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Bird & Bird: Setting a gold standard in meeting cannabis regulation

Healthcare 13 min
January 24, 2020

Medical Cannabis Network speaks with Bird & Bird’s Ben King and Sally Shorthose about the importance of product labelling and the regulation of medical cannabis.

Bird & Bird know that the issue of labelling medical cannabis products can be a confusing and challenging issue for new market entrants. It is important that the product be clearly classified as being either medicinal or recreational. The labelling of some products has been exploited, allowing them to be marketed as something they are not and undermining consumer confidence in the product.

The controversy already surrounding medical cannabis, in addition to the issue of misleading labelling seen on other products, could result in a negative impact on wider distribution.

To find out more, Medical Cannabis Network met with Ben King, a solicitor at Bird & Bird, and Sally Shorthose, a partner, from the Life Sciences & Healthcare team at Bird & Bird, whilst at the Cannabis Innovation Hub event in London, UK, about the importance of labelling a product correctly and how it will have a positive effect on the distribution of medical cannabis.

Intellectual property (IP) is often brought up as a barrier to medical cannabis companies working together to address widespread issues within the industry. From a legal point of view, how would you advise firms to position themselves to move past that in order to benefit patients?

King: That is a tough question because, clearly, these firms are in the industry primarily to make money, and collaboration can be tricky from an IP and commercial point of view. I think collaboration can work, and can have real benefits for everyone, if you have companies with different skill sets, innovative medicines and some challenging research going on across the cannabis industry. If you want to collaborate then that’s brilliant; and it is what needs to happen to a certain extent to get these medicines to market in the current environment.

However, when it comes to collaboration, a good solid IP strategy is important because once your IP gets put into that mix, and you have a joint venture or collaboration agreement, then everyone can see your product – and everyone can exploit it if it is not protected properly.

First, it’s important to ensure that you know exactly what you have, so that you can ring-fence it and protect it as best you can – whether that is through trade secrets, confidentiality agreements, patent or data protection – before providing it to your collaborators. You need to make sure you do this before you start sharing it, so that you can be sure that you know what IP is yours, that you have done everything you can from a registration point of view, and then that you ensure you have contractual protection which says that everything you bring in will remain yours.

It is important to think also about protecting your IP contractually in terms of any improvements that are made, and also making suitable provisions for how you want to deal with any new IP that arises through collaborative endeavours, so that you can protect your investment as well – will you own any arising IP on your own, or jointly?

If you won’t own it, you need to make sure that you are granted a licence which is sufficient to allow you to exploit it effectively on the basis you require, and the terms and conditions of this licence should be clear and explicit in the original contract – trying to negotiate a licence after the event can be very difficult. Ultimately, patients benefit from companies innovating, and if that innovation comes through collaboration then that is brilliant, but you as a company will fail if you don’t protect your IP.

Essentially, then, protecting your IP can be summarised as: know what you’ve got, protect it, share it in a contractually protected environment, and then administer that sharing properly – keep proper records, monitor for infringement of your registered rights and your contract, including dissemination by your collaborators of your confidential information to your competitors. Identify, protect and enforce.

Even when it comes to micro-businesses, your business is, to a large extent, your IP; so take it very seriously. Administration is absolutely key when you create something – file it, save it, make sure you know who created it; and look at it and ask: ‘is there something we can physically register and protect?’ Then, in your agreements, the IP clause is key. Get some professional advice; it doesn’t take long for someone to review a contract.

Do you anticipate that there will be stricter labelling requirements for CBD products as the industry moves towards increased regulation and how should companies prepare themselves for this to ensure minimal disruption?

King: Yes, I think with an increase in regulation, there will of course be stricter labelling requirements – but a sensible and pragmatic CBD company should already be anticipating what those changes might be. A good example is the THC issue – there is no actual requirement to label as, for example, ‘THC content below XX’, but businesses want to show compliance (in so far as they can) with the law, so an informal labelling standard has organically grown up in the industry.

I would say, to prepare properly, clearly defining your product and your market is the first thing to do in order to work out what regulations you fall under – if you are marketing a cosmetic product, then you would consider cosmetic regulations rather than novel food regulation, for instance.

Companies need to know what they are doing and where they are doing it, and then say: ‘this is what we’re doing now, these are all the laws and regulations that might apply to our products’. Some regulations are CBD-specific, such as the controlled drugs issues, but many are general industry gold standards for broad categories of products: the cosmetic and food labelling rules, for example, are very clear about what you can and can’t do on a general and complete basis. You do everything that you know you should do to ensure your product meets the gold standard, as far as you possibly can at the moment, given the commonly-understood issues with CBD.

Shorthose: To a great extent, it is a question of fitting the product into the existing framework, even where the CBD product in question is not specifically regulated. CBD vapes are a good example here: technically, they are completely unregulated to the extent that they do not fall within any specific EU or UK regulation; but they do currently fall under the general product safety regulation of the EU and subordinate regulation in the Member States. I do think that they are going to get up-regulated because there are safety issues with vaping generally.

To what extent that is really an issue is unclear, but up-regulation is a distinct possibility. And so, you ask yourself, what might a CBD vaping product regulation look like? Well, it will probably be much like tobacco vaping regulation – so take a look at the EU Tobacco Product Directive and implementing national regulations and try to anticipate how these may potentially apply to a CBD vaping product, and what compliance may look like. You may not get it 100% right, but if you plan for this up-regulation, you’ll probably be in a pretty good place once it comes in.

I would advise CBD businesses to look at what the industry ‘gold standard’ is, and then make it absolutely open and clear and honest that they are trying to be a conforming business, and that they comply with everything they possibly can. They should anticipate and look forward to the potential regulatory environment, and try to anticipate future standards, and take steps to meet those predicted standards now, before the regulations even appear, so that if the regulator does start clamping down, then they are not the low hanging fruit.

Would you agree that it is those products which are falsely advertising either their contents/ingredients or effects that are undermining market confidence?

Shorthose: Consumers can indeed lose trust in the market because of this. Trade associations can do a really good job here in making sure that there is an industry standard without there being an official one. I believe that there is a definite need for more regulation, rather than less, as it will make the market cleaner, more efficient, and better for everyone.

Regarding the effects that some companies claim their products to have, if a business has gone through the correct processes and have approved food claim, for instance, then there is nothing wrong with that. However, it would seem that we are now seeing companies not willing to do the research and just claiming whatever they want, which is wrong. Making broad, unsubstantiated claims distracts from the real benefits that are starting to be proven for CBD, and mislabelling or under/over-labelling is a real problem in the industry.

Businesses need to be honest about their product, and if they haven’t got proof to back up a claim, then they shouldn’t make it; they need to focus on making their product as good as it can be whilst ensuring that they are compliant, letting people make up their own minds.

You provide advice on regulatory matters internationally. How challenging is it to negotiate the different frameworks within the medical cannabis industry? And which elements should the UK and Europe adopt from other countries?

King: Bird & Bird do indeed work across borders, and it is quite difficult because most of the other product types Bird & Bird work on in Europe, such as pharmaceuticals or medical devices, for example, are subject to very good, and generally clearly understood, regulations: they are clear, transparent and apply uniformly across the EU; there are small differences of course, but generally these are administrative or do not require massive adjustment (like language labelling requirements, for example). The European regulatory model, whilst it has its issues, is pretty much the global gold standard in that sense.

However, when Bird & Bird advise on something like CBD cosmetics, in addition to the EU Cosmetic Regulation, which is generally uniformly applied across the EEA, in respect of the CBD aspect, there are very different laws in different countries – Swiss law, for instance, is pretty permissive in terms of THC content and cosmetics, German law has different issues, and French law is extremely restrictive for CBD.

So what would otherwise be a harmonised product, cosmetics, becomes a hodge podge of different standards, placing a real burden on any business doing its best to be compliant. That creates a real disincentive to compliance – and that means consumers and patients lose out, which is in no one’s best interests. Taking away that variation is key – Europe does it very well for certain industries; it just hasn’t yet got around to doing it for CBD.

Shorthose: What is needed is a settled EU/EEA position on the status of CBD and other cannabinoids, and a clear consistent regulation with local variations permitted on a very limited scale, with compliance requirements which are sensible and which are not overly costly. If a business wants to sell a CBD product across Europe, then they should be able to look at a central regulation and know exactly how to comply across the market.

For best practice, we could perhaps look to Canada, but I don’t think they are a model example – they are finding their way and are still making mistakes. It is very difficult to suddenly legalise something that has been widely illegal. Centralised regulation would be great, but we should look at Canada and learn lessons.

I don’t think that the USA is making any real progress when it comes to centralising things. Canada is doing its best and is learning along the way, so we should just sit back and just give them a few years. Germany is doing well to an extent, certainly within the medicinal cannabis field we should look to them as they are making good progress in provision to patients.

Europe, in respect of harmonised regulation, and despite its well-discussed issues, typically sets the standard for regulatory alignment: the EU does it the best way, once it gets around to doing it; it just hasn’t got around to doing it yet for cannabis and CBD. Hopefully, in the UK we will stay as aligned as possible after Brexit, as it is such a burden for business to have to comply with multiple regulatory regimes.

How different culturally is the medical cannabis industry compared to traditional pharmaceuticals? Do you believe the cannabis industry and the traditional pharmaceutical industry can be reconciled as cannabis is widely regarded to be unsuitable for traditional controlled pharmaceutical trials? If so, how?

Shorthose: Culturally, they are different – the medicinal cannabis industry is evangelical in the sense that it is allied to basically one product, of which it is convinced of the benefits, and it is a question of convincing everyone else of those benefits. Traditional pharma, on a very crude level, doesn’t care what the product is or where it comes from, as long as it can be proven to work and then sold on a commercial basis.

That does mean that traditional pharma can spread its risk, and it also gives more scope for IP protection, as often the compounds are newly synthesised or derived and are secret. The lack of monopoly is a real issue for a lot of medicinal cannabis companies – without being able to protect their IP, and with the basic product available to everyone (subject to controlled drugs laws, of course!) they are vulnerable to bigger, more established companies doing the same thing on a bigger and more efficient scale.

King: I think that, unfortunately for the smaller players, ‘big pharma’ will, to the extent that licensed medicines are derived from specific cannabinoids or combinations of cannabis extracts, take over the market – researching, licensing and producing licensed medicines at sufficient scale to make profits is, in the current regulatory environment, a capital-intensive and long-term process. And to the extent that whole-plant medicinal cannabis is effective and permitted, as I’ve indicated the issue there is the limited protection that can be obtained from an IP point of view.

This probably means that ‘big pharma’ won’t be keen to get involved, however, which does open up the market for smaller businesses – but the differentiators for companies will need to be non-IP – marketing, quality, customer service and so on.

In terms of clinical trials and proving the effectiveness of medicinal cannabis, I do think there is a lot of work going on to try and get the data and the body of evidence of safety and efficacy which will be required to permit medical practitioners to confidently prescribe medicinal cannabis. Whether this will be successful or not is a key question for the next five years – it is a real crunch period and we’re excited to see what happens!

This article was first published on Health Europa: Medical Cannabis Network on 20 January 2020.

Written by
Sally Shorthose
Sally Shorthose
As one of Bird & Bird's most experienced intellectual property partners, specialising in transactional IP matters, I offer a wealth of knowledge to businesses at the cutting edge of research, development and technology, in a variety of sectors for which IP is of prime importance.
Ben King
Ben King
Having retrained as a solicitor following a 12-year career in the Royal Air Force, I try to bring the same practical and outcome-focused approach to legal advice that I used in the cockpit.

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