Awaiting a Landmark Decision in IP Fight Between Major Cannabis Players
By Oliver Bennett, Special Contributor to New Frontier Data
An issue over intellectual property (IP) has seized a spotlight in the cannabis industry after Canadian cannabis giant Canopy Growth filed a lawsuit against GW Pharmaceuticals – the successful U.K. makers of Epidiolex and Sativex – in a dispute over oil extraction methods.
The outcome is much anticipated, both in the long term as its implications will reverberate across the global cannabis industry, and more immediately as the news affected the relative valuations of the rival companies. After it broke, GW Pharma’s Nasdaq share price fell by 3.5% while Canopy’s increased by 4.5% – illustrating how IP ructions can impact investors’ behaviour. In Europe, where the market is less mature than North America’s, it serves as a reminder that IP disputes are inevitable within the growing industry.
While recreational cannabis remains illegal in most European countries, the patenting of cannabis technologies and brands is legal. Though it has a clause that patents should not contravene “public policy and morality”, the European Patent Office (EPO) – the umbrella body for continent-wide patents – applies the same standards for them as for other product types: namely, that it be novel (i.e., new and distinctive), innovative, and applicable to a particular industry. In that spirit, there is no barrier to cannabis patents being filed in Europe – though some with words alluding to the illicit trade (e.g., “weed”) could potentially fall foul of the morality clause. Similarly in the U.S., cannabis’ federal illegality can bedevil patent applications, and even as the European cannabis industry lags behind that of the U.S., its EPO protocol might confer advantages to cannabis businesses wishing to file trademarks without that particular federal obstacle. A quick search on the EPO’s website shows 21,135 results for the word “cannabis” alone, indicating both a healthy input of business ideas seeking IP protection, and a sharp rise in the numbers of medical cannabis applications.
The number of European patent applications for cannabis-related inventions is according to one source, “soaring” and it is said that the World Intellectual Property Organization (WIPO) estimates that cannabis patents have grown by 154% in the past decade – with the true number probably higher.
Patents have been granted in Europe by the EPO since 2006, when GW Pharma’s EP 1280515 application – regarding use of cannabis in the preparation of an aerosol – was first accepted. The European Union Intellectual Property Office (EUIPO) also allows cannabis products to register trademarks, and currently shows 155 trademarks with the word “cannabis” in them.
The first lawsuit over cannabis intellectual property appeared in July 2018 in the U.S., filed by United Cannabis Corporation (UCANN) against fellow Colorado company Pure Hemp Collective (PHC) and changed the script for the North American industry, forcing cannabis start-ups to be mindful that not only brand names but also means of production, business processes, and packaging are subject to IP legal protection. As with the Canopy Growth suit versus GW Pharma, IP is deeper than superficial branding factors: To illustrate the breadth of protection needed – and the territorial reach required – Canadian company Nextleaf Solutions has been granted 24 separate issued patents, and it holds more than 60 pending patents respectively related to extraction, purification, and formulation of cannabis, including patents issued in each Germany, France, and the U.K. related to CBD oil extraction. As Nextleaf Solution’s co-founder and CEO Paul Pedersen said last summer, the “smart money” realizes that the opportunity is in “companies that can develop intellectual property and patents that are defensible commercially and have value in 20 years.”
Cultivation and plant technologies are increasingly becoming protected by patents, along with those for agritech, extraction methods, and plant breeders’ rights (PBR) part of the equation. Indeed, EU filings for cannabis-related PBR rank among the most numerous filings at 48%, with Canada filing less than 6% by comparison. Yet even with the upswing in Europe and among other segments of the industry, the numbers of patent applications still trail those originating in the U.S.
It is not the first time that GW Pharma has been involved in IP legal struggles over its products; in early 2019, it was reported that the U.S. Patent Trial and Appeal Board pushed back its patent US9066920B2 in favour of biotech firm Insys. Conversely, the company has also been criticised for filing a putative excess of patents, fuelling criticism that it has used IP to assert a monopolistic advantage. For now, the process of oil extraction should attract an extra level of diligence, and while such IP disputes will force this industry to grow up, it should be hoped that such legal concerns do not adversely pump the brakes on R&D.