According to a recent report from ALM Media and Shook, Hardy & Bacon, in-house counsel have an increasing concern about cannabis product litigation in the near future. The cannabis industry continues to grow and with expansion comes litigation. It therefore comes as no surprise that in-house counsel have litigation on their minds.
According to the report, the general counsel surveyed believe they will need to spend more resources on product labeling and products liability issues in the next two years. Ten percent of respondents said they spend resources for product labeling now, but 32% of respondents believe they will need to do more within two years. Similarly, fifteen percent of respondents say they now dedicate resources to products liability concerns, but in two years, 31% say they expect to do more.
We agree that cannabis companies will need to designate resources to labeling and products liability cases, but think the tipping point may be even sooner. As more states legalize cannabis, more money will pour into the industry leading to increased marketing budgets and intense competition to capture consumers. Just like every other industry, that competition will see companies test the limits when it comes to claims about their products (we wrote about that happening with CBD already here) and product labeling. With a mature market will come increased regulation and possible regulatory enforcement actions related to product claims and product labels. Those enforcement claims are usually a harbinger of private litigation from the plaintiff’s bar.
In addition to litigation related to product claims and product labels, we expect to see a significant increase in litigation related to intellectual property. Edible marijuana products have long attempted to look like candy (i.e. gummy bears) or baked goods (i.e. brownies). Thus, it is likely that the makers of the original, non-marijuana-infused products are going to fight hard to protect their intellectual property. One such lawsuit was filed in California just last week. Mondelez Canada Inc., the makers of Sour Patch Kids, filed a lawsuit against “Stoney Patch” alleging that Stoney Patch’s product packaging was “virtually identical” to the Sour Patch Kids packaging and infringed upon Mondelez’s intellectual property. From the looks of it, they probably have a pretty good case.
We expect to see similar suits against any cannabis company that utilizes packaging similar to established candy brands. Further, we expect to eventually see litigation initiated by cannabis companies seeking to protect their own intellectual property. As the industry matures, established brands will have significant value, and just like in every other industry, the companies controlling those brands will need to protect their turf.
Every industry deals with litigation and the cannabis industry will be no different. It is simply a question of when, not if.