Hemp Sector Issues

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The Federal Trade Commission (“FTC”) has joined the U.S. Food and Drug Administration (“the “FDA”) in enforcing laws related to marketing CBD products. The FDA has historically issued warning letters and pursued companies that illegally market CBD products with claims the products may treat medical conditions.  The FTC has joined the FDA is this pursuit and announced settlements with six different CBD companies involves fines ranging between $20,000-$85,000 in addition to notifications provided to consumers.  Pursuant to these settlement agreements the respondent companies are also prohibited from similar marketing efforts in the future, any health claims must have scientific evidence to support them.

Industry actors making any health or therapeutic claims are vulnerable to action by agencies such as the FDA and FTC, however, they may also be subject to civil suits based on enforcement by those agencies. In April of 2020 Charlotte’s Web Holdings, Inc. (“CWB”) was served with yet another (its second) class action lawsuit due to how their products are labeled. Benson v. Charlotte’s Web Holdings, Inc., No. 1:20-cv-00418 (N.D. Ill.)  The suit based a significant portion of the allegations on FDA guidance:

 “Based on available evidence, FDA has concluded that THC and CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act [21 U.S.C. § 321(ff)(3)(B)]. Under that provision, if a substance (such as THC or CBD) is an active ingredient in a drug product that has been approved under section 505 of the FD&C Act [21 U.S.C. § 355], or has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, then products containing that substance are excluded from the definition of a dietary supplement”

Companies facing enforcement actions by the FTC may similarly be subject to civil allegations.

WHAT DOES THIS MEAN FOR YOUR BUSINESS

On January 15, 2021, the United States Department of Agriculture (“USDA”) published its final rule (the “Final Rule”) regulating the production of industrial hemp under the Agriculture Improvement Act of 2018 (the “2018 Farm Bill”). The Final Rule modifies regulations set forth in the interim final rule published on October 31, 2019 (the “Interim Rule”). The modifications are based on approximately 5,900 public comments submitted to the USDA over three public comment periods.

The Final Rule contains the following key provisions:

On August 20, 2020, the Drug Enforcement Administration (“DEA”) published an Interim Final Rule on industrial hemp and hemp derivatives (the “Interim Rule”), which immediately went into effect, to conform DEA regulations with the Agriculture Improvement Act of 2018 (the “2018 Farm Bill”).

As we previously discussed, the 2018 Farm Bill effectively removed industrial hemp from the definition of “marijuana” in the Controlled Substances Act (CSA). Additionally, tetrahydrocannabinols contained in industrial hemp, such as Cannabidiol (commonly known as CBD), were also removed from the purview of the CSA.

The U.S. Food and Drug Administration (FDA) issued a press release on the evening of Monday, November 25 concerning its recent enforcement actions and a regulatory decision concerning products that contain cannabidiol (CBD).  The Warning Letters follow FDA’s trend of focusing its CBD product enforcement on unapproved drug claims.  The regulatory decision stated in the press release concerns FDA’s decision that CBD is not generally recognized as safe (GRAS) for use as a food additive.

The fifteen (15) Warning Letters, each dated November 22, 2019, were issued to companies for marketing various CBD products. The products identified in the Warning Letters spanned conventional foods, dietary supplements and animal products.  FDA made specific mention in several Warning Letters about statements regarding the use of CBD products in infants and children.

Today, the United States Department of Agriculture (the “USDA”) released a draft interim final rule regarding the establishment of a domestic hemp production program. We expect the interim final rule to be published in the Federal Register in the next day or so, which will initiate the 60-day public comment period. This rule establishes rules to approve state and tribal plans to regulate the production of hemp pursuant to the Agriculture Improvement Act of 2018, or the 2018 Farm Bill.

Trademark practitioners, hemp producers, and hemp-derived product manufacturers have long struggled with the clash of federal and state law regarding protection of trademarks with the United States Patent and Trademark Office (USPTO). Historically, the USPTO has refused registration of marks that include cannabis, hemp, CBD or derived products on the basis that these marks were unable to have lawful use in commerce under existing federal law. These waters became even murkier after the passage of the Agricultural Improvement Act of 2018 (known as the 2018 Farm Bill), which removed “hemp” from the list of controlled substances under the Controlled Substances Act (CSA). On May 2, 2019, the USPTO issued Examination Guide 1-19, outlining the USPTO’s policies with respect to trademarks including legal CBD and hemp-derived goods and services since passage of the 2018 Farm Bill. This appears to open the door for registration of marks that include legal CBD, hemp or hemp-derived products (such as hemp oil), or services such as the cultivation or production of hemp.

After a lengthy compromise process, The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) was passed on December 12, 2018 by Congress and delivered to the White House for the President to sign. The 2018 Farm Bill will replace the Agriculture Improvement Act of 2014, which expired on September 30, 2018. Distributing more than $850 billion, the 2018 Farm Bill is an enormous piece of legislation and funds programs such as crop insurance, school lunches, and the Supplemental Nutrition Assistance Program (SNAP).

Integrated into the massive omnibus Farm Bill is the bipartisan Hemp Farming Act of 2018, spearheaded by Senator Mitch McConnell. The Hemp Farming Act will legalize at the federal level the production of industrial hemp, defined as Cannabis sativa L. plants containing less than three-tenths of a percent of THC, the intoxicating chemical in marijuana. The low concentration of THC makes these plants unsuitable for marijuana production, which remains federally illegal.

First and foremost, the 2018 Farm Bill will abolish this inconsistent treatment by removing industrial hemp from the definition of “marihuana” in the Controlled Substances Act (CSA). In addition, tetrahydrocannabinols contained in industrial hemp will be removed from the purview of the CSA. This amendment to the CSA will decriminalize the production and use of the Cannabis sativa L. plant and its derived products that match the definition of industrial hemp, such as hemp seed oil, CBD oil, hemp fibers and hemp paper.