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The CBD consumer products boom – the risks considered

Posted on 7 November 2019

CBD (cannabidiol) consumer products are proliferating in a number of UK sectors, including retail, food and beverage, health & beauty, and hospitality. There is also a growing trend of athletes taking CBD as a supplement, which requires an additional consideration of anti-doping rules.   Businesses are actively exploiting the clear CBD opportunity, looking to capture any "first mover" advantage. We set out below the key issues to consider for any business planning to enter the CBD market. However, manufacturers and sellers of CBD products should exercise caution, as the regulatory position remains unclear (even more so following the UK's Food Standard Agency's recent announcement to crack down on CBD food and drinks). Notwithstanding the popularity of CBD retail products, the legality of some CBD products remains unresolved, however presented.

What is CBD?

CBD is the non-psychoactive ingredient of the cannabis plant. It should be contrasted with another part of the plant, "tetrahydrocannabinol" or “THC”, which contains psychoactive properties and is a controlled substance under the Misuse of Drugs Act 1971 and Misuse of Drugs Regulations 2001.

There is ongoing debate as to whether all traces of THC can be removed from the CBD component, with the Home Office’s position being that it is very difficult to do so. If any trace of THC, or other controlled cannabinoids, is found in CBD, such CBD would be treated as a controlled substance. There remains, however, disagreement as to whether the Home Office’s position is correct, as discussed in this article in the New Statesman.

A Home Office licence is currently required to import, export, product, supply or possess CBD products. There are two different licensing regimes, depending on whether the variety contains more or less than 0.2% THC. A Home Office licence is also required to grow a cannabis plant.

Where CBD is used for medicinal purposes, the legislative framework is clear; such CBD products will constitute a “medicine”. They will therefore need to be subject to a Medicines & Healthcare products Regulatory Agency (MHRA) licence unless subject to a possible exemption. Where a CBD medicinal product is not subject to an MHRA licence, it can only be prescribed by a specialist doctor on the General Medical Council’s Specialist Register.

CBD foods

The European Commission has categorised CBD extracts as a “novel food” in the Novel Foods Catalogue, under Regulation (EU) 2015/2283. This means that CBD food products and food supplements must undergo a safety assessment, before being authorised for sale on the EU market.

Whilst this categorisation is not legally binding on EU Member States, the UK’s Food Standards Agency ("FSA") has accepted the EU’s recommendation and therefore CBD is in need of pre-market authorisation and safety assessments. The FSA has stated that it is “committed to finding a proportionate way forward by working with local authorities, businesses and consumers to clarify how to achieve compliance in a marketplace in a proportionate manner”, although it has provided no further guidance on what this may mean in practice. This creates uncertainty as to the long-term legality of CBD as an ingredient in food and beverages, despite such items being on sale in many outlets. What is clear, however, is that unapproved CBD food and drink should not be on sale in the UK, whilst the FSA undertakes its consultation process to determine how to handle CBD products.

There is a novel food application currently in process, with the European Food Standards Agency ("EFSA"), to review and confirm CBD's status as a "novel food". As this application is likely to set a precedent for the market, the EFSA is taking its time assessing the application. A finding by EFSA that CBD is a “novel food” would mean that any CBD food product, thereafter entering the market, would need to undergo a safety assessment and comply with any EFSA prescribed conditions (e.g. labelling requirements), before being sold in the EU. This decision to review the classification is a positive step to providing certainty, and ensuring compliance and safety in the marketplace, notwithstanding the short-term confusion over the legality of CBD products whilst the EFSA considers the application. This process will continue after Brexit as the UK intends to transfer the EU rules into UK law. Government guidance suggests that this will still be the case in the event of a no deal Brexit, as "The UK will maintain current standards that apply to food and feed safety when we leave the EU."

Seeds, seed oil, hemp seed flour and defatted hemp seed, derived from hemp, are not “novel foods”, unless CBD has been added to them.

CBD cosmetics

CBD infused cosmetic products are readily available for sale, particularly within the wellness and natural beauty sectors; with CBD infused beauty lines claiming anti-ageing and problem skin properties. Entry 306 of the Annex II to Regulation (EU) No 1223/2009 (the Cosmetics Regulation) prohibits “cannabis and cannabis resin – and extracts and tinctures of cannabis” and any substance referred to in Schedules I and II of the Single Convention on Narcotic Drugs of 1961 (the Single Convention) from use in cosmetic products. The Single Convention uses a narrow definition of cannabis limited to "the flowering or fruiting tops of the cannabis plant (excluding the seeds and leaves when not accompanied by the tops) from which the resin has not been extracted". The justification for this regulation is that flowering or fruiting tops of the cannabis plant contain higher concentrations of THC.

Therefore, provided the CBD ingredient is not sourced from the flowering or fruiting tops of the cannabis plant and does not contain any THC, CBD can be used in cosmetics in the UK market. Alongside these CBD considerations, cosmetic manufacturers must also comply with the general requirements for cosmetic products, including those relating to safety.

Care must be taken to ensure that the CBD cosmetic does not become a medicine, by virtue of its presentation, claims or composition. The Cosmetic, Toiletry and Perfumery Association has produced a position paper, outlining its guidance on use of CBD.

CBD related trade marks

As more businesses enter the CBD market, brand identity plays an ever-increasing role. Trade mark offices around the world all appear to be adapting to the relaxation of existing cannabis regulations, and permitting applications for CBD related goods and services, provided certain criteria are met.

Earlier this year, the Unites States Patent and Trademark Office (the "USPTO") issued guidance on the examination of marks for cannabis and cannabis related goods and services in wake of the enactment of the 2018 Farm Bill. The Farm Bill decriminalised hemp and specifically allowed interstate commerce of hemp products. This had a significant impact on the legal status of CBD and forced the USPTO to move away from its longstanding practice of refusing any trade mark application that was connected to cannabis outright on the ground the goods or services could not be used lawfully in commerce (which is a requirement for a US federal registration).

The USPTO will now allow therefore certain lawful CBD products to register their brands. What constitutes a lawful CBD product is largely determined by the US Food and Drug Administration (the "FDA"). At present, their regulations stipulate that adding CBD to food, beverages, dietary supplements and pet treats is unlawful. As such, these categories of goods and services cannot be included in a trade mark application. Conversely, CBD is an active ingredient in some FDA-approved drugs. Although the list of permitted CBD products may seem limited at present, changes are expected. If the FDA changes its position on CBD products, this will open the door to much broader trade mark protection in the US.

In Canada, the rules are much more relaxed. Canada legalised the possession and consumption of cannabis for recreational purposes in 2018 and, as a result, hundreds of trade mark applications have followed for cannabis related goods and services including CBD. For CBD brand owners interested in the Canadian market, they should move quickly to consider protection there, or risk the dilution of their brand or losing their brand to third parties altogether.

The position at both the UK Intellectual Property Office and the EU Intellectual Property Office is probably somewhere in the middle of the US and Canada. There is no harmonised law across the EU relating to cannabis or CBD specifically, however recreational use of cannabis remains illegal in most EU member states. On the other hand, in a number of European countries, cannabis has been available for some time for medicinal purposes.

The relevant legal test for registration of a trade mark in the UK and EU is that it must not be "contrary to public policy or to accepted principles of morality". This absolute ground for refusal is intended to prevent registration of marks that could induce public disorder or the likelihood of criminal or other offensive behaviour. For CBD brands, a mark is likely to be rejected if the words or images used in the sign have any criminal connotations, such as being associated with illegal drugs. For example, just recently the General Court of the European Union confirmed that the following figurative mark was contrary to public policy because the terms 'Amsterdam' and 'Store' in conjunction with the prominent word 'Cannabis' and images of marijuana leaves evoked references to an Amsterdam coffee shop where the purchase of the illegal form of the plant has been decriminalised.

The decision provides an insight into the current mind-set of the EU courts. The applicant of the mark had tried to argue that the leaves depicted were not part of the plant containing THC and the goods and services applied for included such goods as "chocolate and deserts, soft drinks, beer". Despite this, the Court was more interested in the meanings the public would infer from the figurative mark and concluded that the leaves were the cultural emblem of the illegal form of the plant.  

It can also be the goods and services themselves and not the mark that is contrary to public policy, particularly if the specification is so broad that it could relate to recreational use of cannabis. For example, in 2018, the EUIPO rejected the mark BLOODY SKUNK which covered 'hemp seeds' alone. It decided that these goods could be used in connection with the illegal cannabis market and there was no limitation of the goods to pharmaceutical or medical use that would make it legal. Therefore, it was against public policy to grant registration.

Despite the above, a review of the trade mark registers at the UKIPO and EUIPO does reveal a number of registrations for marks with goods and services relating specifically to CBD in cosmetic preparations, foodstuff, and for medical purposes. In fact, the number of applications at the UKIPO and EUIPO for marks covering medicinal cannabis or goods containing CBD has risen dramatically in the past 12 months. Many of the applicants are Canadian and US businesses, reflecting heavy investment following law and regulation changes in those jurisdictions. One Canadian business, Spectrum Cannabis Canada Ltd, already has a portfolio of 19 EU registrations, 8 UK registrations and multiple applications under examination.

There seems real potential for businesses in the CBD industry to gain substantial trade mark protection, provided their brand (including any imagery) and specification of goods and services are carefully considered. A registration could prove a valuable asset in a fast-moving environment, both in licensing arrangements and to prevent others from using similar brands.

What else do I need to consider with CBD products?

The Advertising Standards Authority ("ASA"), which regulates UK adverts, has stated that it understands that CBD products tend to be either medicines or food (both of which are subject to complex regulatory regimes). The ASA's position is that it remains the marketer’s responsibility to establish which regulatory regime applies to their CBD product, and to establish how it might be marketed. Adverts which present CBD products as medicines, or as having medicinal effect, trigger the need for such products to be licensed as medicines. If a product is not a licensed medicine, the ASA is very clear that marketers should not make any medicinal claims in their adverts (and claims that the product can “cure”, “restore”, “heal”, "is good for you" or similar therapeutic claims are not risk free).

If a CBD product is not a medicine or a “novel food”, it could be classified as a food supplement, and be subject to section 15 of the CAP Code. Finally, where there is a statement that a product contains CBD, it should actually contain CBD; otherwise there is a risk of a finding of misleading advertising.

If companies choose to manufacture CBD products, they should assess the uncertain regulatory environment in all jurisdictions in which they are growing cannabis plants and manufacturing and selling CBD products. In particular, they should review their existing production and distribution arrangements, ensure that their production methods are safe (and that rigorous extraction methods are used), that particular batches can be easily identified and recalled (if necessary), and that products are properly labelled. Companies may also want to consider third party laboratory testing of their products to ensure that the advertised CBD strength is correct and the product is free of contaminants.

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