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Even though cannabis remains a Schedule I controlled substance under U.S. federal law, the United States Patent Office (USPTO), a federal agency of the U.S. Department of Commerce, routinely grants patents covering cannabis-related technologies. The Schedule I classification of cannabis is not relevant to patentability. As with any other invention, to be patentable, a cannabis-related invention must be new, useful, and nonobvious, and teach one of ordinary skill in the art how to make and use the invention. The USPTO has determined that many cannabis-related patent applications have met these requirements. Patents granted to cannabis-related inventions cover an enormous range of technologies, including cannabis plants, growing systems, extracts, methods of making extracts, foodstuffs, veterinary products, and methods of treating various diseases and disorders.
But, if obtaining a patent is routine in the cannabis industry, patent enforcement is not. A patent is a temporary, territorial right conferred by the government on the patent owner that allows the patent owner to exclude others from making, using, selling, offering for sale or importing the invention covered by the patent in the territory of the issuing government for 20 years. So, a patent holder has the right to take legal action to prevent a competitor from engaging in a variety of activities including making or selling the technology of the claimed invention. And, a patent puts competitors on notice that they will be subject to legal action if they engage in any of those activities.
To date, there have only been two legal proceedings focused on cannabis-related patents. One case is a patent infringement lawsuit currently pending in federal court. The other case is an Inter Partes Review, a trial proceeding before the Patent and Trial Appeal Board at the USPTO. These cases are interesting because both forums are federal forums, and yet, the subject matter of the patents in dispute is illegal under federal law. What impact, if any, is the Schedule I status of cannabis likely to have on these or future proceedings?
Cannabis patent litigation in federal court: United Cannabis Corporation v. Pure Hemp Collective, Inc.
Until recently, no owner of a cannabis-related patent had asserted infringement of the patent in federal court. That changed on July 30, 2018 when United Cannabis Corporation sued Pure Hemp Collective, Inc. in the United States District Court for the District of Colorado (Case No.: 1:18-cv-01922-NYW). Both companies are located in Colorado and both market cannabis-based products. United Cannabis Corporation (“UCANN”) describes itself as a biotechnology company focused on the development of phyto-cannabinoid based products. Pure Hemp Collective (“Pure Hemp”) describes itself as a wellness company.
In its Complaint, UCANN asserted that Pure Hemp was infringing one or more “claims” of its patent, U.S. Patent No. 9,730,911 (“the ‘911 patent”). The “claims” in a U.S. patent are short numbered sentences that appear at the end of the patent. These claims are the invention and describe the “metes and bounds” of the patent owner’s invention in much the same way that a deed describes the boundaries of the real property owner’s land and structures on the land. To prove infringement, a patent holder must show that an infringer’s activities encompass each and every element of at least one claim.
UCANN’s ‘911 patent includes claims to both tetrahydrocannabinol (THC) containing products and cannabidiol (CBD) containing products. For example, claims 1 and 10 specify:
1. A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is tetrahydrocannabinolic acid (THCa).
10. A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is cannabidiol (CBD).
In its Complaint, UCANN asserted that Pure Hemp’s manufacturing and selling of the Vina Bell 5000 mg product, which contains a cannabinoid formulation, “infringes one or more claims of the ‘911 patent, including exemplary claim 10.” As evidence of infringement of claim 10, UCANN alleged that it conducted chemical testing of purchased samples of Pure Hemp’s Vina Bell product showing that the Vina Bell product contained a cannabinoid formulation in which 95% of the total cannabinoids were cannabidiol (CBD).
The allegations in the Complaint are typical of those that might appear in a complaint relating to a patent covering a standard pharmaceutical formulation. What makes this case different, and why it has attracted attention, is that the patented formulation includes a Schedule I controlled substance. Under the circumstances, it is uncertain if a federal court would proceed with the lawsuit. UCANN appears to have addressed this concern by relying on Food and Drug Administration (FDA) documents reporting that CBD does not have properties similar to those of Schedule I drugs. UCANN also cites a spokesperson for the U.S. Drug Enforcement Agency (DEA) who indicated that the DEA intends to reclassify CBD as a Schedule II or Schedule III drug. Unlike Schedule I drugs, which are defined by the DEA as drugs with no currently accepted medical use and a high potential for abuse, Schedule II and Schedule III drugs are considered medically acceptable.
Alternatively, the court may sidestep the Schedule I question. The court could take the position that a patent is a property right granted by the U.S. government and that the litigation relates specifically to the property right and not to the legality or illegality of the subject matter covered by the patent. Should the case proceed, the defenses available to Pure Hemp are much the same as those available to a defendant in any patent litigation. A defendant in a patent litigation suit typically argues that its activities do not encompass each and every element of the claims. Both sides present technical and scientific evidence to support their positions. A defendant may also go on the offensive and attack the validity of the asserted patent, in essence, arguing that the USPTO should not have issued the patent in the first place. If a patent is found to be invalid by a federal court, and the decision is upheld on appeal, then the patent owner no longer has the right to exclude others, including the defendant, from making, using or selling the claimed invention. Procedurally, a defendant may challenge the validity of the asserted patent either by filing a counterclaim or by petitioning the USPTO to institute an Inter Partes Review (a proceeding discussed in more detail below). A scheduling conference for the UCANN v. Pure Hemp case is scheduled for early October and may provide insight into the next steps.
Cannabis patent litigation before the PTAB: Insys Development Company, Inc. v. GW Pharma Limited and Otsuka Pharmaceutical Co.
Although the UCANN v. Pure Hemp is the first lawsuit over a cannabis-related patent, it is not the first trial proceeding. Inter Partes Review (IPR) is a trial proceeding at the Patent and Trial Appeal Board (PTAB) of the USPTO that permits a third-party to challenge the validity of claims of a granted patent. Two key requirements for patentability are novelty and nonobviousness. If challenger can show that the technology of the claims was known to the public, either through a printed publication or patent before the application was filed, then the claims do not meet the novelty and nonobviousness requirements and the Board can declare the patent to be invalid.
IPR is a fairly new procedure that has become a commonly used by defendants initially accused of infringement in federal court. IPR is an appealing option for accused infringers because of the specialized nature of the Board (the judges often have technical or scientific backgrounds and are well-versed in patent law) and the speed of decisions (the Board must complete the review and issue a decision within approximately 18-24 months of the IPR being filed). Often, federal courts will stay litigation pending the outcome of the IPR.
To date, only one cannabis-related patent has been challenged in an IPR proceeding, Insys Development Company, Inc. v. GW Pharma Limited and Otsuka Pharmaceutical Co., (IPR 2017-00503). The challenger, Insys, asserted that claims 1-13 of U.S. Patent No. 9,066,920 (“the ‘920 patent”) owned by GW Pharma and Otsuka Pharmaceutical Co., are unpatentable, citing multiple prior art references. Claim 1 reads:
1. A method of treating partial seizure comprising administering cannabidiol (CBD), to a patient wherein the CBD is present in an amount which provides a daily dose of at least 400 mg.
Based on the evidence presented, Insys asserted that the method would have been obvious to one of ordinary skill in the art of pharmacology or chemistry at the time the application was filed. The proceeding was instituted in July 2017 and was scheduled to be completed by July 2018, but the pendency of the case has been extended by the Board.
If the issue of cannabis as a Schedule I substance is a potential concern in litigation in federal court, it has not been a concern during the Insys IPR proceedings. The Schedule I status of cannabis did not enter into the PTAB decision to institute the IPR based on Insys’ petition. During the proceedings, the Board and the parties have focused on the legal and scientific arguments relating to the claims, and not on the Schedule I status of cannabis. This approach is consistent with that of the USPTO during patent prosecution, where claims are examined based upon legal standards relating to patentability and not the legality of the subject matter of the claims.
IPR proceedings can provide companies with an avenue to challenge granted cannabis patents, independent of federal court litigation. That appears to be the case with the Insys IPR, since there is no co-pending litigation. With the increasing number of granted patents in the cannabis industry, the number of IPRs instituted on cannabis-related patents may also increase. But, such an increase may be tempered by the lack of printed publications available to invalidate cannabis-related patent claims.
The long-term illegality of cannabis in the U.S. and elsewhere has had a dampening effect on research and publication. The volume of readily accessible literature in the cannabis field is moderate compared to literature for other drugs. The results of a search of the National Institute of Health Pub Med database for references containing the term “cannabis” is shown in the Figure below. Cannabis was in the U.S. pharmacopeia from 1851 until 1941. From 1843, the date of the first entry in the database, up until the 1960s the publication rate was minimal. The publication rate rose in the 1960s and then declined in the 1970s, apparently following the classification of cannabis as a Schedule I drug in 1970. The increase in publications starting in the 1990s may be due to many factors. But, the timing of the increase coincides with both the beginning of legalization of cannabis at the state level as well as with discoveries elucidating cannabinoid pharmacology.
The relatively small volume of both non-patent and patent literature in the cannabis field has meant that patent examiners have a limited pool of references to draw from when they examine a patent application. Those seeking to invalidate a cannabis-related patent through an IPR or a counterclaim in patent lawsuit may face similar hurdles in identifying relevant prior art.
Litigation over cannabis-related patents is bound to increase as the industry matures and consolidates. How those proceedings will play out as long as cannabis is illegal under federal law remains unclear. One thing that is certain is that dockets at both the Federal Circuit and the PTAB will be closely watched by patent holders and potential challengers alike.