After Atlanta pharmacist Dr. John Pemberton invented the recipe for Coca-Cola in 1886, sales for the first year totaled about $50. Two years later, an enterprising pharmacist and businessman named Asa Candler bought the formula from Pemberton for $239. Fast-forward to 2023, and Coca-Cola is a Fortune 500 company collecting more than $43 billion in annual revenue. While Coke may be one of the greatest success stories in the history of intellectual property (IP), it surely won’t be the last.
As the cannabis industry continues to mature, companies are investing more resources into protecting the closely guarded trade secrets that will play an increasingly important role going forward. As companies look to get a leg up on rivals, increase their value, and differentiate, unique products, technologies, and assets will be the name of the game.
IP assets are at the core of every other industry, and there is no reason to believe cannabis will be any different. Look at the history of the tobacco, pharmaceuticals, cosmetics, and food-and-beverage sectors. Patents and trademarks have been instrumental in making or breaking fortunes in all of them.
While there have been few patent disputes and trademark challenges in cannabis thus far (partially due to the product’s status as a federally illegal substance), some notable cases will serve as early precedents. Post-federal-legalization, expect a rush to protect the valuable assets that may help companies secure their futures for decades to come.
Staking a claim
The most common types of IP include trademarks, copyrights, and patents. Conduct a search related to a cannabis topic at the United States Patent and Trademark Office (USPTO), and you likely will find hundreds of patents have been granted or are awaiting review.
Companies with valuable IP will become attractive targets for collaborative partnerships and acquisition by larger companies in industries ranging from cannabis to medicine and biotech. Some recent cannabis deals that were driven by IP include:
- In 2021, Jazz Pharmaceuticals bought GW Pharmaceutical for $7.2 billion. GW Pharma is a major international player in cannabis and the maker of Food and Drug Administration-approved cannabis-derived medications including Sativex and Epidiolex.
- In 2021, British American Tobacco bought a nearly 20-percent stake in Canadian licensed producer Organigram for $175 million in an effort to expand beyond BAT’s core business.
- In 2023, Organigram made an $8-million investment in Phylos Bioscience, which develops proprietary genetic identification tools. Organigram is poised to release products incorporating the minor cannabinoid THCV in Canada based on Phylos’s genetics platform.
When the Jazz Pharmaceuticals deal was announced, GW Pharma Chief Executive Officer and co-founder Justin Gover said, “This is an IP estate that is going to continue to build and we think is going to be a strong and compelling one.”
Although there are some limitations on trademarks and patents for cannabis products and cannabis-related inventions, there are numerous ways companies can protect their IP on the state, federal, and international levels.
“It’s supposed to be impossible to get a trademark on an illegal product, but there’s no legality requirement in the patent statute,” said Dale Hunt, founder and senior attorney at Plant & Planet Law Firm in San Diego. “The patent examiners don’t worry about whether something is legal; they just worry about whether it is new and non-obvious and meets the requirements for patentability. So that’s one misconception. People don’t even know patenting is happening and is possible for cannabis-related inventions.”
While federal trademark protection is not available for “unlawful” products such as Schedule I drugs, cannabis companies can plant a flag in other ways. For instance, peripheral products like vape pens and rolling papers are used for legal purposes (tobacco smoking), and manufacturers of these types of products may obtain federal registrations for their branding (company name and logo, product name and logo, et cetera). And because cannabis is legal in many states, companies operating in those states can file state-specific trademark registrations, although those protections are not as robust as a federal registration.
“For most of our clients’ goods, we cannot get registrations on cannabis products, per se, and that has a number of implications,” said Brian Landry, a partner and intellectual-property attorney at Saul Ewing. “One is that we need to take a variety of different strategies relative to what we use in most other industries to try to obtain protection that includes a large reliance on state trademark registrations, which seldom get much use or attention outside the cannabis industry. There’s also a heavier reliance on common-law trademark rights based on use and commerce, although even that has nuances because there have been some decisions where federal district courts have refused to recognize those common-law trademark rights.”
In some cases, the USPTO does grant patent protection for products and processes related to federally illegal goods and services. Three different types of patents are available in the United States: utility patents (processes), design patents (how a product looks), and plant patents (for new or unique plant varieties).
This means companies with unique designs for vape pens, extraction machines, other accessories, or manufacturing equipment may secure patents as long as the inventions are novel and comply with the other requirements of patent law. Cannabis operators may be able to file patents for things like preparation methods, compositions and drug formulations, how compounds engage with human endocannabinoid receptors, and medical-marijuana products and processes.
One of the more significant patent disputes in the industry, adjudicated in April, delivered good news for American vape manufacturers. The U.S. International Trade Commission ruled in favor of U.S. company Advanced Vapor Devices (AVD) and a handful of other companies in a year-long patent-infringement investigation initiated by Chinese e-cigarette maker Shenzhen Smoore Technology Limited, which owns e-cigarette patents.
AVD general counsel Doug Fischer explained the case’s significance. “I think what this case demonstrates is companies need to be forward-looking about their IP strategy, and it’s not just their direct competitors that might develop or monetize IP that threatens them,” he said. “It could be companies way across the world, or companies from other industries. You look at pharma and tobacco, and [IP is] an area where they can sort of get a toehold in the cannabis industry without violating any laws.
“There have been some other big IP cases, so I don’t know that I would say this case is necessarily a precedent, because every patent is different and every infringement claim is different,” he added. “But IP is going to be a driving force behind the development of the industry, both plant-touching and ancillary. And businesses that may be only tangentially related because of federal legality can still pursue intellectual property.”
One of the ways a manufacturer can protect a unique product is by registering a design patent that protects the aesthetic appearance of a device. If another company markets or sells a knock-off product with aesthetic similarities to the patented product, the patent holder can sue for damages and to prevent the other company from marketing the similar product. For companies developing new products, it’s wise to undertake a diligent patent search to review existing patents for products that might be similar to the “new” ones on which they are working.
Along with vaping devices, one of the ripest battlegrounds for patents is the extraction sector, where competing technologies and machines are poised to cash in on a lucrative segment of the industry. There are many different ways to extract cannabinoids and other chemicals from the plant using a variety of solvent-assisted and solventless methods.
“There has already been some litigation around extraction,” said Fischer. “And there are some patent-troll companies around. There was a fairly notable case in which GW Pharma was sued by Canopy Growth over a CO2-extraction method. Canopy claimed a patent on the technology, but GW Pharma came out on top.
“I think that’s going to be one of the really hot areas, and I also think you’ll see it in the medical applications of the plant, for various therapeutic uses that can be patented,” he continued. “And then you’ll certainly see it in vaporization and delivery devices akin to what you see in the tobacco world or the pharma world.”
While patents on manufacturing and other types of equipment are fairly straightforward and have a long history of prior art, patenting plant genetics is a much trickier business. Most of the patents filed for cannabis genetics thus far have been for plants that can be asexually reproduced, typically by cloning, so subsequent generations are identical to the original plant.
It’s somewhat ironic that the age-old battle between underground growers over who grows the best weed might soon become a battle in the courts over who has the most enforceable legal patents for their strains. “When people start trying to patent strains, there’s definitely some legs there,” said Fischer. “And it should be interesting trying to prove that it’s new, because there’s all this prior art. So there’s going to be a lot of interesting court battles on what’s patentable—not because of the subject matter, but because of the question of whether it is truly novel.”
Beyond plant patents, some companies are trying to secure broader “utility patents.” One of the difficulties of establishing a utility patent for a unique plant strain is that the owner must develop and submit seeds that are stable enough to produce the same genetic output (with minor variability) every time. While this is possible in today’s high-tech industry, it remains an expensive and rigorous process. Some utility patents can protect a chemical composition, and many consumable companies protect their methods of extracting THC and the composition resulting from the extraction. However, companies that have tried to secure utility patents for specific formulations of cannabis chemicals have had limited success thus far.
“There are almost no cannabis breeders that have really well-documented inbred lines,” said Reggie Gaudino, chief scientific officer for Front Range Biosciences, who holds patents in areas including DNA diagnostics, tissue culture media, bioreactors, classification systems, and breeding for specific terpene combinations to achieve certain outcomes. “It’s not like corn or wheat or soy, where everybody in that sector in the U.S. is growing genetically identical stuff. That’s not how it happens in cannabis right now. But that’s how it has to go, because ultimately cannabis is farming and it is agriculture and it will be commoditized just like everything else. Even expensive ornamental flowers are commoditized, so the guys growing them are not getting anywhere near what the retailers are getting for them.”
One of the unique traits of cannabis is the plant’s ability to produce chemicals primarily to defend itself from various environmental threats. Therefore, the plant’s chemical output is heavily impacted by the growing conditions. Guadino explained this makes cannabis different from other agricultural crops, complicating the patenting process for specific genetics.
“Nobody’s talking about genetics and growing conditions,” he said. “Early on, I tried to point out [to the USPTO] that if you’re going to [patent cannabis plants], you have to do it differently than other plants. The sugar content of corn is fairly stable, and it’s not a secondary metabolite that’s designed to protect against the environment, whereas every chemical compound in cannabis is designed to protect against the environment. Depending on the environmental challenges, you’re going to see sometimes significant changes in the chemical output. So you can’t just claim genetics, because somebody else with different genetics who has the wrong growing conditions might end up showing something that hits that chemical combination.
“So what do you do? Nobody is filing patents that claim both the genetics and the growing conditions,” he continued. “In some cases they are claiming broad genetics, and in some cases they are claiming a plant making a chemical compound with broad ratio ranges. Our data shows the same genetics can exhibit different outputs depending on the growing environment, and different genetics can arrive at the same or very similar outputs.”
Gaudino keeps tabs on new patents that have been issued or are under review, because noting certain areas where companies are securing patents may provide hints about where the technology side of the industry is headed. Recently, he uncovered patent applications for preparation and use of nano-formulations, biosynthesis of cannabinoids and cannabinoid precursors, sonically enhanced trichome microfiltration, and a production process that results in essentially pure delta-9 tetrahydrocannabinol.
Clearly, the patent field is busy.
A freakish claim
Nathaniel Pennington, founder and CEO at Humboldt Seed Company, has been working in the cannabis seeds and genetics field since the 1990s. Strains he developed are grown around the world. He has seen his fair share of unique plants over the years, some of them his own hybrid creations developed through a rigorous and time-consuming breeding and stabilization process. Several years ago, he agreed to help a farmer named Jordan (aka “Shapeshifter”) develop a utility patent for a unique plant dubbed Freakshow.
Freakshow is a mutant sativa strain with long, fern-like serrated leaves and buds that are predominantly orange. After stabilizing the strain with Pennington’s help and hyping the mutant on Instagram, Jordan took some plants to The Emerald Cup in 2019 to prove they were real. Long lines formed to see Freakshow, and eager growers bought seed stock so they could try their luck in their home gardens.
“The look of it is really the thing you’re protecting, and that was most tied to the crazy leaf pattern he discovered,” said Pennington. “And so we did the work to make it so 100 out of 100 seeds look like that. And then we had to submit a whole bunch of methodology, how we stabilized it, and how we made it uniformly look like that.”
When all was said and done, Pennington said the process took several years and cost almost $50,000. According to Dale Hunt, the attorney who helped secure the utility patent, “the Freakshow patent is a variety-specific utility patent, and it’s one where there was a deposit of seeds made. And the claims cover really any progeny of Freakshow as long as it still has that same kind of leaf structure.”
In recent years, Hunt’s firm has filed and won utility patents for a number of unique strains. “We’ve gotten utility patents, and they’re just as enforceable as a corn patent,” said Hunt. “It does have to be a stable seed line, but people know how to do backcrosses to get stable seeds, and it doesn’t have to be all identical. When you make a seed deposit, it’s understood any batch of seeds is going to have some genetic variation unless it’s completely inbred or an F1 [first-generation] hybrid,” he explained. “But there are plenty of seed varieties that have a certain amount of acceptable variability that are still patentable. And that’s certainly what we’re doing with the seed-deposit-based patents we’re doing for cannabis varieties.”
For companies seeking protection for their plants and genetics going forward, Pennington said there are some high-tech methods of detecting copycats in the plant realm.
“If you want to do it, you can CRISPR in some sort of fingerprinting, which is basically taking an innocuous part of the genome and adding in a code,” said Pennington, referring to a process that inserts clustered regularly interspaced short palindromic repeats. “Anything can be turned into a computer code or DNA. So you just come up with a code and CRISPR it into a part of the genome in the DNA of the plant that’s not functional at all. And that’s a way you can much more easily and cheaply check to see if anyone is using your intellectual property. Because now you only need to look at a target area of DNA rather than sequencing the entire DNA of a plant, which can be very expensive.”
With hundreds of new patents being filed and reviewed each month, it’s no easy feat for companies to review and compare existing patents and applications as they develop new products and processes. Once cannabis becomes legal at the federal level, there is sure to be a flood of new federal patent and trademark applications, along with lawsuits that both defend and challenge existing patents. And that’s when the real fun will begin.
“The typical patent litigation can last years and years and years, and there are many phases of it,” said Fischer. “First, there’s usually a challenge to the validity of the patent. And then, if the patent survives that, there is a claims-construction portion where the court determines the proper way to read the language of the patent, which ultimately leads to the analysis of whether [a product is] infringing.
“You may also have all sorts of claims about improper conduct in terms of how the patents came to be owned by the current owner,” he continued. “Those cases can take anywhere from a few months—because the parties get a sense of where it’s going and it leads to a settlement—to several years, because everyone is fighting through every piece of the litigation.”