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Secretary of State Office Deadlines Update

By: Steven Masur

As we navigate these challenging times, we remain focused on supporting you in the weeks and months ahead. To that end, we have been monitoring Secretary of State offices for updates on filing deadlines and requirements.

Here is an update with respect to Delaware, New York, California, Colorado, Nevada, Washington, and Wyoming.

Delaware
Delaware filing deadlines remain the same. Online services are available on their website: https://corp.delaware.gov/paytaxes/ including the ability to pay taxes and file annual reports.

New York
New York State Tax Department deadlines remain the same; however, penalty and interest may be waived for annual filers whose taxes are due between 3/16/20 and 4/25/20.
See Tax relief for quarterly and annual sales tax vendors affected by COVID-19 to request relief from penalty and interest.

California
California has extended its tax filing and payment deadline to July 15 and waived interest, late filing, and late payment penalties.

Colorado
Colorado has temporarily suspended the deadline for April and June estimated tax payments for 2020 taxable year and extended the deadline to July 15.

Nevada
Nevada Department of Taxation deadlines remain the same. All taxpayers are advised to file and pay their taxes through the online portal, mail or via dropbox at the Taxation offices https://www.nevadatax.nv.gov/#

Washington
Washington State Department of Revenue deadlines remain the same. Upon request, the Department will provide extensions for paying tax returns. https://dor.wa.gov/file-pay-taxes

Wyoming
Wyoming filing deadlines remain the same. Online services are available on their website: https://wyobiz.wy.gov/business/annualreport.aspx

Information is changing daily and we will continue to update you as we learn more.

How Private Keys Create Flexibility, Security, and Risk within Digital Exchange Platforms

By: Jon Avidor, Jason Gershenson and Armando E. Martinez

As cryptocurrency exchange activity continues to grow, it becomes increasingly more important to understand how to protect these assets. Storing cryptocurrency safely is often confusing for first-time and even experienced buyers. Popular digital exchange platforms often make it deceptively easy to assume that they provide retail cryptocurrency traders sufficient asset security.

Such “Custodial Exchanges” were the earliest digital exchange platforms, and necessary to conveniently trade Bitcoin, and the cryptocurrencies that followed. after the advent of Bitcoin. However, the cryptocurrency community at large recognizes the practical advantages of “Non-Custodial Exchanges”.

“If you don’t own your private keys, you don’t own bitcoin”.

The established mantra within cryptocurrency communities – “If you don’t own your private keys, you don’t own bitcoin” – is central to distinguishing the two types of digital exchange platforms. Every platform that facilitates the exchange of cryptocurrency ultimately places the purchased cryptocurrency in an off-blockchain “wallet” that the traders can access and continue to store cryptocurrency in.

A wallet’s public key (akin to bank account number) allows a cryptocurrency trader (and virtually anyone else) to see the funds within a wallet, as well as the history of transactions made with the wallet. Accessing this wallet to withdraw or trade cryptocurrency, however, requires a passcode known a “private key”. The private key is an auto-generated alphanumeric code, and the singular way to access and create transactions with cryptocurrency within a trader’s wallet. Private keys are difficult to remember, and there is often a risk of placing the private key in a location susceptible to theft, or forgetting where the private key was placed all together. Losing the private key for a wallet generally means permanently losing access to the assets within that wallet. Considering that the private key is the tool to control a trader’s cryptocurrency – what does it mean to not own it?

Custodial Exchanges (No Private Key Control)

Custodial digital exchange platforms are the ones that maintain possession of traders’ private keys. These exchanges are considered “custodial”, because at the time a transaction on the exchange is processed, neither the buyer nor seller are in possession of the traded assets – representations of those assets are exchanged off-blockchain, and entirely within the platform’s database. Most major digital exchange platforms, such as Coinbase, Gemini and Binance, are custodial exchanges.

Exchange custodianship of private keys allows crypto traders to access their wallets with a password, and in some cases, additional two-factor authentication via mobile phone. In addition to utilizing log-in processes that resemble most other online services that crypto trading newcomer already uses, custodial exchanges have the highest trade volume, customer support, insurance, and offer the ability to deposit and withdraw fiat currency.

Custodial exchanges also offer speed. Trading takes place off-blockchain, which means transactions can process quickly but at the expense of the transparency that publishing a transaction on-blockchain affords. In other words, when a crypto trader buys bitcoin on a custodial exchange, they technically buying a representation of Bitcoin within the exchange’s database (which the exchange fully controls). Traders only own actual Bitcoin upon withdrawal from the exchange’s wallet to the trader’s wallet. Until then, a trader is at the mercy of the centralized exchange.

Custodial Exchanges 

            Every year, millions of dollars’ worth of crypto are stolen from even the most established centralized exchanges. Aside from direct hacks to a centralized exchange’s customer funds in custody, two-factor authentication — the very method to protect a customer — can be a hacker’s segue for a cybersecurity attack. Other disadvantages that may negate the convenience of a centralized exchange include:

  • Inability to Withdraw Cryptocurrency: Website crashes and maintenance cause funds on even the most reliable centralized exchanges to be unavailable at any given time.
  • Missing Hard Forks: Hard forks occur when a single blockchain splits, resulting in twice the number of tokens — one for each blockchain  Immediately after the 2017 Bitcoin hard fork (which created Bitcoin Cash), and the 2019 Bitcoin Cash hard fork (which created Bitcoin SV), those that could access their private keys had the instant ability to trade the new tokens. However, Coinbase users had to wait weeks for Bitcoin Cash and months for Bitcoin SV, until Coinbase established an internal system supporting the two tokens.
  • False Trade Volumes / Manipulation: Since transactions take place on a central ledger and off-blockchain, trade data can be manipulated by the custodial exchange to produce a certain outcome.

For retail traders to ascertain that they are the only ones who have absolute control over their assets, even in the face of a cybersecurity attack, they must trade cryptocurrency using their private-key wallets on non-custodial exchanges.

Non-Custodial Decentralized Exchanges

            Non-custodial exchanges can take many forms, including in-person trading, linking an external wallet to a central “bank” to buy or sell cryptocurrency, linking a wallet to an exchange. In all cases, the primary feature is that each cryptocurrency trader can always remain in control of their wallet funds by way of private key ownership.

            The analogues to digital custodial exchanges — decentralized exchanges (DEXs)— are built using a blockchain infrastructure, inherently never controls users’ assets, and allows traders to conduct transactions from their own external wallet, or a wallet on the exchange’s blockchain that the user controls. On a DEX, a trader’s Cryptocurrency is deposited into a smart contract which processes then transaction, never interacting with the private key. With no centrally controlled ledger or funds accounts, exposure to hacking and theft is significantly decreased.

However, DEXs still pale in popularity compared to their centralized, custodial counterparts. DEXs often require more technical knowledge to use, exhibit slower performance (issues with scaling the blockchain), and often cannot facilitate trades “cross-chain” (e.g. Bitcoin for Ether). DEXs certainly require more effort and patience from traders, but cryptocurrency communities are committed to solving the accessibility, scaling, and transaction issues in order to increase security, and subsequently, wider cryptocurrency adoption.

When determining which type of exchange to use, prospective or current cryptocurrency traders must decide what is more valuable to them: easier access to one’s digital assets or complete, unequivocal control of these assets. Institutional traders cannot risk any of their respective clients losing access to their assets, so they might choose to operate on a custodial exchange, especially since some custodial exchanges offer insurance against cybersecurity attacks as well as other traditional client services. On the other hand, retail traders might want to overlook the convenience of a custodial exchange to ensure that they are the only ones who have absolute control over their assets by using their private keys within non-custodial DEXs.

It is still too early to determine which type of exchange is “better” for any type of trader. With creative paths to security, access, and complete control, however, both custodial and non-custodial exchanges will entice more activity within the cryptocurrency space in the coming years.

The Innovative Economy – An Online Educational Series

By: Steve Masur

Are you ready to mainstream the Crypto Industry? Steve Masur is an expert on the online educational series called The Innovative Economy to discuss the legal aspects of cryptocurrency.

The series will air from January 28th- February 7th. Steve is set to air on January 31st, Day 4 of the show. Sign up here to watch this online educational series and listen to the interview.

Thanks for signing up and see you online!

Cannabis Advertising Laws: The States’ Way or the Highway

By: Jon Avidor, Sarah Siegel and Liam McKillop

As cannabis continues to be classified as a Schedule I drug under the Controlled Substances Act, federal law prohibits any written advertisement placed in a newspaper, magazine, on the internet, or in any other publication which has the purpose of “seeking or offering illegally to receive, buy, or distribute [cannabis].” While this broad legislation significantly limits the available advertising options for cannabis companies and retailers, it only applies to advertisements that seek to facilitate a transaction of the good and is silent as to advertisements whose purpose is to promote the use of cannabis. However, most states have enacted legislation that places further restrictions on the content, nature, location, and size of cannabis advertising. This article seeks to give an overview of the various forms of state regulation—with a specific focus on states with legal recreational programs—on cannabis advertising, by exploring the similarities and differences between the legislation and examining the different rules in place for both traditional advertising and digital advertising.

Digital Advertising Landscape

The digital marketing platforms available to cannabis companies and retailers are currently extremely limited. In general, TV and Radio broadcasters steer away from cannabis advertisements, largely due to uncertainty about FCC policy and concerns with their FCC licenses being taken away. Further, Google and Facebook—the two companies which dominate the online digital advertising market—currently severely restrict the advertising options for cannabis businesses. Google lists cannabis under the headline of “dangerous products and services” which it bans in order to keep people safe from the “promotion of some products or services that cause damage, harm or injury.” It is quite telling of Google’s view on cannabis, as the other good and products listed within this category are guns, explosives, and tobacco; at the same time, Google has a completely separate policy for alcohol advertising. Facebook has a similar ban on advertisements that promote the sale or use of illegal or recreational drugs and provides specific examples of prohibited advertising activity (which includes using images of smoking-related accessories like bongs and rolling papers or images which simply imply the use of a recreational drug). While Facebook has flirted with the idea of revamping its current policies, and recently began to allow the pages of legally operating cannabis retailers to appear in Facebook searches, it’s strict advertising policies still remain intact, much to the dismay of cannabis communities.

Traditional Advertising Landscape

While there is a larger market of available options for cannabis companies and retailers when it comes to print, billboard, and signage advertisements, there are still many restrictions in place which vary from state to state. Colorado—the first state to legalize the recreational use of cannabis—enacted cannabis advertising legislation which is very similar to the state’s laws related to alcohol advertising. The use of outdoor public advertising for cannabis retailers in Colorado is extremely limited, with fixed signs on the zoning lot for the purpose of identifying the location of the business is the only thing permitted. While retailers are prohibited from using billboards in Colorado to advertise their stores and products, about half of the state’s “Adopt-a-Highway” signs display the logos of local cannabis businesses, a “loophole” being exploited by these businesses. Further, the billboard laws do not apply to cannabis companies such as WeedMaps—an app that primarily provides locations and reviews for dispensaries—as the company is not in the business of selling cannabis, permitting the companies “Weed Facts” campaign to be run on billboards within the state. New York has similarly strict restrictions on external signage, requiring the publicly viewable signage of medical cannabis retailers to be non-illuminative and only in black and white colors; just across the water, the state of New Jersey also has identical restrictions in place.

Health and Safety Concerns

The Federal Trade Commission—a government agency in place to protect American consumers—regularly monitors health-related advertising claims and routinely sends warning letters to cannabis companies whose advertisements promote the prevention, treatment, or cure of symptoms without proven scientific evidence to backs up such claims. The FTC takes these matters extremely seriously, requiring any company that receives a warning to notify the FTC of the specific action they took to remedy the agency’s concerns. The warning letters also serve to inform offending cannabis companies of the legal consequences of the prohibited unsubstantial health promotion, which can result in an injunction to both stop sales and force the refund of money to consumers. Most states have further legislation in place to enact specific requirements for cannabis advertisements which make health claims, with all of them requiring similar scientifically proven substantiation of any claims being put forward. The state of Alaska requires five different warnings to be placed on all advertising, including statements such as “[cannabis] has intoxicating effects and may be habit forming and addictive” and  “[t]here are health risks associated with consumption of [cannabis].”

Beyond health concerns, many state laws have checks to ensure that advertisements are not targeting individuals under the age of 21. For instance, California laws require any cannabis advertising placed in digital communications to be displayed only where “at least 71.6% of the audience is reasonably expected to be 21 years of age or older” while also prohibiting signage within 1,000 feet of any elementary school, high school, playground or youth center. The state’s laws further forbid the use of cartoons, music, and symbols which are known to contain elements that appeal to persons younger than 21. 

Conclusion

As the world of cannabis advertising is filled with strict policies that vary across state lines and general confusion about federal guidelines, it is important for a business to err on the side of caution and consult with legal experts when creating advertising campaigns. While successful advertising is rife with creativity, the rigorous health and safety requirements work to remove such ingenuity from the cannabis advertising industry. This puts cannabis retailers and companies in a tough spot, as they need advertisements to promote their business, but always have to keep the consequences of the law in the back of their minds.

CES Digital Hollywood 2020

By: Steve Masur

Join us on January 6th at the Aria Resort & Casino (9:00 AM PST) for Digital Hollywood CES 2020 to discuss the Top Technology and Entertainment Companies in AR/VR/XR.

9-10 AM January 6

Aria Resort and Casino, Level 3, Juniper 4

About the Panel:

The AR/VR/XR industries might be understood as V/X on all Platforms: Social Media – Smartphone – Computing, TV/Movies, and Live Experiences. From visual communications, advertising, news, retail data and vertical specialties to cinematic experiences, this is the world that surrounds us.

Kristina Serafim, Director, Verizon Ventures
Marcie Jastrow, SVP of Immersive Media, Technicolor Experience Center
Sarah Vick, Head of Business Development, Intel Studios
Neil Parris, AR / VR, Entertainment Partnerships Lead, Google
Steven Masur, Moderator

REGISTER TO ATTEND

 

About the Speakers:

  • Steven Masur has over 24 years of experience advising emerging and established businesses on new opportunities and business challenges. He focuses his practice on corporate finance, M&A, intellectual property, entertainment, emerging businesses, and strategic guidance. Steve has extensive experience in angel and venture capital finance, mergers and acquisitions, joint ventures and cross-border transactions in Europe and Asia. He is passionate about helping new businesses plan a path to success, and helping older businesses bridge the gap to new markets. Steve brings a unique mix of legal, business, and strategic experience to bear on client matters. He has counseled enterprise level clients including Shazam, Virgin Mobile, Liberty Media, Yamaha, Nielsen Buzzmetrics, Bob Vila and Conde Nast Publications in corporate, digital media, and new business matters. He has also helped emerging businesses in a wide variety of sectors, and is especially knowledgeable in media, entertainment, cannabis, blockchain advertising, consumer products, technology, including mobile, games, digital music, social media, augmented and virtual reality, software and hardware. Steve has been recognized as a “Rising Star” and a “Super Lawyer” by Super Lawyers. He serves on a variety of corporate and nonprofit boards and industry associations, and lectures and writes about major issues in venture capital, emerging businesses, entertainment law, technology, and corporate strategy.
  • Kristina Serafim joined Verizon Ventures from Verizon’s Big Data and Artificial Intelligence product team. Prior to Verizon, Kristina was a Director at Intellectual Ventures, where she led investments in machine learning, media, advertising, and gaming technologies. Kristina’s entrepreneurial experience includes co-founding and leading two software companies, from their inception to acquisition. Kristina also spent several years on the strategy and corporate development teams at IBM and at NAGRA Innovations. She received an electrical and mechanical engineering degree from Kettering University and an MBA from Harvard University. Verizon Ventures invests in key areas leading the future of connectivity, with one focus being on immersive entertainment, as demonstrated by its recent investment in holographic display startup Light Field Labs and consumer VR platform The VOID and hologram platform 8i. Kristina can elaborate on the immersive experiences available to consumers today, the importance of seeing AR/VR/MR technologies as an additional advancement of human vision and even how it will integrate into the enterprise.
  • Marcie Jastrow is an industry veteran with over 20 years in the Entertainment business. Currently the SVP of Immersive Media at Technicolor, as well as the Head of the Technicolor Experience Center (TEC), Marcie is dedicated to bringing artists, technologists, and partners together to build the future of immersive media. Since the opening of the TEC in July, 2016, Marcie has consulted on many immersive projects and has provided her insights in dozens of interviews, published articles, and speaking engagements. Focused on igniting VR, AR, and beyond, Marcie sits on several boards including the Interactive Emmys, Periscope, and BAFTA. In 2018, she was honored with the Advanced Imaging Society’s ‘Distinguished Leadership Award’, which recognizes creative, productive and forward-thinking efforts in visual technology and emerging content. Prior to her current role, Marcie was responsible for growing technology and emerging content. Prior to her current role, Marcie was responsible for growing Technicolor’s post-production sales pipeline as SVP of Sales. Before joining Technicolor, she served as EVP of Sales at Laser Pacific, which Technicolor acquired in 2011, as well as SVP of Sales at Modern Video Film for over eight years.
  • Sarah Vick, the Head of Business for Intel Studios, is passionate about evolving the media industry to revolutionize the way we tell stories. Her professional expertise in digital transformation, innovation, and new technology strategy enables her to lead partnership development, portfolio management, and content strategy for the leading immersive media studio. With every production, Vick and her team explore how breaking the fourth wall through volumetric capture and immersive experiences can help us create new and more impactful media experiences. Vick holds a BS in Physics from Stanford University and an MBA from the Sloan School of Management at MIT. She was also a Fulbright Scholar and a Siebel Scholar.
  • Neil Parris leads Google’s AR / VR content efforts across the entertainment vertical, partnering with world-class IP owners and talent to develop and distribute innovative content experiences across Google’s platforms. Before joining the Daydream team, Parris led entertainment partnerships for Google’s Consumer Apps Marketing group and oversaw major content/marketing partnerships with Disney, Warner Bros., Netflix, Fox, ABC, and others. Prior to Google, Parris worked at EQAL, an early pioneer in the YouTube/social/influencer space (later acquired by Everyday Health), Edelman (in their branded entertainment division) and 8+ years in the film business as a creative executive. Parris is a member of the TV Academy and serves on the Digital Strategy Committee. Parris holds a bachelor’s degree from University of Pennsylvania and an MFA in Film / TV Producing from the University of Southern California’s School of Cinematic Arts’ Peter Stark Program.
  • Michael Ludden is a technologist, futurist, evangelist and product leader who loves to operate on the bleeding edge of what’s possible and is a frequent keynote speaker at events around the world. Currently Principal Augmented Reality Evangelist at Bose, Michael was previously Director of Product at IBM’s Watson Developer Labs & AR/VR Labs, Product/Developer Marketing Manager Lead at Google, Head of Product/Developer Marketing at Samsung and Product/Developer Evangelist at HTC, among other career stops. He has also been involved at various times in development, co-founding startups, tech show hosting, and even cruise-ship singing (don’t ask). As passionate about solving complex real-world problems as he is about Immersive Technologies (AR/VR) and Machine Learning (AI), Michael is also fascinated by all things futurist, and has been continuously involved in the creation of some of the most innovative new products and use cases that exist on the bleeding edge of emerging technology today. Michael has a degree from the University of California at Los Angeles (U.C.L.A.) and is excited to share some exciting insights into the future of our increasingly augmented world.

A Limited Shield of Privacy for New York Residents

By: Steve Masur

New York Governor Andrew Cuomo signed the Stop Hacks and Improve Electronic Data Security Act (the “SHIELD Act” or the “Act”) into law on July 25, 2019, nearly two years after the bill was originally proposed. The SHIELD Act amends New York’s General Business Law to reflect the data privacy needs of its residents. The Act implements additional security parameters for entities that own or license private information of New York residents. Additionally, the Act broadens the definitions of “private information” and “breach” to better protect New York residents against the unauthorized access of personal data. 

Reasonable Data Security Requirements

New York joins a growing list of states that have enacted more modern data privacy laws.  The Act requires businesses that own or license the private information of New York residents to have  “reasonable” technical, physical, and administrative safeguards in place in order to protect the security, confidentiality, and integrity of the residents’ private information. This replaces the old standard by which New York residents and entities were only protected if business was conducted within the State of New York. The Act offers several examples of measures that can be implemented to ensure compliance with the necessary safeguards such as training of management and employees in cybersecurity practices, regular monitoring, testing and upgrades to address key controls and systems, and disposal of private information in a timely fashion. Small businesses, however, need only “reasonable administrative, technical, and physical safeguards” that are tailored to the size of the business, the “nature and scope” of the business’ activities, and the sensitivity of the personal data the business holds.  

Private Information under the SHIELD Act

Another key feature of the Act is the wider scope of the definitions of “private information” and “data breach.” Under the Act, “private information” now includes biometric information, financial information (such as account numbers or credit or debit card numbers), and usernames or e-mail addresses in combination with password or security questions. While this is an improvement from the past definitions, it still falls behind the definitions provided in the privacy laws of other states, which include medical information and certain health insurance identifiers in the definitions. Further absent from the new definitions are personal identifiers such as consumers’ health insurance information and passport numbers. 

Breach of the Security System and Penalties under the SHIELD Act

The Act also updates what is considered a “breach of the security in a system.” Mere access to such privileged information now constitutes a breach, a change from the old standard that only restricted the acquisition of private information. While the SHIELD Act does implement stronger penalties for data system breaches, it does not entitle residents to a private right of action. Instead, the Act allows the New York State Attorney General to have broader oversight in bringing actions and obtaining civil penalties on behalf of residents. The new penalty for knowingly and recklessly violating the Act is a $20.00 fine for each instance of a failed notification, with a cap of $250,000. The Act further implements penalties for certain violations to the new data security standards, which can reach up to $5,000 per violation with no cap. It is unclear what constitutes a “violation” under the Act.

The Hazy Relationship between the FDA and CBD

By: Jon Avidor, Sarah Siegel and Liam McKillop

Walking around New York City, it could be easy to be under the impression that the sale of certain CBD products is legal. You can walk into your local convenience store and buy CBD-based chocolate candies over the counter, or you may have walked by one of the various CBD dedicated stores operating in Manhattan. However, in most instances, that is not the case. The legality of the CBD industry is not clearly defined, especially when it comes to CBD-based products such as foods, drinks, cosmetics, and pet goods and how the Food and Drug Administration (“FDA”) regulates the manner in which these products are sold and marketed.

The FDA, which operates as a science-based regulatory agency committed to protecting and promoting public health, has worked to balance the significant public interest and demand for CBD products while continuing to maintain their rigorous public health standards as it relates to drug approval. However, as the popularity of CBD and the industry in general continues to grow—evidenced by estimates that U.S. consumers spent $300 million on CBD foods and drinks throughout 2018—the FDA has continued to come under public pressure to regulate and stay up to date on the legal status of CBD products. 

There are two types of CBD: (1) hemp-based CBD, and (2) THC-based CBD. While both types come from the same plant—Cannabis sativa L.—there are major differences between the chemical makeup of the two after post-harvest, leading to a difference in how the two products are regulated by the FDA. As both types of CBD are common, the legal status of the two individual products has created confusion throughout the CBD industry. 

When the 2018 Farm Bill was signed into law in December 2018, the definition of “hemp” was amended to now be defined as “all parts of the plant Cannabis sativa L. with a delta-9 tetrahydrocannabinol concentration (the component of the plant which is responsible for the “high” attributed to cannabis) of not more than 0.3%.” Further, hemp was removed from the Controlled Substances Act, allowing for hemp-based CBD products to be put into interstate commerce. The result of this is that a majority of CBD products that are sold commercially are hemp-based. However, the Farm Bill ensured that the FDA would continue to have the authority to regulate products that contain cannabis or cannabis-derived compounds under the Federal Food, Drug & Cosmetics Act (“FDC Act”). The FDA has continued to maintain its position that it is currently illegal for THC-based CBD products like foods and drinks to be placed into interstate commerce and/or marketed as a dietary supplement.

Under the FDC Act, any product (excluding foods and drinks) which intends to provide either a therapeutic or medical effect on the body of humans or animals, is a drug. To date, Epidiolex—which is used as a treatment of seizures associated with Lennox-Gastaut syndrome or Dravet syndrome—is the only drug containing CBD which has been approved by the FDA. Further, the FDA has different regulatory standards when it comes to products like foods and drinks and even further differing standards for cosmetic products, with the latter being generally considered to be much less rigorous. For example, with cosmetic products (products which are considered to be “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the body”), there are no pre-approval requirements when it comes to the addition of CBD into these products. 

Meeting the definition “hemp” is only the first step to legally sell a specific type CBD product. The legal status of the product will also depend on its intended use, how the product is labeled and how the product is marketed. For instance, the FDA has concluded that no THC-based CBD product can be marketed or advertised as a dietary supplement, as the FDA has yet to discover scientific evidence which backs up the proposition. The FDA is currently unaware of any evidence which supports CBD products being used as a dietary supplement, and will therefore enforce against companies that market products as such.  it looks to enforce against products which market themselves as such. The FDA worries that such deceptive marketing claims can put the public at risk as individuals may be inclined to attempt to use such products instead of approved treatment methods for their conditions.  

Due to the rapid rise in popularity of CBD and the recent law changes related to hemp and cannabis (which continue to vary at the state and local level), it seems that the goalposts for FDA regulation of CBD products continue to be moved. While the FDA continues to consider public health above and beyond public demand, the FDA also understands that companies are begging for clearer guidelines related to the marketing and sale of their products and that the public wants to know more about the prospective therapeutic and medical benefits of CBD. However, as an agency, the FDA needs to be comfortable with the scientific evidence which supports the purported benefits, and due to the current status of tests and clinical trials, the FDA is not yet there.

Breaking Up Is Hard To Do: Big Tech and the Coming Antitrust Assault

By: Rob Griffitts

Big tech has been under assault by Europe’s regulators for years now, but until recently, not much has been happening in the US.  But after a series of scandals, most notably Facebook’s privacy issues with Cambridge Analytica and a shift in the political climate, a US backlash is gaining momentum.  Detractors on both sides of the political aisle claim big tech is hurting consumers, our democracy and our economy.

The biggest tech companies – namely Facebook, Amazon, Apple, and Google –  are under investigation from multiple federal, state and congressional regulators.  

Google faces four antitrust cases and is being accused of using its stranglehold on the internet search to the detriment of others.  Facebook, which also owns some of the world’s largest messaging apps, also faces four antitrust cases (and five other cases for privacy practices).  Amazon faces three antitrust cases, and questions center on whether the giant favors its own private label goods over those of third parties. And Apple faces three antitrust investigations that focus on whether its app store practices harm competitors.

Put simply, they are being accused of being too big and wielding too much power. The conversations being had about these antitrust investigations assume that, if the companies lose, they will be broken up.  That’s highly unlikely, though.

First, historically, antitrust cases have been brought in situations where consumers are harmed due to a lack of competition, which usually took the form of a monopoly that charged excessively high prices.  That’s not the case here. In fact, the opposite is true: services are continually expanding, and prices – if they aren’t already at zero – are decreasing. This would complicate any argument that consumers are being harmed, and antitrust laws are all about protecting harm to consumers.

Second, antitrust cases take a very long time to resolve and are difficult for regulators to win.  Take the case against Microsoft. The FTC started its investigation in 1990, and the Justice Department started its own case in 1998, claiming that the bundling of its Internet Explorer browser with Windows created an unfair advantage over other browsers.  Not until 2002 – 12 years later – was the case settled, on terms significantly diluted from what regulators were initially asking, even though when the case was brought, Microsoft owned about 90 percent of the PC market. These are lessons that regulators are not likely to have forgotten. 

It’s also worth noting that “behavioral remedies” are increasingly out of fashion among regulators, meaning they’re more likely to seek civil damages or fines.  And if big tech’s responses to Europe’s fines are any indication, fines levied here in the US will have little, if no impact.

All that is not to say the whole affair will be a walk in the park.  To the contrary, responding to years-long investigations from multiple agencies will prove to be a big distraction, and one only needs to look at the depressed stock prices of companies under investigation to see how the markets feel about all the uncertainty.

LA’s Social Equity Program: Transforming Past Wrongs for a Just Future

By: Steve Masur

It is no secret that minority communities have been adversely affected by the War on Drugs.  Though the need for prison reform has recently come to the political forefront, it has not solved the current problems of the newly released.  Higher instances of imprisonment among marginalized groups have led to disenfranchisement as well as general exclusion from the workforce.  As a result of being targets for years, many people who were once convicted for drug charges, specifically cannabis charges, have been excluded by the legal cannabis industry today. Although states have been legalizing recreational cannabis at a rapid rate, the growing cannabis industry’s blind spot to underserved communities is finally being addressed. 

A year after the legalization of recreational cannabis use in California, the city of Los Angeles is looking to balance the scales in terms of business ownership.  The City of Los Angeles Department of Cannabis Regulation (DCR) has adopted a Social Equity Program that offers business support to individuals who have been disproportionately impacted by the previous criminalization of cannabis activities. The program not only offers business support but also expedited cannabis license application and renewal processing. Implemented earlier this year, the program’s benefits and tiered system are based on the findings of the Social Equity Analysis.  This research study aimed to locate the communities negatively affected by cannabis laws as well as disproportionately targeted by law enforcement. 

Using this research, the Social Equity Program created three tiers of program eligibility. The tiers are broken down by ownership of a business as well as economic factors. The first tier requires that an applicant must be low-income and either a) have a cannabis arrest in California prior to 2016 or b) have been a resident in a “Disproportionately Impacted Area.”  The Disproportionately Impacted Area refers to a set of zip codes that the Social Equity Analysis identified as being unfairly targeted by law enforcement.  Tier two requires the applicant to be low income and have lived in one of the above-mentioned areas for 5-10 years.  Tier three is interesting because it does not necessarily apply to marginalized groups.  Instead, tier three states that the applicant must provide business licensing and compliance support to the tier one and two applicants.  This third tier seeks to support the workforce and provide job placement for those who do not own or do not wish to own their own cannabis business.

In all, the program offers valuable business support from the city to a broad group of applicants.  The expedited process, training and workforce support through the program cannot be understated, especially in a fluctuating industry like cannabis.  However, the program alone will not solve every problem in the industry. Even with these incentives from the DCR, the marijuana black market is thriving.  Counterfeits and knockoffs are not only dangerous but also threatening legitimate businesses, businesses that may be starting through the Social Equity Program.  While some issues may be more suited for the state, the program has not been without criticism. Back in March, a scandal broke when it was revealed that about $10 million that was supposed to go to the Social Equity Program in Los Angeles was allegedly instead given to the LAPD sworn overtime.  Although funding for the program still seems to be in flux, the goal has not changed. This same goal is also being implemented in other states where cannabis has been legalized in some capacity.  Diversity in this growing industry is vital and so, social equity programs like the one in L.A. have the responsibility to facilitate inclusion and right the wrongs of the past.

What the FUCT: Can the USPTO Still Deny Your Vulgar or Offensive Mark?

By: Steve Masur and Cameron Ashby

The Supreme Court recently struck down a federal law that banned trademarking words and logos that are “immoral” or “scandalous”. The court reasoned that this federal requirement for registering marks was a form of viewpoint discrimination against vulgar or offensive marks and thus unconstitutional. As a result, Justice Sotomayor foresees a “coming rush” of trademark applications for vulgar or offensive marks, but that does not mean the U.S. Patent and Trademark Office (USPTO) is powerless to deny these applications on other grounds. Before deciding to register a vulgar or offensive mark for your business, it is important to consider whether the mark is registrable. In other words, the mark must satisfy the function of a trademark and be used lawfully in interstate commerce. 

How to make sure your vulgar or offensive mark is a functional trademark

The recent decision in Iancu v. Brunetti  has delivered a big win to shock-value brands and extended federal protection to a whole new class of trademarks. Under this new precedent, the USPTO cannot reject an application for a vulgar or offensive mark on the grounds that it is “immoral” or “scandalous”.  Although, as multiple Justices in the Brunetti dissent pointed out, this “win” may be short-lived due to new Congressional legislation which could achieve the “immoral” or “scandalous” standard through more precise language.  

In the meantime, when attempting to register a vulgar or offensive trademark, you should consider whether the mark truly functions as a trademark or violates any of the other principles of federal trademark law. The USPTO can reject the application if the mark is simply a random vulgar phrase or word printed on a shirt, merely descriptive, or deceptively misdescriptive.  

It is important to note when the application is based on “use in commerce” or “intent to use” a specimen must be included. The USPTO, therefore, looks closely at specimens of use attached to the application and can reject it if the specimen seems not to be genuine but prepared simply to support the filing of an application. Additionally, it is required that the mark be shown on the specimen attached and also, shown to be used with the goods or services listed in the application. The USPTO offers a list of requirements in order for a specimen to be accepted, therefore it is imperative that those seeking trademarks consult with a private trademark attorney. The USPTO will not protect a mark that is used in the illegal stream of commerce; for example, cannabis. 

How does this affect the industry?

While vulgar and offensive marks are now allowed to be federally registered, not all consumers will be comfortable with shock value branding. If your business does not work in a space where vulgar and offensive marks are considered to be valuable and more “shock” centered, it may be unwise to try and register a vulgar or offensive mark. Simply put, if your business is in the market where vulgar or offensive marks will grow your image, then, by all means, explore as many options as possible. At the end of the day, the market will decide what value vulgar or offensive marks have after Brunetti and consumers will control that value through their patronage.