It’s difficult right now to think about much besides COVID-19, whether from a personal, professional, financial or societal perspective. The current pandemic has impacted each of us.
Personal and societal perspectives aside, Hemp Grower and its sister publications Cannabis Business Times and Cannabis Dispensary, like most other businesses, have not been immune to the pandemic’s fallout. In March, we announced our decision to postpone Cannabis Conference 2020 (co-produced by all three publications), originally scheduled for April 21-23 in Las Vegas. Moving an event of its size—which brings thousands of people together from nearly 30 countries—is not something we expected. But we adapted quickly and have fortunately rescheduled the conference for Sept. 1-3. The lessons regarding the importance of nimbleness and backup plans have not been lost on me.
For the hemp industry, COVID-19’s impact has been severe. In a recent Hemp Grower survey, 84% of respondents said they predict revenue or operating capital losses due to the coronavirus pandemic; but this is not the only challenge facing the fledgling U.S. industry.
We are about five months away from the Oct. 31 deadline for states and tribes to either operate under a new U.S. Department of Agriculture (USDA)-approved plan or under their pilot programs established under the 2014 Farm Bill. Also, the USDA is reviewing the first round of public comments to its interim final rule (IRF), which establishes hemp program requirements drawn from the 2018 Farm Bill.
Now, we wait to see what changes are made to the IRF. In “The Fragile State of Hemp,” reporter Paul Barbagallo explores what some state ag departments see as the IRF’s most significant issues and hindrances to farmers’ potential for success.
We see ongoing challenges weaving this newly legal plant into the fabric of the U.S., where confusion over regulations and hemp being mistaken for its higher-THC cannabis relative has fueled significant crop and financial losses and lawsuits. We see a supply chain struggling to evolve in a new industry.
But we also continue to see growth, potential and optimism.
The regulatory structure is not yet ideal, and challenges are sizeable, but farmers continue to build an industry from nothing. Nimbleness and backup plans will be the way of the industry at least a bit longer.
And as noted writer, poet and artist Kahlil Gibran once wrote, “Progress lies not in enhancing what is, but in advancing toward what will be.”
Staffing a business may seem like a straightforward endeavor, but with an often complex regulatory landscape and labor needs that fluctuate seasonally, hemp business owners have much to consider when hiring and training employees.
Hemp Temps launched in 2013 as one of the first staffing agencies to serve the cannabis and hemp industries. The Denver-based company specializes in helping Colorado and Oklahoma dispensaries, cultivation/farming operations, extraction facilities and kitchens find temporary and temporary-to-permanent employees. CEO John Paul Dreibelbis spoke with Hemp Grower to share his tips for hiring, from helping you determine the size and scope of your workforce needs to finding the right candidates to onboarding and training new employees.
Note: This article originally ran in the November/December 2019 issue of Hemp Grower.
1. Consider how labor needs fit into your overall business plan
Long before a business starts production and harvest, it should consider how many full-time, part-time and temporary workers are needed to achieve the business’s goals, Dreibelbis says.
Businesses should ensure standard operating procedures (SOPs) are in place for cultivation, drying, curing and processing with a clear end product and go-to-market strategy in mind. They should also maintain a calendar of harvest and testing dates. These objectives will help business owners understand the operation’s workflow and how much labor is needed to keep things running smoothly throughout the season, Dreibelbis says.
“Whether you’re using machines or doing hand-trimming or defoliation, have an understanding of what it’s really going to take to get the job done,” he says.
2. Define desired qualifications (and how you might teach them)
It is important to define the basic skill sets and qualifications needed when searching for candidates. In this nascent and rapidly growing field, Dreibelbis says to focus on attitude over experience.
“As long as they’re willing to do the job, learn and work hard, that’s really what we look for,” he says.
Some employers may take this a step further and require a certification or compliance training program as a prerequisite for certain positions, he adds. To meet those industry needs, Hemp Temps started Hemp Temps University, which offers free in-person and virtual training programs where employees undergo compliance and technical training to learn the job fundamentals.
Dreibelbis says all employees attend orientation, complete trimming and harvesting training and learn about the Environmental Protection Agency's Agriculture Worker Protection Standards (WPS).
For farmers who don’t have access to these training materials or prefer to self-train, it’s important to consider how you will vet qualified applicants and how you will train those new to the industry.
3. Implement a training program that thoroughly covers safety protocols
Newly hired staff will not only need to be trained in the day-to-day operations and job duties, but also on safety, Dreibelbis says.
“[Make] sure that people are wearing hairnets, beard nets, [and] changing out of their [street] clothes [while working in the processing and packaging areas]. Those are things to keep an eye out for.”
Federal and state agencies also have their own required safety training that employers must adhere to, such as the WPS. “Worker safety is a huge deal,” Dreibelbis says. “You can’t be exposing employees to pesticides, so understanding what those protocols are is … huge because [employers] can get fines from the Department of Agriculture and get potentially shut down.”
4. Set realistic expectations
Another part of the onboarding process is ensuring that new hires understand what is expected of them—and that these expectations can actually be achieved, Dreibelbis says.
“For us, [it’s] making sure they understand what they’re getting into because I think a lot of times, people just hire people, [and new hires] might read the title, but not really understand what it entails,” he says.
If job titles and descriptions are not clearly defined, a facility can quickly become unorganized, Dreibelbis adds.
“People show up, and then next thing you know, everybody’s kind of doing their own thing,” he says. “And then, when they’re not happy with the results, they start pointing fingers. [Be] proactive, [have] a clear picture of what’s going to be done, and maybe [set] some rewards for overproduction … to really keep everybody on the same page and happy.”
Businesses might consider having images and visual aids on the wall that offer examples of what is expected of employees as well as clearly documented processes and goals for each workday, Dreibelbis adds.
“[Take] 10 minutes before the day starts to give everyone a pep talk on what to expect, how the day’s going to go, what time breaks are going to be taken, … who’s in charge of what,” he says. "And [have] clear go-to SOPs where, if someone forgets, they can go look at pictures and diagrams.”
Beyond imagery, designate people who employees can seek out, both on the jobsite and at headquarters, with any questions or report any problems.
5. Consider the market when setting wages
Pay is often a touchy subject with potential hires and employees, but Dreibelbis says wages should be based on tenure, experience, reliability and the market forces at play.
“The price per pound really dictates the value of what the going rate for the position is,” he says. “Unemployment is super low right now, so we’re seeing wages rise. And if you look at [the overall] unemployment [rate] of 2.8% in Colorado, … less and less people [are] available to work. With that, wages are rising, and it’s just like anything else [with] supply and demand.”
While there are, of course, average going rates for each position, wages are ultimately decided based on what the employer and employee agree upon, Dreibelbis adds, but employers should keep in mind that employees are most willing to work for what they believe they are worth. Employers should also consider establishing clear avenues for raises and career advancements, which can help prevent or reduce turnover.
6. Keep your books in order
As a team grows, so do employers’ back-of-house duties, such as maintaining proper insurance coverage and payroll.
For example, companies might try to classify workers as independent contractors (1099) rather than full-time employees (W-2) because the companies don’t have to provide medical insurance or workers’ compensation to 1099s. In addition, wages are non-taxed for 1099s.
“It’s unfortunate, but we see a lot of companies that just try to pay everybody as a contractor, and the states are cracking down on that,” Dreibelbis says.
He points to Colorado as an example. The state conducted an audit of all employees who were classified as 1099 and found those people were not paid through a Federal Employer Identification Number (FEIN). A deeper dive revealed that there was misclassification of employees.
7. Value your employees (equally)
Above all, businesses should treat their employees with respect and make them feel welcome regardless of their status as a full-time, part-time or seasonal worker, Dreibelbis says.
“[Make] them feel welcome and [make] them feel like they’re an equal with the rest of the staff,” he says. “A lot of times, there’s this culture where the existing staff don’t necessarily treat the temporary staff with the respect that they deserve. And inadvertently what happens is those people move on.”
Both temporary and permanent employees should be given the tools necessary for them to do their jobs, Dreibelbis adds. “[Have] the tools for them to be successful and [have] a really clear plan on how to explain that. Don’t just assume that employees know what you want. You have to explain to them what the process is going to be, and sometimes you have to explain it more than once.”
Businesses can implement incentive programs, he says, such as offering rewards when production goals are completed, to keep employees motivated and engaged.
In addition, “[Have] a location that’s easy to get to, the right facilities, bathrooms for people to use, the break area [and give] employees the breaks that are state and federally mandated. [Understand] those rules,” Dreibelbis says, and treat employees like you value their contributions to your business.
The need for and shortage of qualified staff will continue to grow as companies ramp up production and as the hemp industry standardizes and matures. Farmers can’t do it all themselves, and they can’t get by on family and friends anymore, either. It’s important to take the time now to focus on staffing and formalize procedures to help make the hiring process less burdensome and set standards that make it easier to find and train future applicants, as well as retain talented employees.
Melissa Schiller is assistant digital editor of sister magazines Cannabis Business Times and Cannabis Dispensary.
So, you’re ready to make money off your hemp-related intellectual property (IP)? You have managed to develop a cultivar that consistently yields a high percentage of cannabidiol (CBD) and a low percentage of tetrahydrocannabinol (THC). Naturally, you believe you’ve got something special on your hands that people will line up to pay for. And you’d be correct. With proper IP protection, you can easily license the right to use that cultivar and watch the money flow in. Right? Well, not so fast.
The process of obtaining IP protection is not as straightforward as you think, and the competition is fierce. The threshold to prove your uniqueness is high.
Following the Agriculture Improvement Act of 2018 (the 2018 Farm Bill), the “unicorn” that everyone is chasing right now is a cultivar of hemp that guarantees high CBD and low THC, says Corey Cox, J.D., an attorney in Vicente Sederberg’s Denver office.
“We are seeing a huge push right now toward proprietary hemp genetics and unique varieties of the hemp plant,” says Cox, who specializes in regulatory compliance for hemp and marijuana businesses. “People are trying to develop these varieties and protect them from use by competitors. And some want to only license their IP, so they don’t have to have any physical manufacturing capabilities. They simply want to license their genetics to production partners.”
This hemp IP rush can be attributed to new federal testing guidelines. To be legal under the 2018 Farm Bill, hemp must test at or below 0.3% THC—the main psychoactive compound in marijuana. If your hemp crop tests above the 0.3% limit, you’ve got what is known as “hot hemp,” which to the federal government essentially means you grew illegal marijuana. According to most state statutes, those hemp crops must then be destroyed. That puts a premium on good genetics. And while genetics are not the only factor involved in a crop’s final CBD and THC levels, they are an essential foundation
“Having hemp seeds that you know are not going to test high for THC—and can be reproduced without complication—is a really, really big deal,” says Dale Hunt, Ph.D., J.D., a plant scientist, cannabis lawyer and registered U.S. patent attorney with over 20 years of experience protecting plant varieties.
But while IP licensing may soon become big business in the hemp industry, the devil is in the details. U.S. IP law and regulations, along with the 2018 Farm Bill itself, have far more nuances and complexity than many people understand up front.
To separate fact from fiction, Hemp Grower spoke with IP experts who offered three imperatives to help you not only protect your intellectual property but also profit from it.
1. Study Your Options.
The U.S. Patent and Trademark Office (USPTO) provides different protections for different kinds of intellectual property. As a starting point, hemp businesses should understand the key differences between at least two types of patents: a plant patent and a utility patent.
A plant patent is granted to someone who invents or discovers—and asexually reproduces—a distinct and new variety of plant (other than a tuber-propagated plant or a plant found in an uncultivated state). As Sterne, Kessler Goldstein & Fox P.L.L.C. attorneys Pauline Pelletier, J.D., and Deborah Sterling, J.D., explain in a recent blog post, plant patents offer protection for asexually propagated plants (clones having identical genetics to those of the patented plant), but they do not protect sexually produced plants (those cultivated by seed). A plant patent, in essence, provides legal protection from a competitor who grows your specific cultivar from a clone.
A utility patent, on the other hand, is granted to someone who creates a new or improved—and useful—product, process or machine. A utility patent offers much broader protections than a plant patent. It protects your unique seeds and the various chemical compositions of the plant—not just the clone.
“While a plant patent covering a commercially valuable strain for cloning purposes certainly has value, its scope is bounded to the genetics of the patented plant and leaves room for sexual reproduction (e.g., seed farming),” Pelletier and Sterling wrote in their blog post. “By contrast, a utility patent covering a non-naturally occurring strain, where the claim is defined in terms of the plant’s novel characteristics, could make the avoidance of infringement more difficult and thus serve as stronger patent protection.”
Hunt explains a plant patent is like a copyright on a single cultivar—it protects against illegal clonal copying of the exact genotype of the claimed cultivar. In contrast, a utility patent treats a cultivar as an invention.
One other way exists to protect IP associated with plant varieties. In addition to legalizing industrial hemp, the 2018 Farm Bill opened the possibility for hemp IP protection through the U.S. Department of Agriculture’s Plant Variety Protection Office, which provides intellectual property protection to breeders of new varieties of seeds and tubers for 20 years.
Plant Variety Protection (PVP) essentially protects seeds from being “copied” in bulk to compete with the owner of the variety. However, it permits use of the seeds for breeding to make other new varieties. This is called the “breeder’s exemption.” PVP rules also expressly permit the purchaser of protected seeds to keep enough seeds to replant the same acreage as the seeds he or she originally purchased for planting. This is called the “farmer’s exemption.”
In sum, while plant patents apply to asexually propagated plants, utility patents may apply to genes, traits, methods, plant parts and varieties. Additionally, PVP is now available for seeds and tubers.
2. Let the Business Be Your Guide.
No one-size-fits-all solution exists in plant IP, especially with a plant like cannabis that can be propagated via seeds or clones. This is why companies should let their sales strategy dictate their IP strategy, Hunt says.
So, based on what you sell, what kind of IP protection do you need?
If you make money selling hemp seeds, a utility patent may be your best defense. A plant patent would only be useful if the cultivar that is the source of the seeds is itself so valuable that you would want to control its propagation, Hunt says. The most prominent example of this in the hemp industry is Charlotte’s Web, a popular CBD-dominant strain that has helped countless young patients as an epilepsy treatment and has become a figurehead for the legalization of medical cannabis after its appearance in CNN’s Weed series. In 2019, Charlotte’s Web received what is believed to be the first plant patent for a hemp strain. The plant patent describes “CW2A” as a Cannabis sativa L. cultivar that is capable of producing up to 6.24% CBD and only 0.27% THC. For Charlotte’s Web, a plant patent is like insurance against potential theft of the propagating material of its “seed parent” cultivar. However, that plant patent would not directly fit or support the business of selling seeds; in those cases, you would need a utility patent, since a utility patent protects your unique seeds, not just your clones, Hunt says.
Shifting to another scenario, let’s say you sell clones to nurseries that will propagate and sell more clones to other people. Then you need a plant patent and a license agreement with that nursery requiring it to pay you for every clone it makes and sells, Hunt says.
But if you’re only selling harvested flower or extracts and you do all your own farming, the risk of IP theft or infringement would be negligible, since you would have more control over what potential IP others can access. But Hunt says a grower can still seek IP protection as a form of insurance: a plant patent to protect the genetics in case someone was to take a cutting and start competing with you or a utility patent to claim the genetic line more broadly.
3. Prepare for Legal Battles.
While patent litigation has long been a battlefront for technology-focused companies, IP skirmishes are beginning to expand into the cannabis and hemp industries. In 2018, in the first case of its kind, United Cannabis Corporation (UCANN) sued Pure Hemp Collective Inc., for infringing on its 911 Patent, which covers liquid cannabinoid formulations of a purified CBD and/or THC greater than 95%.
The case serves as a reminder that cannabis and hemp companies must be mindful that production methods, technologies and business processes, as well as product logos and packaging, are all subject to legal protection, wrote Knobbe Martens lawyers Jonathan Hyman, Hans Mayer and Christopher Smith in an article for Hemp Grower’s sister magazine Cannabis Business Times. As laws surrounding production and sale of cannabis begin to relax, companies may be more willing, or even eager, to enforce their intellectual property rights than before, they noted.
As the hemp industry grows, legal battles over awarded patents’ validity may intensify, says Theodore Y. McDonough, J.D., counsel for Carter Ledyard & Milburn.
“People have been experimenting with cannabis and hemp for quite some time behind the scenes, under the radar,” McDonough points out. “Somebody may very well have come up with that CBD formulation a number of years prior, and the question is, is that going to be a ‘prior use’ that would invalidate an otherwise valid patent? We really don’t know yet.” In intellectual-property law, “prior user rights” can serve as a patent-infringement defense. But there has not been much case law to go on.
With growers under pressure to produce hemp that will test below the 0.3% THC limit, all eyes for now are on the genetics.
“Any company that’s involved in genetics has a huge business opportunity in developing these strains, and obviously that takes time and money,” says Nathalie Bougenies, an attorney with Harris Bricken who represents clients who have filed for hemp patents. “As we know, a big part of the value in a company is their IP assets. My advice is to definitely spend the time to prepare a patent application [to] protect your work and make money.”
Paul Barbagallo is a Boston-based writer and a former senior editor for Bloomberg News and beat reporter for Bloomberg BNA.