First Cannabis Patent Lawsuit Launched in the United States

The tremendous growth in the cannabis industry in recent years has led to a corresponding surge in patents protecting cannabis strains and cultivation processes. Those patents have largely been untested – until now. In what is understood to be the first case of its kind, Colorado-based United Cannabis Corp. (“United”) launched a lawsuit against Pure Hemp Collective (“Pure Hemp”) for infringement of its cannabis patent.

Background

United States Patent No. 9,730,911 (the “911 Patent”), titled “Cannabis Extracts and Methods of Preparing and Using Same”, was awarded to United in August 2017. The 911 Patent claims “liquid cannabinoid formulation, with or without specific terpene profiles, including formulations wherein at least 95 percent of the total cannabinoids is cannabidiol (CBD).”

In an action filed on July 30, 2018, United alleges that Pure Hemp willfully infringed the 911 Patent by continuing to sell Pure Hemp’s “Vina Bell” product (wherein at least 95% of the total cannabinoids is CBD). The action asserts that United discovered the infringing contents after the company ran lab tests on a purchased bottle of Vina Bell tincture.

United alleges that it has lost sales, market share, and goodwill as a result of the infringement and is seeking a permanent injunction preventing Pure Hemp from continuing to sell its Vina Bell product and an accounting of damages resulting from Pure Hemp’s infringement. Because of Pure Hemp’s alleged willful, deliberate and intentional conduct, United also seeks triple damages under U.S. statute law.

Implications

Although this is the first lawsuit of its kind, it is unlikely to be the last. Given the relative infancy of the industry and the lack of legal guidance around intellectual property relating to cannabis products and processes, it is likely Canadian litigation of a similar nature will follow in short order. Of particular interest (and concern) will be the U.S. Court’s use of prior art in its consideration of whether a patent is sufficiently novel and non-obvious to be patented.

While the markets and legal regimes for cannabis and intellectual property protection in the U.S. are not identical to those in Canada, they are sufficiently similar that cannabis companies carrying on business in Canada or in possession of Canadian patents should pay close attention to the United lawsuit. Notably, United filed a similar patent application in Canada in April 2017, though that patent has not yet issued.

The consequences for infringing a patent can be serious and cannabis companies should be prepared for their implications – new entrants can expect to face cease and desist threats or risk being ordered to disgorge their profits if they are found to infringe an existing patent. On the other hand, established producers and patent holders should consider how to make use of these legal challenges to protect their intellectual property.

Goodmans Intellectual Property (IP) and Cannabis Groups

The Goodmans IP and Cannabis Groups are experienced in IP issues and well-positioned to advise clients in the cannabis industry on protection and enforcement of their IP.

Goodmans has leading IP and cannabis practices. Our IP Group has won numerous landmark cases in the IP area, many of which have defined the extent of IP rights available in Canada. Our award-winning lawyers are recognized for their breadth of expertise and years of experience in trademarks, patents, industrial designs, copyright and trade secrets. Our corporate cannabis lawyers have extensive knowledge of the various players in the industry and have provided strategic business advice on governance, financing, licensing, regulation, capital markets, mergers and acquisitions and real estate matters. Our clients include start-ups, importers and exporters, and financial institutions related to the cannabis industry.

In addition, Goodmans is uniquely positioned with its extensive regulatory, health and IP practices to advise new and existing market entrants. In particular, given our extensive work with respect to “traditional” pharmaceuticals regulated under the Food and Drugs Act and its associated regulations (legislation used, in part, as the model for the upcoming Cannabis Act regulations), we uniquely understand the industry, are equipped to address regulatory concerns that may arise, and know how to best protect and enforce our clients’ IP. This includes matters such as licensing and regulation in the industry’s preliminary stages and future issues that may arise with regulators and competitors, including with respect to labelling and packaging, patent and trademark applications and prosecutions and the protection of trade secrets and confidential information.