Tom Zuber, Managing Partner at Zuber Lawler & Del Duca
Tom Zuber is the Managing Partner of Zuber Lawler & Del Duca LLP, which handles IP, acquisitions, IPO’s and litigation. He has personally advised some of the most iconic companies in the world on their patent and trademark portfolios.
He is at the cutting edge of cannabis patent and trademark law. Tom holds a law degree from Columbia Law School, a master’s degree in public policy from Harvard Government School, and a biomedical engineering degree from Rutgers University, where he graduated with highest honors.
[00:00:01] You're listening to Thinking Outside the Bud where we speak with entrepreneurs investors thought leaders researchers advocates and policymakers who are finding new and exciting ways for cannabis to positively impact business society and culture. And now here is your host Business Coach Bruce Eckfeldt.
[00:00:30] Welcome everyone this is Thinking Outside the Bud. I'm Bruce Eckfeldt, I'm your host and our guest today is Tom Zuber and Tom is a managing partner at Zuber Lawler and Del Duca. It's a law firm focusing on IP acquisitions offerings and litigation. We're going to hear a little bit more about that but first Tom welcome to the program.
[00:00:48] Thank you very much Bruce. Delighted to be here. I love talking about cannabis.
[00:00:52] Good. So let's find out how you got into it. I always love to hear kind of the stories of how how does a lawyer end up in the cannabis space. What's the background.
[00:01:00] Yeah it's certainly different. We are a corporate law firm and a law firm a high stakes litigation law firm intellectual property law firm we do a lot of our work around the world. We represents the kind of companies that you hear about every day or every week. I mean global funds and so forth. We got into the cannabis space by accident completely by and what I mean by that is it was a function of social relationships. My buddies started cannabis companies. I've known these bodies since before they started their cannabis companies. They've known me since before I co-founded this law firm with my brother Jeff. They've watched our firm grow and we watch their cannabis companies grow when anything important came up. They had a serious financing or an acquisition or a real dispute they would call me first of all for their matters and they would tell their buddies call my buddy Tom this offer is in this space they're doing this stuff. So I guess in that sense we were kind of alone for oh most of the last 12 years. It wasn't until about a year or two ago that other corporate other MDA other IP and high stakes litigation firms international firms started to show up. So we've got quite a bit of a head start on on most of our colleagues in the legal industry that focus on the same things we do.
[00:02:07] Yeah. Now this grant and someone with that amount of experience in the cannabis business is it's hard to come by. So I appreciate the I'm on on here.
[00:02:14] So tell me a little bit about like what were you doing in the beginning. So these were kind of business transactions I mean what were the legal issues 12 years ago that people were grappling with when it came to cannabis businesses.
[00:02:24] It tended toward corporate work finance work you would take in some money and also disputes corporate disputes start out with a few partners and you start a corporation together with an LLC together and then one or more unwinding issues and stuff are getting along with the others in those at times have gotten pretty ugly. So we were brought in to clean things up to achieve a settlement or sometimes to get rough. And that's that in the beginning I would say those were the largest sorts of matters.
[00:02:56] Now as soon as things ground like so as as this market has matured what have been the more interesting or the kind of changes in the work that you've been doing or the work that people come to you for the issues and challenges people have.
[00:03:07] So it was it's interesting because the cannabis industry our representations at least started to catch up with the rest of our practice right.
[00:03:14] So again I was receiving friends who were saying hey help us out. Friends we're sending friends say hey help us out but it wasn't really the companies weren't yet as sophisticated as they are today. Increasingly today it's evolved and see representations relating to trademark litigation protecting technology in relation to patent rights around the world IP shows. We represent companies that are going public in Canada and other forms of high stakes deal work and litigation work acquisitions now that sort of work is what occupies most of our time spent representing cannabis companies these days.
[00:03:54] Yeah. And I would imagine like on one hand you know cannabis business is just like any business and has kind of the same kind of legal challenges on the other hand we're in this whole kind of weird federal illegality state you know authorized kind of world here idea. One of the kind of the primary issues people need to be aware of as their kind of thinking about cannabis businesses and we can kind of break it up a little bit and kind of plan touching a non plant touching if you want but just give us a little bit of a sense of why this is sort of challenging or why this is complicated from a legal point of view.
[00:04:22] Sure. Well this is unprecedented. We're all chopping down trees in the wilderness here it's even weirder the alcohol prohibition. Right. And what is alcohol prohibition it was legal and then it was illegal. And that was it. Here we've got this weird by vacation between federal and state where the Federal Government says it's illegal but hey we're looking the other way as long as you states are OK with it. And then the state states increasingly say it's legal. And that's. And furthermore to varying degrees some states are legal only on the medical level and some states are legal. Also what the recreational level some states still haven't caught up. So that's just weird. It's unprecedented. That is complex on the one hand but it's also filled with opportunity. Right. Because that landscape appears tough to navigate for us but it's really quite straightforward. And there are opportunities here to really take a leap forward beyond the rest of the industry.
[00:05:13] So in other words what I'm saying is that the savvy cannabis CEO these impediments these difficulties these complexities can actually act as a filter weed opposition. And that's the way that we pitched or the most sophisticated cannabis clients we say well this is all opportunity here because this stuff is tougher to navigate than the regulatory terrain than the legal terrain. Appropriate relevant to other industries. And we encourage you to take a big picture view on how to utilize this complexity to your competitive advantage. That's a pretty exciting conversation.
[00:05:50] Well I like that approach. I think it's refreshing for me to hear a lawyer and talk about it as a business opportunity.
[00:05:54] I think a lot of lawyers just mount up the risk and that all things you need to be careful of. But I think you're absolutely right. I think that's the exciting part of it.
[00:06:01] From that sort of entrepreneurial side of it is is that complexity creates creates opportunity in the market and a great opportunity for innovation. What do you what are some of the like I know that some of the big issues that I've seen come up when you go to actually turn up handle corporate matters there.
[00:06:16] I know there are some things that become complicated things particularly around IP and copyrights and trademarks and things like that patent. Can you give us a quick and quick understanding of why what ends up happening with some of those things when you try to build a brand or you're trying to build a company and what's enforceable and what's not enforceable.
[00:06:33] Sure. Well there are distinct trends as far as what's enforceable or not enforceable was between patents and trademarks for instance right now. So first of all a lot of folks don't recognize even a lot of lawyers don't know that there's nothing in the patent statute which of course is federal.
[00:06:48] There's no such thing as state patent protection in the United States. The federal patent statute includes no reference to a legal subject matter being an obstacle to patent ability. So I'll say that again.
[00:07:00] Again if you have a process for making better cocaine and it's innovative novel and non obvious you should patent it because the federal government will allow you to do so so you can get the patent.
[00:07:12] I guess the question is is can you like once you have the patent what can you enforce. I mean can you can you prohibit someone else's business activities based on that patent for a better illegal substance.
[00:07:22] Well that's an astute question Bruce. And the answer is depends. And really it's closer on the side of no. Often times and toward the Yes end of the spectrum. So what I mean by that is you're going to be hard pressed to find a federal judge that's going to award you a bunch of damages related to the illegal sale of cocaine. In the example that I'd give it right on the other hand that same technology might be used in other industries. Right. So even though you've discovered in relation to cocaine perhaps somebody else is using it in the pharmaceutical industry. That same process where that's mechanism that same machine in that instance despite the illegal more less of the technology described in the relevant patent a federal judge actually would assert that patent would allow you to assert that PEDs against legal revenue stream.
[00:08:11] So what I'm curious is that why because this is what I've seen a lot as you know a lot of companies here have you know approaching you know trademarks patents copyrights stuff where they're doing it around just plant extracts you know could be various you know they're kind of generic sizing it to be around an herbal extract of you know of general terms or legal terms and then applying it to the to the cannabis market on a state by state level. What is this. Is that why I'm seeing some of this stuff because people are trying to get around this whole you know they don't want to directly identify it as being a cannabis specific processor brand. And so they're keeping a more general so you can get that protection.
[00:08:47] Well we don't advise that. If I've understood you correctly so let me rephrase make sure that I'm answering the right question. Do we recommend is a law firm that folks hide the ball as far as the fact that they are Cannabis Company.
[00:09:00] Absolutely not. You do not. It back. That's grounds. Let's take a trademark for instance if you're hiding the ball from the PTO the Patent and Trademark Office in order to obtain a registration and to be more precise you're not disclosing that in fact some of your goods described in the application are cannabis goods.
[00:09:18] That's canceling the original element reality. Right. And I'll do my I'll do my disclaimer for everyone listening a podcast that we're not we're not giving out legal advice here we're talking about the nature of the business. But yeah I think that I think that's interesting.
[00:09:30] If I could get no legal relationship between myself and any listener without a fully executed written engagement letter which which multiple provide e-mail addresses on how to get later in the program because I think that's that is I think something people still struggle with. I think people that are trying to build brands trying to build IP have not really figured out how to successfully kind of navigate these waters and I think I'm kind of curious personally what's going to happen when it does go federally legal and also now the federal game is in play and you've got all these businesses that are in flight I'm assuming there's going to be some kind of you know sort of very quick turf war about people you know gobbling up these brands and the IPO I just I'm I'm sensing there is going to be a big big event once it goes federally legal around IP and copyright and trademarks. What do you think I'm going to do my my over exaggerating what might happen here.
[00:10:20] Bruce you're right on the money. In fact I'll go ahead and amplify your statements. Let's talk about patents. The patent wars are coming to cannabis the way that they dominate transgenic corn industry. I started my legal career. They're going to dominate the cannabis landscape and they will weed out a great deal of cannabis marketplace companies that own the best patents will be achieving more dominant positions than companies that don't do it. In other things being equal in relation to brands once prohibition ends the world will be increasingly focused on federal and global brands and there will be less emphasis on state by state brand protection and in fact it is possible to achieve meaningful federal trademark protection for cannabis brands and in fact we're doing that for our clients. It involves full disclosure to the PTO as relates to the cannabis nature of our client's business. But at the same time we're able to surgically articulate the subject matter that the PTO finds acceptable and at the same time is relevant to cannabis business. So to be clear we're not talking about hats and t shirts and jeans which is pretty meaningless to a company that's not a clothing company right now. We're talking about products that are within the zone of relevance to cannabis companies. So that's obviously a complicated argument. But what I'm saying is that it is possible by law firm is absolutely out in front on that issue and it's exciting because when Prohibition ends that companies that have federal and global trademark protection are going to have an extraordinary leg up on the companies that don't to put a finer point on it. Even in the short term we're seeing the dramatic results of companies that have failed to protect their brands at the federal level at the global level because knockoff companies are acquiring rights in states in which journalists are not yet doing business right.
[00:12:14] So you'll have a cannabis company that will build the brand out here on the West Coast in Oregon or California Nevada Colorado and another company will start building up rights in another state. And so when that company begins to prepare to go public and we're involved in those representations you begin looking under rocks because it's relevant to the public disclosures in that context. And there's a lot to be found under those rocks interest to make sure I understand what you're talking about.
[00:12:42] You have an established brand that's doing business in say California. They are building the brand doing the business in that state. Some other company basically takes that brand and establishes it in another state. And so when that company goes federal or starts to look to doing business in that state they're now there is conflict there is IP conflict within that other state. How does it get resolved as it goes in a state court. I mean how do how do you protect these things so.
[00:13:07] Well that's a big question and I'd have to make assumptions in order to answer it with any sort of precision. So let me make a couple of assumptions.
[00:13:15] One let me assume that unfair competition doesn't come into play that day by a former employee you walk out the back door with an anticipated launch of a brand doesn't come into play in those sorts of other issues don't come into play. The only thing that's relevant this trademark law in that context let me also make the assumption that the first company was let's call it company a company that was using the brand first let's say in California and then a second company began selling a another candidate product in say Ohio. And that company in Ohio is selling the cannabis product in Ohio after a company one was selling it can't afford California. But before company one started selling in Ohio exactly. At that point in the absence of federal trademark protection that second company company number two went right to that brand in Ohio and Ohio. That's the way it works because the absence of federal brand protection you by definition or relying on state by state brand protection.
[00:14:13] So it's just that it's every state is an island and you've got a you're going to claim your trademark on that island and claim your IP on that island. That's right. That seems like a lot of work.
[00:14:23] It is. And in fact it's I think impractical to keep up with brand protection state by state because of course cannabis is currently a schedule one substance you can't put cannabis in the back of a truck and transported across state lines. You've got a cannabis company with national ambitions must begin its operations and new in each state to begin the process of creating rights to their brand state by state federal trademark protection is meant to address that circumstance directly by achieving brand protection throughout the land. That's why it's so critical for cannabis companies to focus on this cannabis companies have largely been scared off by a notion an incorrect notion that it's not possible to obtain meaningful trademark protection for cannabis brands. It absolutely is. Again it involves being completely forthright with the PTO about the fact that cannabis is relevant to the application. We sort of start with that assumption.
[00:15:18] Excellent. And talk to me a little bit about international rights and you know as I think that one of the interesting things about this market right now is that so much is happening on the international level. A brand or an IP. How do I protect that. Now that this is going really global in terms of a market.
[00:15:35] Well first as far as protecting a brand. I'd like to give a larger broader answer to that question. Let me give a specific answer. First to make sure I've answered your question directly. There are treaties. So for instance the Madrid Protocol over 100 countries throughout the world are signatories to it. The Madrid Protocol allows you to for instance claim brand rights trademark rights for let's say the European Union or countries individual countries within the European Union while referencing a priority date achieved by the filing of a US trademark application for that same brand and regard it as goods and services. So it's quite a wonderful thing. So by filing in fact here in the United States achieving a priority date here in the United States you can go ahead and file a so-called international application on that protocol and name not only the European Union but the other countries that are signatories to the Madrid Protocol and thereby establish a global filing date that references your U.S. priority dates. And it's quite a powerful treaty.
[00:16:35] Yeah. It seems like you know given the way the market's going on the international kind of model of the international business that is appearing on the scene it's to be something that you probably want to look into or at least companies seem to be aware of. Indeed.
[00:16:48] So other other than kind of the IP side of things. What else have you seen kind of play out in terms of IP. I mean I know that you know Canada is kind of the big the big place right now to do offerings. However he's been playing out what would have been some of the things you've noticed about the initial public offering market for cannabis.
[00:17:07] Sure. Well the money's in Canada and many of the brands much of the talent is here in the United States. So what you see is an inflow of cash from the candidates to the US and that can happen in terms of acquisitions in terms of financing and also in terms of IPO in terms of U.S. companies going public on the Canadian Stock Exchange. So that's happening we're involved in those representations the. There are a number of factors to take into consideration here. One the country seems to be headed toward a d scheduling of cannabis at the federal level. And when that happens companies of course are going to begin looking toward the American stock exchanges. The New York Stock Exchange Nasdaq and so forth. So when that happens it seems likely that the attractiveness of the Canadian stock market the Canadian capital will decrease to some extent too.
[00:18:01] In the meantime what you're seeing is a an irony play out in the sense that companies that are touching the plant in Canada now Canadian companies are able to go public on the American Stock Exchange because they're not violating U.S. law and a U.S. company that is doing the same thing in the U.S. is not able to go public on the American stock exchanges because they are violating U.S. federal Yeah and then maybe back up for a second for folks as a company who is touching the plant who has operations that actually touch cannabis material extracts any any part of the plan that deals with THC is breaking federal law.
[00:18:43] Therefore cannot use the the the markets to raise capital. I mean that's that's essentially the issue right now. So now what happens is they can go. Can I as a U.S. company go do an offering on the Canadian market. What prevents me from doing an offering on the Canadian market.
[00:18:59] You can the Toronto Stock Exchange will not allow you to list it has similar restrictions because you're breaking U.S. law. Yes correct. So if you know the laws of another country your home country the Toronto Stock Exchange will not allow you to list even even if I was doing even if it was a U.S. cannabis touching company getting acquired by a Canadian cannabis stuttering company.
[00:19:23] They wouldn't be able to do it because they're now they would be delisted because they're now breaking U.S. law because yes they have an asset or they have a wholly owned company that is that is in violation of U.S. law. Fascinating. So that's that's a whole host of dynamics around capitalization.
[00:19:38] So if I'm a U.S. company I'm looking to basically capitalize I'm looking for capital to expand my operations. Where do I go. And I can't do public offerings. What are people doing. How are people raising money these days.
[00:19:47] There are a number of ways one money is finding its way into the U.S. through other means. So for instance direct investments. Right. Acquisition by companies that are not public. You have funds here in the U.S. that are increasingly looking to the cannabis base to find opportunities. We represent some of these companies now. So it actually is quite exciting. You have also there are ways to structure things at a corporate level such that plant touching things do not coincide with this listed companies simply cross contamination is a pretty big issue.
[00:20:20] Like if I if I do an acquisition or of an investment on one of these companies like so you get you can legally set up enough of a buffer enough of that separation of these things where you're not and my non plant touching business with the from a federal regulation point of view.
[00:20:34] Yes well you have for instance Mad Men is quite a ring retail shops throughout the US. They are also listed on the Canadian exchange so that that's one example here. So there there are ways to achieve that but it's important to structure things such that you don't offend. If you're going to register on the Toronto Stock Exchange or the American Stock Exchange it's important that you structure things very carefully so that you because they don't allow you the same freedom that Mad Men is currently enjoying.
[00:21:04] Yes this is that whole idea of piercing the corporate veil. You have to keep it and have to be consistent. And once it once it's gone it's gone and you're kind of you're then open to open to liability.
[00:21:15] Well also if it did say so expressly Bruce there's also a distinction between the Canadian stock exchange and the other stock exchanges that I referenced the Canadian stock exchange which does not prohibit companies from touching the plants in the United States.
[00:21:29] So that's that's why I made mention list there in Canada.
[00:21:32] Got it. Yes it seems like getting good guidance good advice on how to navigate these things is money well spent these days because getting it wrong can be pretty costly. Any any other thoughts. I mean given the you know if I'm a business person interested in getting into the Qantas mess you know you're an entrepreneur or looking to do acquisitions and stuff. What else do I need to kind of keep in mind as I navigate the opportunities in the market here.
[00:21:56] So I would say three things. First I would touch on technology mean patentable technology.
[00:22:02] And also technology that can be protected by trade secret. This is currently not focused on sufficiently the cannabis industry for it to be focused on licences and other things and they should be focused on those things up. The new regs coming out here in California. They're about to land in early January and those are things that that are important in the short term but in the long term it's going to be that technology is going to be about patents. It's also going to be the second item I mentioned is is branding we've spoken about branding protecting with federal trademark protection global trademark protection Europe cannabis brands. That's going to be vital and that's going to play itself out increasingly we're going to discover that the cannabis industry is the technology industry like the pharmaceutical technology industry. We're going to discover that it's an industry of brands. Brands are going to rise to the top as they do in any consumer facing industry. And so that's that's going to play a big role. The third thing I would mention to investors is to focus on the licenses. So as an example we do work relating to large while large for the cannabis industry large loans and financing amounts and oftentimes these loans are well they are a function of real estate and or licenses and those related with that real estate. There are restrictions relating to the transfer of ownership the transfer of rights relating to those cannabis licenses. So before making an investment through all exploration of the hair on those licenses associated real estate is would be wise.
[00:23:28] Yeah I've heard a lot of a lot of stories around trying to trying to get the licenses trying to transfer the real estate trying to get the real estate set up capitalize it can actually get development stuff. It's it's a little tricky. You know again those are going to right have an advantage. They get to play a little barrier to entry there. But it is part of the business.
[00:23:47] So Tom we're just out of time here and if people want to know more about you about the work that you do what's the best way to find out more information.
[00:23:54] Thanks for asking Bruce. Our Web site is Zuberlaw.com that’s Z U B E R L A W .com and my email address is firstname.lastname@example.org
[00:24:09] I'll make sure that both of those are in the show notes here so people can click through and get a hold of you. Tom this has been a pleasure. I've actually learned quite a bit. I appreciate the time and I'm looking forward to keeping in touch.
[00:24:19] Same here Bruce. Thank you. I enjoy talking about this subject matter it's very exciting and you're doing great work educating the world about this wonderful world of cannabis. So I appreciate your work very much. Thank you.
[00:24:30] Thank you. It's always fun.
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