible for linking underrepresented admits to alumni mentors during the admissions process.

Duncan joined Emerge in August 2021, leading Emerge’s expansion to New Jersey and New York.  Over the past year and a half, Duncan has grown Emerge’s east coast business into a vibrant, full-service practice servicing cannabis applicants, investors, landlords, and others in the newly regulated cannabis markets.  Duncan helps cannabis businesses of all types apply for and obtain state and local licenses throughout New Jersey and New York.  This includes locating and financing their operations, and finding success in a highly regulated and rapidly changing industry.

Duncan’s practice also focuses on commercial real estate and general corporate law, representing entrepreneurs, lenders, borrowers, developers, funds and commercial landlords and tenants in a variety of business and commercial real estate transactions, including mortgage and mezzanine financing and syndications, joint ventures, commercial leasing, and acquisitions and dispositions of real property and debt.

Duncan has a long record of pro bono service, working with immigrants seeking asylum and reuniting mothers and children separated at the border, successfully petitioning the President to commute the sentence of a non-violent drug offender, and expunging the records of those convicted of marijuana crimes.  Duncan serves on the New York City Bar Association’s Drugs and the Law Committee and on the committee’s Psychedelic Subcommittee.  The Committee recently organized a free seminar series in conjunction with the City Bar Justice Center to educate aspiring New York cannabis entrepreneurs on a variety of pertinent legal startup topics.

Prior to joining Emerge, Duncan worked for seven years at two AM Law 100 firms in New York City, Schulte Roth & Zabel LLP and Haynes and Boone, LLP, in their commercial real estate groups after spending the first three years of his career in Portland, Oregon in a general corporate practice.  Duncan graduated magna cum laude from Lewis & Clark Law School in 2010 with a Certificate in Environmental and Natural Resources Law.

Join us in celebrating our newest shareholders! Congratulations Jay & Duncan!

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Beneficial Owners – New Reporting Rules

Authors:
Kaci Hohmann and Delia Rojas, Attorneys at Emerge Law Group

On September 30, 2022, the federal Financial Crimes Enforcement Network (“FinCEN”) published final regulations governing beneficial ownership reporting requirements under the Corporate Transparency Act (the “Final Rule”). The Final Rule substantially mirrors the draft rules covered in our earlier blog on the topic. The Final Rule becomes effective January 1, 2024. See our summary and tips below to prepare for the upcoming reporting requirements.

Who must report?

The Final Rule requires a “reporting company” to report certain information to FinCEN regarding its beneficial owners and company applicants. A “reporting company” is any domestic or foreign entity created or registered to do business in a U.S. state or Indian tribal jurisdiction (“Reporting Company”). This definition would seemingly capture nearly all US businesses, although there are 23 categories of exemptions set forth in the Final Rule, including (i) certain inactive entities, (ii) insurance companies, (iii) financial institutions, and (iv) large operating companies employing more than 20 full-time employees, having an operating presence in the U.S., and having gross receipts for sales in the U.S. exceeding $5,000,000.

Who is reported?

Each Reporting Company must report information concerning its “beneficial owners,” which includes any individual who, directly or indirectly, exercises “substantial control” over or owns or controls 25% or more of the “ownership interests” of the Reporting Company (“Beneficial Owners”).

An individual has “substantial control” over a Reporting Company if they serve as a senior officer, have authority over the appointment or removal of any senior officer or a majority of the directors (or similar body), or directs, determines, or substantially influences important Reporting Company decisions.  FinCEN indicated that it designed the “substantial control” element to capture the key individuals of the Reporting Company who direct its actions and to “focus the applicability [of the Final Rule] on the senior officer element of the definition of substantial control”.

In the Final Rule, the definition of “ownership interest’’ more broadly focuses on types of arrangements that directly or indirectly convey ownership interests, such as equity, convertible instruments, and put options. Additionally, the definition of “ownership interest” now includes a catch-all provision for “any other instrument, contract, arrangement, understanding, relationship, or other mechanism used to establish ownership.” Importantly, any option or similar interest of the Reporting Company is treated as exercised in determining “ownership interest.”

In response to extensive public comments on the topic of a “company applicant”, the Final Rule requires Reporting Companies created or registered on or after January 1, 2024, to report information related to a “company applicant.” A company applicant is the individual(s) primarily responsible for directly filing the document that creates or registers a Reporting Company, such as a law firm (“Company Applicant”).  Entities created or registered before January 1, 2024, are not required to report information with respect to any “company applicant.”

What information must reports include?

The initial report for the Reporting Company must include the legal name, any trade name or d/b/a name, principal place of business address in the U.S., state of formation or registration, and its IRS employee identification number. The Reporting Company must also provide the full name, date of birth, current address, the number and issuing jurisdiction of a passport, identification card, or driver’s license, and a photo of the identification document used for each Beneficial Owner and Company Applicant.

When must reports be filed?

Reporting Companies in existence prior to January 1, 2024 must file its initial report before January 1, 2025. Reporting Companies created or registered on or after January 1, 2024 must file its initial report within 30 calendar days of receiving actual notice that it was created or registered to do business with a secretary of state or similar office. If a Reporting Company’s exemption status changes, a report must be filed within 30 calendar days of the change in exemption status. Lastly, if there are any changes to the information filed in the initial report, an updated report must be submitted within 30 calendar days of the change.

What proactive compliance steps should businesses take?

The Final Rule imposes considerable new federal compliance requirements on businesses. Although some entities will be exempted, many will not. Every business should investigate whether it is a Reporting Company or qualifies for an exemption. A Reporting Company’s failure to comply with the reporting requirements could result in significant penalties and possible imprisonment.

Businesses with reporting obligations should create and implement internal policies and procedures to ensure that all reporting is timely and properly made. It’s not too early to begin collecting the information your business may need to report. Additionally, businesses and business attorneys should consider adding provisions to certain agreements requiring the applicable people to cooperation with required information collection and reporting, and update confidentiality clauses to carve out exceptions for reporting requirements.

If you have any questions or concerns about how the beneficial reporting requirements may impact your business, contact an attorney from our Business Group.

See the final rule here.

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FRANCHISE LAW

Franchisors

Franchise law is a heavily regulated area of law.  We help clients expand their businesses through franchising and other distribution methods. We have experience in many industries including, restaurants, health, and beauty, alcohol, and cannabis among others. Our representative services include the following:

Franchisees

We also help potential franchisees interested in buying a franchise. We are able to assist with evaluation of franchise opportunities with respect to:

Alternative Structures

However, not all businesses are suited to franchise. We are also experienced with helping clients structure alternative distribution methods to prevent classification as a franchise.

MERGERS AND ACQUISITIONS

Our M&A attorneys are highly experienced in counseling clients who are considering acquisitions or exit strategies.  We have many years of experience handling deals of various types and sizes, ranging from sales of small closely-held business, private companies, and publicly-traded corporations.  We have represented business owners, private equity firms and investment banks in a wide range of industries. 

We have a deep business bench, and Emerge attorneys have handled transactions of all shapes and sizes.  Whether your deal is valued at $100,000 or $100,000,000, our experienced attorneys will guide you through the deal process.

We understand the intensity, technical skill and judgment needed to get deals done, and we provide our clients with timely, practical and cost-effective legal advice.  We are highly capable in all aspects of M&A, including the following:

CANNABIS INDUSTRY

Emerge Law Group is highly experienced in the cannabis industry.  We have helped many clients obtain state licenses and local permits to operate cannabis businesses throughout California, Oregon, and Washington.

Emerge attorneys were instrumental in the drafting and passage of Oregon Measure 91, legalizing marijuana in the State of Oregon, and have represented cannabis businesses well before many law firms were willing to enter the cannabis industry. As a firm that has provided legal services in the cannabis space for many years, we are familiar with the unique and complex issues businesses and individuals face in an emerging and highly regulated industry.

We regularly help clients with:

Cannabis laws and rules are also regularly changing.  Members of our team are dedicated to attending legislative hearings, state agency and local city and county meetings to stay up-to-date on any new changes and how to adjust to any new changes.

See our Cannabis Industry page for more information.

PSYCHEDELICS

There is tremendous excitement about the potential for psychedelic drugs to benefit a wide variety of populations, including terminally ill patients suffering with anxiety and depression. Until recently, psychedelic substances have been accessible only in the illicit market and are illegal under federal and state to manufacture, distribute, or possess. These substances have, since 1970, been treated as having no legitimate medical use, and no commercial application. As such, no one invested in this area or required legal services, outside of the criminal context.

Today, researchers in a multitude of clinical studies are proving the medical safety and efficacy of these medicines, with the objective of changing the treatment of these substances under the Controlled Substances Act. Companies are now actively raising money to develop intellectual property and seize market opportunities associated with psychedelic drugs.

In addition, advocates at the state and local levels are not waiting for the rescheduling of these substances and are active in undertaking efforts to decriminalize these substances and/or make them affirmatively legal under state and/or municipal law. Decriminalization already has occurred in cities including Denver, Oakland, Santa Cruz, and Ann Arbor. Oregon is poised to be the first state to make psilocybin therapy affirmatively legal. Emerge Law Group is working with a wide array of clients pushing forward in this emerging area.

See our Psychedelics Practice Group page for more information.

TAXATION

CORPORATE AND PARTNERSHIP TAX

Businesses of all kinds benefit from a customized but systematic approach to structuring legal relationships. Emerge Law Group helps businesses and business owners with a variety of tax planning matters.

Representative client services include:

ESTATE PLANNING

Estate planning encompasses everything from a will and power of attorney to combined estate and business succession planning. In almost all cases, the purpose of the plan is to help the client protect those they care about most in the event they can no longer be there for them.

Emerge Law Group has experience with a wide range of tools used in estate planning, including wills, trusts, and family business entity planning.

TAX CONTROVERSIES

Emerge Law Group can assist with the resolution of difficult tax controversies. Our areas of emphasis and experience include:

REAL ESTATE TRANSACTIONS

Emerge Law Group assists clients with a wide range of real estate transactional matters.  We regularly help clients with:

LAND USE

Emerge Law Group also assists clients with all aspects of local government land use and development processes, ranging from preliminary property analyses and building permit issues to complex land use reviews and hearings. Our attorneys are experienced in obtaining land use entitlements and development permits for a wide range of uses.

We regularly help clients with:

Above all, we understand the value of working with cities and counties to enhance communities while developing the land to its potential. We strive to create solutions to land use issues that serve to better our clients and the communities in which they live and work.

LITIGATION AND ALTERNATIVE DISPUTE RESOLUTION

The attorneys in Emerge Law Group’s Litigation and Alternative Dispute Resolution practice group litigate commercial, intellectual property, and public interest matters in state and federal courts, as well as private mediation and arbitration proceedings.  Our lawyers have represented national and regional financial institutions, major media, entertainment and technology companies, and other Fortune 500 companies in a broad array of high-stakes disputes.  Our team of litigators has handled leading cases that have shaped the law in cutting-edge business, technology, free speech, and public interest impact lawsuits in trial and the courts of appeal.

We have particular expertise in handling civil litigation and regulatory enforcement matters in the cannabis and psychedelic industries.  While many firms claim expertise in the these industries, few have our depth of experience successfully litigating contract, trademark, partnership, shareholder, land use, and real estate disputes in court and arbitration.  Even fewer firms have our level of experience handling writ of mandate proceedings against the government regulators.

Our litigators practice in California, Oregon, and Washington, but have appeared in state and federal courts nationwide.  Our knowledge of our clients’ businesses, goals and concerns, and our experience litigating at the highest levels, give us unique insight into possible outcomes and pitfalls as we continuously confront issues of new impression.

No matter what the industry, we pride ourselves in achieving our clients’ objectives through efficient and creative solutions primarily designed to avoid disputes in the first place—which is always the best litigation strategy.  Many times, our clients obtain excellent outcomes before or at the earliest stages of litigation because our adversaries quickly recognize the challenges they will face in litigating against us.  When litigation is unavoidable, however, we work hard to provide our clients with both cost-efficient and “big firm” quality representation.

 

INTELLECTUAL PROPERTY

Your intellectual property (or “IP”) strategy can harness your most valuable information and intangible assets including your name, your brand, your designs, your content, your services, and your products — what makes your business stand apart in a competitive world.  We can help you evaluate and build your IP portfolio, then secure it, monetize it, and protect it.

IP encompasses multiple areas of law and different types of information or material.

Our Intellectual Property practice focuses on:

TRADEMARK

Trademarks include names, signs, logos, designs, phrases, slogans, expressions, and sometimes even colors, sounds, or smells that identify or distinguish one business compared to others.  Trademark protection is fundamental in securing your “brand.”

COPYRIGHT

Copyright covers original works of creative authorship fixed in a tangible medium of expression.  This includes literary, dramatic, musical, and artistic works, such as poetry, novels, designs, movies, songs, computer software, and architecture. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.  Depending upon the type of work, “moral rights” (such as the right of attribution) may be implicated as well.

TRADE SECRET

Trade secret laws can vary somewhat between states, but generally trade secrets cover information, including drawings, cost data, customer lists, formulas, recipes, patterns, compilations, programs, devices, methods, techniques or processes that derive economic value from not being generally known and are the subject of efforts that are “reasonable under the circumstances” to maintain secrecy.

PRIVACY

Depending upon where you live or operate, there is a special patchwork of laws and regulations that protect and regulate personal information.  If you are handling or giving out personal or potentially sensitive information, you may be implicating privacy laws.

PUBLICITY

Publicity rights address the commercial use of an individual’s face, name, image, or likeness.  These rights vary state-to-state.  Marilyn Monroe, for example, lived in multiple states which created complex questions about her publicity rights.

Our Intellectual Property services include:

FINANCIAL INSTITUTIONS

In states where new cannabis banking opportunities exist, Emerge Law Group has the proven expertise in creating canna-banking programs to efficiently capitalize on those opportunities. Our Banking Practice Group specializes in working with banks and credit unions to develop regulatory compliant programs and operational best practices. We also train banking staff to become experts in canna-banking so they can effective understand and manage the risk affiliated with canna-banking.

We regularly help clients with:

EMPLOYMENT LAW

At Emerge Law Group, we recognize that employees are the heart and soul of any successful business.  Our Employment Law Practice Group works with employers to help them effectively manage their workforce, navigate the complex web of federal, state and local employment laws and, if necessary, defend against claims before administrative agencies and in court.

We regularly help clients with:

CORPORATE FINANCE AND SECURITIES

Our corporate finance and securities lawyers are experienced attorneys who have practiced at large law firms, worked as in-house counsel for public companies and investment banks, and owned and operated start-up companies. We work with clients to help achieve their financing goals while safely navigating the highly technical securities law landscape. 

In addition to representing issuers, we also routinely represent institutional and individual investors, including in connection with fund formation and investments.

Our expertise includes:

We have a deep understanding of the financing options available to businesses, including simple unsecured loans, asset-backed financing, convertible debt, common and preferred equity, crowdfunding and various other structures.  We work closely with our clients to understand their business and financing needs, ensure they are prepared to approach investors and choose the right partners, structure and negotiate terms, navigate the due diligence process and successfully close the deal.

COMPLIANCE AND LICENSING

ALCOHOL AND BEVERAGE INDUSTRY

Emerge attorneys have represented businesses in the alcohol and beverage industry, including wineries, breweries, distilleries, restaurants, bars, movie theaters, golf courses, and gas stations.  We can help you vet new locations, acquire existing locations, and apply for the appropriate liquor license.  We also provide training to comply with applicable rules and regulations, prepare operating procedures, submit renewals, and keep clients protected in the event of any potential violations or administrative hearings.

CANNABIS INDUSTRY

Emerge Law Group is highly experienced in the cannabis industry.  We have helped many clients obtain state licenses and local permits to operate cannabis businesses throughout California, Oregon, and Washington.  We regularly help clients with:

Cannabis laws and rules are also regularly changing.  Members of our team are dedicated to attending legislative hearings, state agency and local city and county meetings to stay up-to-date on any new changes and how to adjust to any new changes.

See our Cannabis Industry page for more information.

PSYCHEDELICS INDUSTRY

Emerge Law Group is a leader in the psychedelics industry.  There is tremendous excitement about the potential for psychedelic drugs to benefit a wide variety of populations, including veterans struggling with PTSD and terminally ill patients suffering with anxiety and depression.  Until recently, psychedelic substances have been accessible only in the underground; they are illegal under state and federal law to manufacture, distribute, or possess.  These substances have, since 1970, been treated as having no legitimate medical use, and no commercial application.  As such, businesses have not invested in this area or required legal services, outside of the criminal context.

Today, psychedelics are proceeding toward legalization on multiple paths.  Researchers in a multitude of clinical studies are proving the medical safety and efficacy of these medicines, with the objective of changing the treatment of these substances under the federal Controlled Substances Act, opening legal access to them.  Private and public companies are now actively raising money to develop intellectual property and capitalize on the market opportunities associated with psychedelic drugs.  Opportunities to be early actors in this new arena are tremendous.

See our Psychedelics Practice Group page for more information.

BUSINESS AND CORPORATE

Our business transactions team is made up of highly experienced transactional attorneys who have practiced at large law and accounting firms, worked as in-house counsel for public companies and investment banks, and owned and operated start-up companies. We understand complex legal matters and provide high quality legal services in a cost-effective manner.  Our clients value our experience, knowledge and judgment.

ENTITY FORMATION

Our team routinely advises clients regarding:

CORPORATE GOVERNANCE

Emerge attorneys also advise on-going concerns with: