Category: Uncategorized

By Michael S. Dorsi

This morning, the U.S. Supreme Court announced its decision in Icanu v. Brunetti, holding that the First Amendment compels invalidation of the provision of the Lanham Act that instructed the United States Patent and Trademark Office to deny registration of any “immoral” or “scandalous” marks. As a result, Brunetti can register his trademark: FUCT. This was not a surprise. When the U.S. Supreme Court grants certiorari on a free speech question, the speaker usually wins, and the government usually loses. Two terms ago, the Court struck down a similar provision of the Lanham Act concerning disparaging marks, compelling the PTO to register the mark for the applicant’s band’s name, THE SLANTS. During oral argument for that case, multiple justices were critical of the PTO’s inconsistent application of the rule against immoral or scandalous trademarks.

If the PTO must register the mark for the name of a rock band despite a potentially disparaging name and a potentially vulgar mark suggestive of a sex act, must it also issue marks for federally illegal drugs? I wondered if that would be the next case. But Justice Kagan, perhaps thinking a step ahead, explained the following in the Opinion of the Court:

• • • • The PTO rejected marks conveying approval of drug use (YOU CAN’T SPELL HEALTHCARE WITHOUT THC for pain-relief medication, MARIJUANA COLA and KO KANE for beverages) because it is scandalous to “inappropriately glamoriz[e] drug abuse.” [citations]. But at the same time, the PTO registered marks with such sayings as D.A.R.E. TO RESIST DRUGS AND VIOLENCE and SAY NO TO DRUGS—REALITY IS THE BEST TRIP IN LIFE. [citations]. Similarly, the PTO disapproved registration for the mark BONG HITS 4 JESUS because it “suggests that people should engage in an illegal activity [in connection with]worship” and because “Christians would be morally out-raged by a statement that connects Jesus Christ with illegal drug use.” [citation].

Iancu v. Brunetti, No. 18-302 (U.S. Jun. 24, 2019), Slip. Op. at pp. 6–7.

That’s cute, but it avoids commenting on the more pressing question for drug-related trademarks: can the PTO deny registration because the applicant’s use in commerce was not lawful. This is not just a question for underground market sales. Many cannabis industry businesses are eager to know the answer. Marijuana and cannabinoids are legal, at least for medical use, in 33 states, 4 of the 5 populated U.S. territories, and the District of Columbia. Although the Controlled Substances Act still lists marijuana and cannabinoids as Schedule I drugs, the Rohrabacher–Farr amendment prohibits the Justice Department from spending appropriated funds prosecuting medical marijuana activity consistent with state law.

Presently, this industry cannot obtain trademarks because the PTO follows a rule refusing to register marks when the use in commerce is unlawful. See, e.g., In Re Pharmacann LLC, 123 U.S.P.Q.2d 1122 (T.T.A.B. 2017 (rejecting application for retail cannabis store), In Re JJ206, LLC, DBA Juju Joints, 120 U.S.P.Q.2d 1568 (T.T.A.B. 2016) (rejecting application for single-use cannabis vape devices), In Re Morgan Brown, 119 U.S.P.Q.2d 1350, *4 (T.T.A.B. 2016 (rejecting application when applicant contemplated selling marijuana and other herbs); see also General Mills, Inc. v. Health Valley Foods, 24 U.S.P.Q.2d 1270, 1274 (T.T.A.B. 1992 (“some unlawful uses are of such a nature (e.g., use of a mark in connection with an illegal drug) that it would be unthinkable to register a mark”).

With the PTO reversed twice in its last two trips to the Supreme Court, one might wonder if success for applicants seeking disparaging or scandalous marks is a good sign for applicants seeking trademark registrations related to the sale of cannabis. As a matter of doctrine, Tam and Brunetti do not lend much support. But two broader trends in Federal Circuit and U.S. Supreme Court cases may help cannabis business applicants.

First, as was evident in the oral argument and written opinion in Brunetti, the Justices are not happy with the PTO’s inconsistent application of restrictions on trademarks. Even if the case turns on a different question of law, skepticism toward the government is an advantage for the challenger.

Second, the trend in statutory interpretation over the past few decades has been to focus on text over purpose, and the PTO’s position is vulnerable to a challenge based on the text of the statute. The relevant section of the Lanham Act permits registration of marks based on “use in commerce,” which the PTO interprets to mean “lawful use in commerce.” But the term lawful does not appear in that section, and other sections do specifically include and refer to “lawful use in commerce.” If Congress meant to constrain registrations to lawful use in commerce, it could have done so. Instead it referred just to use in commerce. The relevant statute, 15 U.S.C. § 1127 says that “commerce” means what may lawfully be regulated by Congress. There is no doubt that Congress can regulate marijuana. Gonzales v. Raich, 545 U.S. 1 (2005) (concluding that marijuana is subject to federal regulation).

Wait — could Congress have really meant for the Lanham Act to allow registration for marks used unlawfully in commerce like illegal drugs? If that sounds like a tough sell, then it might be time for a challenger to look for a better vehicle. How about a more ordinary legal drug or dietary supplement?

That case came before the Ninth Circuit Court of Appeals in the case of CreAgri, Inc. v. USANA Health Sciences, Inc., 474 F.3d 626 (9th Cir. 2007). The District Court had cancelled CreAgri’s mark OLIVENOL on the grounds that because of improper labeling of the dietary supplement, CreAgri had not used the mark lawfully in commerce. The Ninth Circuit affirmed, and CredAgri did not seek review by the Supreme Court. Perhaps it should have. The result seems harsh: cancellation of a trademark based on a labeling violation requiring no wrongful intent.

Taking a commercial cannabis trademark case to the Supreme Court may seem unreasonably risky. But finding a case like CreAgri and making it into a test case — that might give the Supreme Court the opportunity to reverse the PTO for a third time after THE SLANTS and FUCT, checking the boxes for all three of sex, drugs, and rock ‘n’ roll.

           

Written by Michael S. Dorsi

Leap, a new comfortable-looking private bus service in San Francisco, recently came under scrutiny for removing wheelchair accessibility equipment from buses it purchased and retrofitted. Chris Pangilinan, a former San Francisco Municipal Transportation Agency engineer, recently filed a complaint with the Department of Justice alleging that Leap violated the  Americans with Disabilities Act.

President George H.W. Bush signing the Americans with Disabilities Act into law.

If anything, it is surprising that Leap has not already been sued. Hotel and restaurant owners in California are often familiar with so-called “serial plaintiffs  who bring hundreds— sometimes thousands — of disability access lawsuits. They keep doing so because the law favors their cases.

A person harmed by a violation of the Americans with Disabilities Act may sue under California’s Unruh Civil Rights Act.[1] Successful plaintiffs are awarded damages of triple the harm suffered, no less than $4000, plus mandatory attorneys’ fees.[2] Attorneys’ fees are only available to plaintiffs; defendants may not recover their fees even if they win a defense verdict.[3] The damages and fees rules create a strong incentive for defendants to quickly settle their cases and remedy any conditions that do not conform to ADA rules.

California State Assembly Speaker Jesse Unruh, after whom the Unruh Civil Rights Act is named, with Willie Brown, who would go on to serve as Assembly Speaker after Unruh’s retirement.

The Unruh Civil Rights Act does require that the plaintiff be directly harmed.[4] Mr. Pangilinan, who now works in New York, may not be directly harmed, but there are likely other potential plaintiffs. Leap may have defenses, but defending an Unruh Civil Rights Act case is difficult, costly, and risky.

*Mr. Dorsi is an attorney with Ad Astra Law Group, who has represented plaintiffs and defendants in fee-shifting litigation under public interest statutes, including disability access litigation the Unruh Civil Rights Act.

[1] Cal. Civil Code § 51(f).

[2] Cal. Civil Code § 52(a).

[3] Turner v. Association of American Medical Colleges, 193 Cal.App. 4th 1047, 1060 (2011).

[4] Surrey v. TrueBeginnings, LLC, 168 Cal. App. 4th 414, 420 (2008).

 

 

Author: Wendy Hillger

To help increase funding for affordable housing, Gov. Jerry Brown recently signed a bill (Senate Bill 2: “Building Homes and Jobs Act”) that places fees on some real estate transactions in the state of California.  Effective in January 2018, a fee of $75 per single parcel of property will now apply for documents such as deeds and notices.  The fees are capped at $225 per transaction.   Recording of these documents for sales of residential and commercial property are specifically excluded [SB 2 bill text, section 2(19)].

The State Senate estimated these fees would bring the state between $200 to $300 million annually.  The additional revenue from the fees will be a permanent source of funding to pay for affordable, low-income housing, of which lawmakers estimate 1.8 million units are needed in the state.

The full bill text can be read here:

 

By Sean Gentry

In response to the health concerns and shelter in place orders affecting individuals and business through the United States, the federal government has passed new paid sick time laws that all employers need to be aware of, called the Families First Coronavirus Response Act (FFCRA or Act).

This law goes into effect for April 2020 and continues through December 31, 2020.  It affects all employers with 500 or fewer employees.  In general, this law requires affected employers to provide their employees who cannot work (or remote work) with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19.  Covered employers must provide to all employees:

• • Two weeks (up to 80 hours, or a part-time employee’s two-week equivalent) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis.
    
    OR

 

• Two weeks (up to 80 hours, or a part-time employee’s two-week equivalent) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine, or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition.

For the first category, the amount of sick time to be paid is 100% of the employee’s income up to a maximum of $511 daily and $5,110 total.

For the second category, the amount of sick time to be paid is 2/3^rd of the employee’s income up to a maximum of $200 daily and $2,000 total.

However, in the case of employees caring for their child whose school or place of care is closed (or child care provider is unavailable) due to COVID-19 related reasons, then up to 12 weeks (i.e., 10 more weeks) of paid sick leave and expanded family and medical leave is available and paid at 2/3^rd of the employee’s income up to a maximum of $200 daily and $12,000 total.

Employees are eligible for the extra 10 weeks of paid leave only if they have been employed for at least 30 days prior to their leave request.  Employees are eligible for the paid sick time regardless of length of employment.

The Department of Labor (DOL) has explained that “unable to work” means the employer has work for you and one of the COVID-19 qualifying reasons set forth above prevents you from being able to perform that work, either under normal circumstances at your normal worksite or by means of Remote work (“telework”).

Therefore, it appears that the sick leave requirements do not apply when no work is available.  In that case, please refer to the EDD website* with regard to various considerations for unemployment insurance benefits that may be applicable for employees whose businesses have been forced to reduce hours substantially, make furloughs, or make layoffs due to Coronavirus and the shelter in place orders.

The law prohibits employers from requiring an employee to find a replacement when using qualifying paid sick leave.  On the other hand, the paid sick time stops beginning with the employee’s next scheduled shift immediately following the conclusion of the need for paid sick time.  In other words, an employee must return to work as soon as the need for leave ends, even if the employee has not used all of the paid sick time available under the FFCRA.

Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business.  To elect this small business exemption, you should document why your business with fewer than 50 employees needs the exemption.  However, the DOL has not yet released the criteria for the exemption, which will apparently be addressed in more detail in forthcoming regulations.  The DOL does not need you to send any materials to them when seeking a small business exemption for paid sick leave and expanded family and medical leave.

A link to the poster that all employers should share with their employees—and post in the location where similar posters are displayed once it is safe to do so—can be found here:

https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf

Employers covered by the FFCRA qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA, for amounts paid to an employee who takes eligible leave, up to the maximums listed above.  Applicable tax credits also extend to amounts paid or incurred to maintain health insurance coverage.  For more information on this part, please see the Department of the Treasury’s website, for example here:

https://home.treasury.gov/news/press-releases/sm952

For more information about the FFCRA, you can visit the Department of Labor’s information pages here:

https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

Please note also that permitted uses of job-protected leave under the Family and Medical Leave Act (FMLA) were separately addressed under the Emergency Family and Medical Leave Act in response to COVID-19, which may be the topic of a separate article.

* Information from the EDD about unemployment benefits, options available for both employers and employees, and Coronavirus in California in general, please see the EDD’s website here:

https://www.edd.ca.gov/about_edd/coronavirus-2019.htm

https://www.edd.ca.gov/about_edd/coronavirus-2019/faqs.htm

Written by Katy Young

This morning, the New York Times ran an article about the St. Louis Cardinals organization allegedly hacking into the Houston Astros’ computer database containing proprietary player information. You can read the article here:

http://www.nytimes.com/2015/06/17/sports/baseball/st-louis-cardinals-hack-astros-fbi.html

Ad Astra is particularly interested in this story for two reasons: we are big baseball fans (in fact my brother, Chuckie Fick, pitched for both the Cardinals and then the Astros!) and big fans of the federal Computer Fraud and Abuse Act (CFAA), which creates both a criminal and civil cause of action for unauthorized access of information stored on a computer.

The Houston Astros apparently maintain a computer database containing proprietary information about its players and prospects. The database is called Ground Control and it is the brainchild of former Cardinals bigwig turned Astros’ General Manager Jeff Luhnow. The St. Louis Cardinals are accused of accessing the Astros’ database using an old master list of passwords because they were concerned that Luhnow took the Cardinals’ proprietary player information when he left the Cardinals to go work for the Astros. The CFAA doesn’t care why you accessed another’s database without authority, nor does the CFAA care what you did with that information after you accessed it (that’s a trade secret problem)- but the CFAA does create a cause of action if someone accessed your data without authority, altered or deleted anything, and you incurred at least $5,000 in damages trying to remedy the problem. The New York Times article states that the FBI is already involved, but we here at Ad Astra are wondering if the Astros want to look into filing a civil complaint against the Cardinals under the CFAA!

Author: Annie Smiddy

A new bill was recently passed into law that will provide more certainty in contracting and consulting with attorneys for the cannabis industry. While medicinal and recreational use of marijuana is still currently illegal under federal law, California authorized medicinal cannabis in 1996, and adult recreational cannabis use in 2016. The conflict in law has provided a number of obstacles for the cannabis industry. Since existing law requires that a contract “be for a lawful object,” the federal conflict in law has created uncertainty regarding the enforceability of contracts in the cannabis industry. The new law provides that commercial activity relating to medicinal cannabis or adult-use cannabis conducted in compliance with state law, and any applicable local standards and regulations, is a lawful object of a contract, is not contrary to an express policy or provision of law or to good morals, and is not against public policy. In addition, the law increases the availability of attorney-client privilege in the cannabis industry by clarifying that attorney-client privilege protections regarding “legal services rendered in compliance with state or local laws on medicinal cannabis or adult-use cannabis and [] confidential communications provided for the purpose of rendering those services” do not fall within the crime/fraud exception to attorney-client privilege. This law is beneficial because it promotes written agreements, and consultation with attorneys who are knowledgeable in cannabis regulatory issues. The law will promote good business practices within the cannabis industry, and will lead to increased compliance with California’s regulations.

See here for the text of AB 1159.

Author: Michael S. Dorsi

California law permits plaintiffs to file a complaint and seek a temporary restraining order on an ex parte basis the day the plaintiff files the complaint. This is not for every case, but it is an important procedure when time is of the essence. Sometimes judges attempt to cajole the parties into an agreement that will hold until the judge can decide a fully briefed preliminary injunction, and sometimes judges will issue a TRO on the papers submitted on day one.

But to get to a day-one temporary restraining order, you must get past the clerk’s office.

San Francisco Superior Court adopted rules that make getting past the clerk difficult. For most civil cases, parties represented by an attorney file their complaint in hard copy, then all subsequent filings must be online via the e-filing system. This includes papers for ex parte appearances.Read More >

Co-authored by:

Heather Burke (Origin Group Law LLP) & Katy Young (Ad Astra Law Group LLP)

In the first few years of regulated cannabis activity in California, many (if not most) cannabis farmers did not get paid for their product on time and, in some cases, they didn’t get paid at all. Debt collection quickly became a hot topic, as unpaid farmers waded through their legal options, from selling the debt to full tilt civil litigation. In those situations, a written contract almost always helps the farmer, which means oral agreements often hurt the producer (aka the farmer) more than the buyer (aka the distributor or manufacturer). To be sure, the best defense is a good offense (just sayin’).

While we are hoping to see more on-time payments this year, here’s a quick reminder of the debt-collection issues in play for the 2020 harvest season just in case:

1. Private Debt Collectors

2. A Demand Letter

3. Alternative Dispute Resolution

4. Breach of Contract Lawsuit

5. Foreclosing on a Security Interest or Producer’s Lien

A security interest is simply collateral from one party to another for an unpaid debt. Security interests can take many forms but the main point is that the farmer (who holds the security interest) may be able to get paid out on a priority basis if the buyer goes out of business and ends up selling off its assets.  We often recommend security interests wherever the sells their entire season in a single transaction under an agreement to pay the farmer at some later date.

In addition to security interests granted in a written purchase agreement, California law thankfully offers farmers an “producer’s lien,” which is a special type of security interest that farmers keep in their product after a buyer takes possession of the product before paying. A producer’s lien is an implied security interest, meaning the parties do not need to have a written contract in place for the lien to exist: it is automatic, provided they do not waive the producer’s lien in any written agreement.

While CDFA does offer an administrative avenue for foreclosing on a producer’s lien, cannabis farmers are not yet eligible to use that option. This means that cannabis farmers can only foreclose their producer’s lien in a civil court at this time. There is no precedent (as far as we’re aware) applying the producer’s lien in the cannabis context, though the law is fairly clear, so we assume this lien will be applied in the cannabis context at some point in the future.

Additionally, the producer’s lien may be extinguished if the buyer sells the product to a third-party, as is often the case with cannabis distributors who are acting as an intermediary (aka middle-man/broker). In such a case, the farmer may want to consider filing an injunction to stop the distributor from selling the cannabis to another party.

Moving forward, we hope written security interests become more common in California’s cannabis purchase agreements, since they offer the farmer the most protection. If a distro or manufacturer is taking the farmer’s entire season in a single transaction without paying at the time of delivery, security interests are a fair request.

CLOSING

In closing, these are worst case scenarios that generally only come into play when the farmer is already under financial stress due to the lack of payment. So the processes for going after an unpaid debt are often shrouded in a cloud of negativity and are not utilized. However, these formal processes are designed to protect sellers from unscrupulous buyers, meaning these systems may suck, but they can be powerful tools to protect farmers from getting ripped off.

Use of a written contract with an attorneys’ fees clause will provide the most protection in the event of non-payment, as the attorneys’ fees clause makes it harder for the buyer to justify the cost of the fight if the case were to proceed through trial and result in a prevailing party attorneys’ fee award. If all of this information is making your head spin, reach out to an attorney knowledgeable about the California cannabis industry and breach of contract actions.

Massive gratitude to Katy M. Young of Ad Astra Law Group LLP in San Francisco, one of Sarah and my favorite civil litigators of all time, for co-authoring this blog with me. Please stay safe everyone!

To sign up for Origin Group Law LLP’s blog list, please go HERE.

For Ad Astra Law Group LLP’s blog, please go HERE.

Author: Wendy Hillger

An Uber driver filed a complaint against Uber Technologies, Inc., asserting she was an employee of the ride-hailing company and thus owed back-wages and employee expenses. Uber has consistently maintained that its drivers are independent contractors. The California Labor Commission disagreed, and ruled recently that Uber is an employer.

The California Labor Commission examined the numerous factors identified by the Supreme Court (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341) to evaluate the relationship between the driver and Uber. The commissioner noted that Uber maintains a substantial amount of control over its drivers: such as the equipment they must use (an Uber-provided iPhone), the fares they can charge, the model of cars they drive, and, to some extent, how often they work. Uber also does not allow drivers to negotiate their percentage of the fare and thus controlled their wages.
Uber was ordered to have to pay its employee reimbursable expenses and interest in the amount of $4,152. Uber did dodge a bullet by being spared from having to pay the driver an hourly wage, liquidated damages or waiting time penalties for this employee. The employee failed in her burden of proof on these issues by not providing the commissioner with her pay records.

The decision was appealed in the San Francisco County Superior Court on June 16, 2015, in the matter of CGC-15-546378. A copy of the Order is HERE. A timeline for the Superior Court’s ruling is unknown, but if the Labor Commission’s Order is upheld, the decision will have wide-ranging impacts upon the ride-hailing company and its competitors like Lyft.
For information as to whether your company may be improperly classifying its workers as independent contractors, please contact Ad Astra Law Group LLP.