Marijuana Business Magazine April 2019

Marijuana Business Magazine | April 2019 94 C ounterfeiters have long ped- dled knockoffs mimicking Louis Vuitton handbags, Ray Ban sunglasses and Rolex watches. But over the past year, counterfeiters have increasingly set their sights on the global cannabis space, hoping to capitalize on the industry’s explosive growth. That has forced marijuana business owners to find ways to protect their products, such as through trademarking or keeping closer tabs on their supply chains. Disposable vape cartridges, in particular, are among the products under attack. Counterfeiters are stealing well-known brand names and logos, including Heavy Hitters, Brass Knuckles, Kingpen and others. But counterfeiters have also branched out into packaged marijuana flower and have imitated well-known brands such as Canndescent, according to a recent report on the issue prepared by California-based Mammoth Distribution. Moreover, the problem has grown in scope because Chinese manufacturers in cities such as Shenzhen, which is a hub of vape cartridge manufacturing, have found that there’s a lucrative market in knockoff American marijuana goods. The issue has become so pervasive that some attendees at MJBizCon in Las Vegas last November even came across counterfeit versions of their own prod- ucts on the expo show floor. “I had a half-dozen companies approach me at (MJBizCon), telling me that they had seen product that appeared to be theirs but was actually counterfeit,” said Peter Scheir, president of California- based AuthentiBrand, which provides custom hologram and authentication solutions to various industries to help protect against counterfeiting. “I was flabbergasted, because this wasn’t just out at some Podunk dispensary in nowhere’s land. This is someone who had the gumption to walk into a major trade show and show it,” Scheir said. “To me, that could mean that the companies presenting the product didn’t even know they were counterfeit, or that they were colossally stupid or at least callous.” Following are concrete steps that com- panies can take to protect themselves and their brands. Get a Trademark While the federal government isn’t readily handing out marijuana-specific trademarks (although companies have secured them for wordmarks, logos and non-plant-touching items), state governments are doing so. “If you pay California for the right to register your trademark—and California does allow registration of cannabis product trademarks—California law enforcement has jurisdiction to go in and enforce against counterfeiters,” said Gavin Kogan, general counsel at Grupo Flor, a cannabis consultancy in the Golden State. Kogan said that should be a first step for just about any company eager to protect its intellectual property and brand. But it can be particularly useful in combating counterfeiters, because a legal trademark can get law enforcement involved, up to and perhaps including the state attorney general’s office. “I’d work with the attorney general in California, who is very pro-cannabis, and say, ‘We’re having a major counterfeit problem,’” Kogan said. “My guess is (he) would take the gloves off and go after them.” Without any state trademark protection, Kogan said, trying to take legal action against a counterfeiting ring can be like chasing shadows. “If you don’t have that protection and you’re just a private citizen, then you’re really just left with the strategy of a lawsuit. And how do you sue a ghost?” Audit Your Own Supply Chain A vape cartridge manufacturer should get audits done of its own vendors and retailers to ensure their business partners aren’t double-crossing them, said Leeton Lee, principal consultant at Califor- nia-based Comply Box. “The best protection is having enforcement on our side of the ocean. It’s corrupt over there,” Lee said, referring to China. “You have to manage and vet your vendors very carefully, that’s first and foremost,” he added. “Secondly, you have to have the factories inspected or audited on a regular basis. … Your own partner in doing this can also be the bad actor.” Peter Scheir is president of AuthentiBrand. Courtesy Photo Cannabis brands have gotten so big in recent years that counterfeiters have started to take notice. Marijuana products that are cheap imitations of the real thing—particularly disposable vape cartridges—have begun surfacing in the United States, forcing companies to take steps to protect their intellectual property. Here are some options: • Get a trademark, even if it’s just at the state level. That can help provide a lot of legal protection and enforcement. • Audit your supply chain. That means checking on business partners to make sure they’re not double- crossing you and keeping an eye on retailers that may have been duped by counterfeiters. • Be aggressive when you encounter pirated MJ goods. Send a cease- and-desist letter, and if that doesn’t work, file a lawsuit. • Get custom, hard-to-imitate packaging. Multiple options are already available, including some that have holograms and others that use different anti-piracy technology. Countering the Counterfeiters