Episode Transcript

Reefer MEDness_E109_RyanLawyer.mp3

Trevor: Kirk, we are back. 

Kirk: Yes, sir. How are you? 

Trevor: I am well. So on the line today, I've got Ryan Kocot. So he. I stumbled across him on LinkedIn. I seemed to be doing that a lot lately. So this is loosely a follow up to Kieley Beaudry from a few episodes ago as well, was talking to Kieley and sort of she was our evolution of an entrepreneur. She's talking about in the U.S. there was these things called MSOs, and I had no idea what that was. So it's a multistate operator. And so if you own a cannabis company in one state and you want to do the same thing in another state, it is difficult. And if you manage to do that, you are now an MSO, a multistate operator, and Ryan happens to be a cannabis lawyer who might help you with things like that. So that's sort of how this all started. 

Kirk: Yeah exactly. 

Trevor: Any thoughts about him before we jump in? 

Kirk: Well, he refers to himself as a compliance lawyer and he explains it in the interview. But I guess from my perspective, how I relate to this kind of stuff is that I was thinking about my scope of practice. And again, as a pharmacist, your scope of practice, if we're ever called upon our practice, is something's wrong or our colleges call us. It would be on our competencies, right, or our compliance to the competencies. So what would be in front of us and who we would bring to defend us is a compliance lawyer, somebody that understands the scope of practice, understands what we do as a nurse, and what you do as a pharmacist. And then were we compliant to the competencies and our skill set. So he applies those skills of compliance to cannabis companies. So I just just so people sort of relate that into your practice. I mean, everybody, any professional group has a body that watches out for your compliance. So this is the lawyer who's watching out for the compliance. 

Trevor: Yeah. This is not meant to slate at Ryan or any of our other legal colleagues. Honestly, law stuff usually bores me to tears because they just seem to be pointless rules argued over here that has very little to do with what I'm trying to do over here. But I thought this one was really interesting. You know, again, kind of the hoops you have to go through if you are south of the border. Now, I'm not saying there are hoops up here, but this is specifically in the US if you want to sort of run a cannabis business. And this was way more entertaining than I thought. Usually you were the the guy who was fascinated by the laws. I really like this one. 

Kirk: I enjoyed this conversation as well. And you know, pharmacy might be different than nursing, but in the last nine, last 14 years my practice has been at a very high level. So I'm often thinking about, you know, when I get into a situation that requires me to work within guidelines, and guidelines are just that, they're guidelines, right? They're not necessarily rules or the law. They're guidelines. So as you walk through the guidelines, sometimes you're thinking yourself, what would a compliance lawyer say about this? You know, so I get it in my practice. I often deal with medical legal issues and it's unfortunate that I have to say this, but often my practice is dictated by, gee whiz, if I'm successful, I get an ice cream, you know.  If I'm not successful. Oh, boy, you know. 

Trevor: Oh, yeah, yeah. We run into that that a lot. But let's, let's go away from pharmacy and nursing and we'll go back to Ryan and tour through cannabis law south of the border. Here's Ryan. On the line today. We have Ryan Kocot. Ryan, tell everybody a little bit about you and how you got into the cannabis industry. 

Ryan Kocot: Sure. So I was born and raised in Massachusetts, moved out to California in 2011, and I had basically I had the choice as far as law school goes between Sacramento, California, or Milwaukee, Wisconsin. I was thinking about going to Marquette, and it turned out that Milwaukee, Wisconsin is the second coldest city in the United States next to Minneapolis, Minnesota. So we went with California. If you have an audience made up of any number of Canadians, I'm guessing I'm preaching to the choir about that. But. 

Trevor: You know, it's nice to have seasons. Seasons are good. 

Ryan Kocot: Yeah. You know, it's one of those things to, you know, growing Massachusetts, you definitely experience some cold. And I think I had stepped foot in California once on a layover to Las Vegas on a layover in San Francisco. So I kind of just came out here on a whim. And that's where I am now. I live in Sacramento, California. I practiced law here in California, but as well as my home state of Massachusetts and New York, I was in-house for a company and the director of compliance for a multinational company, a cannabis company that is, that started off as a startup and eventually went public on the Canadian Stock Exchange. And during that time, I was a Swiss Army knife, so to speak, and was exposed to any number of legal and compliance issues within the cannabis space. And I use that experience now as private counsel. You know, if you look at my website, it will say cannabis business attorney, because just candidly, that's kind of what's Sku while I'm Google in terms of search, I'm really more like, you know, an attorney, another attorney would call a deal attorney. I help a lot of existing operators work joint ventures, trademark and other intellectual property licensing agreements. Operators that are looking to scale into other states is what my day to day looks like. So I run a lot of contracts in the cannabis space and by virtue of doing contract work, you're really doing compliance work at the same time. So I kind of use my old skills that I developed in-house as director of compliance in that vein too. But I am what I would call a deal attorney in the cannabis space. 

Trevor: Okay? Now, just because I'm sure there's going to be people don't know what do you mean by compliance work? What's what's compliance work? 

Ryan Kocot: So I you know, I get on my soapbox about it's on LinkedIn, on social media in general, is that the cannabis industry has a bad habit of only considering state and local cannabis specific operational regulations when we talk about compliance. But compliance really extends far beyond that and to insurance and into corporate compliance. So in other words, making sure your corporate documents are in order. That you're filing what you need to file annually or every two years, depending on the type of entity. Contract compliance, so what I mean by that is cannabis companies have a really bad habit of signing a contract and just throwing it in the top drawer and never looking at it again and not having systems in place to make sure you're actually abiding by the terms of that contract. So when I say compliance, it could really mean any number of different things depending on the context that we're talking about. 

Trevor: Okay, That's. Thank you. Not being a lawyer, I didn't know either. So and we're going to talk about some other things, but some when we're initially chatting, things that sort of came to my attention was multi-state operations. Now, our audience will hopefully remember when we were talking with Kieley Beaudry, she was dipping her toe into she's been mostly in Canada, but we're dipping her toe into talking to people in the U.S. And she came up with this MSO thing that we had no idea. So in Canada, cannabis is federally regulated now, not to say different provinces don't have their own little quirks, but, you know, it's federally legal in the U.S. it's completely different. It is not federally legal. And so if I wanted to have my business cross state lines, what what's involved? 

Ryan Kocot: So it depends on what type of business we're talking about. So cannabis has two different varietals that are regulated within the United States. We have hemp as one variety of cannabis and then marijuana as one variety of cannabis. The only, the distinction between the two is a legal one. The distinction is does the plant have more than .3% THC if it does have more than  point 3% Delta9 THC, it's classified as marijuana. It had less than point 3% THC. It's classified as hemp. Marijuana is still listed as a schedule one substance under the Controlled Substances Act, which long story short means it's quote unquote illegal at the federal level. Despite that, in the United States, states at the state level have legalized and commercialize cannabis. So what it looks like, to expand into other states really depends on whether or not we're talking about hemp products or marijuana products. 

Trevor: But let's assume marijuana products. I have got a high THC gummy that is selling really well in Colorado. And I want to now do something in Massachusetts. 

Ryan Kocot: Well, I think the real key thing to understand about that, that if we're talking about marijuana products, is I can't cross state lines with marijuana products. Legally at least. Right. So if I'm in Colorado and I want to make gummies in Massachusetts, we have to think about each state as its own silo, call it. So if I want to start operating in Massachusetts, I have to figure out a way to get my gummy recipes from Colorado to Massachusetts, which usually involves just working with an operator, with an existing licensee in Massachusetts to produce that gummy or B, to just get licensed myself. People usually go with the former option in terms of finding an existing operator, though, because ultimately when you're talking about getting licensed from scratch, you're talking about up to two years potentially of a licensing process and hundreds and hundreds of thousands of dollars in getting there as far as getting your own license. 

Trevor: Okay.

Ryan Kocot: That being said, though, it also really comes down to the size of the company that we're talking about. If gummy manufacture in Colorado is a, you know, a multinational public company on the CSC, more, you know, with substantial funding, there's a possibility that they're just going to try to acquire an operator in Massachusetts or maybe even go through the licensing process because they have the money to do so. If gummy manufacturer in Colorado is a smaller operator but is trying to expand their brand, it's more likely that they're going to try to link up with an existing operator in Massachusetts and produce their gummies that way. 

Trevor: Okay. So the actual marijuana can't cross state lines. It'll have to be sourced, produced in the other state. And so then, yeah, I can see why that would make a lot of sense for a smaller operator. You know, find someone who's up and existing and say, Hey, do you want to produce my brand of gummies? 

Ryan Kocot: Exactly. To throw a wrinkle on that a little bit. There have been states, California is one of them, who have proposed legislation to basically enter into agreements with neighboring states for interstate commerce. In other words, to be able to cross lines from California to Washington or to Oregon. But a lot of the proposed legislation that you see along those same lines, it's contingent upon federal legalization, which is that's maybe getting into the weeds a little bit too much. But there has been some proposals that have been made to account for being able to cross state lines. But as it stands right now, if I'm a gummy producer in Colorado and I want to end up in Massachusetts, I need to either establish my own operations in that state or work with an existing operator. 

Trevor: Okay. And it's going to sound like I have dreams of being a gummy manufacturer, but sticking with our fictitious gummy manufacturer. All right. So I've decided to partner up with someone in Massachusetts. So I've got a whole bunch of info in Colorado. You know, I have the size of molds, my recipe. So I assume that's intellectual property. How is there, are there any problems with getting that over to Massachusetts? Any anything weirder than if I was just a regular baker or paper maker getting my info over other to my other satellite. Is there more involved in cannabis? 

Ryan Kocot: Yeah. I mean, that's where someone like me comes in and I don't know. I mean, I think any industry, regardless of whether it's cannabis or some other manufactured goods, is going to face a concern that, you know, if I there's always an inherent risk that if I take that gummy recipe and I give it to someone in Massachusetts, a manufacturer in Massachusetts, are they going to run off with it or are they going to maybe improve upon it? As far as take my proprietary recipe, add a few things and then call it something new, that sort of thing. And that's where contracts come in. And obviously at a certain point I make this point to clients all the time. You know, we can write whatever we want to write in the contract, but at a certain point there's a human element to this, and it has to be a certain level of trust with the operator that you're working with in Massachusetts. And that trust is obtained by doing due diligence into that operator in Massachusetts and not just picking the first company that you find. So to go back to that, the contract and that there has to be clear language in the contract that this is my IP and hopefully that contract is pretty specific about what IP you're talking about in that you're not to take it, you're not to improve upon it to make any proprietary recipe off of it, that sort of thing, in terms of making sure that contract really contemplates that, I need to be protecting this recipe to make sure no one in Massachusetts, as an operator, is taking it and running off with it. 

Trevor: Okay. So we'll stick with Colorado for a second. We'll stick with gummy manufacture and I have a really recognizable brand in Colorado and I obviously want that brand to now move over to Massachusetts. So my brand, my trademark. Are there are there more complications with getting my brand and trademark in another state, especially if I'm especially if it's cannabis related? 

Ryan Kocot: Yeah, And this goes back to the initial conversation we were having about the distinction between Hemp and Marijuana. Again, marijuana products are still illegal at the federal level. They're still a schedule one substance under the Controlled Substances Act, which is essentially the federal law of the land in the United States when it comes to drugs. So what's important to realize is there's a mechanism to get a trademark for my brand at the federal level to protect it in all states. But the problem is, is that the USPTO, the Patent and Trademark Office, is not going to grant protection to the illegal substance. So if I say, here's my flower jar with my brand on it, flower, meaning marijuana flower, it's going to be rejected right away because it's an illegal product. And one of the main requirements of getting a trademark is, for the applicant to show that their product is being sold lawfully in commerce. So if it's a illegal product, by definition you can't do that. So what has developed again, state by state by state is state level trademark. So if I'm a gummy manufacturer in California and in Colorado, in our example, I should be looking into Colorado state law, in any other state that I operate in, to see if there is state level trademark protection. Now, you kind of have a chicken in the egg scenario with the manufacturer in Massachusetts, because ultimately to be able to get a trademark, even at the state level in Massachusetts, I have to be selling those gummies lawfully in commerce. And how you handle that as far as with the Massachusetts manufacturers, again, in that contract, you contemplate the fact that that trademark application is going to need to be filed once these gummies are actually sold in Massachusetts. In that the manufacturer is going to do nothing to interfere with that application or otherwise try to steal the intellectual property. 

Trevor: Wow. All these extra complications I would have never thought of. No, that's fascinating that, you know, we've got like I said, in Canada, we've got our own set of hoops. But you guys seem to have a beat right now. On if if you want to be in multiple, multiple states.  Let's circle back to hemp. So, you know, my starting source has the less than point 3% THC and I, I because like everybody else, I process that into a CBD something I process that into CBD tea. Does that make my life easier if I'm now dealing with hemp instead of marijuana? 

Ryan Kocot: So the thing to understand about hemp derived products is that only certain types of products are allowed by the FDA, the Food and Drug Administration, at the federal level. And really what it boils down to, is the FDA is really only allowing hemp derived products to be added to cosmetics. So anything that really goes to affect the structure or function of the body is a no no. And you're getting closer to it being a drug. So the key or the first question to ask when you're looking at a hemp product is what is the classification or type of product that you're dealing with? If you're dealing with anything that falls outside of what the FDA allows, which for the most part is really just cosmetics at this point, then you're looking at federal risk, there. Where most people have gotten themselves into trouble though, outside of just misclassifying or or using a product that's not a legal classification at the federal level. They're just making outlandish medical claims like this cures COVID or cures cancer or whatever, you know, whatever the case may be. What's interesting now, is that states have kind of taken a similar approach that they've taken with marijuana. In that marijuana, you know, as we've talked about, illegal at the federal level but despite that, states have legalized it. What you're starting to see is the same thing develop with hemp. Hemp products are illegal at the federal level if they don't fall within those classification. So, for example, the biggies outside of drugs is food and beverage. At the federal level I can't add a CBD to a food or to a drink or whatever legally at the federal level. But a state like California recently at the state level is allowing it. So you're you're starting to see the same dynamic of the conflict between state and federal law in hemp, as we've seen with marijuana as well. 

Trevor: All right. So it's no simpler if I have a hemp derived company, unless I want to make a really, really good face cream, then I can then buy hemp derived CBD face cream you know, that should be simpler. 

Ryan Kocot: Yeah, but, you know, ask me how many times when people call me about a hemp product that it's actually a cosmetic. It's usually, I would argue that it's really no more simple as you know, compared to mere marijuana products. It's really you end up with the same dynamic and it's really a calculation of risk, whether it's hemp or marijuana operator. And I would also just to go back to the gummy example, there is an entire area of law, and that is Trade Secret Law that really get into the protection of the gummy makers proprietary blend and all of that. That's probably getting a little too much into the weeds. But it's it's worth mentioning as well outside of, you know, protecting the brand with state level trademarks and contracting things correctly. 

Trevor: Wow. So we're getting close to our end of our time. So I, I really better ask because I, you know, my imagination's only this big. Are there, you know, obviously without releasing anything confidential, are there any sort of interesting cases you run into lately that you when when it comes to cannabis or marijuana or hemp based businesses that have come up or things that come up often that you saw which people knew? Any sort of, you know, top ten lists of don't do this or are call me before you try that that you think the audience might be interested in. 

Ryan Kocot: Well, I'll give you, you know, through your latter questions of like don't do this is avoid marijuana or you know, cannabis puns at all costs. You know, you see these horror stories constantly and these are, you know, it's nothing confidential, not my clients, but, you know, people imitating other IP as well along the same lines as far as like nerds edibles. You know, or Skittles edibles. Definitely, it should go without saying, but you definitely want to avoid infringing upon anybody else's IP. And also, I think to that end, it's helpful to avoid using your stereotypical puns surrounding candidates because the odds that someone else has already use it are increased, in my opinion. But in terms of like litigation, and this is not really happened yet because we haven't seen federal movement yet, but I'll give you the hypothetical situation of, let's say gummy manufacturer that we've been talking about and Colorado has name X and they have a state level trademark in Colorado for name acts. What happens when in Massachusetts where our gummy manufacturer wants to work? There's an operator with that same name. You know what's going to happen ultimately, when federal law changes, interstate commerce is allowed and we have movement across state to states. What I think's going to happen is you're going to have gummy producer in Colorado, fighting with operator in Massachusetts over name X. I mean, that's the litigation from an IP perspective that I could see popping up that inevitably in this coincides with don't use puns for names because you're increasing your chances this is going to happen. But I can see state to state there being a lot of fights in litigation about brand names and that sort of thing, because again, it's all siloed state to state to state in that protection really only runs as far as the state boundaries. So I could see litigation popping up. You know, between operators in different states who have the same or similarly sounding names. And it's, you know, you would have to talk to an intellectual property litigator to get a better idea of how that's going to play out. I am not a litigator in that space by any stretch, but I imagine a lot of it will come down to who is using the name first, who was able to get the registration first at the federal level that that that sort of stuff. 

Trevor: Cool. Yeah, you're right. We really like our puns in the cannabis space. You're right. If I thought of it, five people have thought of it before me. Save myself the headache and go for something more boring and or more, not funny. 

Ryan Kocot: Yeah. And, you know, I would also note, Trevor, this conversation, everything we've talked about could be completely different in Canada. I understand that the marketing restrictions. You would probably know more about it than I would. I don't know that you could do. 

Trevor: No! Right now we can't do anything. Marketing is. Yeah. No it's. Yeah. Yes. No. Note for Canadian listeners. None of this applies to you because right now you can basically do no marketing. Like there's been cases where, you know, a social media influencer said, you know, I really like, you know, brand X around Christmas. And the original manufacturer got in trouble because way back when they paid that social media influencer for something different. Like there yeah. Marketing is very, very restrictive here. And yeah, definitely consult a Canadian attorney on that one because there are almost nothing you can do marketing wise and Canada. Hopefully round the lot of other things will be changing shortly because, you know, really hard to build up your brand if you can't tell anybody about your brand. 

Ryan Kocot: Yeah, and we could do an entire other podcast on influencers in the United States as far as FTC regs. And making sure that, if I paid influencer to advertise my product on Instagram, for example, I have to be very clear and make sure that influencer understands that they need to be disclosing the relationship that we have and that it's a paid relationship and the like. You saw Kim Kardashian and a lot of other celebrities are getting in trouble right now and will continue to for I think they put ads out on Instagram for like crypto and they didn't disclose that they were paid to do that. And the idea is, is the average consumer could be confused or duped by that to think that, oh, Kim Kardashian is genuinely endorsing this product. She's, you know, whereas if they if they knew she was being paid to do it, would that change their opinion on the product that that sort of thing and that you see a lot of a lot of collaborations in the United States with musicians and cannabis and whatnot. So it's kind of the same deal. But. Another topic topic. 

Trevor: Yeah, I was going to say that might have to be a follow up one, not for another day. So our time is running short. Is there anything you wished I'd add or anything I missed that you think the audience might not like to know about? 

Ryan Kocot: No. I mean, I would just make the point that I think any of the topics we've talked about you could talk about for an hour. This is really high level stuff, but I appreciate you having me on. And it was fun. 

Trevor: So. Kirk so let's see, intellectual property. So that's not just my gummy recipes. That might be my, trademark, my packaging. And then how do you trademark something that isn't actually federally legal? Well, you really can't. So, you know, then do you trademark it in your state? And what is going to happen down the road if if when that becomes federally legal? I can see why you need a lawyer to to walk you through all this. 

Kirk: Yeah. Yeah, right. Yeah. Lawyers. I think lawyers have a sense of humor. Most of the lawyers I know have a sense of humor. Some of the best jokes are lawyer jokes, But, you know, it's. We've done this podcast now for six years. We've interviewed. We've interviewed scientists, nurses, doctors, internists, lawyers, psychologists. And it always comes down to definition, right? How do you define cannabis? How do you define marijuana? How do you define blah, blah, blah X And oh? Well, what does a lawyer do? He defines marijuana and hemp, so he takes cannabis and separates it into two different parts. And that's how he defines cannabis. Is is it is it over 0.3 milligrams of THC? Then it's marijuana and it's illegal. So, I mean, that's I found that fascinating because, you know, as you listen to these stories, you try to pick up little nuances of the story. And lawyers, lawyers speak differently than the rest of us, and they define cannabis this way. And but it's funny, though. I mean, we've we've done hemp episodes and all of them. I mean, we know the definition of hemp, right? Anything anything less than 0.3 milligrams of THC is legally hemp, so. Yeah. Lawyers. 

Trevor: Yeah. No. And like I said, the law stuff usually bores me to tears. But I really enjoyed this one. Yeah, just all the hoops. And you know what you have to do to do it properly. 

Kirk: You know it. 

Trevor: Gives me a new appreciation for what you do. If you were trying to own and run a company in in the U.S.. 

Kirk: Well, it's in an anecdote that I heard. I was thinking about this. How long ago did I hear this? And I'm thinking it's about 15, maybe it's about 15 years ago. This is before I started going north. A friend of mine in Winnipeg has an international business, and he moved his business into China. And and I said to him, that's that's interesting going into China. Isn't China notorious for stealing intellectual property? And he said, you know, when we factor that into the equation, when we amortize the expenses, etc., etc., and he got into business speak and you know, this this little nurse was trying to keep up with that and he got into it he basically said, you know, we factor that into the equation that, you know, over how many years it would take for them to to duplicate our work, even though they have a contract. They went into China knowing their work was going to be duplicated eventually. Their factory secrets. And that was part of the equation. So I was sitting there with that antidote in my head listening to this in about the States and thinking. David Crosby, when we talked to him and he was trying to copyright or, you know, get his Mighty Croz brand out there, he had to go to individual states and he had to do all this stuff. And it just seems very cumbersome and I guess hopeful. And I would imagine, I would imagine state law contracts are a little stronger than international contracts to China. But when you still have to consider that your intellectual knowledge might be taken by just crossing a border, that's pretty threatening. And again, and it doesn't allow you as a business man to stretch. 

Trevor: Yeah, no, it's back to, you know, contracts are good and fine and necessary, but if you're going to partner up with somebody in a different city, state or country, you know, probably real good idea. If you trust them first. 

Kirk: You're going to have a lot of fun with trust. You know, I am. I enjoyed this one. It was it was very much American centric. So we'll have a link on him on our Web page. And basically the services he provides is he creates and implements cannabis compliant programs. He structures, drafts and and encloses compliant deals. He helps with permitting and licensing. So he really can help you set up your business between states. We need to get a Canadian lawyer. And ironically, as I was Googling him, I found another Canadian, bunch of Canadian lawyers in Toronto that specialize in Canada. So I've put a I've reached out to see if there's any similarities in Canadian law with what you found with the American stuff. 

Trevor: Honestly, I think I would find that surprisingly interesting as well. But to wrap up this one, I'm Trevor Shewfelt, I'm the pharmacist. 

Kirk: I am Kirk Nyquist, the registered nurse, and we are Reefer Medness - The Podcast. We are found on all those platforms. We have a very, very comprehensive web page. Tell your friends about us. Tell your students that are in medicine. Anybody you know that's taking a health related course. Tell them about Reefer Medness -The Podcast. 

Trevor: Growing every week. 

Kirk: So we're budding. We are a budding potcast.

Trevor: We're budding, Yeah. To have to end on a dad pun. All right. Kirk was another good one. We'll talk to you soon. Everybody out there, come back. 

Kirk: All right man.