Can Cannabis Become Big Business in New York?

Exploring the potential pot of gold

In 2009, after an associate told attorney Michael Hiller how medical cannabis helped alleviate symptoms of her mother’s pancreatic cancer, he considered entering the new legal field. But a partner was concerned it might alienate existing clients. In 2014, after the partner left, Hiller took the jump.

Now cannabis represents a quarter of his firm’s business—from commercial enterprises and treatment providers to pro bono cases for medical marijuana patients. And instead of being repelled by the change, Hiller says his existing clientele has welcomed the firm’s move. “When they find out—an apparel business client, for instance—they’re like, ‘Really? That’s fantastic. We were looking at getting involved in it,’” Hiller says. “They want to know more and see if we can introduce them to people and represent them in deals.”

Hiller’s clients aren’t the only ones embracing cannabis. Recent polls suggest anywhere between 60 to 80 percent of Americans favor legalizing the drug for medical or recreational purposes. “It is one of the most rapidly advancing industries I have seen in my 27 years of practicing law,” says Hiller.

While New York State’s medical cannabis program, legalized in 2014, has so far been constrained by rules strictly limiting who can obtain cannabis and how they can acquire it, efforts are mounting to legalize the recreational cannabis market.

Of course, because it remains illegal under federal law, there are complications to doing business in cannabis. Banks are reluctant to deal with cannabis businesses; and the federal tax code prohibits cannabis entrepreneurs from using tax deductions and credits allowed other businesses.

There’s also the challenge of marketing cannabis products in an industry that has never had to bother with trademarks or copyrights. “There has been a lag time in people recognizing that the brand is everything,” says Kieran Doyle, a partner at Cowan, Liebowitz & Latman, who has been working on brand protection matters in the cannabis industry since 1998.

It doesn’t help, Doyle points out, that the U.S. Patent and Trademark Office won’t issue trademark registrations for goods or services that directly involve cannabis plants. At the same time, cannabis companies need to be careful in their branding. Cannabis business names were used with relative impunity on the black market, but that’s no longer the case when it’s legal. In 2017, for example, the adhesive company Gorilla Glue sued a Nevada cannabis cultivator that had titled one of its strains “Gorilla Glue #4,” forcing the cultivator to rebrand.

Doyle suggests cannabis companies actually stay away from traditional words (“weed” and “canna”) and colors (green) in their branding. Not only do such elements run the risk of overlapping with existing brands, they won’t help products stand out. He points to the dispensary chain MedMen, a client, which has adopted a particular shade of red for all of its branding. “They use that red for cannabis products and services the same way that Tiffany uses robin-egg blue and UPS uses brown,” he says.

Branding and marketing issues will likely become more pressing as cannabis becomes bigger business. “Cannabis is in the process of disrupting the food, beverage, cosmetics and pharmaceutical industries,” says Ron Geffner, a founding partner of Sadis & Goldberg, who’s been investing in the cannabis industry, and advising investors, since 2014. Referencing Constellation Brands, the producer of Corona beers, which invested $4 billion in a Canadian cannabis company, he says, “We’ve already seen the process of big beverage becoming big cannabis.”

Hiller, meanwhile, is working pro bono on a federal lawsuit to remove cannabis from the DEA’s schedule of controlled substances, on behalf of the Cannabis Cultural Association, former NFL player Marvin Washington and three medical cannabis patients, including two children.

“One of the reasons I am passionate about cannabis is because of Jagger Cotte and Alexis Bortell,” he says. Alexis, 13, uses cannabis to control and treat her intractable epilepsy, while Jagger, 8, uses it to treat Leigh’s disease. “These kids need cannabis to live.”

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