Cannabis Intellectual Property- Do Your Products Violate A Patent?

As the father of several teenagers, I have come to recognize certain milestones on the road to maturity: the first girlfriend/boyfriend, the first drive, the first drink/smoke, and so on. Most are difficult; many are inherently messy; and they all involve a testing of boundaries. An emerging industry, such as cannabis, experiences similar milestones: the first IPO, the first national marketing campaign, the first employment law disputes, the first class action lawsuit, and so on. As with milestones for teenagers, milestones for an industry test boundaries.

The cannabis industry has hit many milestones, including most of the ones I just mentioned. (The first class action lawsuit has yet to come, but we can be certain that it’s not far off.) One of the major milestones- perhaps the the most important- is the first lawsuit over intellectual property. The cannabis industry hit that milestone last month with a lawsuit filed by United Cannabis Corporation (UCANN) against Pure Hemp Collective (PHC), both Colorado corporations, in federal court. (A copy of the lawsuit is embedded, below.) I am not exaggerating when I say that the future of your cannabis business, and the industry at large, may depend on the outcome of this case.

Part 1: Intellectual Property

At its core, the entire cannabis industry is founded on intellectual property: plant genetics, cannabinoid extraction processes, branding and marketing methods, legal strategies, etc. The tangible object at the heart of the cannabis business is, of course, the cannabis plant. Everything that flows from it is, in some sense, intellectual property. This begs the question of what, exactly, is meant by intellectual property.

Broadly speaking, and according to the World Intellectual Property Association (WIPA), intellectual property (IP) refers to:

“Creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. IP is protected in law by, for example, patents, copyright and trademarks, which enable people to earn recognition or financial benefit from what they invent or create. By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish.”

In this post I will be discussing inventions, which are protected under US law by patents. The central questions I will address are the novelty of the invention (ie, when does a claimed invention deserve legal protection?) and the scope of protection that the patent gives it.

A US patent provides statutory protection of inventions or discoveries of “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” to its owner. The scope of protection is defined by the “claims” in the patent, which are summary descriptions of the things that are covered by the patent. Patent infringement occurs when a person other than the owner of the patent uses the “invention” described in any of the claims. The ultimate remedy for patent infringement is for the owner of the patent to sue the the alleged infringer.

Part 2: The Lawsuit

UCANN sued UPC by filing a complaint in the US District Court for the District of Colorado court on July 30, 2018 alleging violations of its patent, number 9,730,911, “Cannabis Extracts and Methods of Preparing and Using Same” obtained in August 2017 (911 Patent). Under federal court rules, UPC has 21 days from the date it is served to file a response. We do not yet know the date that UPC was served. This post is not about the federal rules of civil procedure, which can fill entire books, so I will not go into them. Suffice it to say that, as of the date of this post, UPC has not filed a response. Unless the lawsuit is settled early on, it could take more than a year to resolve (many lawsuits take years).

The patent claims as an “invention” an “extract comprising a mixture of at least 95% total cannabinoids, and at least one terpene/flavonoid.” According to UCANN, the 911 Patent “relates to the extraction of pharmaceutically active components from plant materials, and more particularly to botanical drug substance (BDS) comprising cannabinoids obtained by extraction from cannabis.” It addresses “the need to provide more effective and safer cannabis extracts for various medical uses, extraction methods that provide unique active compounds that are useful to treat pain and various medical conditions….” and to “provide the desired active ingredient(s) for the particular medical purpose.” These are laudable claims. They are also very broad.

Paragraph 22 of the complaint alleges:

“UCANN purchased Pure Hemp’s Vina Bell 5000mg product and ran chemical composition tests on it to determine whether the cannabinoid formulations within the product are covered by the ’911 Patent. The analysis revealed that the product contains a cannabinoid formulation that directly infringes one or more claims of the ’911 Patent, including exemplary claim 10: “A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is cannabidiol (CBD).” Specifically, the Vina Bell 5000mg product contains a cannabinoid formulation wherein at least 95% of the total cannabinoids is CBD. Pure Hemp sells other cannabis products with similar cannabinoid compositions that infringe other claims of the ’911 patent.” (emphasis added)

Claim 10 appears to cover any liquid formulation containing total CBD concentrations that meet or exceed 95%. How many CBD products currently on the market does this claim cover? A lot. The 911 Patent has thirty-six claims. Numbers 1, 5, 16, 20, and 25 are equally as broad and cover cannabinoid formulations containing the following: THCA; THC; THCA and CBDA; THC and CBD; CBD, CBN, and THC. If the 911 patent is valid then any cannabis company (ie, recreational use, medical use, and hemp) selling these formulations are at risk of a similar lawsuit by UCANN. This covers an enormous swath of the industry.

The mere fact of owning a patent does not, in and of itself, guarantee that the patent is valid. As counterintuitive as it may seem, many patent holders have invalid patents. This is because federal courts have the final right to determine a patent’s validity. In doing so the federal court will review at the patent claims and decide on their scope. Once it has established the scope of the claims, the Court will then review the “prior art” that predates the patent. “Prior art” is simply any evidence that an invention was already known as of a certain date, referred to as the “critical reference date”. (In this case, the critical reference date is October 21, 2013.) If the invention is described in the prior art then it is not new and will fail the statutory requirement that it be novel. If the patent is found not to be novel then it will be ruled invalid and unenforceable. This is the crux of the case.

Specifically, the case will likely turn on whether or not a liquid formulation of CBD existed prior to October 21, 2013. If so, then the patent will likely be ruled invalid and unenforceable. If not,  then it will likely be ruled valid and enforceable, in which case UCANN will have a strong basis to sue any manufacturer of products containing a liquid formulation of at least 95% CBD.

Part 3: Analysis

How strong are UCANN’s claims? The CBD claim (#10) is particularly weak. If you’re in the CBD industry you are aware that the Food and Drug Administration (FDA) approved GW Pharmaceuticals’ drug, Epidiolex, on June 25, 2018. It is an oral solution for the treatment of seizures associated with two rare and severe forms of epilepsy. Epidiolex is a 99% liquid formulation of CBD that has been in development for over ten years. Additionally, there have been liquid solutions of CBD created and sold by various manufacturers for a number of years. For these reasons, UCANN will presumably lose on these claims.

In fact, it may seem odd that the US Patent and Trademark Office (USPTO), which issues patents, did not discover the prior art. Certainly, and at the least, the USPTO should have known or discovered the Epidiolex drug trials and denied Claim 10. Given that the federal government was simultaneously involved in CBD drug trials and a patent application that included CBD formulations, this appears to be a classic example of the left hand not knowing what the right hand is doing. A ten minute Google search I conducted yielded information about the September 2013 Phase 1 clinical trial of Epidiolex that would have been available at the time UCANN applied for its patent. That the USPTO examiners missed it is inexcusable. However, when it comes to cannabis in general, there is often scant evidence of prior art in any number of scenarios, despite the prior art having been practiced. This is due to the fact that cannabis, specifically “marihuana”, has been illegal since 1937 and evidence of prior art was driven underground so that the practitioners would avoid prosecution. Unlike with trademarks, which are regulated by a different statute, the fact that an invention is illegal is not a sufficient reason to deny a patent. Similarly, evidence of an illegal prior art having been practiced is sufficient to invalidate a patent claim. However, the fact that evidence of prior art is often difficult to find for cannabis will cause significant problems in future patent infringement cases. It also makes it a ripe time for would-be patent holders to stake out large-scope “land-grab” cannabis patent claims.

My prediction is that UCANN’s attempts to sue based on Claim 10 (regarding CBD) will likely fail in the lawsuit. But what about the other claims in the 911 Patent? For example, Claim 31 is for a “formulation of any one of the proceeding claims, wherein the formulation is infused in a medium chain triglyceride (MCT).” How many CBD, THC, and THC/CBD products are you aware of that use MCT oil? (There are a lot of them.) Presumably, if challenged, a court would find this claim to be invalid. But consider Claim 25, which is for an invention of a “liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids are CBD, cannabinol (CBN) and THC.” Is that patent claim enforceable against a manufacturer whose products meet the description? Is there evidence that this particular invention existed prior to October 21, 2013? Or, to get more esoteric, consider Claim 28: “The formulation of claim 25, wherein the formulation comprises no more than 4% terpene.” Did this claim exist prior to the critical reference date? And so on and so forth.

If UCANN prevails in its lawsuit against PHC then we can assume it will file suit against others violating the claims, such as #10, referenced in the lawsuit. We can also assume that it will press to enforce some of the more esoteric claims in the 911 Patent. This will have an enormous chilling effect on the industry since any manufactures of products that fall within the patent’s purview will have to obtain a license to continue producing their products.

On the other hand, if UCANN loses then the industry will breathe a collective sigh of relief. We can assume that it will not seek to enforce its other claims absent more rigorous research into whether the inventions described in the other claims were in existence prior to the critical reference date.

Part 4: Conclusion

The cannabis industry has reached an important milestone. The fight for patent rights has begun. Some claims which are obvious and not novel will be validated due to a lack of evidence of the prior art. This is unfortunate. To be clear, truly novel inventions should be granted protection from infringement. This incentivizes and promotes advances in the field. However, patent “land-grabs” that are broad in scope and based on inventions which existed but were not well documented are a blight on on the industry and will stall advances. This and future lawsuits will determine the course of cannabis intellectual property for the foreseeable future.

Here is UCANN’s lawsuit:

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Rod Kight is a lawyer based in Asheville, NC. He is licensed in North Carolina and Oregon and represents legal cannabis businesses. You can contact him by clicking here.