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What You Need to Know About California's AB-45

The law has significant intellectual property and marketing implications for CBD companies.

Opinions expressed by Entrepreneur contributors are their own.

Over the past decade, the sale of CBD and other hemp-derived products has exploded in popularity, but legally CBD is still in murky territory.

While the 2018 Farm Bill legalized hemp at the federal level, federal and state agencies have been slow to clarify the kinds of products CBD may be added to. Notably, the FDA declared CBD-infused ingestibles illegal adulterants under the Food, Drug, and Cosmetic Act (FDCA), but it still has not issued any regulatory guidance. 

The FDA’s position on CBD has been echoed by many states, including California, which has treated CBD as an illegal adulterant under the Sherman Food, Drug and Cosmetic Act (the Sherman Act) since 2018. 

But with the passage of Assembly Bill 45 (AB-45), California officially changes its course on CBD.

Related: CBD Is Legal But Still Not Federally Regulated. Here's Why.

What the new law does

AB-45 amends the law to legalize certain CBD-infused food, beverage, and cosmetic products; establishes new labeling and advertising rules; restricts CBD inhalables, like e-cigarettes or vape pens; and addresses products containing Delta-8 THC and other cannabidiols.

AB-45 will have significant intellectual property and marketing implications as CBD companies look to bring their brands in compliance with the new law.

Marketing requirements

In addition to manufacturing requirements, AB-45 requires several different warning labels to be included on product packaging and creates several advertising requirements. For example, food and beverage products containing CBD must include a label, barcode, website, or other links to the certificate of analysis and the statement: “THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY.”

AB-45 also reaffirms the existing FDA prohibition on unsubstantiated health-related statements on the label, packaging, advertising, or marketing of CBD products. In addition, hemp manufacturers cannot directly target advertising to children or persons who are pregnant or breastfeeding. Any marketing by broadcast, cable, radio, print, or digital communications can only be displayed in locations where at least 70 percent of the audience is reasonably expected to be 18 years of age or older.

But these marketing provisions should come as no surprise. AB-45 does not exempt California CBD manufacturers from standard health-related laws under Chapter 4 of the Sherman Act, or any federal regulations imposed by the FDA or others. As well, audience-age restrictions on advertising are standard for other industries, such as for alcohol and tobacco products.

Inhalables and non-CBD cannabinoids 

AB-45 is also significant for excluding other types of CBD products, including inhalables and other cannabinoids derived from hemp, from full legality.

AB-45 makes clear that inhalable hemp products are still prohibited, except for the “sole purpose” of out-of-state sale. The law states that the ban on domestic sales will be lifted upon passage of a tax, which would trigger other provisions, including limits on flavorings or substances that the CDPH may find a danger to public health. AB-45 also prohibits the inclusion of hemp derivatives in medical devices, prescription drugs, products containing nicotine or tobacco, and alcoholic beverages. 

Additionally, by calculating THC percentages as “total THC” instead of the most-common Delta-9 THC, products containing other cannabinoids like Delta-8 and Delta-10 THC also face concentration limits that may keep some products illegal under AB-45. Delta-8, in particular, has faced increasing scrutiny by the FDA and the CDC. California appears to be joining the ranks for now.

IP implications

AB-45’s passage brings new options to California CBD companies looking to protect their brands from trademark infringement.

Trademarks are words, names, symbols, or devices used to identify the source of a product or service. In the U.S., a trademark may be registered on a state or federal trademark registry, so long as the mark meets all the legal requirements for registration. In California, those requirements include “lawful use in commerce.” Prior to AB-45, CBD-infused food, beverages, and cosmetics defined as illegal adulterants could not be registered in California because they could not meet the lawful use requirement. Now, because AB-45 explicitly exempts these products from the definition of an adulterant, it is a safe assumption that the California Secretary of State will soon allow CBD-infused products to be added to the trademark registry. 

While AB-45 will provide state trademark protection benefits in California, AB-45 will not have the same effect federally. Although AB-45 legalizes CBD-infused products in California, they are still considered adulterated and illegal by the FDA and the U.S. Patent and Trademark Office (USPTO). The USPTO has followed the FDA’s lead and continues to deny trademark applications for CBD-infused products on the ground that such products do not meet the “lawful use in commerce” requirement. Thus, although CBD companies in California now have additional protection for their brands, they may still be vulnerable outside California.