Conquering the Expanding Cannabis Industry: A Race to the Top

By Rachel Gu
Rachel Gu is a sophomore in the School of Engineering and Applied Sciences at the University of Pennsylvania studying Bioengineering.
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On October 27, 1970, the Controlled Substances Act was passed, establishing four levels of drug severity. Marijuana was classified as one of the most dangerous substances and carried the highest penalties in the U.S. [1]. Today, 33 states have legalized medical marijuana, with 10 states and Washington D.C. having also legalized recreational marijuana use. As a result, the cannabis industry is rapidly expanding, with companies fighting to establish a dominant foot in the nascent field. When attempting to pioneer a new industry, companies must effectively protect their branding, marketing methods, and new products. However, due to marijuana’s illegal status on the federal level, intellectual property law and trademarking has become slightly more complicated.

Just how fast is this market growing? According to Arview Market Research and BDS Analytics, global spending on legal cannabis will reach $57 billion within the next 10 years by 2027. Most of these cannabis buyers reside in North America, with their projected spending in 2027 comprising about $47.3 billion out of the total. Recreational use will cover 67% of the market, while medical marijuana will cover the remaining 33% [2].

The entrepreneurs that capitalize on this large recreational cannabis market must solidify their intellectual property protection early on to minimize risk of infringement in the future. Trademarking the company’s logo and trade names as well as copyrighting the marketing content will ensure that emerging cannabis companies can establish uniquely identifiable products [3]. 

However, a federal trademark registered with the U.S. Patent and Trademark Office (USPTO) requires that the trademark be used in a commercial way consistent with U.S. federal laws. Therefore, federal law must first declare marijuana use lawful before companies can federally trademark cannabis-specific items [4]. Businesses can loop around this issue for now by registering for state trademarks or copyrighting company symbols. Unlike federal trademark law, copyright law does not require the copyrighted item to engage in “lawful commerce” [5]. Registering logos or packaging with the U.S. Copyright Office will allow the company to sue any party that infringes on that copyright.

Outside of branding, cannabis companies should also patent their new technologies. For example, new cannabis strains or plant-growing methods, such as systems developed to efficiently regulate CO2 or humidity levels, are considered trade secrets in which the rest of the cannabis industry could be interested. Once patented, the company can license the rights to use their developed technologies and, in turn, generate an additional source of income. 

In 2018, the USPTO issued 39 patents related to cannabis products, an increase from only 29 patents in 2017 and 14 patents in 2016 [6]. Despite holding patents, companies must be able to defend their patents in court as well. 

The United Cannabis Corporation (UCANN) is the first to test the integrity of its cannabis patent in the first U.S. cannabis infringement case known as United Cannabis Corporation v. Pure Hemp Collective, Inc. [7]. This case was filed in early August of 2018 in the U.S. District Court for the District of Colorado, regarding patent claims that cover liquid cannabinol formulations using tetrahydrocannabinol (THC) and cannabidiol (CBD), as well as several terpenes. More specifically, UCANN’s patent includes a claim over liquid cannabinoid formulations, “wherein at least 95% of the total cannabinoids is cannabidiol.”

After six months of litigation, Pure Hemp had filed a Counterclaim and a Motion for Partial Summary Judgement [8]. In these filings, Pure Hemp argued that highly concentrated liquid CBD formulations are “ubiquitous” and “were not invented in this millennium,” ultimately bringing up the issue of “prior art.”

To obtain a patent, U.S. patent law requires applicants to demonstrate their invention falls under a patentable subject matter, holds utility, is novel, and nonobvious [9]. Evidence of prior art--publicly available or disclosed knowledge—can invalidate the novel and nonobvious requirements of a patent application [10]. 

However, locating prior art for living plants like cannabis proves difficult in that most living organisms are not patented or stringently documented. An Oregon-based nonprofit known as the Open Cannabis Project (OCP) is combatting this issue by building an open-source database containing genetic and chemotypic data of existing cannabis strains. With this archive of data, they hope to establish a source of prior art for the USPTO. Consequently, these documented varieties previously available to the public will render unpatentable and help keep cannabis open to the open domain. The OCP also hopes to protect the genetic diversity of cannabis plants as well as the economic diversity of the cannabis industry [11].

In response to UCANN’s filed case for a permanent injunction against Pure Hemp for damages, attorney’s fees, and infringements on UCANN’s cannabis patent, Pure Hemp has filed numerous motions specifically against UCANN’s Claim 31. However, after about one year of alternating arguments from both sides, Judge Nina Y. Wang denied Pure Hemp’s motions and officially validated Claim 31 [12].

Now, the parties will proceed to analyze claim constructions of this patent. Regardless of the outcome, this case will undoubtedly shape the future of the cannabis industry. 

References
[1] Milestones in U.S. Marijuana Laws. (2013, October 26). Retrieved from https://archive.nytimes.com/www.nytimes.com/interactive/2013/10/27/us/marijuana-legalization-timeline.html#/#time283_8144
[2] Pellechia, T. (2018, March 01). Legal Cannabis Industry Poised For Big Growth, In North America And Around The World. Retrieved from https://www.forbes.com/sites/thomaspellechia/2018/03/01/double-digit-billions-puts-north-america-in-the-worldwide-cannabis-market-lead/#6d6999e65109
[3] Bania, D. (2019, February 18). Building Cannabis IP Includes Both Your Brand and Your Technology. Retrieved from https://www.greenentrepreneur.com/article/328073
[4] Klein, C. (2019, November 10). The Complicated Relationship Between IP Law & Cannabis. Retrieved from https://www.ipwatchdog.com/2018/11/10/complicated-relationship-ip-law-cannabis/id=102941/ 
[5] Kluft, D. (2018, July 19). How to Protect Your Trademarks When You Can't Protect Your Trademarks. Retrieved from https://www.trademarkandcopyrightlawblog.com/2018/07/how-to-protect-your-trademarks-when-you-cant-protect-your-trademarks/
[6] Wolfe, J. (2018, November 29). Patents on pot? U.S. lawsuit puts cannabis claims to the test. Retrieved from https://www.reuters.com/article/us-usa-marijuana-patent-analysis/patents-on-pot-u-s-lawsuit-puts-cannabis-claims-to-the-test-idUSKCN1NY1GU
[7] BREAKING NEWS: First Cannabis Patent Lawsuit Filed. (2018, August 8). Retrieved from https://www.cannalawblog.com/breaking-news-first-cannabis-patent-lawsuit-filed/
[8] Ahn, J. (2019, March 04). Cannabis Patent Litigation Update: Is Extraction and Preparation Prior Art? Retrieved from https://www.cannalawblog.com/cannabis-patent-litigation-update-is-extraction-and-preparation-prior-art/
[9] LII Staff. (2017, October 23). Patent. Retrieved from https://www.law.cornell.edu/wex/patent
[10] Henry, M. (2017, September 7). What is Prior Art? Retrieved from https://www.henrypatentfirm.com/blog/what-is-prior-art
[11] Open Cannabis Project: The Fight to Get Marijuana Patents Right. (2018, February 23). Retrieved from https://www.cannalawblog.com/open-cannabis-project-and-the/
[12] Ahn, J. (2019, July 09). Cannabis Patent Litigation Update: A Certificate of Correction Allows the 911 Patent to Survive Another Challenge. Retrieved from https://www.cannalawblog.com/cannabis-patent-litigation-update-a-certificate-of-correction-allows-the-911-patent-to-survive-another-challenge/
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The opinions and views expressed in this publication are the opinions of the designated authors and do not reflect the opinions or views of the Penn Undergraduate Law Journal, our staff, or our clients.