How the ‘UCANN v. Pure Hemp’ IP Lawsuit Will Affect the Cannabis Industry

Patent litigation has long been a battlefront for technology-focused companies, but it has begun its expansion into the cannabis field. Last summer, in the first case of its kind, United Cannabis Corporation (“UCANN”) sued Pure Hemp Collective Inc., for patent infringement.

UCANN, a publicly-traded biotechnology company headquartered in Golden, Colo., specializes in the development, distribution, licensing, and sales of medical cannabis products for the U.S. and Australian markets. Pure Hemp is a privately-held company located in Conifer, Colo., that manufactures and retails cannabis-based wellness products online and through distributors across the U.S.

This case highlights the growing competition between cannabis companies and the ways by which at least one company is seeking to gain an edge over its competitors. This case serves as a reminder that cannabis companies also must be mindful that methods of production, the technologies and business processes, and of course logos and packaging of products are all subject to legal protection, which also means they may also be the subject of enforcement efforts, like litigation in Federal District Courts. As the laws surrounding production and sale of cannabis begin to relax, companies may be more willing, or even eager, to enforce their intellectual property rights than before. 

While this case is still in its infancy, with the continuing proliferation of concentrated cannabis products and producers in the market, the ramifications of the case could extend far beyond a spat between the two Colorado companies: Sales of products containing 95 percent cannabis extracts are now widespread and growing throughout the country.

Not only that, but these extracts are an intermediate used to produce a wide variety of consumer products, from edibles like candies and sodas, to wellness products such as tinctures and salves. If this patent is upheld, it would potentially be infringed by an entire segment of the cannabis industry, making producers and sellers alike vulnerable to infringement suits from UCANN.

What happened?

On July 30, 2018, UCANN filed a lawsuit against Pure Hemp in the U.S. District Court for the district of Colorado, claiming that Pure Hemp’s “Vina Bell” products infringe UCANN’s U.S. Patent No. 9,730,911 (the “911 Patent”). According to the lawsuit, the 911 Patent essentially covers any liquid cannabinoid formulation of at least 95 percent total cannabinoids that contains one or more terpene or flavonoid. In its lawsuit, UCANN alleges that Pure Hemp’s product line includes a variety of topical and ingestible cannabis preparations that have concentrations of CBD in excess of 95 percent.

On November 29, 2018 Pure Hemp made an early attempt to dispose of the case and filed a motion for partial summary judgement. In the motion, Pure Hemp argued to the court that the 911 Patent is invalid because the claims (which define the scope of protection afforded by the patent) are directed to “natural phenomena,” namely, cannabinoids and terpenes that are found naturally in the cannabis plant. Certain subject matter is not subject to patent protection, such as something that exists naturally in the wild, like DNA.

On April 17, 2019, the court denied Pure Hemp’s motion, applying a test set forth by the Supreme Court in Alice Corp. v. CLS Bank International. The court found that Pure Hemp failed to show that a liquefied version of cannabinoids and related chemicals at the concentrations specified in the ’911 Patent is like a natural phenomenon, primarily because it didn’t show that “these precise concentrations [95% pure cannabinoids], or anything close to them, occur in liquid form in nature.” Thus, from the information the parties provided, the court held that the ’911 Patent was not patent ineligible, and was unwilling to dispose of the case at this very early stage based on Pure Hemp’s argument.

The significance of this latest decision is two-fold. First, had the court ruled cannabis extracts to be patent ineligible, the case would be over, and the patent would be thrown out. Such a ruling could also temper any future patent enforcement efforts in the cannabis space. Second, that cannabis extracts were found not to be patent-ineligible subject matter means that at least this court suggests that there could be other valid patents covering cannabis extracts in the future. This is good news for industry players investing in cannabis, as technologies for creating cannabis extracts, particular formulations, or treatment regimens that rely on cannabis extracts all still may be eligible for patent protection. Thus, companies may want to explore whether they have any patentable subject matter in their business and seek patent protection.

But that was not the end of the court’s opinion. In a move that may foreshadow future developments in the case, the court went out of its way to note that it “sees reason to question whether the ’911 Patent claims anything novel, useful, or nonobvious.” Under U.S. patent laws, an invention has to meet all three of these requirements in order to be patentable. In noting this, the court pointed back to its overview of what the ’911 Patent does not claim, such as, for example:

• A process for extracting cannabinoids from cannabis plants
• A process for making the “liquid cannabinoid formulation”
• Particular ratios between the cannabinoids and the inactive ingredients in a formulation
• A process for ensuring that the 95 percent threshold has been met
• A method for using any claimed formulation to treat any particular disease, condition, or symptom

The court was, in essence, giving categorical examples of concepts that it would expect to see in a valid cannabis patent, instead of a mere extract percentage, which arguably is the scope of the UCANN patent.

What’s Next?

Pure Hemp stated in its response to the lawsuit that anyone in the cannabis industry would be aware that all of these processes and their resulting products had been in use for years before 2014, when UCANN filed its patent application, and that their use has been growing rapidly with the increasing demand for concentrates and related products.  This is an attempt to argue that the patent is not novel and UCANN’s patent is invalid.

Although the outcome of this motion is an early setback for Pure Hemp, the court seems to be signaling that this patent may eventually be invalidated—a cue that Pure Hemp will likely attempt to capitalize on in a future motion.