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    Locke Lord QuickStudy: Not Your Parents’ Dime Bag: How Cannabis Companies Can Limit Litigation Exposure by Toning Down Retail Cannabis Packaging

    Locke Lord Publications

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    It is widely anticipated that the fledgling legalized cannabis industry is on the brink of exploding into a mainstream industry that will generate billions of dollars in annual revenue. As more and more states legalize recreational cannabis, companies are engaged in an arms race to secure as many licenses, greenhouses, and retail shops as possible. Like with any competitive market, companies that are selling retail cannabis products – whether medicinal or recreational – are looking for every advantage they can get. One area where companies are looking to gain an advantage is with the appearance of edible cannabis products and the packaging for those products; the days of buying an ounce of cannabis in a zip lock baggie are coming to an end. This makes sense because packaging is a critical part of the marketing directive of any company that manufactures and sells products. However, companies should consult their lawyers and think long and hard about whether the benefits of aesthetically pleasing products and packaging are worth the liability risks that could come with it.

    Numerous studies have found that attractive packaging can attract new consumers, influence consumer perception about a product, and ultimately close the sale. In other words, packaging can be the selling point for consumers. It is therefore no surprise that companies across all industries spend significant marketing dollars developing a product and packaging they believe will attract consumer eyeballs. Newly created cannabis companies are using this same approach to develop attractive edible products and related packaging. In fact, there is an entire sub-industry of companies that focuses solely on cannabis and cannabis product packaging. These packaging companies offer to help cannabis companies develop packaging for everything from CBD powders to cannabis edibles, and they are good at what they do, as illustrated below. However, before cannabis companies run out and spend their marketing dollars on package development, they should consider what kind of potential liability that packaging could create.

     

    Lawsuits based on misleading product packaging and labeling have been on the rise for nearly half a decade, and that alone should give cannabis companies a reason to scrutinize their packaging decisions. Further, cannabis companies have the added risk that their product could cause adverse or harmful effects if inadvertently consumed by minors, and that risk increases if the product looks attractive to minors (and especially younger children). In an article published in the New England Journal of Medicine, Robert MacCoun and Michelle Mello of Stanford Law School previously opined that edible cannabis products – which often look like candy, cookies, or brownies – increase the chances that children will inadvertently digest the product and possibly overdose. Mello likened the edible packaging to an “attractive nuisance” likely to attract children who do not comprehend the risks involved with consumption. To date, the “attractive nuisance” theory of liability has not been tested with respect to cannabis products, but as more and more states legalize cannabis at the recreational level, the chances of a child accidentally overdosing increase and so do the chances of such a lawsuit.

    Even if the “attractive nuisance” theory is not viable when it comes to product packaging, there remains the risk of product liability lawsuits akin to the Tide Pod lawsuits that were filed in recent years. In those cases, plaintiffs brought product liability and negligence claims against Proctor & Gamble for designing a toxic product that looks like a brightly-colored, sweet-smelling piece of candy. That same theory could apply to a case against a cannabis company that designs a brightly colored edible gummy bear like the ones below.

     

    In the rush to keep up with the onslaught of states that are legalizing cannabis at various levels, most state legislatures have failed to pass legislation regulating packaging for cannabis and cannabis-based products. Therefore, in most states cannabis companies have little guidance on what is appropriate when it comes to product packaging. Other states, like Nevada, that have had legalized cannabis for several years have recently updated the packaging and labeling requirements. For instance, Nevada requires child-resistant packaging and regulates the thickness of packaging. Those requirements can serve as guidelines for cannabis companies to use nationwide, but even compliance with those guidelines are unlikely to serve as a complete defense in the event a child consumes a cannabis-infused product that looks like candy or was packaged like candy.

    Packaging that helps drive sales will be important to help establish a foothold in this emerging industry, but companies need to balance the benefits obtained from attractive packaging with the potential liability it could create in the future. Every company will have a different risk tolerance level, but all companies should ensure their marketing departments are communicating with the general counsel or outside counsel when making packaging and labeling decisions. This will allow companies to make informed decisions about packaging and the potential future liability that could result from those decisions.

     

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