Patently Strategic - Patent Strategy for Startups
Patently Strategic - Patent Strategy for Startups
Cannabis Patents: Cutting Through the Haze of the IP Landscape
In this month’s episode, we’re getting high on innovation with a deep dive into cannabis patents!
As more and more states relax restrictions on both medical and recreational uses of marijuana and hemp, the U.S. cannabis industry is projected to reach $50 billion in sales this year and over $74.6 billion by 2032! This rapid growth is happening despite immense challenges brought on by a complex and conflicting web of legal disparities between federal and state laws. These legal challenges include limited access to financial institutions and the inability to transport products across state lines, but what about patents? THC – the primary psychoactive compound in cannabis – was deemed a Schedule One drug under the Controlled Substances Act of 1970. This is the most restrictive category for drugs in the eyes of the federal government. And unlike most other property rights, patents fall squarely within federal jurisdiction. So what does this mean for inventors in the space hoping to protect their cannabis-related innovations?
** Guest Host: James Gourley **
For the answer, we turned to *the* expert in this space. There have only been five or so cannabis patent infringement cases ever filed in the United States, and our guest host today has worked on two of them. James Gourley is a partner at Carstens, Allen & Gourley, LLP, and a registered patent attorney with the United States Patent and Trademark Office. James served on the Dallas Bar Association's Intellectual Property Section Board before moving to Denver. He is a member of the State Bar of Texas and Colorado and is admitted to practice in the U.S. District Courts for the Northern, Southern, Eastern, and Western Districts of Texas, the District of Colorado, the Fifth Circuit Court of Appeals, and the United States Supreme Court. James has been a pioneer cannabis IP law and brings incredible depth of expertise, based on first-hand experience, to our conversation.
** Episode Overview **
⦿ Cannabis at the molecular level, specifically THC and CBD, and how the subtle differences underscore the complexity of cannabis legality.
⦿ The present legal framework around cannabis and the challenges that come via a patchwork of conflicting state and federal laws.
⦿ Cannabis IP issues surrounding obtaining and asserting both patents and trademarks, including insights from the cases James has personally litigated.
⦿ Patent prosecution strategies to help ensure your rights are enforceable in a federal court.
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Josh: [00:00:00] Good day and welcome to the Patently Strategic Podcast where we discuss all things at the intersection of business, technology, and patents. This podcast is a monthly discussion among experts in the field of patenting. It's for inventors, founders, and IP professionals alike, established or aspiring. And in this month's episode, we're getting high on innovation with a deep dive into cannabis patents.
Josh: As more and more states relax restrictions on both medical and recreational uses of marijuana and hemp, the US cannabis industry is projected to reach 50 billion in sales this year, and over 74.6 billion by 2032. This rapid growth is happening despite immense challenges brought on by a complex and conflicting web of legal disparities between federal and state laws.
Josh: These legal challenges include limited access to financial institutions and the inability to transport products across state lines. But what about patents? THC. The primary psychoactive compound in cannabis was deemed a Schedule one drug [00:01:00] under the Controlled Substances Act of 1970. This is the most restrictive category for drugs in the eyes of the federal government, and unlike most other property rights, patents fall squarely within federal jurisdiction.
Josh: So what does this mean for inventors in the space hoping to protect their cannabis related innovations? For the answer, we turn to the expert in the space. There have only been five or so cannabis patent infringement cases ever filed in the United States, and our guest host today has worked on two of them.
Josh: James Gorley is a partner at Carsten's Allen and Gorley, LLP, and a registered patent attorney with the United States Patent and Trademark Office. James served on the Dallas Bar Association's intellectual property section board before moving to Denver. He's a member of the State Bar of Texas and Colorado, and is admitted to practice in the US district courts for the northern, southern eastern and western districts of Texas.
Josh: The District of Colorado in the Fifth Circuit Court of Appeals and the United States Supreme Court. James has been a pioneer in the budding space of cannabis IP law and brings incredible depth of [00:02:00] expertise based on firsthand experience to our conversation. In today's episode, James helps us cut through the haze of the IP, legal landscape of cannabis in the US at a time when some states have legalized it to varying degrees while others haven't.
Josh: And at the same time, while cannabis remains federally illegal is a highly restricted schedule one drug. Yet, despite the contradiction, the US Patent and Trademark Office happily issues federally granted patents on cannabis related inventions and fact. And here's a kicker. Even the Department of Health and Human Services holds a patent on using cannabinoids as antioxidants and neuroprotectants.
Josh: This is the same federal agency whose findings around quote unquote, no accepted medical benefit, are partially responsible for the Schedule one classification. But if that weren't enough to leave you feeling dazed and confused, it gets more complicated when you consider enforcing your cannabis patent rights.
Josh: Federal courts have refused to get involved in resolving disputes that would essentially condone illegal activity. The Illegality doctrine implies that if you're involved in financial transactions [00:03:00] with somebody who's violating the Controlled Substances Act and you're trying to facilitate that, you're essentially guilty of money laundering to little surprise court want no involvement.
Josh: In such cases, depending on how you've crafted your claims, you may have a very difficult time asserting your federally obtained rights in a federal courtroom to help make sense of all of this. And so your IP rights don't just go up and smoke. James and the panel discuss cannabis at the molecular level, specifically THC and CBD, and how the subtle differences underscore the complexity of cannabis legality, the present legal framework around cannabis, and the challenges that come via a patchwork of conflicting state and federal laws, cannabis IP issues surrounding, obtaining and asserting both patents and trademarks, including insights from cases James' personally litigated.
Josh: Some patent prosecution strategies to help ensure your rights are enforceable in a federal court. James leads this blunt conversation with our always exceptional group of IP experts, including Dr. Ashley Sloate, president and Director of Patent Strategy here at Aurora. [00:04:00] Dr. David Jaguar, president of JA Consulting, Kristen Hansen, patent Strategy specialist at Aurora, and Maurice Smith, patent agent at Break Hughes Erman, LLP.
Josh: Now, before jumping in with the panel, we'd like to take you to the next installment of the Mossoff Minute, a monthly segment that builds on our Patent Wars episode and features short conversations with investor Adam Mossoff, providing updates and quick takes on movements and patent reform, significant court rulings, innovation policy happenings, and occasional Star Wars references.
Josh: In this month's minute, Adam discusses six. That's right, six new anti-patent bills that the Senate Judiciary Committee recently advanced, despite being backed by bogus data.
Professor Adam Mossoff: Some big news in the patent law world. Unfortunately, bad news is that the Senate Judiciary Committee advanced recently. Six bills addressing drug patents and drug pricing.
Professor Adam Mossoff: These bills are based on longstanding and long recognized anti-patent rhetoric. We often hear these terms called evergreening and [00:05:00] patent thickets that, uh, accuse patent owners and innovators of abusing the patent system. This is not based on any actual real data. In fact, the US Patent and Trademark Office just recently confirmed that the data that has been thrown around in these, in these debates and that underlie these terms is, is bogus and unconformable.
Professor Adam Mossoff: And it's really unfortunate that Democrats in the Senate and some Republicans who have joined them are looking for an easy scapegoat for what is the complex problem of drug pricing in the United States, ignoring all of the regulations and statutes and other institutions that contribute to these problems like PBMs and even the Obamacare regime.
Professor Adam Mossoff: Stay tuned for more on this, but hopefully the full Senate will not take action on these bills.
Josh: Thanks, Adam. We're also publishing clips from the mossoff Minute at short form videos on Instagram reels, YouTube shorts, and TikTok. You can check out these shorts and follow us at Aurora patents on all three platforms.
Josh: And now [00:06:00] without further ado, I'll pass it over to James.
James Gourley: All right. Um, so first of all, I wanna talk about what is cannabis. Um, I think when, when someone says cannabis, most people think about a. Snoop Dogg smoking a, uh, marijuana cigarette. And that's certainly part of it. But, um, when you're looking at legal issues related to cannabis, it's quite a bit more complicated than that.
James Gourley: And so before we really get to the IP issues with cannabis, I've got to give you background on the legal framework that applies to, to cannabis generally, because it, it dictates a, a lot of what happens down the line. So when we're thinking about cannabis and what most people are interested in, uh, it is, it is two molecules that are found in the cannabis plant.
James Gourley: One of them is, uh, [00:07:00] THC tetrahydrocannabinol. The other one is CBD, uh, just cannabidiol and. These two molecules are actually very similar to one another. They have the same molecular formula. They have the, almost the exact same molecular weight. Um, and the difference between different cannabis plants is some are much, much higher in THC than C, B, D and others are much, much higher in C, b, D than they are in THC.
James Gourley: And, um, I've got a slide up that shows the, the structure, um, of both molecules and you can see that they're, they're, they're very close to one another. And really the only difference is there's a, a ring structure in the middle, and in, in THC, that ring is closed. And in CB, D, that ring is open. So, um, other than that, they, they look very, very similar to one another.
James Gourley: [00:08:00] Um, I. And that seemingly minor structural difference causes a very major difference in how the human body reacts to these chemicals. And, uh, THC is the one that is intoxicating. So, um, you know, a lot of people when they ingest THC, they feel feelings of like euphoria, um, maybe a high enough dose, maybe a little bit of psychedelic, um, things.
James Gourley: And, uh, CBD just really has none of these effects. Um, you know, there's some literature that talks about it being sort of like an anti-inflammatory, a little bit of literature on it, maybe being a sleep aid. Um, but it really does not make you, CBD does not make you feel anything remotely close to the way THC makes you feel.
James Gourley: So, um, and just to give you an i an idea about, about CBDs sort of, uh. Biological effects. There was a study published in [00:09:00] 2019 where my reading of it is they almost like tried to kill mice by administering super high doses of CBD and were not able to do that. So they, they gave mice CBD at levels that were over 2,400 milligrams per kilogram of body weight.
James Gourley: And if you translate that over into like a, an average human body, it's about like a baseball size amount of pure CBD that they gave to these mice. And really the only thing they observed is that they were kind of like lethargic and had, um, reduced activity and reduced appetite. Um, so, you know, CBD just doesn't do like a, a really a whole lot to the, the mammalian brain or, or body.
James Gourley: Um, but THC certainly does so. That's the, that's the, the two main differences that we're thinking of when we're thinking about different cannabis products.
Kristen: So, Jane and then, yeah, let me ask, [00:10:00] let me ask you a quick question when we get to the IP part. Yeah. Are we talking all plant patents or are we talking maybe some pharmaceutical combination plant?
James Gourley: So there, there, uh, there are composition claims, patents, you know, about different, you know, topical compositions, edical, edible compositions, certainly, you know, pharmaceutical claims. Um, there are also a lot of processing patents. You know, there's different ways to extract these molecules outta the cannabis and there are patents around that.
James Gourley: Um, and then there are ways to sort of take these, these chemicals and do certain things to them to like increase or decrease their, their activity. Um, so it's really almost anything you can think of around what to do with these molecules. People have, have either patented or tried to patent them.
Kristen: Okay, great.
Kristen: Thank
James Gourley: you. Yeah. We'll, and we'll definitely get into that. You'll see some examples. Um, [00:11:00] and then, so again, before we get to the ip, we gotta talk about the legality of these, of these products. So, um. Is it legal? The answer is a classic, you know, lawyer answer. It depends sort of. Um, the, I have a map up on the screen that, that shows, um, that breaks down the legality under state law, under it breaks it down six different ways.
James Gourley: You know, fully illegal. It's still fully illegal in some states. Um, several states allow CBD only, no, THC. Um, it's sort of decriminalized in some states, which can mean, you know, you're not going to jail if you're caught with it, but you may get sort of like a traffic ticket. Um, so those are the states where it's decriminalized.
James Gourley: Um,
Ashley: so it's still illegal in those states, but your penalties are much less severe.
James Gourley: Right? Yeah. So you're not going to jail basically, is the [00:12:00] thing. Yeah. Um, and uh, some states it is. Legal medically, so you can get like a medical card, um, and go to, you know, a, a, a medical dispensary and get the products. Um, some of those medical states have also decriminalized it, and that's broken down, uh, by color on this map as well.
James Gourley: And then there are a bunch of states that have just totally legalized it. Um, like my home state of Colorado, uh, it's totally legal here. You know, California, Oregon, Washington, a bunch of states on the east coast. Um, but even, you know, as colorful as this map is, and as, as much as it breaks it down by, by different categories, that doesn't even give you a full picture of the legality because in Colorado, for example.
James Gourley: Even though it's legal under state law, the state law allows local jurisdictions to place even more restrictions on it, um, than [00:13:00] than the state regulators do. So, for example, I live in Jefferson County, which is west of Denver, and the voters in Jefferson County decided that they don't want it grown, manufactured, produced, or sold in their county, and they passed a law in Jefferson County where you can't make it or sell it in Jefferson County.
James Gourley: So it's even, you know, you could even break it down even more than what's shown here. And it's really, really difficult for, for companies in the space to, to comply with all of the laws and regulations in all the different states. So, um, oh, the other thing I wanna say, uh, just kind of the history of it. Um.
James Gourley: California was the first state to legalize medicinal, uh, marijuana back in 1996. And Colorado came in in 2000 with the same thing. But, uh, Colorado was the first state to fully legalize it in 2012. Uh, and that was before California, so [00:14:00] some history there. Um, and then next we're looking at the legality of marijuana or cannabis on the, on the federal level.
James Gourley: And, um, on the federal level, it, it essentially, there's a distinction made between hemp and high THC, marijuana. So the first thing I'm gonna note is that the Controlled Substances Act classifies cannabis as Schedule One, schedule one drug, which is the most restrictive, uh, category for drugs under the Controlled Substances Act.
James Gourley: Um. Drugs are classified in Schedule one because the United States government has determined that drugs in this category have no accepted medical benefit, and there is a high potential for abuse. And the government makes this finding [00:15:00] by using, supposed, you know, experts at the Department of Health and Human Services who, you know, investigate it and, um, determine whether, uh, there is an acceptable accepted medical benefit and a high potential for abuse.
James Gourley: And if they, if they make that finding, then they categorize it under Schedule one. Um, there are other, so, so cannabis is, is in the same schedule as things like heroin, LSD and psilocybin, which is the active ingredient in magic mushrooms. Um, and a little bit more about the history. Cannabis has actually been, I.
James Gourley: Effectively illegal since 1937. Um, Congress passed something called, I think it was the Marijuana Tax Stamp Act, um, which ostensibly, uh, allowed, you know, people, companies to, to use or, or sell marijuana if they had a, a tax stamp from the government. [00:16:00] But in practice, they just never, they never issued any of those tax stamps.
James Gourley: So it was, it was effectively illegal since 1937. Uh, in 1970, Congress came through with the, uh, controlled Substances Act and, you know, put even tighter restrictions on cannabis and many other drugs. Um, interestingly, uh, a couple of drugs that are not in Schedule One, they're in Schedule two, are things like cocaine and opioids, which are, you know, responsible for a lot of deaths in this country.
James Gourley: So, it's kind of an interesting distinction that doesn't usually receive a whole lot of, uh, explanation, but, um. So we've got 1970. Up until 2018, cannabis was totally illegal under the Controlled Substances Act. Doesn't matter if it's T-H-C-C-B-D, anything else, any classified under Schedule one totally illegal.
James Gourley: You, you're going to jail for a long time if you make or sell it. In 2018, Congress came through with a [00:17:00] farm bill that, um, exempted something called hemp from the definition of cannabis under the Controlled Substance Act. And that Farm Bill defined hemp as any cannabis product with less than 0.3% THC in it.
James Gourley: Starting in 2018, the, you know, the DEA could no longer go after anyone who was making or selling hemp products. Um, and as long as those hemp products had less than 0.3% THC, they were good. They were legal under federal law. Um, and, you know, I think the intent there was to open up, um, cannabis plants for other types of products like, uh, you know, clothing and paper because the cannabis, uh, plant matter itself is actually useful for those kinds of things.
James Gourley: Um, so I think they were trying to, um, to make [00:18:00] those types of agricultural products available from the American market. Um, the actual effect it had is, um, the market was flooded with things like, you know, CBD tinctures and CBD lotions and, um. Even, uh, lately, uh, people are selling hemp derived THC beverages and gummies and things like that, where they're claiming that, oh, you know, the product, the, the, the plant has less than 0.3% THC, but we've we're getting enough out of it to actually give the psychoactive effect in a, in a final product.
James Gourley: And they're claiming that it's hemp derived. So, um, I don't think Congress really intended for that to happen, but that is what has in fact happened. You can get THC products all over the place in almost every state. Um, and they're, the, the purveyors of these products are claiming that they're legal under this 2018 farm bill.
James Gourley: Um, you know, that [00:19:00] hasn't been tested a whole lot and, um, it'll be interesting to see how that develops as the, the market grows for these hemp derived THC products. Um, but then there's another big. However that I have to give, which is that even though CBD products are legal under the 2018 Farm Bill, they are still illegal under the Food Drug and Cosmetic Act, which is regulated by the FDA.
James Gourley: So, you know, there's a lot of, like I said, a lot of these products out there on the market like CR CBD Cream, CBD, tincture, CBD gummies. Um, and yes, they have less than 0.3% THC, but CBD does not fall, fall under the category of generally recognized as safe. Um, and the FDA has taken the position that you cannot include CBD as an ingredient in any topical ingestible, [00:20:00] inhalable product without FDA approval and FDA has not approved it for anybody.
James Gourley: So, um. Every one of those products is illegal under the FDCA. Um, and the FDA in theory could go shut down every single one of these companies because they don't have FDA approval. But really what we're seeing in practice is that they've only really been enforcing this against CBD companies that are making medical claims.
James Gourley: Uh, so they're claiming that CBD can, you know, cure cancer or, you know, whatever. Um, and if the, if the FDA is alerted to, to a CBD company making a, uh, a medical claim, they will send them a letter to, to shut down and stop selling the product. Um, and then before we get into the IP issues, I just wanna say one more thing about these hemp derived products on the market.
James Gourley: And it's, um, again, it has nothing to do with, uh, [00:21:00] with IP or really any legal issue, but, um, I, I know a lot about this industry and. If you're ever thinking about buying a hemp product, a hemp a, a product that says it's hemp derived THC, I know that um, a lot of these products contain THC that has been converted from C, b, D.
James Gourley: So if we go back to the molecular structure, um, again, I, I pointed out that the only real difference is that this ring in the middle of the structure is closed on THC and it's open on CBD. So what a lot of people on the market are doing, and it's totally unregulated, is they're, they're getting high CBD hemp plants and they are converting the CBD into THC.
James Gourley: And the way you do this is you have to use an exotic metal catalyst and several very harmful solvents to accomplish this thing. [00:22:00] And then, um. They're taking and then they're separating the, the THC, they're, they say they're separating the THC that you get on the, as the end product. They're separating it from the catalyst and they're separating it from the, the harmful solvents.
James Gourley: But you just really need to do your research and make sure that whoever's selling these things are, um, giving you what you're asking for, which is something that is free of harmful metals and free of harmful solvents. Okay. That's just kind of like my own PSA that I have to get out there. 'cause I, I know, I probably know.
James Gourley: I had no
Ashley: idea. So that's crazy. Like, I had no idea that that's what they were, um, that they were doing. I mean, like for those, is that more, do you think that that's more for places that's not legalized? Do you think that's happening more in those places or is it kind of across the board whether the state has legalized it or not, that that practice of converting CBD to THC is happening?
James Gourley: Um, [00:23:00] it, it is. Um. I would say if you are buying a, a, a hemp derived THC product that is totally unregulated, that they're claiming if their, if their argument for why it is legal is, um, based on the, the 2018 farm bill, it's, it's highly likely that it's a converted product. Um, now if you're in a state like Colorado, um, they changed the rules a couple of years ago to completely prohibit any THC products being on the market that are made from converting CBD into THC.
James Gourley: Like, it's totally, it's, it's in, in Colorado.
Ashley: Right.
James Gourley: Um, so it's, it's really a state by state basis. And I'm just saying again, like, do your research, you know? Yeah. Call the company, like, find out what documentation they have. I mean, it's, it, it's, it takes some legwork, but it's totally worth it because again, like my background is [00:24:00] chemical engineering, so.
James Gourley: I know, you know, I know quite a bit about manufacturing different chemicals and I understand all the processes involved. And there, there's actually a patent on, um, this conversion process, one way of doing it. And it's just like a very exotic metal catalyst that I, I just, I'm highly skeptical that whatever separation process they're using is gonna be like, totally getting rid of it.
James Gourley: Um, so, and there's one, I've even seen videos of this happening like at one point during the process that it, it, the whole chemical reaction makes it turn purple. Oh. And then, I mean, it's just, it's just not something that I would wanna, um, be putting in my body. But, um, anyway, so That's crazy. Yeah. So now, now that we've got a good, um, understanding of the, the legal framework around cannabis, um.
James Gourley: Let's look at the IP issues. So, um, I know this [00:25:00] is a patent, you know, related podcast, but I I did wanna talk about the trademark issues 'cause that's, that's really interesting too, uh, around cannabis. So, um, what are the issues that come up with, with cannabis related trademarks? So, as I'm sure we all know, you know, if you've got a, a product and you've got a brand on that product, one option for protecting it is to register the trademark with the US PTO.
James Gourley: And we all know the way you do that is you fill out an application and you file it with the US Patent and Trademark Office. And in that application you have to, you know, pick an international class, you have to describe the goods and services that you're selling under that, um, under that brand. And then you submit it and it gets examined by a trademark examiner.
James Gourley: Well. The US Patent and Trademark Office will not register any trademark if they believe that you are not using that trademark in accordance with us Federal Law. And this doctrine that they [00:26:00] use is called the lawful use doctrine. So they, it's not just cannabis. Um, they've, uh, they've rejected, uh, trademark applications under laws relating to like pesticides, um, uh, gambling, you know, just like I, they're, you know, 10 or 12 different examples of federal laws that have been used to reject trademark applications because the US PTO has taken the position that you're selling illegal goods.
James Gourley: We're not gonna be condoning that by giving you a registered trademark on it. Um, 'cause I, I guess they think that it's giving it sort of like the, uh, some sort of legal imp premature from the federal government and that they're just not gonna do it. Um. Just a side note, I think that doctrine is on highly shaky ground.
James Gourley: Um, but nevertheless, you're not gonna, you're not gonna convince the trademark office otherwise, so they're not gonna register it. If you, um, if [00:27:00] you submit a trademark application for any sort of high THC product, they're just, they're, they're gonna reject it. Uh, they're gonna look at the application, they're gonna send you a rejection, and there's pretty much no way you're gonna be able to get around it.
James Gourley: Um, so, and this is because, you know, TH C's illegal under the Controlled Substance Act. So, um, they're just not gonna do it. Um, so I guess that means that we can register CBD products, right? Because they are legal under the farm bill. But that's, that's wrong too. Um, the U-S-P-T-O is, takes the same position as the FDA that most of these CBD products are.
James Gourley: Illegal under the FDCA and, uh, the FDA has not approved them. So they're illegal too. So if you submit a trademark application on like a CBD beverage or a CBD cream, they're not gonna register that eagle either. Really, [00:28:00] the, the only thing that can consistently get registered is a trademark on hemp flour.
James Gourley: So you have to stay in the goods and services description that it's hemp flour with a concentration of THC less than 0.3%. And if you do that, um, the U-S-P-T-O will register your trademark. Of course, you actually have to be selling the hemp flour on, it's not a super popular product. Everybody wants the high THC one, right?
James Gourley: So, um, there's not a lot of, uh. Motivation for a, uh, manufacturer to be producing and selling the hemp flour by itself. 'cause not a lot of people want that product. So, um, it's not a great option for a lot of people in the cannabis space. So what, what are we supposed to do? One option to get something on the register is to trademark what we call ancillary goods.
James Gourley: So things like clothing, lighters, [00:29:00] rolling papers, there's even whole category of, uh, cannabis companies, uh, registering their trademark for quote, providing information about cannabis, which is not illegal. Um, and other things like that. So you can get your trademark on the register. It's just not gonna be for the product.
James Gourley: The main product that you're selling, like your primary profit center is not gonna be the product that's covered by your registration. Um, but of course the, the. Caveat here is you actually have to be selling these goods. We all know that you can't register a trademark until you're actually using it on the goods.
James Gourley: So you can't just say, oh, I'm, I'm registering this for clothing or lighters. You actually have to be selling clothing or lighters. So that's another, you know, it's just another cost of doing business. You gotta actually have these products and be selling them before you can get the trademark. Um, another option is state trademark registration.
James Gourley: So if you're selling cannabis goods in Colorado, you can register your trademark under Colorado State law, [00:30:00] get a state registration in Colorado. That way if somebody is infringing your trademark in Colorado, at least you have something. Um, and these. State trademark applications and registrations are all kind of interesting too because each state law is different.
James Gourley: Um, sometimes they, the, these applications are examined in a way that's similar to the way the U-S-P-T-O examines them. And, and sometimes they're not, sometimes they just kind of go on the register and, and when it comes time to enforce it, you actually have to prove that the market is distinctive and, you know, you're the senior user and you know, all the things.
James Gourley: So, um, it's really interesting. Another, you know, sort of patchwork of state laws, uh, can apply to, to cannabis ip. Uh, but again, you know, it's not the, it's not the greatest thing to, to have a state registration because it only covers one state, but at least it's something
David: James on, on the federal side. Yeah.
David: I know you said the legal framework was maybe on shaky ground, in your opinion, Uhhuh, but have you heard any kind of an [00:31:00] explanation for why I. On the patent, it's the PTO, same organization, but on the patent side, totally okay to file patents on illegal things, but on the trademark side it's not. Okay. Have you heard any explanation for that?
James Gourley: I guess the difference could be that the, you can get a patent without actually practicing it, right? So, sure. Got it. Um, yes. Yeah, so I think that's the big difference is they can say, Hey, look, we're not condoning any sort of activity here. And if you look at the patent rights, what does the patent give you the right to do?
James Gourley: Stop people from doing something. So basically the federal government's saying, Hey, you can go out there and stop people from doing this. So it's consistent with the, the CSA from, uh, uh, you know, from a legal perspective, if you're, if you're, if all you're doing is going for Injun an injunction, we'll talk about that here in a second.
David: That's pretty interesting [00:32:00] and at the risk of a, a little bit of a rabbit hole maybe, but, uh, from a patent, it's an interesting patent question. My background is material science and I do some chemistry related things as well. And, um, we've talked a couple of times about sort of the unpredictable art side of things.
David: So if you have a chemical or a biological invention, there's sort of higher bar for disclosure and sometimes in the extreme, they want you to have actually reduced it to practice in order to have it be really enabled. Um, have you run into any, I mean that seems like that's usually not something that you'll, a patent examiner.
David: I, I guess would say it's something that comes up in litigation or on appeal, but I don't know. Do you have any thoughts on that or?
James Gourley: Yeah, no, I haven't, I haven't really seen that issue come up during prosecution. Um, and a lot of this stuff is. Fairly straightforward. Um, I quite honestly, I mean, my personal view on a lot of these cannabis patents is, uh, it's, a [00:33:00] lot of it is people just repurposing, you know, processes that were already used to sort of like, I don't know, extract lavender oil from lavender plants or, you know, other chemicals from other sort of plant material.
James Gourley: And I don't, I don't know that there's a lot of like new ground being tread here. Now, the, the, the one that I talked about earlier about converting CBD over to THC using a specific catalyst, now that's kind of interesting. Um, and you know, that one I would say maybe there's some sort of enablement issue and you'd have to actually probably do that and prove it before, you know, before you could get a patent.
James Gourley: But stuff like, uh, chemical extraction, you know, using solvents or pressure, ice water, whatever you want to do, um. I think a lot of that stuff is just ground that's been pretty well tread over the last a hundred years, but interesting. Yeah. Thanks. Um, [00:34:00] so let's see. So that's the, that's about all I have to say on trademarks.
James Gourley: Um, like I just talked about, um, on the patent side, the U-S-P-T-O will issue patents that cover federally illegal cannabis. This is a really funny example of, of one issued patent. So this was issued in 2003. Um, it was well before anything was, anything cannabis related was legal under the farm bill. Um, and it looks like a normal patent.
James Gourley: You know, it's got the patent number, it's got the inventors, it's got the title cannabinoids as antioxidants and neuroprotectants. But the funny thing is you look down here at the as signee, it's the United States of America. As represented by the Department of Health and Human Services. So on the one hand, you got HHS that has taken the position that there is no accepted [00:35:00] medical benefit for cannabis as an excuse to keep it under Schedule one.
James Gourley: And on the other hand, they own this patent about using cannabinoids as antioxidants and neuroprotectants. Now this is one that I've never seen explained adequately anyway. Um, I mean, it's
Ashley: like a double dip to me. I don't know. Or a two-faced approach a little bit. I've always thought that when I, I bring this up all the time too.
James Gourley: Yeah. So, um, it's really funny that HHS has a patent at the same time that they, um, claim that it has no medical benefit. So, um, so as I think was mentioned before, um, I. I have been, I have quite a bit of experience in different aspects of the, um, of the cannabis industry. Um, I, I've represented co uh, companies who are in a dispute with the Colorado regulators actually, that have nothing to do with ip.
James Gourley: So I know a lot about the industry, [00:36:00] but, um, I have been on the defense side of two patent cases involving, uh, cannabis related patents. And the first one was back in 2018. It was filed in the district of Colorado and it was United Cannabis versus Pure Hemp Collective. And I've got the US patent number up here.
James Gourley: It's 9 7 3 0 9 1 1, and one of the claims that was asserted against my client, I have, instead of typing it into my PowerPoint slide, I actually took a, a screenshot, a clip from the PDF of the patent, because I know there are patent practitioners on here who will appreciate this. This is a two line claim.
James Gourley: This is the entire claim. It's two lines of the patent, and it is, um, by far the broadest claim that I've ever seen in 20 years of practice. And I'll just read it. It's, uh, a liquid cannabinoid formulation. We're in at [00:37:00] least 95% of the total cannabinoids is CBD cannabidiol. And, um, this patent has a, another claim that it's the exact same except it says at least 95% is THC.
James Gourley: It's got another one that says at least 95% is CBN, which is another cannabinoid. Um, and then there were a bunch of other, you know. Dependent claims that didn't really add anything. That also included things like terpenes, which are naturally present in the plant. Um, this, I mean, it, it's, it was shocking to me when I saw this patent that it actually got through the US Patent and Trademark Office.
James Gourley: 'cause the priority day was something like 2014. There is just an absolute ton of prior art on this patent.
Kristen: Are we sure There's not like a COAs me of the United States government and they just wanted to get in on this. 'cause this is ridiculously broad. Yeah, I know. They wanted to start selling, start making themselves.[00:38:00]
James Gourley: Well, you, I mean, this, this was, uh, this is owned by a co uh, it was owned by a company called United Cannabis, uh, corporation. So it was a private, private party, but
Kristen: Sure, sure. The,
James Gourley: um, I, I looked up, uh, back when I was working on this case, I looked up this examiner statistics and I think they had an allowance rate of like.
James Gourley: 85% or something like that. Like it was one of the, I think one of the easier examiners, if you're prosecuting patents, this is definitely like an examiner that you would want to, you would want to draw. Um, so, uh, so anyway, this is one of the cases that I worked on and, um, we ended up winning this case. Like finally at the end of it, they, the other side wanted to talk settlement, and I was like, okay, here's the settlement.
James Gourley: You dismiss all your claims with prejudice. That's it. That's it. And, uh, they did it. So, um, which they had, you know, they needed our consent to do it obviously, but, [00:39:00] um, so anyway, that's the way this one ended up. Um, and the only other thing that, again, the, the patent practitioners here might, might appreciate, um, and I would love to hear thoughts on this is, um, one of our arguments.
James Gourley: For why this patent was invalid was, it wasn't just that there was a ton of prior art. There was, but it, it was even worse. The, the, the attorney who drafted the patent copied and pasted a total of about, like two columns of text from a prior art reference. And, um, and they didn't disclose that reference to the U-S-P-T-O.
James Gourley: And that was one of the, the, the reference they copied and pasted from was one of the best novelty references that I had.
Ashley: Oh, weird.
James Gourley: So we were arguing that it all, it was also invalid based on inequitable conduct. And I know that, [00:40:00] you know, copying and pasting from the prior art is, is done, you know, on a fairly frequent basis when you're drafting patents.
James Gourley: But I just think that, I think you've got to. You gotta disclose it to the U-S-P-T-O, and I don't know that there's really any excuse for not doing that.
Ashley: Yeah, I think two things and like, you know, everybody else can weigh in. I mean, I think one, I don't think actually copying and pasting, I, you know, at least I, I don't think most of us copying and paste.
Ashley: There may be a world where I think, at least internally, a lot of our practice is, um, when referring to the prior art within the patent document, but then also citing it with the patent office, we may kind of say like, conventionally, you know, in this case we'd say conventionally CBD has been used in A, B, and C, you know?
Ashley: Mm-hmm. We, you know, our clients invention solves this problem by, you know, e, f, and G. Mm-hmm. Right. And then, you know, so we don't actually cite to the exact document. We don't, uh, copy and paste from [00:41:00] it, and we don't cite to the exact document in the patent application. But we do then cite the document in an information disclosure statement.
Ashley: So it's providing arguments. To the patent office already. Um, kind of more generally broadly in the application, but then also still saying, Hey, here it is, in case, you know, you wanna take a look at it. I'd be kind of curious your thoughts, James, too, on that practice, um, of, you know, kind of admitting that there's something out there, but kind of doing it in a more general way and then preemptively providing some arguments about why maybe your client's information or your, their invention is different from what's conventionally out there.
James Gourley: Yeah, I don't, I don't think that's a problem. Uh, I think as long as you are, um, like if, if they had disclosed that they got all of this text from this prior art document, I, I don't think there would've been a problem. Or even if they had summarized it and then still submitted the document, that wouldn't have been a problem.
James Gourley: But funny thing is, [00:42:00] one of the paragraphs that they copied and pasted was exactly a description like you just provided where it said, it talked about. Methods of making liquid formulations are well known in the art. It was a little bit longer than that, you know, it talked about, you know, different examples of liquid formulations and it said methods of making.
James Gourley: These are well known in the art. They copied that from the prior art. So it was like a double, you know, a double reference. Um, but the other thing is they, they, they copied a bunch of, uh, texts from Wikipedia too. And, um, that was about like almost a column of texts and it was all about like the different properties and uses of the different cannabinoids and the way I busted him on the copying and pasting for the prior art, because.
James Gourley: As I was reading through the prior art, I was like, this, this looks really familiar. And I went back to the patent and I was like, oh, they, they just copied and pasted it. But, um, the Wikipedia one, you [00:43:00] know, they've got, for each statement on Wikipedia, they've got a little bracketed footnote. They forgot to remove the bracketed footnote number from like two of the statements.
James Gourley: And I was like, that looks, that looks kind of funny. I wonder where they got that. And then I, you know, did some digging and, um, found that too. And they didn't disclose any of the Wikipedia stuff, any of the references cited in Wikipedia for any of that information. And that one was kind of deceptive too, because there were statements in there about like, uh, you know, certain cannabinoids are useful for certain medical conditions and things like that.
James Gourley: And if you, if you read it just completely cold, it almost sounded like they discovered that, like they did some testing, uh. Showed that, you know, a certain cannabinoid was, was useful for a certain medical condition and that wasn't what it was at all. They, they just copied that from Wikipedia. So again, there's like a, I don't know, it was just seemed highly deceptive to me the way they did it.[00:44:00]
James Gourley: Yeah.
Ashley: Well I feel like that kind gets to, oh, go ahead, Kristen.
Kristen: So overall it's very, very poor form to copy from other patents into your patent, except in a background section, maybe right where you're admitting prior art.
James Gourley: Yep.
Kristen: And maybe if you're talking boilerplate, like really generic computer type of boilerplate, those sorts of things.
Kristen: And even still, you know, we tend to make it our own. Like I would copy my own boilerplate from my own drafting, but I'm, I would, it would be unlikely that I would go out, find somebody else's content and put it into my application unless I was doing, as Ashley had said, where I'm, I'm trying to make a point that conventionally this is what happens.
Kristen: And I would still cite that art. So I'm, I would be surprised if you would not win on inequitable conduct if they were using the content reporting that it was kind of something they did and not [00:45:00] citing it. I would think those three points alone, you could get them, but. I know.
James Gourley: Yeah. We, unfortunately we didn't make it to sort of the final analysis on that, but
Ashley: ah, I was pretty confident more than invalidation James, is that the kind of what won the day is little bit the invalidation proceedings for this one, or,
James Gourley: well, I mean, it's kind of a long story.
James Gourley: It's, and it's a bit hard to know. Um, one thing that happened in the middle of this litigation is they filed for federal bankruptcy protection. Mm-hmm. The, the, the patent owner. So that immediately stayed the litigation, and then I followed the, um, I followed the bankruptcy fairly closely, you know, because we, we had a, a claim against them.
James Gourley: Um, and I just wanted to see if, if there was ever a chance that we could ever get that satisfied and. During the litigation, they, the, they filed, somebody filed a document, I can't remember if it was one of the, one of the creditors or the, the [00:46:00] patent owner filed a document suggesting that there was some kinda like New York investment group that was interested in buying this patent.
James Gourley: And for whatever reason, I don't know if that deal like never went through. But my allegations that I'm giving you about this copying and pasting and everything, there's an amended complaint with extreme detail about all this stuff and all of our inequitable conduct allegations. So even the most basic due diligence research would turn up, you know, our position, uh, the defendant's position on, uh, validity of this patent.
James Gourley: And, you know, it was, I guess it's kind of speculation, but I thought, I think maybe that investment group read through that and said, eh, I don't know if I want any part of this. So, um. The patent owner ended up getting kicked outta bankruptcy because as I we're gonna talk about next, um, cannabis companies can't file for federal bankruptcy protection.
James Gourley: So, um, the, [00:47:00] the, the US trustee filed a motion to dismiss and the creditors filed a motion to dismiss and the judge granted it, so the litigation started back up and, um, they immediately wanted to settle. So, um, yeah, so that's kind of how that ended up. We just never got to the, the, the final analysis.
Ashley: Well, I think the other thing interesting you bring up James too, is can you, you're talking about their examples about, you know, kinda the working, working examples that weren't really theirs.
Ashley: And I think that's like an important and a lesson around, um, you know, one in the space think as kind of David J was mentioning that. In some areas, especially these more unpredictable sciences you do, ideally you have examples and ideally you have working examples. But to your point, James, you know, it's not your own example.
Ashley: Making sure it's clear that it's not your own example, but then also if it's a working example, making sure that it's clear, you know, like label as a working example, past tense, that kind of stuff. If it's a prophetic example, maybe [00:48:00] labeling it as such and you know, or using like future tense, right? Yeah.
Ashley: Um, to help the patent office distinguish what's actually been reduced to practice versus what could be. And I know that, you know, a lot of our clients, we find it super useful to provide working examples if they're available, and then even supplement those working examples with pro prophetic examples to kind of expand it, saying, well if this is true then you know, B, C and D might also be true and here's how we would discern that.
Marie: Mm-hmm. Um,
Ashley: but yeah, I mean, again, getting back to just. Showing your work. Right. And if you're pulling stuff from other places, you know, in this case the joke is they couldn't even really say it was AI or anything. 'cause you know, AI wasn't as big of a thing as it, you know, at that time. Right. Yeah. Um, so yeah.
Ashley: Interesting.
James Gourley: Yeah. Um, so
James Gourley: there's, I think, a looming issue out there that has not been decided, which is, uh, whether [00:49:00] cannabis patents can be enforced, um, as I've, as we've been talking about high THC is, is illegal under federal law. I mean, it's been stated again and again and again. Even with all these, you know, there's, they seem to be allowing all these states to allow dispensaries and stuff that should be illegal under federal law.
James Gourley: Federal courts have said over and over again that it's, it remains illegal even if they're not enforcing it. And it's not just the Controlled Substances Act. Uh, there's also a federal law, uh, that says it's illegal for a per a person to, for a person, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity.
James Gourley: To conduct or attempt to conduct the financial transaction, which in fact involves the proceeds of specified unlawful activity with the intent to promote the carrying [00:50:00] on of specified unlawful activity. And that's known as money laundering. That's what we, that's the, that's generally, that's a federal statute, but it's the, the, the general term is called money laundering.
James Gourley: And under the statute specified unlawful activity is, includes violations of the Controlled Substances Act. So if you're involved in financial transactions with somebody who's violating the Controlled Substances Act and you're trying to sort of facilitate that, you're guilty of money laundering. Um, so it's not just violations of the CSA, it's also moving money around.
James Gourley: Um, and then the other doctrine that applies here is something that is known as the illegality rule or the ILE Illegality Doctrine. And it. Started out back in the earliest recorded example, uh, is from 1725, an English case called Everett versus Williams, and it's better it the, the, the [00:51:00] better title that it's, it's generally known as it's the Highway Men's case.
James Gourley: And that case involved one highway robber who sued another highway robber and. Claimed that he had been cheated out of his proceeds from like a series of robberies that the two of them had committed together. And the, the court in England in that case, refused to consider the suit and actually turned the two men over to the sheriff.
James Gourley: So, and then it goes from there. There's a, a bunch of Supreme Court cases and a bunch of other cases in federal court, um, in this, in, in the United States that follow this doctrine. And, um, the, the Latin, the Latin phrase begins, it's, uh, ex terpy causa. And the, the literal, I guess the translation from Latin is from a dishonorable cause and action does not arise.
James Gourley: And the most frequent place, um, like I just hinted at where this comes up is, is under federal bankruptcy. Um, and federal bankruptcy courts [00:52:00] just will not entertain bankruptcy petitions that are filed by illegal cannabis businesses. Um, and the main reason is that the trustee will be in the position of either administering an illegal business and, you know, making payments, accepting payments, involving illegal activity, or even if they liquidate, the trustee is distributing proceeds from an, an illegal business.
James Gourley: And, and that's a violation of federal law. And they, the court have said the trustee, the US trustee cannot be involved in that. Um, and there's, there's been one bankruptcy case that's involved, the IP rights and, um, it's called en re Med Point Management. And the bankruptcy court in that case noted that the debtor owned some IP and was licensing that IP for $8,000 a month to companies who were engaged in the federally illegal, but state legal, Arizona medical marijuana business.
James Gourley: And the court said that this was [00:53:00] the, the debtor's only current source of revenue. So, um, because the court said cannabis is illegal under the Controlled Substances Act, the, the bankruptcy court quote observed without citing that it is quite possible that the debtor's IP and the IP licensing revenues could be seized or forfeited.
James Gourley: The debtor could be or could have been guilty of facilitation of the crime of, of a crime under the CSA. So due to the unacceptable risk of violating federal law and administering the bankruptcy estate, the court dismissed the case. So that's a pretty strong pronouncement that if you're even, even in cases involving IP rights in federal court, that you're on very shaky ground.
James Gourley: And like I said, the plaintiff in that case that I handled in 2018, filed for federal bankruptcy protection. It, it was dismissed under the illegal doctrine. Um, [00:54:00] and even outside of the bankruptcy context, uh, the illegality doctrine has been cited in several cases. There was one in Colorado, uh, called Sensoria versus Kiski, and it was a dispute over sort of like a partnership dispute over ownership of a, uh, uh, an illegal marijuana business in Colorado.
James Gourley: And the plaintiff in that case tried to distinguish the bankruptcy cases that are, you know, there's, there's a bunch of 'em, uh, involving cannabis related companies. And the court in that is sort of like a breach of contract case noted that quote, the same obstacles a trustee faces in managing marijuana assets.
James Gourley: The court in this case has in providing a means of redress. And the court also said that it may not vindicate equity in or award profits from a business that grows processes and sells marijuana. So again, you've got a court saying, we look, [00:55:00] we just can't touch this. If we're gonna be moving money from an illegal business over to another business, it's, we just can't do that.
James Gourley: And then on February 25th, uh, a federal judge in Ohio has dismissed a breach of contract case involving the sale of a marijuana business, uh, which the court said was illegal under federal law, you know, using basically the exact same type of reasoning as Sensoria. Um, and that case is called CCH Acquisitions versus j and j and D Holdings, if you wanna go look it up.
James Gourley: Uh, so again, you've got, you know, again, it, it's never been, it's never been, you know, affirmatively answered in a, in a patent case, but I think there are great arguments out there. Um, so there are IP cases that have been heard in federal courts, and this is generally, uh, these have been cases where there is a legal business that has a federally registered trademark [00:56:00] that is being infringed by an illegal cannabis business.
James Gourley: And the court will hear that because. These, these trademark owners are, are pretty much just trying to shut down the illegal business. They're not really going after damages. I mean, maybe they are, but um, really they just want it to stop because they don't want their legal product being confused with this illegal product.
James Gourley: And it's so silly too because it's stuff like, um, um, you know, there's a, I can't, I can't remember what the company who, who, which company owns it, but they own a trademark on like Sour Patch Kids, the candy. And there was a cannabis company out there selling something called Stony Patch Kids. You know, I mean, it's just, I mean, have some originality.
James Gourley: Um, and I think there was one, there was a different one where a company was selling something that was just like Skittles, but it was Skittles, like with a z, um, at the, as the first letter. So I don't know. [00:57:00] These, these guys don't really have a lot of originality, but, um. The court will hear a case like that.
James Gourley: Um, because it's not really condoning, it doesn't involve the court condoning an illegal activity or being involved in it. Um, but patent cases are a little more nuanced. Um,
Ashley: you
James Gourley: know, like a, yeah.
Ashley: Or actually a quick question. So even in, I don't know what, I can't remember what Ohio's status is. Kinda go back to the Ohio case.
Ashley: So even, okay. So federal illegal, but different states have varying levels of legality. If I am a Michigan business, so it's legal for me, for medical or you know, recreational, recreational Michigan, um, if I'm a Michigan business trying to sell a my cannabis business to somebody else and they have a breach of contract, would that hold up?
Ashley: Versus a state where, you know what I mean? Because
James Gourley: No, [00:58:00] the state, not in federal, not in federal court.
Ashley: So only the district court. But if somebody appeals it to a federal court then, right. If it were like a district court Yeah. If you
James Gourley: file, if you file in state court, and that's actually, you know, it's not, it doesn't have really anything to do with ip.
James Gourley: But if you're, if you're involved in a cannabis contract, cannabis related contract transaction, you need to have a dispute resolution clause that specifies that any dispute needs to be heard in state court. Patent cases can only be heard in federal court. Um, trademark cases under the Lanam Act can actually be heard in state court.
James Gourley: So that would be really interesting. I don't, I don't know of any cannabis related cases under the, the LANAM Act that have been heard in state court, but in theory, I guess it's possible.
Ashley: Right. Um.
James Gourley: But yeah, no, I mean, if you're, if you've got a patent and you wanna sue somebody, you gotta do it in federal court.
James Gourley: Mm-hmm.
Ashley: Yeah.
James Gourley: Okay. So, um, but other transactions, you can specify that it has to be heard in state court and that, that, you know, [00:59:00] we'll, we'll survive, you know, according to the legality in the whatever state you're suing in. Yeah. So I, I, I've seen, uh, there was another case, um, where instead of, I think instead of dismissing the case, the court sent it back to the state court.
James Gourley: It just sort of like abstained and sent the case back to the state court after it was removed. Um, so that's, you know, that's one option that, that could happen. I guess if somebody tries to remove you to federal court, you could ask to send it back down because the federal court just can't hear it. Um, but, you know, patent cases are interesting because, um.
James Gourley: You can get an injunction, conceivably. Uh, so if you're asking the court to shut down a, an illegal cannabis business, that may not be something that a court would see would be violating the Controlled Substance Act. But if you're asking [01:00:00] for a royalty, you know, you're, you're sort of asking for a, a piece of the action.
James Gourley: You know, this company's selling illegal products and I want 3% of it, or I want 5% of it. That's kind of sounds like money laundering to me. Um, and I don't know that a federal court's gonna get involved in that. Um, I, I was on the defense side of another patent case where the defendant was in the federally illegal THC business.
James Gourley: It was a, it was a patent that involved, uh, extraction processes. Uh, it's, uh, like, but clo it was called closed loop butane extraction. So. You got, you know, a, a, a tank of butane, you transfer it over to a, an extraction container. Um, you leave the plant material in that extraction container and get the butane plus extract into a separation container.
James Gourley: Heat the separator to boil off the butane [01:01:00] essentially, and then you recapture the butane and use it just in a closed loop process. Um, and then what you're left with in, in the separation container is just the extract that you're interested in. So that, that was the basic technology that was involved. And again, it's like used for lavender oil and every oregano oil, whatever you wanna extract from a plant, you can do it using this, this butane close loop extraction.
James Gourley: So, um, in that case, I actually filed a motion to dismiss based on the illegality doctrine and, um, the court denied it, but I. Not in a way that I think really answers the question because if you file a motion to dismiss the, the court has to take everything in the complaint as if it's true and also kind of read it in, in a way that's most favorable to the company that did not move to dismiss.
James Gourley: And what the court found is that the allegations in the complaint and the patent were both broad enough to cover legal c, b, [01:02:00] D and illegal THC. And the fact that it was broad enough to cover a legal product was enough to survive the motion to dismiss. And in that case, we, again, we didn't get far enough to answer the question where it was squarely in front where all the evidence was in front of the court, that the vast, vast majority of the product that they were accusing of infringing was illegal under federal law.
James Gourley: Um, we never got to that point in that case, unfortunately. So it. You know, it's never to this day, I don't think it's ever really been answered.
David: That's pretty interesting. I it almost, it almost gives a roadmap or a, a path, at least a strategy. 'cause this, this, the fact that patents can't be enforced is kind of a big deal.
David: Mm-hmm. Um, it's sort of the whole point of like the grand bargain where you teach the world about something you're doing in exchange for being able to exclude people [01:03:00] for a set period of time, whatever. But like, if you can't exclude people, what's the motivation to, uh, file your, your great process or, or, or, or product.
David: But if you can, um, patent it, claim it in a way that's broad enough to cover CBD processes, for instance, legal processes, then you could focus on that.
Ashley: Yeah. Yeah.
David: Or an oil of something else. Sure. Right.
James Gourley: Exactly. Yeah. So that you, you you beat me to it. I was, I was gonna give some patent way to go prosecution strategy.
James Gourley: No, I, I mean it's good that, that, that's, I hopefully I explained it clear enough that, that that was obvious. Um, and exactly you can, for, especially for, for processing claims. I mean, a lot of 'em, you can just specify plant material and, you know, essential oils basically. Um, and I don't think that's, even though that is broader than just specifying the cannabis plant and cannabis, you know, related chemicals, [01:04:00] the same principles apply.
James Gourley: I mean, you're not, you're, you're not gonna get around like prior art on lave lavender oil extraction by saying, oh no, this is cannabis. I mean, it's just not gonna work. So, um,
Ashley: I don't think, is there any, is there any risk? And if you go to that broad approach where you're covering. Lots of different kinds of plants.
Ashley: Is there risk in even mentioning cannabis or in your opinion, is it okay to still, like if you had the laundry list, right, of Oh, it could be lilac, it could be whatever.
James Gourley: Yeah. Is there
Ashley: risk in saying cannabis in there or? Yeah,
James Gourley: I don't think so. Um, like I said, I think as long as it's broad enough, you're going to survive a motion to dismiss.
James Gourley: As long as it covers some legal activity that when the rubber meets the road though, is if you're going after an illegal high THC product that's gonna come out eventually. And I just really, I mean, I think it's gonna be [01:05:00] tough, the, the, A court may find a way to kind of weasel out of it. Um, but I don't know.
James Gourley: It's just, uh, I think it's, I think it's really uncertain. I think you may spend a whole bunch of money going after something that is, is just never gonna happen. So. And of course, you know, they're, they're looking at rescheduling high THC products into schedule three, which may change the analysis a little bit.
James Gourley: All of a sudden you're maybe not engaging in money laundering if you're asking for a royalty, um, you know, things like that. So the, the legal landscape could change and, um, make it easier to go after high THC products. But right now I just think it's, uh, there's too much risk for me to be involved in that anyway.
James Gourley: But sort of like breaking news, the last thing I have, in the last couple days, there have been three new cannabis related patent cases filed. [01:06:00] Um, this company called Metronome, LLC, has sued bio spectrum hemp up in Wisconsin. And then. These two companies, happy Hemp and Floyd's of Leadville were sued in Colorado.
James Gourley: And the patent, uh, is a, uh, the claims cover, a topical cream application. Again, I think there's a ton of prior art on this thing, uh, just based on my knowledge of, you know, that I've gathered over the last two cases. But we'll see what happens. Um, the, it's interesting though that the, the defendants in these cases are CBD companies.
James Gourley: So my, my suspicion is that the plaintiff may be a little worried about this illegality doctrine idea and doesn't want to go after. High THC defendants because there's some risk there. Uh, because I, I looked at the claims that are being asserted in, in the, these cases and the claims cover, [01:07:00] C-B-D-T-H-C, pretty much anything else in the cannabis plant.
James Gourley: So it's not, it's not limited to it's CBD or anything like that, but the defendants are certainly CB, D only companies. So, um, that's kind of like the, the latest salvo in the, the, uh, the cannabis patent litigation landscape. So,
Ashley: no, that was awesome. Appreciate it. So it seems like the takeaways are like, one, it's potentially risky business to file patents in the space because assertion may be difficult, but if you really do want to, it seems like searching.
Ashley: Is a must because there's, there's probably a fair amount of prior art out there, especially for compositions and things like that. Mm-hmm. Um, and then, and I've even heard that for like new strains and plant patents and things like that, like getting biochemical testing of it done because there are, I mean, there's been so many different strains and things like that out there that you wanna have the data to be able to prove that you [01:08:00] actually have a new strain of something.
Ashley: Right. But again, the enforcement of that might be difficult. And then three, um, if you are going to file regardless, you know, hopefully it's, you can file it in such a way where it's inclusive of legal things Yep. In addition to the illegal aspect, that might be part of it.
James Gourley: Yep. That's right. Yeah. And you know, like I said, even if a, even if a royalty is tough to get on an illegal THC product.
James Gourley: My reading of it is an injunction preventing them from selling any high THC product that, that's probably consistent with federal law. So that would carry some settlement value. At least, you know, if, if you've got a court order saying, Hey, you can't sell these THC products, it's like, well that's my business, you know, that's, that's my old business.
James Gourley: So there may be some settlement value there, but you know what, what it would entail is kind of like up to the parties, I guess,
Ashley: but from an injunction relief, [01:09:00] how does that, um, is that impacted because you were saying like based on the patent or are you saying Yeah, on the patent?
James Gourley: Yeah. You're infringing the patent.
James Gourley: So the injunctions
Ashley: are more difficult to get given the, they are more recent eBay interpretations and so,
James Gourley: right. But you, uh, again, in the cannabis content in the high THC. Uh, context. One of the factors is whether this injunction is in the public interest.
Ashley: Yeah. And if you've got a
James Gourley: federal law saying you can't, it's pretty
Ashley: clear.
James Gourley: Yeah. You're like,
Ashley: yeah,
James Gourley: this is, this is exactly in line with the public interest according to federal law. You know, if it, if it,
Ashley: yeah. It's not changed. That's true. It would, it's less about like, oh, I can't get my Apple watch at Christmas. And it's more like, oh, this is, they schedule one drug. Right.
James Gourley: Right.
Ashley: Fair enough.
James Gourley: Yep. And then like, you know, we talked about the other takeaway is claim strategy. Just make sure it's, the claims are, are, probably shouldn't mention THC unless it's like a dependent claim that you're not gonna assert. Um, [01:10:00] but yeah, just make sure it's kind of broad enough to, to cover legal activity.
Ashley: Yeah. That's crazy. Yeah, it's so weird in this like mixed landscape that we're in of having the federal legal at the federal, but technically you can still patent it and even government agencies are getting patents on it and in certain states have legalized it in varying degrees, but other ones haven't.
Ashley: And it's out, it's like a very weird, very weird landscape right now and hard to navigate for in that federal versus state climate. Yeah.
James Gourley: Yeah. And the, the trademark stuff too is also interesting. It really requires a lot of thought in how best to protect a brand given, given the landscape. Um, and I, I've just, it's so, I, I don't know why my career is involved so much cannabis work, but, um, I learned about this, this, these trademark issues because I, uh, I helped the, this organization called the Americans for Safe Access.
James Gourley: It's a, uh, cannabis [01:11:00] advocacy organization. It's pretty large. And, um. There was a trademark case at the federal circuit involving, uh, cannabis t and they wanted to file a, an amicus brief with the federal circuit in that case. So they asked me to, to help them prepare that and file it. And over the course of drafting that amicus brief, I learned like everything you'd ever want to know about cannabis trademarks and more.
James Gourley: So, um, I don't know, it's just been, been kinda strange, but Yeah.
Ashley: But for the trademark side of it, you would, you generally recommend filing state trademarks in legalized states as a good route, um, and leaving the fed, obviously leaving the federal side outside of those, um, however you called it, those
James Gourley: ancillary.
James Gourley: Yeah. See if you can get some, some ancillary goods, uh, trademarked and um, yeah, just go state by state wherever you can get registration.
Kristen: Yep. Okay. Yeah. I really appreciate this, James. This is a hard [01:12:00] topic to keep up on in our space, but it's also difficult just following the news to keep up. So this was great.
James Gourley: Cool.
Ashley: Awesome. Well, cool. Any other questions from anybody or, um,
Marie: no, I found it fascinating. Oh, good. It's, uh, it, it's got a little bit of everything in it. The legality of things from state to state. Yeah. Yet you're in the, basically you're under the umbrella umbrella of the federal government. Yeah. But it's not legal federally.
Marie: Yeah. Yeah. Right. So yeah. It, it's clear as mud, right?
Ashley: Yeah.
James Gourley: Yeah.
Ashley: I love the Highway Men case too, that you shared from like 1700. That was awesome.
James Gourley: Yeah.
Ashley: One robber stole for me.
James Gourley: Yeah. Yeah. No, they're, I mean, they're, uh, the earliest US Supreme Court case. That cited the illegality doctrine was like back in the 1920 or 1820s or 1830s or something like that.
James Gourley: Um, so there's like a, there's a really long history of cases [01:13:00] of courts just not wanting to get involved in disputes over illegal activity. I mean, it's just very, very long history of it.
Marie: I do have one question. Um, I would assume that there's just going to be more activity in this area because, you know, I'm, I live in Massachusetts, so I have that perspective on it, but there's money behind this.
Marie: There's money to be made. Mm-hmm. So I think the minute that happens, everybody starts trying to protect what they're trying to do.
Ashley: Well in the states, you know, even two states that have legalized, you see this boon of not necessarily protecting stuff, but like of industries popping up. Right. I mean, it's just crazy.
James Gourley: That, that's all I have. If you guys, if you, if there are no further questions, I appreciate you having me on.
Ashley: Yeah, this was great. We really appreciate it.
David: Yeah, thanks. Super interesting. Awesome. [01:14:00]
Ashley: Thank you. Thank you. Take care everybody. Have a good new weekend. Bye-bye. You too. Bye-bye, James. Bye-bye. Bye.
Ashley: Alright,
Josh: that's all for today folks. Thanks for listening, and remember to check us out@aurorapatents.com for more great podcasts, blogs and videos covering all things patents strategy. And if you're an agent or attorney and would like to be part of the discussion or an inventor with a topic you'd like to hear discussed, email us at podcast@aurorapatents.com.
Josh: Do remember that this podcast is not constitute legal advice And until next time, keep calm and patent on.
