Yesterday, December 20, 2018 marks a day that will go down in history. Industrial hemp is federally legal for the first time in over 80 years. The end of hemp prohibition instantly opens the doors to a world we know very little about and many are excited to see how we can utilize this multi-functional plant.
Below you will find an article by our friends Marc Adesso and A.J. Bahou that outlines how the new Farm Bill affects hemp in the United States. Furthermore, it discusses the U.S. Food & Drug Administration’s (FDA) position on the various components of hemp.
There are still many grey areas that need sorting out but December 21st 2018 is a day that will go down in the history books.

“On December 20, 2018, President Trump signed into law the Agriculture Improvement Act of 2018 (more commonly referred to as the “Farm Bill”).

The Farm Bill represents a compromise that was struck between the House and the Senate as it allocates billions of dollars in subsidies to American farmers, bolsters local food programs such as farmers’ markets, and rejects stricter limits on food stamps pushed by House Republicans. In addition, the Farm Bill legalizes hemp by defining it as an agricultural commodity under federal law. This definition removes the parts of the cannabis plant that make up hemp from scheduling under the Controlled Substances Act of 1970 (under which marijuana remains illegal) and effectively allows hemp to be treated like any other agricultural product would be under federal law. Thus, once the law is in effect, hemp farmers can legally import and export hemp throughout the United States, and participate in U.S. Department of Agriculture (“USDA”) programs such as low-cost crop insurance.

However, the Farm Bill does put some unique restrictions around hemp cultivation, including empowerment of the USDA to create rules surrounding the industry. The Farm Bill also does not prohibit the enactment of state-level regulations relating to hemp (so long as such regulations comply with federal law), but does limit the level of punishment that can be imposed upon hemp producers, even in the case of negligent violations: “A hemp producer that negligently violates a State … plan … shall not as a result of that violation be subject to any criminal enforcement action by the Federal Government or any State government.” Section 10113 (p. 431). Thus, under the Farm Bill’s provisions, even negligent violations are subject only to “corrective action,” which means that if a farmer accidentally grows plants that exceed legal THC limits (hemp can only contain 0.3% percent delta-9 tetrahydrocannabinol, or THC, on a dry basis), the farmer would merely need to correct the error. This “corrective action” is certainly an improvement under most states’ “pilot program” regimes. In the past, if a farmer grew plants that exceed THC limits, the whole crop must be burned.

The Farm Bill also prevents states from prohibiting the transportation or shipment of hemp within the U.S. While the legislation seems to indicate that individual states could ban the sale of hemp, the Farm Bill does not explicitly state this is the case. Certainly, an area to watch will be for potential changes in state-level regulations that occur as a result of the passage of the Farm Bill.

Further, the Farm Bill also does not unsettle the U.S. Food and Drug Administration’s (“FDA”) position that hemp-derived CBD oil (cannabidiol) is prohibited from use as a food ingredient or dietary supplement, such that the current CBD consumer products market is likely to experience significant changes as a result of the passage of the Farm Bill. Since hemp (and its byproduct CBD) are now not subject to scheduling under the Controlled Substances Act of 1970, it will be interesting to see whether the FDA continues to require DEA approval of CBD-derived pharmaceuticals, as it did with GW Pharmaceuticals plc’s Epidiolex® CBD-derived product.

Given the growth opportunities in hemp and the CBD marketplace, businesses will certainly seek intellectual property protection at an increasing rate. Among the many opportunities to protect new products and brands, patents and trademarks will be heavily used in the CBD market. Based on a search of U.S. patents issued in 2018, there have been almost 200 patents issued this year that reference the term “cannabidiol.”[1] The innovations range from DNA patents that reference cancer treatment to methods of processing hemp stalks for extracting CBD oil. With the new legislation granting the ability to legally perform CBD research, innovations will continue to grow in the segments of health, wellness, foods, supplements, pharmaceuticals, alcoholic drinks, and a plethora of areas. For example, current patents include advances in the supply chain management of hemp-based products, treatment of epilepsy, hemp-infused food and beverages (alcohol, etc.), lozenges, and variety of uses.

Trademark branding will also become extremely important for businesses to distinguish their branded CBD products. At the current time, however, whether a trademark applicant can obtain federal trademark protection through filing a trademark application with the U.S. Patent and Trademark Office (“USPTO”) is not addressed in the Farm Bill, and therefore remains uncertain. With respect to the 2014 Farm Bill, the USPTO essentially took the position that any trademark identifying goods or services related to production, sales, and/or distribution of hemp and hemp products would not be allowed to receive a federal trademark registration, placing its reliance on the broad definition of “marijuana” under the CSA. Looking ahead, it remains to be seen whether the USPTO will acknowledge the significant changes set forth under the 2018 Farm Bill, as related to hemp-related products and services. Admittedly, the 2014 Farm Bill carve-out was quite narrow, by comparison to the changes implemented under the 2018 update. Time will tell whether the USPTO will soften its position in light of the new legislation.

Almost certainly, the impact of the Farm Bill’s hemp legalization on the greater United States economy will be a point of great debate. CNBC has reported that the hemp business could grow to a market size of over $20 billion by 2022. To date, no hemp-only cultivator has “gone public” on a national stock exchange in the United States. Now that hemp production is legal, it will be interesting to see if there is a rush for hemp cultivators and processors to access the public markets in order to raise capital in this rapidly growing (and now federally legal) industry.

[1] This limited search of the United States Patent and Trademark Office database yielded over 760 issued patents with the term “cannabidiol” in the text of the patent, which range from 1976 to 2018. Similarly, there are over 1600 published patent applications that include the term “cannabidiol.” That patent application database includes publicly-available applications since 2001. “

BY: Marc Adesso & A.J. Bahou of Waller Law