As usual, we’ve been monitoring both brewing and active trademark disputes in the cannabis space, and the most recent example involves the institution that is the Girl Scouts. For background, here are some of the other disputes we’ve covered in the past:

According to a recent article in Forbes, California cannabis-edibles company Kaneh Co. was promoting its cannabis-infused cookies as similar to several of the Girl Scouts’ cookie brands. According to the article, Kaneh was comparing its “Toasted Coconut Caramels (‘flecked with vanilla and sea salt’) to the Scouts’ Samoas; its Lemon Sugar Cookies to the Scouts’ Lemonades; and its Salted Toffee Blondies (‘a brown sugar blondie swirled with toffee chips and a generous dose of sea salt’) to the Scouts’ Toffee-tastic cookies.” All of these descriptions were included in an emailed advertisement for Kaneh’s goods, and a representative from Kaneh stated that the Girl Scouts comparison would not appear in any print or online advertisements.

The Girl Scouts, however, were not amused by Kaneh’s likening of its products to the Girls Scouts’ cookies, particularly given the connection to cannabis. A statement from the Girl Scouts said, “We consider … such use of our [cookie names] trademarks to be misappropriation, which we take seriously and, when applicable, [we] will send a cease and desist request.”

This is not the first time the Girl Scouts have gone to bat against a cannabis company, previously having clamped down on the use of the strain name “Girl Scout Cookies.” See: How an LA Weed Dispensary Pissed Off the Girl Scouts.

Quite frankly, it’s understandable that a youth organization would object to the use of its intellectual property in conjunction with a Schedule I controlled substance. But what is interesting about the Girl Scouts’ current beef with Kaneh’s use of its intellectual property (IP) is that the Girl Scouts representative didn’t argue that Kaneh was infringing the Girl Scouts’ trademarks (as was the case in the disputes we’ve covered in the past and linked to above). The representative instead asserted that such use of the Girl Scouts’ cookie names was “misappropriation,” and this is an important distinction.

As we’ve covered before, a trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. And trademark infringement is the “unauthorized use of a trademark or service mark on or in connection with goods and/or services in a manner that is likely to cause confusion, deception, or mistake about the source of the goods and/or services.” In the case at hand, the Girl Scouts would be hard pressed to show that Kaneh’s use of the names of its cookies (which are protected by trademark registrations), was likely to cause consumer confusion or mistake about the source of the goods, since Kaneh was only referencing the cookies in a comparative manner, to explain to customers what its cookies tasted like. In fact, this comparative manner of use would make it very clear to customers that Kaneh’s cookies were not Girl Scout cookies.

But are companies allowed to make these kinds of comparative statements? And what is “misappropriation” in the context of trademarks? The theory of misappropriation in a trademark context is tenuous, but there are three basic elements (J. THOMAS MCCARTHY, 2 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 10.72 (4th ed. 2006)):

1. Plaintiff has made a substantial investment of time, effort and money into creating the thing misappropriated such that the court can characterize that “thing” as a kind of property right [the creation element].
2. Defendant had appropriated the “thing” at little or no cost, such that the court can characterize defendant’s action as “reaping where it has not sown” [the appropriation element].
3. Defendant has injured plaintiff by the misappropriation [the injury element].

The idea here would be that Kaneh was free-riding on the goodwill that the Girl Scouts have worked to establish over the years. But there are also “fair use” exceptions to trademark infringement, including for comparative advertising. It is unclear whether such comparative advertising principles would apply in this case, since traditional girl scout cookies fall within a completely different product category from cannabis-infused cookies. Still, this is something that all cannabis business owners should be mindful of. Use of another company’s trademark in comparative advertising may be allowed under certain circumstances, but businesses must be very careful to avoid advertisements that could be deemed false and misleading.

Even if you think that your use of another’s trademark does not constitute trademark infringement, or that your use falls within a fair use exception like comparative advertising, it is important to consider claims that could be made against you like misappropriation, or false and misleading advertising, and it is important to run these types of advertisements by your IP lawyer.

A few weeks back, Twitter was abuzz about the fact that the United State Patent and Trademark Office (“USPTO”) granted a federal trademark registration for the word PSILOCYBIN. The mark was registered by the company Black Pandas LLC and applies to the following services in Class 041:

“Development and dissemination of education materials of others regarding psychoactive plants, psychoactive fungi, and chemicals and related topics in the field of spirituality, religion, politics, art and science; Publication of articles, books, pamphlets and newsletters regarding psychoactive plants, psychoactive fungi, and chemicals and related topics in the field of spirituality, religion, politics, art and science.”

First, it is important to note that the registration does NOT provide the registrant with exclusive rights to use the word “psilocybin” on all goods and services, and particularly not on goods that could be described as “psilocybin.” One of the requirements for federal trademark protection in the U.S. is that a mark is “distinctive.” Simply put, this means that a mark cannot be “merely descriptive” of the goods or services on which it is applied. So, for example, no one would be eligible to protect the word “psilocybin” for use on mushrooms, because this would be merely descriptive. It would be against public policy to limit the ability of other businesses and individuals to describe the goods they are selling (note that I’m setting aside the legality issues that come into play here, which are nearly identical to those faced by cannabis businesses attempting to procure federal trademark protection).

So, what happened here with the PSILOCYBIN registration? Initially, the examining attorney assigned to the file rejected the application under Section 2(e)(1) of the Trademark Act, meaning that she deemed the mark merely descriptive of the applicant’s services stating:

“Here, the term PSILOCYBIN is a naturally occurring psychedelic compound produced by various mushrooms.  Applicant’s services feature materials regarding “psychoactive plants” and related topics; thus, the term PSILOCYBIN is descriptive of the subject matter of applicant’s services.  Consumers encountering this mark – in the context of those services – will immediately understand the descriptive significance of the mark.”

However, in this case, the mark was only refused registration on the Principal Register. The examining attorney gave the applicant the opportunity to amend their application to seek registration on the Supplemental Register, so long as they could amend their application to show use in commerce.

Many trademark applicants are unaware of the existence of the Supplemental Register, let alone what it is. The Supplemental Register is “a second trademark register where trademarks can be registered that are not yet eligible for registration on the Principal Register, but may, over time, become an indicator of source. Marks registered on the Supplemental Register, like those registered on the Principal Register, are protected against conflicting marks in later-filed USPTO applications. However, Supplemental Register registrations do not receive the same legal advantages and presumptions of Principal Register registrations.”

What this means is that in a trademark dispute, the owner of a mark on the Supplemental Register does not enjoy a presumption of federal ownership. It’s much harder to win an infringement lawsuit with a Supplemental Register registration.

After five years of continuous use, an applicant for a mark that would otherwise be rejected for being merely descriptive can apply to register its mark on the Principal Register if it has additional proof of “acquired distinctiveness,” which can include evidence of notoriety, extensive advertisement of the mark, and declarations from third parties. A good example of a mark that made it onto the Principal Register through this process is SKATEBOARDER, which is a skateboard magazine. The mark would have been deemed merely descriptive and rejected, but the applicant was able to show sufficient notoriety over time to prove acquired distinctiveness.

It remains to be seen whether or not the PSILOCYBIN trademark will ever make it to the Principal Register. The more companies that begin to use the word “psilocybin” in conjunction with their online publications and services, the less likely it will be that the owner of this mark will be able to prove acquired distinctiveness five years from now.

Last week, COMPASS Pathways announced its acquisition of US Patent No 10,591,175. What does that patent cover? Psilocybin! More specifically, COMPASS has locked down “methods of treating drug-resistant depression with a psilocybin formulation.” The company is also running a phase IIb clinical trial of its patented formulation, COMP360, which we covered in a blog post back in 2018. In that post, I explained how the Food and Drug Administration (FDA) approval process works and why this trial is so interesting and important.

COMP360 is not the only patent application related to psilocybin, but it has generated a lot of press. Some of that press includes scare articles related to a “millionaire couple threatening to create a magic mushroom monopoly.” Other observers take a more measured position, examining the COMP360 application in detail, and concluding that “the only monopoly sought by Compass Pathways is for the right to make, use or sell their extremely narrow and specific forms of psilocybin.” These analysts posit that psilocybin research and commerce will not be affected in any meaningful way by COMP360, including for sale of “any varieties of magic mushrooms.”

Patents with narrow claims are easier to obtain and enforce. Assuming that is the case with psilocybin, the COMPASS effort should have no direct impact on decriminalized psilocybin in places like Oakland and Denver, or broader legalization efforts here in Oregon. Still, the fallout from patents—and especially drug approvals—for controlled substances can be hard to predict. When clinical trials began for cannabidiol (CBD), for example, no one could have foreseen the impact that FDA’s eventual approval of Epidiolex would have on the legality of CBD as a food or dietary supplement. Back then, no one knew CBD consumer products would be a thing.

Will the country be overrun by a wave of food, beverage and other products containing psilocybin sometime in the next decade? It seems unlikely, even if microdosing continues to trend. Psilocybin is a very different chemical than CBD, primarily for its psychoactive properties. In addition, psilocybin (along with psilocin) is included in Schedule I of the federal Controlled Substances Act and in Schedule I of the United Nations Convention on Psychotropic Substances. For psilocybin to have a broad path forward, it would have to be descheduled and decriminalized, just as hemp was here in the United States.

Ultimately, it is important not to lose sight of what COMP360 is actually for: treating drug-resistant depression. As I wrote previously, around 100 million individuals suffer from treatment-resistant depression worldwide. This means that nothing works– not antidepressants, not psychological counseling, not even grisly procedures like electroconvulsive therapy. Almost everyone knows someone who has suffered from this disorder.

If COMP360 performs well in current trials, a lot of people stand to benefit. COMPASS will benefit as well by raking in the profits, just as GW Pharma is doing today with Epidiolex. That seizure drug returned $296 million in revenues in a stellar launch year. Remember too that COMP360 is a depression drug: its ceiling is probably much higher.

Hopefully COMP360 expands rather than limits the seemingly vast potential of magic mushrooms. If it does not, the fallout will be deeply felt. Even compared to the cannabis community, the magic mushrooms crowd is decidedly anti-corporate and impassioned with respect to ownership claims on the compound. Psilocybin advocates will be watching COMPASS closely.

We will continue to track COMP360 and psilocybin in general. For more on psilocybin, check out the following posts:

We try to cover cannabis-related trademark issues thoroughly on this blog, because branding and trademark protection form the most basic foundation for most businesses. In our most recent posts, we’ve focused heavily on trademark disputes, because as the industry matures, litigation has become inevitable. For reference, you can check out some of the big trademark disputes from the last couple of years here:

But what we haven’t done recently is a recap of the trademark basics for cannabis companies, as well as a rundown on the updates regarding what products are and aren’t eligible for protection. There have been some positive changes in the last year with the implementation of the 2018 Farm Bill – the USPTO released updated guidance regarding the registration of hemp-related trademarks, which can be found here.

I’ll give a brief overview of the cannabis trademark landscape, but at this point, I think it’s safe to say that nearly every cannabis company has at least something that should be the basis for obtaining trademark protection.

Trademarks 101: A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. More commonly, a trademark is recognized as a brand. The importance of trademarks is two-fold: On one hand, owners of successful brands want to rest assured that other parties will not be able to use and exploit their brand without the brand-owner’s permission. But on the other, perhaps more important hand, trademarks are crucial from a consumer protection standpoint. As a society, we want consumers to know where the goods and services they purchase are coming from, and to make informed purchasing decisions based on factors like quality and safety. The primary way consumers are able to distinguish the goods of one company from the goods of another is via branding.

There are three ways in which a brand owner can establish trademark rights:

1. By using the mark in connection with their goods or services (legally) in commerce;
2. By registering the mark with the United States Patent and Trademark Office (USPTO); and
3. By registering the mark with an appropriate state trademark registry.

Registering a trademark with the USPTO is the best way to protect one’s mark, but because cannabis is still illegal under federal law, and because one requirement for registration of a federal trademark is that the applicant has made “legal use” of the mark in commerce, the USPTO has continually refused to register marks for use on cannabis and any other goods and services that violate the Controlled Substances Act (CSA).

The crux of the analysis for any cannabis company’s federal trademark eligibility is whether or not the company sells goods or offers services that comply with federal law. To the extent that it does, those goods or services are likely eligible for trademark protection. In addition, to the extent that a company is selling products that comply with both the Controlled Substances Act (CSA) and the Food Drug and Cosmetic Act (FDCA), those products are likely eligible as well. For example, while the FDA maintains that CBD cannot be added to food products without violating the FDCA, its position on CBD in topical products is quite different. Those products, as long as they comply with the 2018 Farm Bill, are likely eligible for trademark protection. Likewise, certain hemp products are Generally Recognized As Safe (GRAS) by the FDA – these products, including hemp seed oil, for example, are also eligible for federal trademark protection.

For products that do not meet the threshold for federal trademark protection, there’s a good chance that state protection is available. Though the protection afforded by a state trademark is geographically limited to the state of the registration (and sometimes just the area of use within that state), state trademarks usually provide more extensive geographic protection and legal remedies than common law rights. Common law rights are almost always limited to the geographic area in which you are using the mark, meaning that if you only do business in San Francisco, your common law trademark rights could only protect you within the city of San Francisco. And if you want to avail yourself of the statutory remedies available to trademark owners in infringement cases, you will need to register your mark.

While trademark protection in the cannabis industry still presents challenges for business owners, the law is in constant flux, and opportunities are beginning to emerge. If you haven’t worked with your cannabis intellectual property lawyer to develop a strategy for protecting your trademarks now and going forward, now is the time to do so.

On December 12, 2019, the EU General Court upheld an EU Intellectual Property Office ruling that blocked registration of a mark that “an average person would assume references marijuana use” because it was “contrary to public policy.” The mark in question was CANNABIS STORE AMSTERDAM with green cannabis leaves in the background, and the court held that the public would perceive this mark (reasonably, we think) as referencing narcotics.

The court’s decision does not ban all marks containing a reference to cannabis, which is, under certain circumstances, legal in many EU countries. However, the court’s decision effectively blocks registration of marks that an average person would assume reference narcotic marijuana use.

The trademark applicant in this case was Santa Conte, and the goods and services covered by the application were as follows:

• Baked goods, confectionery, chocolate and desserts; salts, seasonings, flavourings and condiments; ice, ice creams, frozen yoghurts and sorbets, savoury pastries;
• Soft drinks; beer and brewery products; preparations for making beverages;
• Services for providing food and drink.

One of the applicant’s arguments against refusal was that the mark did not reference any narcotic because the psychoactive substance in marijuana comes from the flower of the plant, not the leaves, as pictured in the mark. The court reasonably rejected this argument, stating that “the particular shape of this leaf is often used as a media symbol for marijuana, understood as the psychoactive substance that is obtained from the dried inflorescences of female cannabis plants.” The court also reasoned that what mattered most in the analysis of whether the mark should be rejected for public policy reasons was public perception, and that it didn’t matter if that perception was based on inaccurate definitions from a scientific or technical point of view, and “irrespective of whether the consumer has all the information available.”

The court also determined that the applicant’s use of the word “Amsterdam” in its mark would “be understood by the relevant public as referring to the city in the Netherlands which tolerates the use of drugs and is known for its ‘coffee shops.’”

For applicants seeking to register hemp or marijuana-related trademarks in the EU it will be important to consult with a trademark attorney to determine whether the mark could be considered contrary to public policy or to accepted principles of morality as perceived in reference to the relevant public of the EU. The court noted that the relevant public in this case was not only the English-speaking public, “but more broadly, the public in the European Union,” and that the relevant public should not be limited only to potential customers within a certain age range or within a certain member state that has taken a less strict regulatory approach to regulation of cannabis. The court also pointed out that in many countries of the EU, including Bulgaria, Finland, France, Hungary, Ireland, Poland, Slovakia, Sweden and the United Kingdom, products derived from cannabis with a THC content exceeding 0.2% are regarded as illegal narcotics.

This decision will be important for trademark applicants in the EU seeking protection of cannabis-related trademarks, and business owners should be careful not to adopt brand names that could be deemed contrary to public policy.

A patent is deemed invalid “if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.”

In light of the Supreme Court’s decisions over the years, it’s clear that an infringer asserting the defense of invalidity has high hurdles to overcome due to three considerations:

1. The USPTO examiner having reviewed the prior art, has already made a determination that the patent is not obvious in view of this prior art.

Patents issue only after a pretty extensive examination has been conducted, which includes analysis as to whether the form and content of each application conforms to the applicable laws. Actions taken by agencies of the government are generally granted the presumption of administrative correctness. In this context, that presumption is actually codified into my next point, the existence of 35 U.S.C.A. § 282.

2.  Patents are presumed to be valid under 35 U.S.C.A. § 282, so defendants must prove invalidity by clear and convincing evidence.

That section provides, in relevant part:

A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.”

Although a nebulous concept, “clear and convincing” evidence has been described as evidence which produces in the mind of the trier of fact an “abiding conviction” that the truth of the factual contentions is highly probable. Translation: it’s the highest burden you could bear. (Note, the statutory presumption of validity attaches to each claim independently of other claims).

3.  A federal court will only overturn the district court’s underlying factual determinations under the clearly erroneous standard of review.

The district court will determine the issue of obviousness as a matter of law based on several factual determinations:

• “The scope and content of the prior art”;
• “Differences between the prior art and the claims at issue”;
• “The level of ordinary skill in the pertinent art”; and
• “Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc.”

These are usually fact-intensive inquiries, and the higher courts trust that the district court reviewed the evidence carefully.  Unless a factual determination is glaringly wrong (which almost never happens), it won’t be questioned.

For more on cannabis patent litigation, check out the following posts:

The application specified the following goods:

• Herbs for medicinal purposes
• Boots; Coats; Dresses; Gloves; Hats; Hoodies; Jackets; Jerseys; Shirts; Shoes; Shorts; Sneakers; Suits; Sweat pants; Sweatshirts; T-shirts; Ties as clothing; Track suits; Trousers; Undergarments; Waist belts
• Raw herbs
• Herbs for smoking

The USPTO examining attorney assigned to this application refused registration on three grounds, all of which are interesting and relevant to would-be cannabis trademark applicants.

First, registration was refused due to likelihood of confusion with an existing trademark registration in Class 25, which covers apparel. This existing trademark registration is for the mark THC. Because the literal element of the applicant’s mark was identical to the registered THC word mark, the examining attorney deemed the marks likely to cause consumer confusion, and denied registration for apparel. This is an illustration of why conducting a trademark clearance search prior to filing your trademark application is a good idea.

Second, the application was denied as to the other three classes of goods specified (herbs) because “applicant did not have a bona fide intent to lawfully use the applied-for mark in commerce as of the filing date of the application.” As we’ve covered before, in order to qualify for federal trademark protection, the use of a mark in commerce must be lawful (Gray v. Daffy Dan’s Bargaintown, 823 F.2d 522, 526, 3 USPQ2d 1306, 1308 (Fed. Cir. 1987)). Here, the examining attorney did some digging and quickly learned that the applicant was a company owned by Drake, who had recently partnered with a Canadian cannabis company to produce marijuana. The wording of the three classes encompassing herbs was broad enough to include cannabis, which is not lawful under U.S. federal law, and is not eligible for trademark protection.

But this leads us to the third and perhaps most interesting grounds for refusal. which involves the nature of the applied-for mark itself. The logo specified in the application is identical to the symbol mandated under Canadian law to indicate that goods bearing the symbol contain THC. This is a warning symbol intended to alert customers that cannabis products contain more than 10 micrograms of THC per gram. The examining attorney asserted that because “the symbol is intended to be used merely to convey information about the material content of the product,” it serves no source identifying function.

The examining attorney’s assertion is an important foundation of trademark law: In order to be eligible for trademark protection, a mark must actually function as a trademark, meaning that it must actually indicate the source of the specified goods. The examining attorney’s considerations here included (1) the significance of the symbol, (2) the nature of the symbol’s use in the relevant marketplace, and (3) the impression created when the mark is used in connection with the identified goods. Ultimately, the examining attorney declared that:

[b]ecause consumers are accustomed to seeing this symbol used in this manner, when it is applied to applicant’s goods, they would perceive it merely as informational matter indicating that the goods are comprised of THC derived from cannabis or marijuana.

These are all valuable lessons in what can and cannot be eligible for U.S. federal trademark protection, and illustrate the ongoing challenges faced by the cannabis industry in developing strong brands that are eligible for federal protection.

Over the last couple of years, there has been quite a wide range of cannabis-related trademark disputes to write about on this blog, although most of those disputes have ultimately settled. Last year, Kiva Health Brands, LLC (“Kiva Health”) sued Kiva Brands Inc. (“Kiva Cannabis”) for trademark infringement, alleging that Kiva Cannabis’ “use of the names and marks KIVA and KIVA CONFECTIONS on and in relation to its cannabis containing food products is confusing, misleading, and deceiving consumers as to the source and origin of [Kiva Cannabis’] cannabis containing food products relative to Plaintiff’s healthy, eco-friendly food products.”

Kiva Health sells food products, including food supplements under the KIVA mark and has done so since as early as October 2010, and at least as early as February 2013. KIVA CANNABIS, on the other hand, uses the KIVA and KIVA CONFECTIONS marks on food products that contain cannabis. Kiva Health alleges that “consumers and prospective customers have contacted Plaintiff expressing concern and frustration believing that Plaintiff’s food products and supplements, marketed as healthy and eco-friendly, contain cannabis or other regulated substances.” Kiva Health asserts that Kiva Cannabis’ use of the KIVA marks “tarnishes” Kiva Health’s positive reputation.

Conversely, Kiva Cannabis argues that “its ownership stems from its predecessor  company selling cannabis-infused edibles in California since 2010.” The court rejected this argument, however, on the grounds that Kiva Cannabis makes cannabis-infused edibles, which are illegal under federal law. Kiva Cannabis was attempting to assert California common law rights in the KIVA mark, but its use of the mark was illegal under federal law and therefore, Kiva Cannabis did not make lawful prior use.

This is a huge blow to cannabis businesses, and means that prior common law use will not necessarily give you grounds to challenge a later federal trademark application for the same mark.

For this reason, it is absolutely crucial that cannabis business owners both clear and monitor their trademarks to avoid conflicts. The best way to mitigate infringement risk is to have a comprehensive clearance search performed on your proposed mark by a company that specializes in such searches and then have that search analyzed by a trademark attorney well-versed in cannabis. With this report, your cannabis trademark attorney can advise you on the level of risk you face by assuming a particular brand. Your cannabis trademark lawyer can also give you initial feedback on the strength of your proposed mark, along with tips on choosing a brand that will be protectable. The real takeaway here is that you don’t need to use the exact same mark as another company to infringe that company’s trademark, and you don’t necessarily need to sell exactly the same goods or services. Crossing the line into infringement takes a lesser degree of similarity than most people realize, so choose your brand name wisely.

And after you’ve adopted your mark, be sure to monitor for infringing use. Below are a few basic tips for monitoring potential infringers of your mark:

1. Regularly search the Internet. This is common sense. Perform Google searches for your trademark, and for your logo if you have one. Google Alerts comes in handy here as well. Set up an automated search and receive email alerts every time new pages containing your mark are indexed.
2. If you really want to delve into things, search the Trademark Electronic Search System (TESS) on the USPTO website. This search engine allows you to search the USPTO’s database of registered trademarks and pending applications to find marks that may be similar to yours. Pending applications may give you some insight into companies that are using or attempting to use marks that are similar to or the same as your own. For additional information on searching the USPTO’s database, which can get a bit complicated, go here.
3. Aside from self-monitoring, there are many companies and law firms that provide trademark monitoring services for their clients. These companies conduct regular monitoring searches for your mark. These services can be particularly helpful if you hold trademarks in multiple domestic and international jurisdictions.

If you do encounter a company you believe to be infringing your trademark, you should contact a cannabis intellectual property (IP) attorney right away. An experienced IP attorney can walk you through your options for dealing with an infringer, including cease and desist letters, settlement negotiations, and ultimately, litigation if necessary. An experienced IP attorney can also guide you toward adopting a brand name at the outset that is less likely to land you in hot water.

We like to keep abreast of trademark litigation in the cannabis space, and have written about several other notable cases that you can read about here:

Compensatory damages

35 U.S.C.A. § 284 provides: “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.”

The major, underlying theory of damages in patent litigation is to deny the infringer the fruits of his illegal act, AND to restore to the patent owner the benefits which he would have derived from his monopoly had he not been denied the infringing sales. Another way to think about this is the distinction between “damages” and “profits.” Profits refers to what an infringer makes. Damages refers to what a patent owner lost by the infringement. A patent owner’s monetary award equals the amount adequate to compensate him for the infringement (usually, for the patent owner’s lost profits), but in no event less than a reasonable or established royalty.

Measured by patent owner’s lost profits

For a patent owner to recover lost profits, he must demonstrate that “but for” the infringement, he would have made the sales that the infringer made. To recover under the lost profits approach, the patent owner must prove two things:

• The patent owner would have made the sale of the product but for the infringement (which is an inquiry made based on the demand for the patented product in the market, the patent owner’s ability to meet this demand, and the absence of acceptable substitutes); and
• Computation on the loss of profits by proper evidence.

Unlike copyright or trademark infringement, patent infringement does not provide for an accounting for an infringer’s profits (except in the case of a design patent). However, the infringer’s profits may properly be considered, for comparison purposes with the patent owner’s proof of his lost profits, in estimating the patent owner’s damages.

Lost profits may be in the form of diverted sales, eroded prices, or increased expenses. It should be noted that an infringer’s foreign sales are not included in this calculation because protection only extends to infringement in the United States.

Measured by a reasonable royalty

In the event a patent owner cannot prove the above, his damages are limited to a “reasonable royalty.” A reasonable royalty is generally the amount at which a person desiring to manufacture and sell a patented product would be willing to pay as a royalty to the patent owner. The factors considered in this analysis are called the Georgia-Pacific factors (from Georgia-Pacific Corp v. United States Plywood Corp.):

• The royalties received by the patent owner for the licensing of the subject patent.
• The rates paid by the licensee for the use of other patents comparable to the subject patent.
• The nature and scope of the license, as exclusive or non-exclusive.
• The licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.
• The commercial relationship between the licensor and licensee.
• The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.
• The duration of the patent and the term of the license.
• The established profitability of the product made under the patent; its commercial success; and its current popularity.
• The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.
• The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.
• The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.
• The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.
• The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
• The opinion testimony of qualified experts.
• The amount that a licensor (such as the patent owner) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement.

Indirect damages

Generally, indirect or consequential damages (such as lost supply sales) are not recoverable.

Interest on damages award

35 U.S.C.A. § 284 provides as follows regarding interest: “Upon finding for the claimant the court shall award the claimant damages … together with interest and costs as fixed by the court.”

Both pre-judgment and post-judgment interest are included.

Exemplary (or, punitive) damages

35 U.S.C.A. § 284 provides as follows regarding exemplary damages: “When the damages are not found by a jury, the court shall assess them. In either event, the court may increase the damages up to three times the amount found or assessed.”

A patent owner can win exemplary damages, up to and including three times the actual damages, where the infringer has knowingly, deliberately, intentionally, willfully, or wantonly infringed the patent. While “willful infringement” is a nebulous fact inquiry, the primary question is whether the infringer, acting in good faith, had reason to believe that it had the right to act in the infringing manner. The In re Seagate Technology test is comprised of two parts:

• Did the infringer act despite an objectively high likelihood that his actions would constitute infringement of a valid patent? (Note, the infringer’s actual state of mind is irrelevant).
• Was this risk either known or so obvious that it should’ve been known to the infringer?

On November 20th, our own Alison Malsbury will lead a presentation on CBD & Cosmetics at the 2019 Emerging Issues Conference in Marina del Rey, California. Her presentation will focus on the contentious landscape of hemp and CBD topical products, which she has most recently written about here and here.

As CBD continues to impact markets from textiles to beverages to wellness, we can only anticipate the laws around manufacturing, branding, distribution, and consumption (to name a few) will grow more complex as we enter 2020. Alison has been a leading voice on cannabis and help-derived intellectual property developments, both domestically and abroad, and she regularly helps companies navigate the complex and ever-changing IP issues related to CBD products.

You can register for the 2019 Emerging Issues Conference here! We hope to see you there!

In the meantime, please check out Alison’s writings on industrial hemp/CBD and cannabis intellectual property in the global market: