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Cannabis filers hash over FTO and future enforcement


Counsel at Aphria, Cresco Labs, Aurora, Scientus Pharma and Canopy Growth say due diligence is becoming more important in their efforts to avoid infringement on copious new registrations, many of which are overly broad or hidden

Cannabis companies are doubling down on their freedom to operate efforts and considering future enforcement prospects because of the number of new patents being filed at the Canadian and US patent offices, many of which are too broad, obvious or hard to find.

In-house counsel from five marijuana-focused businesses tell Managing IP there has been a patent rush over the past year because of the cannabis industry’s growth. Market analytics company Prohibition Partners estimated that the legal cannabis market would grow to $4.3 billion by 2024.

Sources say that this projected growth is not surprising considering the expanded R&D efforts across the industry related to both medicinal and recreational cannabis product development.

The problem is that the historic illegality of cannabis and consequent lack of available prior art to examiners has allowed companies and law firms to register absurdly broad, obvious or non-novel claims. There are at least 30 USPTO applications for cannabis ‘in the use of sleep’, for example.

The fact that cannabis is still a federally illegal substance in the US also means some companies have hesitated to refer to it in their applications. As a result, companies often have a hard time identifying relevant prior art when they search with cannabis-related terminology.

“We do a significant amount of patentability and freedom to operate searches in comparison to other companies in similar industries because of the number of copycat products on the market,” says Christelle Gedeon, chief legal officer at medical cannabis manufacturer Aphria in Ontario, Canada, where recreational cannabis use has been legal since 2018.

“We also closely track our own R&D to allow for more effective searches that help us stay on side, and are careful whenever we go into new jurisdictions because of the number of local players in the market.”

Har Grover, CEO at biopharmaceutical firm Scientus Pharma in Ontario, adds that prior art searches are similarly cumbersome for his company because of the amount of bad literature out there.

“What makes the cannabis industry different from lots of others is the smoke and mirrors involved in the fact that it is only eight or so years old and has quickly become a juggernaut in Canada and the US.

“It has become clear that cannabis is here to stay in the recreational and medical spaces, and those taking advantage of that momentum who are trying to get rich quickly by claiming ownership of things that have been around for a long time are causing problem for companies.”

Emily Tupy, senior counsel at cannabis product maker Cresco Labs in Chicago, tells Managing IP that she cannot speak about the USPTO’s cannabis patent review process, but says it is important to carefully consider the claims being made in patents and that they are sufficiently reviewed and embedded into the application.

Head of IP at Aurora Cannabis in Canada, Michael Sharp, adds that the main challenge for his firm is not just identifying the overly broad patents but the ones that are flying under the radar.

“There are cannabis-related applications out there that never mention the word cannabis or marijuana,” he says. “It is clear that the historical illicit nature of the subject matter has compelled many to avoid mentioning it, even though their applications apply to processes and products that are clearly cannabis related, such as new methods of herb processing.”

But some sources say they are much more concerned with the applications that are likely to be published in the next 18 months or so than they are with what has already been made publicly available by the patent offices.

Phillip Shaer, chief legal officer at the Canopy Growth Corporation in Ottawa, says: “The already-issued patents don’t give me much pause. It’s the stuff that will be published in the next year and a half that FTO searches won’t bring up that I worry about.

“There’s not much out there that makes me think we might be infringing on something. In any case, you don’t necessarily stop what you’re doing when you find something during FTO, especially if there is a chance of taking a licence at some point in time.”

Growing enforcement

The other crucial matter for in-house counsel in the cannabis industry is looking ahead to matters of enforcement.

Litigation is unlikely to become common among industry players for some time. As Shaer at Canopy Growth points out, cannabis patents are unlikely to be enforced until they are at least 10 years old, and because the legal cannabis industry is so new, there are very few relevant patents registered that are close to that age.

The relative infancy of the legal cannabis industry means that the market dynamics are also not sufficiently mature to justify the expense of litigation.

“It is a bit early to be enforcing, given that cannabis is not federally legal in the US and that it is one of the biggest markets for legal products,” says Shaer. “We are focusing on where we spend our money on filings because we only have a limited budget. It could be on vape pens or extraction formulations – but we have to choose.”

Grover at Scientus Pharma agrees that the market is too immature for enforcement, adding that there are only a handful of countries where cannabis has been legalised and commercialised and only 20 to 30 companies worldwide that are generating more than $50 million in revenue.

He says that litigation is all but certain to become common for cannabis products, given the money involved and that the first patent infringement case, UCANN v Pure Hemp Collective, has already been considered in the US.

But the first swathe of infringement matters is probably two to five years away, he adds.

Gedeon at Aphria says she and her company are certainly keeping a close eye on the enforcement landscape because it is likely to become a big deal within the next few years.

Cannabis is quickly becoming a booming industry, and businesses have been swift to react to the growth of related patent applications in the US and Canada. Enforcement will be the next big challenge, particularly as increased acceptance of marijuana is making it safer to litigate on infringement matters in the US.

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