U.S. Cannabis Pioneers Face Chaotic Advertising Laws

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Businesses preparing to market a new product nationally must follow the rules of trademark law as well as marketing and advertising claims under state and US laws when creating a trademark, advertising copy and copyright-registered packaging for the product. In cases where the product is illegal under some federal laws, but legal under some state and federal laws, marketing is complicated. This is particularly the case for cannabis and cannabidiol (CBD) products. As an example, the USPTO allows patents for cannabis inventions but prohibits registering trademarks for cannabis and cannabis products.

Thurston v Koi CBD, LLC

Koi CBD, LLC is a cannabis company based in California. Bianca Thurston, from Pennsylvania, purchased Koi’s CBD products in a local store. She chose Koi’s products under the impression that they could help treat or mitigate her knee pain and that she would not fail her employer’s drug test because the cannabis company claimed and marketed its CBD products derived from hemp as being free from tetrahydrocannabinol (THC), which has psychoactive properties. After using Koi’s products, Thurston was given a random drug test by her employer, which came back positive for cannabinoids. She lost her job as a result.

In April 2019 Thurston filed a class action lawsuit in California against Koi CBD, suing it for violations of California State Unfair Competition and Consumer Legal Remedies Laws and the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

Laws on Legalised Cannabis

In the United States, cannabis remains a Schedule I illegal substance under the Controlled Substance Act. However, approximately 37 states and the District of Columbia have passed laws with regard to legalised cannabis, which includes medical, recreational and decriminalised cannabis. There is no uniform set of state laws for marketing legal cannabis at this time. According to researchers at the University of Maryland King Carey School of Law:

  • 30 states and the District of Columbia have passed medical cannabis legislation;
  • 19 states and the District of Columbia have laws on the advertisements for medical cannabis;
  • nine states have no restrictions on medical cannabis advertising;
  • two states prohibit all medical cannabis advertising; and
  • six states require advertisements to be submitted to their department or commission that regulates the medical cannabis programme.

Of the states that permit medical cannabis advertising, some restrict or prohibit advertisements in print as well as on radio, television and the Internet. Other states prohibit medical cannabis advertising that is targeted at children, makes false and misleading or untrue statements, touts the curative or therapeutic effects of medical cannabis (some states permit claims with substantial clinical data in support of such statements), restricts safety and efficacy claims and advertises gifts and prizes or other inducement containing cannabis. Some states require mandatory warning statements in advertisements for medical cannabis. US federal laws with regard to advertising claims for cannabis and CBD are somewhat conflicting.

Marketing and Advertising Cannabis/CBD Products – Maryland Example

Cannabis businesses in states that have legalised medical or recreational cannabis or CBD face a chaotic regulatory landscape with respect to marketing or advertising health claims for their products. Maryland’s consumer protection laws along with elements of the Federal Food, Drug and Cosmetic Act can help businesses better understand the requirements for making health claims while marketing medical cannabis products.

The Maryland Medical Cannabis Commission initially instituted advertising restrictions on growers, processors, dispensaries, independent testing laboratories and their third-party vendors. The initial restrictions included prohibitions against medical cannabis businesses advertising their goods and services on radio, television, billboards and in print publications unless 85% of the audience were above 18. Further, advertising was prohibited on signs on public property as well as signs on private property unless the owner consented. Medical cannabis providers were:

  • required to adhere to Maryland’s Board of Physicians’ advertising regulations;
  • prohibited from making false and misleading statements;
  • required to make a statement that the product is for use by a qualifying patient only;
  • required to provide warnings for the health risks associated with consumption of the product; and
  • required to provide other warnings that may be needed by the commission.

However, cannabis associations in Maryland found the initial regulations to constitute a total ban on advertising. Therefore, on 31 December 2018 the commission sent a legislative report to Maryland’s General Assembly that laid the groundwork for several bills submitted during the 2019 legislative session. The resulting law requires that:

  • all advertisements for medical cannabis, medical cannabis products, edible cannabis products or medical cannabis-related services that make therapeutic or medical claims must be supported by substantial clinical evidence or data and include information on the most significant side-effects or risks associated with use;
  • any advertisement for a grower, processor, dispensary, independent testing laboratory, certifying provider or third-party vendor may not:
    • make any statement that is false or misleading in any material way or is otherwise a violation of the Maryland Consumer Protection Act;
    • contain a design, illustration, picture, or representation that encourages or represents the recreational use of cannabis, targets or is attractive to minors, displays the use of cannabis, encourages or promotes cannabis for use as an intoxicant or is obscene;
  • all advertising for medical cannabis, medical cannabis products, or edible cannabis products must include a statement that the product is for use by a qualifying patient only;
  • any website owned, managed or operated by a certifying provider, dispensary, grower or processor must employ a neutral age-screening mechanism to verify that users are at least 18. An advertisement placed on social media or a mobile application must include a notification that:
    • a person must be at least 18 to view the content;
    • medical cannabis is for use by certified patients only;
  • any advertisement for medical cannabis, medical cannabis products, edible cannabis products, or medical cannabis-related services may not be placed within 500 feet of:
    • a substance abuse or treatment facility;
    • a primary or secondary school in the state or a licensed child care centre or a registered family child care home; or
    • a playground, recreation centre, library or public park. However, these location restrictions do not apply to an advertisement placed on property owned or leased by a dispensary, grower or processor.

Conclusion

The Food and Drug Administration (FDA) is aware that several states have either passed laws that remove state restrictions on the medical use of cannabis and its derivatives or are considering doing so. It welcomes the opportunity to talk with states that are considering support for medical research of cannabis and its derivatives so that it can provide information on federal and scientific standards.

When considering marketing or advertising a cannabis or CBD product nationally, companies must understand the federal statutes that pertain to health claims, packaging and branding. It is important that they conduct medical research into the safety and effectiveness of cannabis products through adequate and well-controlled clinical trials. Companies must follow the USPTO’s rules, understand common-law trademark principles and study state laws on cannabis marketing in order to have a solid framework to avoid state attorneys general, the Federal Trade Commission and FDA regulatory bodies and class action lawsuits, thereby avoiding the same advertising issues as Koi CBD.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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