In Richmond Compassionate Care Collective v. 7 Stars Holistic Foundation, an independently-owned dispensary, RCCC, in Contra Costa County, sued the owners of the Richmond Patients’ Group (RPG) over allegations of conspiring to block RCCC from opening a new shop. Evidence presented at trial included evidence the defendant impeded access to the finite amount of commercial property zoned for medical marijuana distribution.

Plaintiffs argued the defendant, a potential competitor, intentionally thwarted their opportunities by submitting fraudulent letters of intent, leases, and purchase agreements to landlords of commercial properties, effectively tying up those spaces until RCCC’s permits became expired. (Local ordinance in Richmond, Calif. requires cannabis shop permit holders open up a shop within six months or lose their permit.) The defendants reportedly even went door-to-door, trying to persuade landlords to avoid leasing to RCCC. Defendants also made efforts to compel a change in city ordinance that would reduce the number of cannabis permits available (in this, they were successful). RPG was also accused of trying to influence city officials to deny RCCC’s licensing permit.

As our Los Angeles cannabis attorneys can explain, trying to compel a change in local ordinance or state law isn’t illegal. But the plaintiffs underscored it as evidence of the defendant’s purpose and intention with regard to the other actions.

RCCC alleged RPG’s efforts ensured they were closed off at every turn by RPG’s actions and eventually lost their permit – and millions of dollars in investments and potential profits. This, they allege, was in direct affront to the California Cartwright Act, the state’s antitrust law prohibiting efforts to block fair competition in the free market.

Why California Cannabis Company Antitrust Cases May be On the Rise

Antitrust cases are intended to ensure free and fair markets in our economy. Congress passed the first antitrust law in 1890, the Sherman Act. Two additional federal antitrust laws were passed in the years after, including the Federal Trade Commission Act, which established the FTC, and the Clayton Act. Although there have been some revisions over the years, these laws are still in effect today and remain the core of U.S. antitrust law.

The laws exist to prevent things like unfair competition, unlawful mergers, and illegal business practices that would deprive consumers and workers of the benefits of free market trade and opportunities. Ultimately, the idea is to ensure there are strong incentives for companies to operate efficiently, keep prices down, keep quality up, and play fairly.

The California Cartwright Act builds upon these principles, with specific prohibitions on things like market division schemes, exclusive dealings, price fixing, price discrimination, and group boycotting.

We’ll start seeing more antitrust cases in the California cannabis industry because the competition is getting increasingly fierce, particularly in regions where potential profit margins are high but permits and opportunities are limited. Cannabis as an industry is highly-regulated and inherently regional, which means it’s going to be inevitable that some firms are going to get squeezed. Whether that amounts to antitrust violations will depend on the specifics of the case.

If you believe your competitors have engaged in unlawful business practices or if your cannabis company has been accused of unfair practices, it’s important to consult with an experienced Los Angeles cannabis business lawyer as soon as possible.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

California Jury Awards Millions To Cannabis Company In Antitrust Case – Anti-trust/Competition Law, Oct. 6, 2021, 6Park News

What complicates cases like this is that for now, marijuana remains illegal under federal law – specifically 21 U.S. Code Section 863. The company, which does possess a legitimate trademark, officially refers to its product as a bong, proudly advertises its awards from publications like High Times magazine and is open about its commitment to excellence in cannabis consumer goods and advocating for the expansion of marijuana legalization laws. The reason that is problematic is that products in violation of federal law cannot seek trademark protection, and many companies are reticent to go into a courtroom and testify that their primary product violates federal statute. However, the firm has managed some success in securing settlements from alleged counterfeit distributors.

Further, a company spokesman was quoted by The Associated Press as saying the firm is willing to go to court to defend these cases, and is seeking millions of dollars in damages.

Cannabis Copyright and Trademark Infringement Lawsuits Likely to Climb

As the market demand for legal and medicinal marijuana has risen steadily (currently at $8.5 million a year now in the U.S.), so too has the demand for ancillary cannabis products. Many, including pipe manufacturers, are venturing more brazenly into the waters of U.S. trademark law – with some success. It’s enough of an issue that our L.A. marijuana trademark attorneys know companies need to pay attention.

For a brief time in 2010, the U.S. Patent and Trademark Office announced a new category of trademarks for medical marijuana, and numerous firms jumped on the bandwagon for to secure their own. However, the “green rush” on patents was short-lived when, just a few months later, the federal agency declared that adding the category was error and and that no marijuana product would be eligible legally for trademark protection so long as the substance remained unlawful.

As if that wasn’t bad enough, the USPTO started regularly requiring applicants to declare in good faith they were not seeking copyright or trademark protection for any services to marijuana businesses. Fort his reason, it is critically important that you discuss any application for trademark or copyright protection for any dispensary, farm, physician’s office or ancillary products company with an experienced L.A. marijuana trademark attorney.

As the cannabis market continues to grow, we expect these claims will continue to expand. Our offices can help defend against marijuana trademark infringement allegations or help you assert trademark infringement rights.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Bogus bongs or bogus lawsuits? Pipe maker sues over fakes, Jan. 16, 2019, Tribune News Service

More Blog Entries:

Marijuana Pipe Maker Suing for Alleged Counterfeit Bongs, March 12, 2017, L.A. Marijuana Trademark Attorney Blog

Historically, cannabis business ventures have been small as federal law has hindered businesses from stretching across state lines. While the states control trade within their borders, the federal government has jurisdiction over interstate sales – and cannabis is still under federal law considered a Schedule I dangerous narcotic. But with the drug legalized in some form now by 33 states and available for recreational use in 10, legal in Canada and poised for legitimacy in Mexico, this is probably going to change (though it’s tough to say exactly when). State and local governments are embracing the tax revenue these companies rake in and they’re spending less on police resources to bust people for petty marijuana possession charges. A legal marijuana industry analyst with Forbes opined next year will see an explosion of cannabis mergers and acquisitions.

Still, expanding the tentacles of one’s marijuana business into other states is still very risky and could result in millions of dollars in losses if they overreach or fail to follow the stringent regulations set forth by each state. There are personnel issues, regulatory issues and sometimes just rotten luck. But even for smaller cannabis businesses in Southern California, staying competitive in this rapidly expanding and evolving market may require it. If you’re thinking about branching out – whether into the next county or across state borders, you can begin strategic business plan discussion with an experienced Los Angeles marijuana lawyer who can help you maximize your odds of success and minimize the liability risk.

How a Cannabis Law Firm Helps With Multi-State Marijuana Business Expansion

There are so many considerations that must be weighed when deciding to take this plunge. In speaking with a Los Angeles marijuana business attorney, you’ll learn a few of those include:

• State-by-state licensing. This is mission critical if you want to expand operations in another state. There is no federal law that regulates marijuana, so each state has its own specific regulations and licensing processes – and they can be widely varying. Your cannabis regulatory and compliance attorney can help you look at the residency and ownership requirements of each state so you can plan accordingly.
• Securing the property. More than likely, you’re going to need qualified real property on which to run your out-of-state operations. There are all kinds of zoning rules, regulatory restrictions and other challenges that can make this aspect a headache – and that’s before you even get to negotiating the lease or purchase of that property. The type of structure and where choose to locate your marijuana business is extremely important for both compliance and security reasons, as most cannabis businesses are still almost exclusively cash-based.
• Structuring your marijuana business. Because of the federal law that outlaws marijuana, it’s unlikely if not impossible that the limited liability company that’s based in and licensed by the State of Colorado will be qualified to do business in California. At minimum you’ll probably need at least two licenses, one for each state. You may need to establish separate entities for each section, which not only ensures you are properly licensed, but that your whole corporation doesn’t collapse if for some reason one section flounders. Having a cannabis business company with experience establishing business plans in multiple states (as our attorneys do) will be essential to your success.

The whole concept of inter-state expansion isn’t a far-off possibility for California marijuana entrepreneurs. The time to start planning is today.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Growing Ambition, Companies leverage capital, partnerships and diversification to expand beyond state lines, Nov./ Dec. 2018, By Omar Sacirbey, Marijuana Business Magazine

More Blog Entries:

California Marijuana Lawyers Talk Practical, Legal Hurdles for Hemp Food Manufacturers, Dec. 20, 2018, California Marijuana Lawyer Blog