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Bank Of America Cancels Account Of Marijuana And Psychedelics Research Institute Registered With DEA

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The second-largest bank in the U.S. is shutting down the account of a research institute that’s federally authorized to cultivate and study Schedule I substances like marijuana and psilocybin mushrooms.

Bank of America (BoA) abruptly notified the Scottsdale Research Institute (SRI) that it would be closing its accounts last week, without a clear explanation of the reasoning. A letter from the bank that was shared with Marijuana Moment on Monday says the decision was made after “a careful review of your banking relationship” and that the action is “final and won’t be reconsidered.”

SRI has spent years fighting for expanded access to research-grade controlled substances to study their therapeutic potential, in part by litigating against the Drug Enforcement Administration (DEA) on issues such as cannabis scheduling. In May, it received preliminary approval from the agency to be one of the first new federally authorized cultivators of cannabis for research, effectively ending a decades-long monopoly on such manufacturing.

The institute is already getting bids from other financial institutions that want to take on the account after chief investigator Sue Sisley shared the news of the BoA closure on social media.

“We just wanted to expose wrongdoing of these big banks,” Sisley told Marijuana Moment, adding that they want to “show the public that even federally legal operations are being unfairly targeted by these large banks who refuse to look at our federal regulatory documents.”

It takes significant resources to obtain and maintain DEA clearance to grow and study Schedule I substances like marijuana. One theory that Sisley floated was that BoA may have decided to end the business relationship after SRI was more recently cleared to cultivate psilocybin for research, but the bank provided “zero justification.”

“Maybe it was the mushrooms that freaked them out?”

Marijuana Moment reached out to BoA for comment, but representatives did not respond by the time of publication.

Sisley said the institute received “no warning,” with “no ability to speak to somebody logical who could review our operating agreement with DEA. We have been plant-touching since our start with Bank of America 10 years ago” and were “always transparent about that.”

“We have a contract with DEA. We are growing cannabis for [Food and Drug Administration] clinical trials and selling it to the DEA,” she said. “It’s unconscionable the way they are behaving—and further proof that the word ‘cannabis’ continues to be completely radioactive even though this is a 100 percent federally legal operation.”

“Fortunately, there are banks that care about the progress of federally regulated and federally legal research and are eager to step up and support us immediately,” Sisley added. “We will be moving our funding from Bank of America and never returning there. Our research continues without harm because other banks that care about scientific freedom were able to step up. Bank of America doesn’t even have the decency to provide an explanation after a decade of banking with an openly plant-touching business.”

SRI has been behind several legal challenges imploring the federal government to remove research barriers for Schedule I drugs like marijuana and psychedelics.

In August, a federal appeals court has dismissed SRI’s petition to require DEA to reevaluate marijuana’s scheduling under the Controlled Substances Act (CSA)—but one judge said in a concurring opinion that the agency may soon be forced to consider a policy change anyway based on a misinterpretation of the medical value of cannabis.

The lawsuit received oral arguments in June and largely centered on DEA’s 2020 denial of a one-page marijuana rescheduling petition filed by a separate individual. In its response, the agency argued that marijuana has no currently accepted medical value.

The petitioners initially filed their lawsuit, Sisley v. DEA, against the federal agency in May of last year, contending that DEA’s justification for maintaining a Schedule I status for cannabis violates the Constitution on numerous grounds. DEA attempted to dismiss the case, but the Ninth Circuit rejected that request in August.

In a separate case, the institute successfully forced DEA to issue an update on the status of its application to grow cannabis and then got the Justice Department to hand over a “secret” memo that DEA allegedly used to justify a delay in deciding those proposals.

Meanwhile, DEA is taking additional steps to promote research into the potential risks and benefits of marijuana and certain psychedelics. Last week it proposed a dramatic increase in the legal production substances like cannabis, psilocybin, LSD, MDMA and DMT to be used in research next year.

DEA had already massively upped its proposed 2021 quota for cannabis and psilocybin last month, but now it’s calling for significantly larger quantities of research-grade marijuana and a broader array of psychedelics to be manufactured in 2022.

But despite these developments and the changing policy landscape surrounding marijuana and psychedelics at the state and local level, many financial institutions remain reluctant to service clients that work with these currently federally illicit products.

The number of banks and credit unions reporting that they work with marijuana businesses ticked up last quarter, according to federal data released last month.

Lawmakers have been working to to enact clear, statutory protections for banks and credit unions that work with the marijuana industry to alleviate remaining hesitation in the financial services industry about working with cannabis businesses. That would be accomplished through House-passed standalone legislation, or an amendment that was attached to a defense spending bill last month.

In the meantime, Sisley said SRI could sue BoA over the account cancelation, but it has other things to focus on.

“We have important work to do,” she said. “We need to stay on our path to helping whole plant cannabis flower walk through the entire FDA drug development process.”

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GW Pharma Scores Interim Victory In Cannabis Extraction Patent Infringement Fight With Canopy (Op-Ed)

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“GW’s claim construction victory bodes very well for their ultimate success in defending this lawsuit.”

By Larry Sandell, Mei & Mark, LLP

Last week, U.S. District Judge Alan D. Albright issued a claim construction order favoring GW Pharmaceuticals in the high-stakes, high-profile cannabis patent litigation brought by Canopy Growth Corporation. Canopy has accused GW of infringing U.S. Patent No. 10,870,632, titled, “Process for producing an extract containing tetrahydrocannabinol and cannabidiol from cannabis plant material, and cannabis extracts,” and generally directed to CO2 extraction methods.

Canopy filed this lawsuit on December 20, 2020—the same day the patent issued—in U.S. District Court for the Western District of Texas, which has a reputation for patent-friendly juries and rapid litigation. Canopy had acquired the rights to the allowed patent application several weeks prior. The patent-in-suit claims priority to a German patent application dating all the way back to October 2000, rendering the pool of potentially invalidating prior art extremely small.

“Claim Construction” is the legal process where a judge interprets the meaning of language in an asserted patent claim. Later in a patent infringement litigation, this interpretation is used by the jury (or, sometimes, the judge) to determine whether the accused products or methods infringe the patent and whether the patent is rendered invalid by prior art. Generally, the patent owner seeks a claim construction broad enough to ensure that the accused method infringes; conversely, the defendant generally seeks a claim construction narrow enough to ensure that the accused method does not infringe.

This claim construction dispute focused on the following limitation of claim 1 of U.S. Patent No. 10,870,632: “(1) subjecting the cannabis plant material or primary extract thereof to CO2 in liquefied form under subcritical pressure and temperature conditions to extract cannabinoid components.”

The Court explained the parties’ positions as follows:

“[GW] contend[s] that ‘subcritical pressure and temperature conditions’ means that both the pressure and temperature need to be below the critical pressure and critical temperature, respectively. [Canopy], by contrast, contends that ‘subcritical’ simply means ‘not supercritical.’ As such, at least according to [Canopy], because being supercritical requires both the pressure and temperature to be above the critical pressure and critical temperature, respectively, if either the pressure or temperature—but not both—is above its corresponding critical value, then the CO2 is not supercritical, but rather is subcritical.”

In its claim construction order, the court agreed with GW that subjecting cannabis material to CO2 under conditions corresponding to the striped area of the phase diagram below is outside of the scope of the claim language and would not infringe. Canopy’s argument that subjecting cannabis to CO2 under striped-area conditions is within the scope of its patent claims was rejected.

In many patent infringement cases, a litigant who loses claim construction may concede an inability to win the case. Conceding early may enable the losing party to immediately appeal the claim construction order to the U.S. Court of Appeals for the Federal Circuit without wasting resources litigating an otherwise doomed case. Here, it is not yet clear how Canopy will respond to its claim construction loss. Canopy may concede noninfringement under the claim construction so that they may promptly appeal. Alternatively, Canopy may believe that they can still prevail on their infringement allegations and continue litigating in the Western District of Texas. Another potential consequence is that the claim construction order may push the parties closer to a negotiated settlement and corresponding dismissal of the case.

Ultimately, GW’s claim construction victory bodes very well for their ultimate success in defending this lawsuit. Additionally, the narrower claim construction adopted by the court should be welcome news for CO2 extraction companies and equipment manufacturers: At least for the time being (for those operating in stripped-area conditions), the pending threat of a patent infringement lawsuit by Canopy has been greatly diminished.

Larry Sandell, a registered patent attorney with Mei & Mark LLP and the head of the firm’s cannabis practice, focuses his practice on counseling clients on strategic intellectual property matters; drafting and prosecuting patent applications; litigating patent infringement and other matters in federal district courts and the International Trade Commission; arguing federal appeals; and handling patent-related Amazon.com take-down disputes. He can be reached at [email protected].

ATTORNEY ADVERTISING NOTICE

Please note that this article may be considered attorney advertising in some states. Prior results described on this article do not guarantee similar outcomes in future cases or transactions. The opinions expressed are those of the author and do not necessarily reflect the views of the Mei & Mark LLP (818 18th St., NW, Suite 410, Washington, DC 20006), its clients, Marijuana Moment® LLC, or any of their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Read the full claim construction order below:

Click to access wdtx-6-20-cv-01180-50-cc-order.pdf

Top Federal Drug Official Personally Hesitates To Study Marijuana Because Of Schedule I Research Barriers

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Congressional Black Caucus Foundation Partners With Marijuana Industry On Internship Program For Future Cannabis Leaders

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A marijuana industry organization is teaming up with the Congressional Black Caucus Foundation (CBCF) to provide internship opportunities to black students and recent graduates who will get first-hand work experience at major cannabis companies next year.

The U.S. Cannabis Council (USCC) is sponsoring the spring 2022 program, which will place nine interns at one of eight marijuana firms like Canopy, Columbia Care, Curaleaf, the Marijuana Policy Project and Weedmaps.

For more than 30 years, CBCF has been supporting internships to help build leadership skills and give young people the professional experience to enter into public service. The foundation’s “Pathways to C-Suite Internship Program” is a more recent iteration that helps place black undergraduates and graduates in the private sector.

Now, in yet another sign of the normalization of the cannabis industry, CBCF and USCC are working together to mold the next generation of marijuana entrepreneurs and reform advocates.

“Black Americans are woefully underrepresented in today’s cannabis industry,” Donna Fisher-Lewis, co-interim president and CEO of CBCF, said in a press release. “We’re excited to partner with USCC and its members to help build a diverse talent pipeline for the cannabis industry.”

Interns selected for the program will be able to network with industry professionals and learn the ins and outs of cannabis policy while gaining professional experience, and they will be provided a stipend and housing credit.

Applications for the internship are due by Friday, December 3.

“Really the overall goal of the program is to create pathways for future leadership in the cannabis industry, especially in upper management and future executives of cannabis,” Tahir Johnson, director of social equity and inclusion at USCC, told Marijuana Moment.

“We know that there’s a lack of [black ownership in the industry], so we want to be able to make sure that we’re training, preparing and giving opportunities to get their foot in the door at cannabis companies to help to lessen that gap and be able to create opportunities for entrepreneurship and future leaders and executives in cannabis,” he said.

Cedric Haynes, who serves associate vice president for government relations at Weedmaps and went through the CBCF Emerging Leaders internship program in 2009, said he is “a testament to the impact of these programs and the many opportunities that such an internship affords.”

“I had a front row seat to the federal legislative process while living in Washington, D.C.,” he said. “The experience that CBCF provided jump started my career in public policy, and I am forever grateful for it.”

CBCF was founded about five years after the Congressional Black Caucus (CBC) came together in 1971. Its board is comprised of private industry executives, educators and several current members of the legislative caucus such as Reps. Colin Allred (D-TX), Dwight Evans (D-PA) and Sheila Jackson Lee (D-TX).

“The Pathways to the C-Suite internship program will provide our members with top-notch talent while helping build a more equitable industry,” Steven Hawkins, CEO of USCC, said. “Interns will gain valuable work experience in a dynamic, growing and evolving field. Their on- the job experience combined with the professional development provided by the internship program will set them up for success in cannabis and other professional paths.”

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California Marijuana Businesses Seek Tax Amnesty After Spate Of Robberies In Oakland

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Members of the marijuana business community in Oakland, California are calling on state and local officials to provide “tax amnesty” after numerous cannabis companies were robbed earlier this month.

At a press conference on Monday, the Oakland-based association Supernova Women urged officials to deliver financial relief after more than 25 licensed marijuana businesses were burglarized or robbed during the week of November 15.

Specifically, the non-profit group wants to see a repeal of the state’s cannabis cultivation tax and a “significant reduction” in the excise tax on marijuana products. They say that would help sustain small and minority-owned firms that are facing up to $5 million in losses following the robberies.

“All types of licensed cannabis businesses were impacted—cultivation, manufacturing, distribution and retail, delivery and storefront,” Amber Senter, executive director of Supernova Women, said at the press conference. “The cannabis industry needs tax relief.”

“Cannabis equity businesses in particular need more money and resources. Small businesses and small farmers need help,” she said. “Piling on and increasing taxes—and now with the threat of robberies and violence—is proving to be unbearable for cannabis operators. When we’re faced with targeted attacks, the effects are magnified. Our communities do not have the runway for robberies and tragedies of this time.”

Raeven Duckett, a social equity licensee who founded Text Johnnie, emphasized that “cannabis companies operating in Oakland pay at least a 6 percent tax rate while other non cannabis companies pay 0.12 percent—so cannabis companies are paying 600 percent more taxes than any other Oakland company.”

“Yet when organized crime organizations target at our facilities, we get little to no response and zero compassion from local law enforcement and city officials,” she said. “Our businesses are hurting. These operators are scared. These operators deserve the right to a safe work environment and local support in a city where we pay an exorbitant amount of taxes.”

Across the bay in San Francisco, activists have similarly criticized the police response to marijuana burglaries. Surveillance video from earlier this month that was obtained by The San Francisco Chronicle showed local police apparently observing and not intervening as suspects got away after they responded to a 911 call about a dispensary being burglarized.

State officials say they understand where the activists concerns are coming from and said that changes to laws might be needed to make it easier for businesses victimized by robberies to get relief.

“We appreciate hearing from and deeply sympathize with cannabis operators impacted by the recent increases in organized cannabis theft,” Nicole Elliott, director of the California Department of Cannabis Control, told Marijuana Moment. “Though state law does not require excise and sales tax to be paid on stolen goods, the complexities of the current cannabis tax structure mean that, in practice, it can be difficult for retailers to recover those taxes.”

“We encourage businesses to focus their advocacy on addressing the broader cannabis tax challenges and engage with their state legislators on policy proposals to reform and simplify California’s cannabis tax structure,” she said. “A 2/3 vote is needed to amend the law related to cannabis taxes so any changes will require a collective effort.”

When a theft of cannabis occurs, a retailer seeking a refund of taxes needs to work with a distributor to amend relevant tax filings. Unlike other systems where tax is due only at point-of-sale, California’s cannabis tax process—where retailers must pay estimated excise tax to distributors, who then remit the payment to state tax authorities—is relatively long and cumbersome, and requires arduous record keeping.

Senter ended Monday’s event with a clear message to city and state officials: “Listen to us. This is our cry for help. Help us.”

“We’re not going to hire people with AK-47s and put them on the roof. That’s not our job,” she said. “That’s not why we started to sell weed. We didn’t decide to get into cannabis to kill people. We’re here to provide medicine and improve people’s lives.”

Prior to the spate of cannabis-related robberies, California Attorney General Rob Bonta (D) celebrated the 25th anniversary of the state’s move to legalize medical cannabis and described today’s market as “number one in the world.” However, he did acknowledge that more work needs to be done.

Separately, California officials started accepting concept proposals last month for a program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts.

Gov. Gavin Newsom (D) did veto a bill last month that would have allowed cannabis businesses to advertise on billboards along most highways in the state.

The governor also recently approved a bill to boost the state’s hemp industry by legalizing retail sales of a wide range of consumable products derived from the plant—including CBD-infused foods, beverages, cosmetics and dietary supplements. It will also eventually allow the sales of smokable hemp products in the state.

In September, Newsom signed separate legislation to require hospitals to permit medical marijuana use by certain patients in their facilities.

California officials are also making millions of dollars available for grants programs to support marijuana social equity initiatives and assist localities in processing pending cannabis business license applications.

Next year’s California State Fair will host a first-of-its-kind, state-sanctioned cannabis competition.

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