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National Association of Cannabis Businesses Announces Launch

According to a press release, the National Association of Cannabis Businesses (NACB) launches today, becoming the first self-regulatory organization (SRO) for the cannabis industry. With their mission to help compliance, transparency and growth of cannabis companies, they will lead member businesses in establishing voluntary national standards, addressing issues like advertising and financial integrity.

A team of experienced legal regulatory professionals will lead member businesses through a process of developing those standards. Andrew Kline, president of the NACB, was a senior advisor to Vice President and then-Senator Joseph Biden, served as an Assistant United States Attorney in the District of Columbia and in the Enforcement Bureau of the FCC. Their chief executive officer, Joshua Laterman, began working on NACB three years ago, but before that he had two decades of experience as general counsel at global financial and investment institutions. Doug Fischer, their chief legal officer and director of standards, spent the past nine years in cannabis law and financial regulation and enforcement at the law firm Cadwalader Wickersham and Taft.

Andrew Kline, president of NACB

According to the press release, SROs have proven to be effective in other industries at limiting government interference and overregulation, while preserving public safety. FINRA (Financial Industry Regulatory Authority) is an example of an SRO that serves the financial industry. It is a non-governmental organization that helps regulate member brokerage firms and exchange markets, working to help their members stay compliant with regulations set by the Securities and Exchange Commission. Much like the rapid growth of the financial markets over the past 30 years, the cannabis industry is experiencing exponential growth while regulators try to keep up.

“The cannabis industry is on a historical growth trajectory that is expected to continue for years to come, but even the most established, well-run businesses recognize that the future favors the prepared,” says Josh Laterman, CEO of NACB. “As other industries have experienced with their SROs, establishing and committing to voluntary national standards will enable cannabis business owners to demonstrate impeccable business and compliance practices to consumers, regulators, banks and investors.”

According to Doug Fischer, chief legal officer and director of standards, they will focus on a variety of topics that align with the federal enforcement priorities. So these standards might not cover some of the product safety and quality aspects that ASTM International and FOCUS touch on, rather addressing issues like advertising, financial integrity, preventing diversion across state lines, prevention of youth use and corporate responsibility. Another important distinction to make is that an organization like ASTM International sets standards, but the NACB as an SRO is tasked with enforcing them as well.

Doug Fischer, director of standards and chief legal counsel

“From our perspective, businesses have been having a hard time navigating the complex state regulations, particularly those operating in multiple states,” says Fischer. “That is further complicated by the current administration not solidifying their stance on recreational cannabis.” The Cole Memo put out under the Obama Administration set clear federal enforcement priorities, allowing cannabis businesses and states to identify ways to avoid federal government interference or prosecution.

The current administration has done nothing but fuel regulatory uncertainty. This is particularly important given this week’s news regarding the leaders at the Justice Department making inflammatory and threatening statements regarding legal medical cannabis. “It causes these businesses, who should be focused on their own day-to-day operations, instead focusing on complying with what they think the federal government wants and regulatory compliance with state regulations,” says Fischer. “We can help solve that problem by making it easier for companies to become compliant, not only with state regulations but federal guidance as well. This has been proven by other SROs, that if we set our own standards and abide by them, federal regulators might be guided by the industry’s self-policing in determining how to regulate the cannabis industry.” According to Andrew Kline, it could also provide a window of opportunity for better banking access.

The founder and CEO, Joshua Laterman, used to work in the banking industry and recognized the need for a cannabis industry SRO. “He saw an incredible opportunity in a projected $50 billion market by 2026, and as a former banker he saw the opportunity for banks to do business in the industry, but they don’t know who to trust,” says Kline. “Starting a self regulatory organization can help fill that void, allowing companies to identify and put a stamp of approval on a segment of the population that is uber-compliant, therefore giving banks a view into who they should and shouldn’t do business with.” While it won’t immediately resolve the many issues associated with cannabis businesses’ accounting, the NACB could be a major help to smaller businesses looking to prove their worth. “The important point here is that based on the experience of our team, we know what is important to the federal government, and we understand that members will be shaping standards with us, so we will also guide them to federal priorities,” says Kline.

Fischer says a self-regulatory organization is always driven by the industry and needs of the members, but they have the added unique challenge of working in a web of competing governmental interests. “Self-regulatory organizations can shape the future of regulation; we don’t know if or when federal prohibition will end, but if it does, the government is going to look at a variety of areas for regulations,” says Fischer. “We might be able to help shed light on our self-regulating nature and if we can demonstrate the best practices for specific areas, states and even the federal government could look to that, giving our members an advantage.” According to their press release, licensed cannabis growers, dispensaries or any other ancillary business may apply to become members. Some of the founding members include Buds & Roses, Etain, Green Dot Labs, Local Product of Colorado, Matrix NV, Mesa Organics, among others.

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Protecting Your Innovative Cannabis Strains With a Strong Intellectual Property Strategy: Part 3 – Trademark Protection for New Cannabis Strains

In the first two installments of this three-part series, we explored the reasons why cannabis breeders and growers should adopt a strong IP strategy and discussed the types of patent protection that they should consider. In this final installment, we examine trademark protection for new cannabis varieties and the unique trademark issues currently facing the cannabis industry.

What is a trademark and what does it really get me?

A trademark is a visual feature of some sort, such as a word, phrase, or symbol, which is used to identify a company’s goods and to distinguish those goods from the goods of a competitor. Like a patent, a trademark is effectively an exclusionary right, meaning that it gives the owner the right to exclude others from using the same mark, or a mark that is confusingly similar, in connection with the same type of goods. The test for determining whether a competitor’s mark infringes upon your trademark is whether there is a likelihood of confusion in the mind of consumers over the source of the goods. Put another way, the test is whether a consumer is likely to be confused into believing that your competitor’s goods are actually associated with your company.

How long does this exclusionary right last? So long as certain requirements are met, a trademark can last forever. While a patent that protects a new cannabis variety will expire in 20 years, a trademark that also covers that strain can be maintained forever, which allows patents and trademarks to be used together to offer both stronger and longer lasting protection over a new cannabis variety.

How do I get a trademark?

Trademarks exist under both state and federal law. In many states, to obtain common law trademark protection, one does not need to file anything with a government entity – you simply need to use the mark (e.g., the word or logo) in connection with your company’s goods and use a “TM” in conjunction with the mark. However, the protections afforded by such a common law mark are relatively limited, so it is generally advisable to register the mark with the state and/or federal government in order to strengthen the exclusionary rights. Along the same lines, federal registration offers certain advantages over state registration, such as the right to use the mark nationwide and the right to challenge infringers of the mark in federal court.

To register a trademark, breeders and growers need to file a trademark application with the relevant government entity – the U.S. Patent and Trademark Office (USPTO) for a federal mark or various state government offices for state marks. For both state and federal trademark registrations, an applicant typically must demonstrate that 1) he/she is the first to use and register the mark for the type of goods at issue, 2) that he/she is actually using the mark in commerce or has intent to do so, and 3) that the mark is distinctive. Of these three requirements, proving distinctiveness is often the one that gives applicants the most difficulty.

A mark is “distinctive” if it is capable of identifying the source of a particular good. Because of this requirement, a brand name that is generic or merely describes the goods, such as “Large Bud Cannabis Plants,” is often less desirable because it is less distinctive and thus may be difficult to register. Conversely, a brand name that is “arbitrary” or “fanciful,” such as “Moose Foot Cannabis,” is often more distinctive and therefore may be easier to register, generally making it a more desirable choice as a brand name. This issue of distinctiveness is something that cannabis growers and breeders should keep in mind as they develop a branding strategy for their new varieties.

Unique trademark issues for the cannabis industry

Like almost every aspect in the cannabis industry, there are some unique trademark issues that breeders and growers must contend with. With regard to federal registration, the USPTO will currently not allow registration of any trademark for cannabis products that are illegal under federal law. However, that does not mean that every cannabis-related product cannot obtain any federal trademark protection. The reason for this is that a federal trademark registration is tied to specific types of goods that are being sold under the mark, so the ability to register a desired brand name will depend on what type of goods are covered by the trademark.

To that end, a mark that covers actual cannabis products (like plants or edibles) cannot currently be federally registered even if the mark does not actually include the word cannabis. For example, a breeder likely could not federally register the brand name “River’s Edge Farms” for the sale of cannabis plants and plant parts. However, a mark that covers products that are related to the cannabis industry may be allowable – even if it references cannabis –if the goods being sold under the mark are not themselves illegal under federal law. For example, “Pot Maximizer,” a trademark name for a grow light that is being sold to cannabis growers, could be federally registered since it is not illegal to sell a grow light.

Under current federal law, which prohibits the cultivation and sale of cannabis plants and their parts, a federal trademark registration is certainly not currently available for new cannabis varieties. However, this does not mean that trademark registration for new cannabis varieties is impossible. Most states with legalized cannabis will allow registration of state trademarks for cannabis products (e.g., Washington, Oregon, Colorado).

Further, since branding is a long-term strategy it is important for growers and breeders to keep the requirements for federal registration in mind when adopting a branding strategy to ensure they can obtain federal protection for their current brand names if and when cannabis becomes federally legal.

The bottom line…

Despite the fact that there are currently some unique trademark issues for cannabis growers and breeders, trademark protection can be a very valuable asset that both increases the level of protection and extends it beyond what can be obtained through a patent alone. As such, breeders and growers should adopt a branding strategy for their new varieties that attempt to maximize trademark protections for those varieties, both now and in the future.

Breeders and growers should select brand names that are sufficiently distinctive to meet the requirements of both federal and state trademarks. Right now, they will likely need to focus on state trademark rights by applying for state trademark registrations where available and by making sure that they are treating the mark as a brand name of their company (e.g., using a “TM” after their marks). However, they should also keep a close eye on the status of federal registration laws so that they can apply for federal registration of their marks when it becomes available.

Additionally, as discussed in prior articles, growers and breeders should also be seeking to maximize patent protection for their new cannabis strains so that they can use that protection in addition to trademarks to create a stronger IP position. Cannabis growers and breeders who adopt such a comprehensive strategy now could reap huge rewards down the road, especially if (or when) cannabis becomes federally legal, either at the medical or recreational level.

Legal disclaimer: The material provided in this article is for informational purposes only and not for the purpose of providing legal advice. The opinions expressed herein are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. The provision of this information and your receipt and/or use of it (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.

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ASTM International and American Herbal Products Association Announce Partnership

According to a press release sent out on June 8th, ASTM International and the American Herbal Products Association (AHPA) announced a memorandum of understanding to collaborate on cannabis standards. The press release says that ASTM International will coordinate the work to develop the standards with all stakeholders involved and AHPA will make technical contributions and regulatory recommendations. AHPA will get recognized for their contributions per the license agreement. ASTM International is a standards development organization that develops voluntary consensus-based standards for industries.

This announcement precedes the first committee meetings for the development of cannabis standards, which began Sunday, June 11th and continue through June 12th. That committee group has now grown to roughly 200 members, including businesses, laboratories, associations, governments and more. “Many of our stakeholders – manufacturers, dispensaries, labs, consultants, and others – have laid the groundwork for guidance on the safe use and legal commerce of cannabis,” says Jane Wilson, director of program development at AHPA. “We are thrilled to now be contributing to standards development through one of the world’s top standards organizations.”

Ralph Paroli, Ph.D., the committee’s new chairman and the director of R&D in measurement science and standards at the National Research Council of Canada, says AHPA is a key organization in providing expertise on cannabis standards. “AHPA’s support for this new committee will help expedite international standards development, identify gaps, prevent duplicative efforts, and more,” says Paroli. The cannabis standards committee, officially designated D37, was formed on March 1st.

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Washington Changes Course, Selects MJ Freeway as New ASV

Two weeks ago, we reported on the State of Washington choosing Franwell as their apparent successful vendor (ASV) for their seed-to-sale traceability system contract. Late last week, the Washington State Liquor and Cannabis Board (WSLCB) sent out an email explaining that they are no longer going with Franwell and the new ASV is MJ Freeway.

The email (left) consisted of a letter sent by Peter Antolin, Deputy Director of the WSLCB, to licensees “who had written to the Board and staff regarding the marijuana traceability Apparent Successful Vendor and RFID tags.” Apparently, the reason behind switching the ASV to MJ Freeway is because Franwell’s system requires only one method for tagging plants- RFID tags. According to the letter, Deputy Director Antolin says the initial request for proposal (RFP) stated that the traceability system needs to support a variety of tagging methods, including bar codes and RFID. “The RFP requirements did not allow a vendor to make any assumptions regarding use of a single tagging methodology or allow vendors to include any such costs affecting the state or our licensees in their proposal,” says Antolin. As they made clear in the previous press release, the ASV is not the official contract winner until they complete negotiations and sign the contract.

On June 7th, Franwell withdrew their proposal for the state’s traceability system, thus Washington went with the second highest scoring vendor, MJ Freeway. Deputy Director Antolin says they submitted a strong bid, but there are still many questions left unanswered. How could such a glaring mistake be overlooked when the state named Franwell the highest scoring bidder? Is MJ Freeway’s system robust enough and capable of handling the state’s cannabis licensees’ traceability requirements even though they were not the highest scoring bidder? The deadline for the new system to be in place is October 31, 2017, which is quickly approaching for such a massive systems overhaul.

The WSLCB’s oversight highlights a few inadequacies with the state’s regulatory agency, particularly their indecision and lack of foresight. So much of the concept behind seed-to-sale traceability rests on Cole Memo compliance. A big reason why some states seek to implement a robust tracking system is to remain compliant with the Cole Memo; preventing diversion to crime organizations with regulatory oversight is a key tool that states use to tell the federal government they are complying with their directive and intend to protect their state’s legal cannabis operations from federal prosecution. Without a proper system in place, the state runs the risk of exposing their entire cannabis market to threats of federal enforcement, a scenario that seems unlikely but could be disastrous to cannabis businesses and the local economy.

The WSLCB needs to get their act together fast.

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Organic Cannabis Association & Ethical Cannabis Alliance Announce Merger

The Organic Cannabis Association and Ethical Cannabis Alliance announced today they are merging into one organization, the Cannabis Certification Council (CCC), according to a press release. The new third-party certifications include “Organically Grown” and “Fairly Produced”, granting producers a seal for marketing if they achieve the certifications.

Ashley Preece, executive director of the Cannabis Certification Council

According to Ashley Preece of the Ethical Cannabis Alliance, now executive director at CCC, they plan on starting with the “Organically Grown” certification as first certification to market. “We are launching with Organically which will include robust labor standards as well as standards that go beyond [USDA] Organic,” says Preece. “The USDA Organic standard is watered down and we want to expand on proper horticulture practices so it relates directly to cannabis producers.” The process of designing that certification involves using that USDA Organic certification as a building block to draw from but not directly adopt.

“We will start by pulling from Organic and Fair Trade standards, then we will have a technical advisory committee (TAC), made up of multi-stakeholder agricultural industry and cannabis industry professionals to give input and adjust the standard accordingly,” says Preece. “From there we will have a pilot program, engaging with producers abiding by the standards’ requirements. After the pilot phase, we make final adjustments before bringing it to market.” In order to make sure their certification works across the board, Preece says they are engaging with stakeholders around the country and eventually globally. “We need to engage each different community to make sure this is applicable on a national level.” Preece also says they plan staying abreast of other standards, such as ASTM International’s, but those are geared more towards production safety. “We are looking towards more robust Organic and Fair Trade standards, and ‘cannabinizing’ them,” says Preece.

Photo courtesy of L’Eagle Services

David Bronner, a prominent advocate of drug policy reform and CEO of Dr. Bronner’s, a top-selling soap brand in the US market place, will be providing seed funding and a matching grant to the CCC. “We are committed to making socially and environmentally responsible products of the highest value, and we are excited for the CCC to begin driving that ethos in the cannabis industry,” says Bronner. “The Cannabis Certification Council (CCC), with its unique mission, is a perfect vessel for us to support our values in the cannabis space.”

Preece says the “Fairly Produced” labor certification is going to be based off of Fair Trade practices. “That will include living wages per community and taking options of ownership into consideration, including different business models where employees might have shares or partial ownership,” says Preece. “As we know, this industry has come from the illicit market, where we saw a lot of inappropriate working environments, gender relations and pay schedules. So we want to ensure that workers have contracts in place, they are treated fairly just as any other industry and we want to mitigate any strange encounters that might have seeped into this regulated market.” Founding board members include Laura Rivero of Yerba Buena Farms; Amy Andrle of L’Eagle Services Denver; Nick Richards of Dill and Dill and Vicente Sederberg; and Ben Gelt of Par, with Ashley Preece as executive director. “This is a huge step for the cannabis industry,” says Preece. “Our collaboration reflects the priority of the mission ingrained in both parties, and together we will immediately be greater than the sum of our parts.”

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Applications for Tissue Culture in Cannabis Growing: Part 3

In the first part of this series, we introduced some relevant terms and principles to tissue culture micropropagation and reviewed Dr. Hope Jones’ background in the science of it. In the second part, we went into the advantages and disadvantages of using mother plants to clone and why tissue culture could help growers scale up. In the third part of this series, we are going to examine the five steps that Dr. Jones lays out to successfully micropropagate cannabis plants from tissue cultures.

Cleaning – Stage 0

Using disposable gloves and blades, Dr. Jones carefully harvests the explants

Micropropagation includes 5 stages. “Stage 0 is the preparation of mother plants and harvest of cuttings for the explant material,” says Dr. Jones. “To ensure the best chance of growing well in culture, those ladies [the mom’s] should be cleaned up and at their best. And hopefully not stressed by insects or pathogens.” She says growers should also make sure the plants are properly fertilized and watered before harvesting explants. “Obtaining the explants is done with a clean technique using new disposable blades and gloves,” says Dr. Jones. “Young shoot tips are harvested and placed in labeled, large Ziploc bags with a small amount of dilute bleach and surfactant solution, then placed in a cooler and taken to the lab.” This is a process that could be documented with record keeping and data logs to ensure the same care is taken for every explant. “Once in the lab, working in the sterile environment of the transfer hood, the cuttings are sterilized, typically with bleach and a little surfactant, and then rinsed several times with sterile water,” says Dr. Jones. Once they reach the sterile environment, Dr. Jones removes the leaves and cuts the stem down to individual nodes.

Establishment – Stage 1

Establishing the culture requires an absolutely sterile environment, which is why the first step is so important. “Proper explant disinfection is equally as important as the control parameters of the facility itself,” says Dr. Jones. Establishment essentially means waiting for the shoots to develop. Growers should use extra care to prevent contamination.

Waiting for the shoots to develop in the establishment stage

Establishing the culture requires an absolutely sterile environment, which is why the first step is so important. “Proper explant disinfection is equally as important is the control parameters of the facility itself,” says Dr. Jones. Mother plants are not grown in sterile facilities, but in an environment that is invariably contaminated with dust, which harbors micro-organisms, insects and other potential sources of contamination, including human handling. We discussed some of this in Part 2.

Explants, once sterilized and placed in the culture vessel, must establish to the new aseptic conditions. “Basically Stage 0 ends when the explants are cleaned and placed in the vessel. Stage 1 begins on the shelf while we patiently sit, watch and wait for the shoot growth,” says Dr. Jones. “Successful establishment means we properly disinfected the explants because the cultures do not become contaminated with bacteria or fungi and new shoot growth emerges.”

Multiplication – Stage 2

Stage 2 involves subculturing an explant to produce new shoots

This stage is rather self-explanatory as multiplication simplified means generating many more shoots per explant. In order to create a large number of plants needed for meeting the demand of weekly clone orders, Dr. Jones can break up, or subculture, one explant that contains multiple numerous new shoots. “Let’s say one vessel, which originally started with 4 explants each developed four new shoots. Working in the hood, I remove each explant from the vessel and place it on a sterile petri dish. Now I can divide each explant into 4 new explants and then place the four new explant cuttings into their own vessel. In this example, we started with one vessel with 4 explants,” says Dr. Jones. “Which when subcultured 4-6 weeks later, we now have 4 vessels with 16 plants.” This is instrumental in understanding how tissue culture micropropagation can help growers scale without the need for a ton of space and maintenance. From a single explant, you can potentially generate 70,000 plants after 48 weeks, according to Dr. Jones. “Starting with not 1, but 10 or 20 explants would significantly speed up multiplication.” Using tissue culture effectively, one can see how a grower can exponentially increase their production.

Rooting – Stage 3

“When the decision is made to move cultures to the rooting stage, we need to subculture the plantlets to a different media formulated to induce rooting,” says Dr. Jones. “In some instances, the media is very dark, and that’s because of the addition of activated charcoal.” Using activated charcoal, according to Dr. Jones, helps darken the rooting environment, which closely mimics a normal rooting environment. “It helps remove high levels of cytokinin and other possible inhibitory compounds,” says Dr. Jones. Cytokinins are a type of plant growth hormone commonly used to promote healthy shoot growth, but it is important to make sure the culture contains the right ratio of hormones, including cytokinin and auxin for maximum root and shoot development. Dr. Jones suggests that growers research their own media formulation to ensure nice, healthy roots develop and that no tissue dies in the process. “With everything I grow in culture, when it comes to media, in any stage and with all new strains, I run some simple experiments in order to refine the media used,” says Dr. Jones. She puts a special focus on the concentrations and ratios of plant hormones in formulating her medias.

After harvesting and multiplying, these explants are ready for rooting

“We commonly think of auxin’s role in rooting, but it’s also important in leaves and acts as a regulator of apical shoot dominance,” says Dr. Jones. “So having no auxin may not be ideal for the shooting media used in Stages 1 and 2.” Auxin is a plant hormone that can help promote the elongation of cells, an important step in any plant’s growth. “And cytokinins are typically synthesized in the root and moves through xylem to shoots to regulate mitosis as well as inducing lateral bud branching, so again finding that nice balance between these two hormones is key.”

Acclimation & Hardening Off – Stage 4

“When plants have developed good looking healthy roots, it’s time to pop the top,” says Dr. Jones. This means opening the vessel, another risk for contamination, which is why having a clean environment is so crucial. “The location of these vessels needs to be tightly controlled for light, relative humidity, temperature and cleanliness.” In the culture, sugar is a main ingredient in the medium, because the growing explants are not very photosynthetically active. “By opening the lid of the vessel, carbon dioxide is introduced to the environment, which promotes and enhances photosynthesis, really getting the plants ready for cultivation.”

Harvesting explant material from mother plants

The very final step in tissue culture micropropagation is hardening, which involves the formation of the waxy cuticle on the leaves of the plant, according to Dr. Jones. This is what preps the plant to actually survive in an unsterile environment. “The rooted plants are removed from the culture vessel, the media washed off and placed in a potting mix/matrix or plug and kept in high humidity and low light,” says Dr. Jones. “Now that there is no sugar, contamination is no longer a threat, and these plants can be moved to the grow facility.” She says conditioning these plants can take one or two weeks. Over that time, growers should gradually increase light intensity and bring down the relative humidity to normal growing conditions.

Overall, this process, if done efficiently, can take roughly eleven weeks from prepping the explants to acclimation and hardening. If growers perform all the steps correctly and with extra care to reduce risks of contamination, one can produce thousands of plants in a matter of weeks.

In the fourth and final part of this series, we are going to dive into implementation. In that piece, we will discuss design principles for tissue culture facilities, equipment and instrumentation and some real-world case studies of tissue culture micropropagation.

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What Does it Really Mean To Be Organic in Cannabis?

If you ask an organic chemist, it’s any molecule with a carbon attached. If you ask a consumer of USDA Certified Organic vegetables, they might say it is food produced without chemicals pesticides, that it is safer and cleaner and even more nutritious. Possibly another consumer will say it’s just a hoax to pay more for food, but what does the USDA Certified Organic Farmer say?

Most will agree it is a very rigorous process of record keeping, fees, rules and oversight. The farmers have limited choices for pesticides and fertilizers; they incur higher labor costs, suffer potentially lower yields and generally have higher input costs. However, at the end of the day the farmer does get a higher price point.

With so many misconceptions about organic food, it is difficult to know what is actually organic by definition. First let’s think about what the word pesticide means. A pesticide is “a substance used for destroying insects or other organisms harmful to cultivated plants or to animals.” By definition, a vacuum used to suck off spidermites is a pesticide, so instead we should say that no synthetic pesticides are used. These are pesticides that enter and reside for long periods of time within the plant, which are potentially harmful to the end consumer. Though organic food does not contain synthetic pesticides, the perception of the food being healthier is also not always accurate. Growers often use foliar applied teas or manures, which increase the chance of the product containing E. coli or other harmful microbes. In addition, certain sanitizing agents or gamma irradiation is not allowed, so the post-harvest cleaning is not always as thorough as for conventional foods. When cannabis is sold as a dried product, the consumer cannot wash the flower as they might do before eating an apple. As growers, we should make sure we are disinfecting the flower before harvest and keeping the plant/processes clean throughout curing.

I often hear cannabis growers saying they are producing an organic product, but this simply cannot be true. The term “organic” is a labeling term for agricultural products (food, fiber or feed) that have been produced in accordance to the federal government’s USDA organic regulations. Due to our (cannabis growers) ongoing disagreements with the federal government, this is not a term we can put on our product. However, we can still grow to the same standards as USDA-certified farmers. How can we do this? By using OMRI (Organic Materials Review Institute) approved products. OMRI is a third-party, nonprofit organization that lets growers know if a product can be used in certified Organic production. You can find this seal on many fertilizers or pesticides.

Next, if it is a pesticide product that is not OMRI approved, check to see if it is registered by the EPA (Environmental Protection Agency). The EPA will provide ingredients and crops that are approved, amounts which can be used safely and storage/disposal practices on the label. Products that are put through the EPA registration are evaluated for their environmental, human and residual risks. Companies pay a hefty fee for this process, and much research goes into providing this information – ALWAYS READ THE LABEL!

A couple of exceptions to an EPA registration are pesticides that are 25B-exempt and biological control. 25B-exempt pesticides are pesticides that pose minimal or no risk to humans. A complete list of these products can be found here. Examples of these pesticides include rosemary, garlic, spearmint, etc.

Biological control is a method for controlling pests by the use of natural enemies. Biological control agents are allowed in organic production. If you are still wondering which pesticides or fertilizer are OK to use in cannabis and you do not live in a state with already enforced regulation, check out allowed lists in states that do.

So we know we cannot be considered a USDA organic cannabis farmer, but we CAN strive to meet the same standards:

  • Follow your state’s regulations; they are there for a reason!
  • Use OMRI products, 25B-exempt products and BCAs.
  • Keep an eye out for upcoming third-party certification companies, such as Clean Green or MPS (beware of the ones that want you to only use their products), because we need more than the state to regulate what we put onto our crop.
  • Finally, always think about the microbial load you’ve put on your plants. Although many can be very beneficial and help to produce high quality crops, many species can be harmful to the end user.

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Human Resources and the Cannabis Workforce

Cannabis businesses encounter a variety of problems when hiring and managing employees. Some of those are issues that every business runs into and some of them are quite specific to the cannabis industry. Chris Cassese, co-founder and managing director of Faces Human Capital Management, has some solutions for cannabis businesses facing seemingly daunting workforce management issues.

Cassese co-founded Faces HCM with Caela Bintner after two decades of working in the human resources and sales strategy across a variety of financial institutions. He oversees software platform development, daily operations, sales, and business development for their organization. Before co-founding the company, Cassese held a variety of operational and product development roles during his ten-year tenure at Merrill Lynch, worked in marketing at HSBC and was a sales and performance advisor at Insperity, a professional employment organization. Faces HCM is a professional employment organization that handles workforce compliance, education, and other HR needs for cannabis companies. They work with companies like Dixie Elixirs, LivWell and Women Grow, among other cannabis businesses.

Chris Cassese, co-founder and managing director of Faces Human Capital Management

According to Cassese, the cannabis industry faces a roughly 60% turnover rate, which is on par with the turnover rates in retail and call centers. Those are industries that typically have high turnover rates simply because the nature of the business. However, Cassese says it doesn’t have to be so high for the cannabis industry. “It is easy to say it is just high turnover by nature, but we found there are some steps that we can put in place that seem relatively easy, but are key tenants of Fortune 500 companies’ hiring strategies,” says Cassese. “Engaging in a needs-based analysis with companies will help us figure out exactly what’s going on.” They start by looking at the onboarding process, or what happens immediately after an employee is hired. “We start by looking at their pay rate, employee handbook and the paid time off policy, which are some of the points that a lot of the owners are familiar with coming from other high-end industries outside of cannabis.” He says things like swag bags, free ski passes after reaching quotas and other perks can keep employees engaged on the team. “Things like that go a long way and can reduce turnover by up to 20 or 30 percent,” says Cassese. “Sometimes [business owners] are so stressed with regulatory compliance that they don’t have time to tackle these issues so employee dissatisfaction often starts with onboarding procedures.” That can include anything from analyzing the overall compensation structure to making a video displaying the company’s vision, mission and values. “There is no panacea for reducing turnover. It requires conducting a needs-based assessment, taking pieces of what we know works well in other companies and bringing that to the cannabis industry.” Making an employee feel like they are part of the team can help boost retention and keep turnover low.

One area they often help companies with is performance reviews. “Performance reviews are a big part of any business,” says Cassese. “You can’t make progress if you don’t know where you’re going. If you don’t know how you’re doing you can’t get better.” Looking at the supervisor level, they have often found employees have never given a performance review before. “We implement processes to teach them how to deliver positive or negative performance reviews and help make them feel comfortable delivering that,” says Cassese. They might have employees perform a DISC analysis (dominance, influence, steadiness and conscientiousness), a personality test akin to the Meyers-Briggs test. “From this we can help figure out the stressors and motivators of people and create effective teams,” says Cassese. “If an employee might be more outgoing or humble, high-spirited, results-oriented, analytical or good working on teams.” These are approaches to workforce management that have been adopted from Fortune 500 companies.

Caela Bintner, Co-Founder and Managing Director of Faces Human Capital Management

Cassese says one of the most overlooked items for companies are proper I-9 verification forms. This goes back to basic record keeping and documentation, but if overlooked, companies can get hefty fines for improper record keeping. “You are supposed to have a separate binder, in a separate locked drawer where your I-9 forms are housed, but a lot of people don’t know about that, which could come back to bite them in the form of large fines” says Cassese. “Businesses can’t afford to have sloppy record keeping. We help businesses take a look at their process and how they put their files in the cloud or physical locations, which is an area where companies often need guidance.” Civil fines can reach up to $20,000 for mistakes on I-9 forms.

Employee education is another crucial aspect of managing the workforce. Faces HCM has a learning management system that gives companies the ability to push education to their employees. Education is of course a broad term and can cover a wide variety of needs for employees. “We can help them take leadership, teamwork, excel, OSHA, safety classes and more,” says Cassese. “Training that shows you active listening, empathy skills and other types of training can really help budtenders deal with customers appropriately.” They have developed customized training programs for cannabis companies expanding beyond their own state too. “As you find certain cannabis companies growing in different states they want to create a repeatable, consistent and predictable experience,” says Cassese. “Putting those standard operating procedures online is important to streamline the process and ensures that you are creating a learning or education plan to meet your employees’ needs.” That can look like requiring employees to take an online course once every quarter, or offering them books on subjects pertaining to their specific job function.

Little things like improving the employee experience, implementing an education program and keeping up with employee records can make or break a business. They all add up to solid workforce management, which if done correctly, can enhance a business’ bottom line and keep employees working for you.

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Washington Selects Franwell’s METRC for Traceability Program

The Washington State Liquor and Cannabis Board (WSLCB) announced today they plan to choose Franwell as their technology partner for the state’s cannabis seed-to-sale traceability system. While the release states they have not yet officially awarded them the contract, it says Farewell is the apparent successful vendor (ASV) to replace their current system. “An ASV is the procurement term used for the highest scoring, responsive vendor,” says the press release.

Rick Garza, director of the WSLCB, says they plan on making a number of changes that they couldn’t under their current contract. “Over the last four years we have learned a lot about this industry, including aspects to the industry that were unknown when the current traceability system was implemented,” says Garza. “We need a system that will grow and flex with Washington’s maturing marijuana system.”

Seven companies submitted bids for the new contract and the agency narrowed that down to three finalists, each of which gave presentations and demonstrations on their software products to WSLCB staff last week. They also worked with folks in the cannabis industry, selected by trade organizations, that provided input on the requests for proposal. Those industry stakeholders that participated with input will get a demonstration of the new software system in early June.

They plan on transitioning to the new system no later than October 31, 2017. Franwell’s METRC product is currently used in Colorado, Oregon and Alaska.

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NCIA: 280E, Federal Reform & Cannabis Lobbying Efforts

With the 2017 Cannabis Business Summit just around the corner, we sat down with Taylor West, deputy director of the National Cannabis Industry Association (NCIA), to hear about their lobbying efforts and what they’ll discuss in the keynote panel discussion on Taxes, 280E and the Path to Federal Reform. Henry Wykowski, Esq., attorney, Steve DeAngelo, founder of Harborside Health Center and Michael Correia, director of Government Relations for NCIA will join her on that panel discussion.

According to West, the 280E tax code issue has an enormous impact on the industry. This tax code essentially means that businesses cannot make deductions for normal business operations from the sale of schedule I narcotics. Because cannabis is still listed as schedule I, businesses touching the plant often pay a majority of their profits to federal taxes. “When they are handing over 80% of their profit to the federal government, which is a lot of money that isn’t being pumped into the local economy, that is a big problem,” says West. “We want to highlight how 280E isn’t just harmful to businesses, but also harmful to the local economies and states that have businesses dealing with cannabis in them.” As the primary organization lobbying on behalf of the cannabis industry in Washington D.C., they have three full-time staff as well as a contracted lobbying firm working there. “We are the voice on Capitol Hill for the businesses of the cannabis industry,” says West. “We primarily focus on a couple of core issues, and one of them is 280E tax reform since that is such a significant issue for our members touching the plant.”

Taylor West, deputy director of NCIA

Another important issue they have been lobbying on is banking access. According to West, banks and credit unions are regulated on the federal level, and as a result, are largely still reluctant to serve cannabis businesses. “The inconsistency between federal and state law means they are concerned their federal regulators will flag them for working with cannabis businesses,” says West. “It is very difficult to operate without a bank account- this creates a lot of transparency, logistical and safety issues. We are working with lawmakers to try and make a change in the law that would make it safe for banks to serve state-legal cannabis businesses.” NCIA’s lobbying efforts have long engaged a few core allies on Capitol Hill, including the representatives that formed the Congressional Cannabis Caucus. “They have been champions of broader reform issues around cannabis,” says West. “But we are also starting to see new faces, new members of congress getting interested in these issues, beyond the traditional champions.” A lot of NCIA’s recent lobbying efforts have focused on recruiting members of Congress for those issues.

One example of their success came by teaming up with Rep. Carlos Curbelo, a Republican Congressman from Florida serving on the House committee overseeing tax issues. “He hasn’t previously been involved with cannabis legislation, but because Florida moved forward with the medical program, he got more interested in the issue and we helped educate him about the problem with 280E,” says West. “Having a republican that sits on the committee dealing with these issues is a huge step forward as we build the case for reform in D.C.” A lot of these efforts will be discussed in greater detail at the upcoming Cannabis Business Summit June 12-14. “We want to talk about the work we are doing just now in Washington D.C.; we have been doing a significant amount of work helping to draft legislation that would fix the 280E issue,” says West. “We will talk about those efforts as well as what businesses are currently doing to deal with the issue of 280E.” For readers interested in getting tickets, seeing the agenda and learning more about NCIA’s lobbying efforts, click here.

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