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Jihee is an experienced complex commercial litigator in Harris Bricken’s Portland office. She represents clients in business, intellectual property, and real estate matters. Having worked extensively in both federal and state courts, Jihee advises her clients from case intake through arbitration and trial.

Great news: on March 7, 2019, the “Secure and Fair Enforcement Banking Act of 2019” (or, the “SAFE Banking Act”) was officially introduced in the House of Representatives. Even greater news: championed by Representatives Ed Perlmutter (D-CO) and Denny Heck (D-WA), the SAFE Banking Act reached the House with a bipartisan alliance of 106 co-sponsors – meaning a quarter of the House recognizes that state-legal, marijuana-related businesses need to be able to engage with banks and other financial institutions, and vice versa.

As discussed in this earlier blog post, the SAFE Banking Act aims to prohibit federal regulators from punishing banks and other financial institutions that provide banking services to state-legal marijuana businesses, marijuana-related businesses, and their owners and employees. This includes preventing federal banking regulators from limiting a depository institution’s access to the Deposit Insurance Fund and taking action on loans made to marijuana businesses.

At the time of its introduction, Representative Perlmutter re-emphasized that the legislation was primarily aimed at safety – “The SAFE Banking Act is focused solely on taking cash off the streets and making our communities safer. Only Congress can provide the certainty financial institutions need to start banking legitimate marijuana businesses – just like any other legal business – and reduce risks for employees, businesses and communities across the country.”

Representative Heck went on to elaborate: “We know based on the Treasury guidance that the federal government prioritizes keeping this product out of the hands of children and organized crime. The most effective way to do that is to not only allow, but encourage these businesses to use traditional banking methods to track their sales, deposits, expenses, tax payments, and other business transactions. If Congress fails to act, we are discouraging responsible, regulated markets and allowing a serious public safety threat to go unaddressed.”

In case you need a refresher, the SAFE Banking Act needs to pass the House by a simple majority (218 of 435) to reach the Senate. While it’s a long way off from becoming law, the SAFE Banking Act is certainly off to a much better start than all its predecessors. Stay tuned.

In keeping with last week’s cannabis patent litigation update, it’s important to discuss a landmark decision that was made by the U.S. Patent and Trademark Office (“USPTO”) Patent Trial and Appeal Board (“PTAB”) on claims involving a cannabis patent just two months ago. On January 3, 2019, the PTAB published its Final Written Decision in the case, Insys Development Co, Inc. v. GW Pharma Ltd., et al. (IPR 2017-00503). SPOILER ALERT: the PTAB found two claims to be unpatentable as obvious, and the remaining eleven claims to be valid (and potentially enforceable in litigation).

In this case, the subject patent was U.S. Patent No. 9,066,920 – “Use of one or a combination of phyto-cannabinoids in the treatment of epilepsy” (“the 920 Patent”). The 920 Patent was originally assigned to GW Pharma Ltd. (“GW Pharma”) and Otsuka Pharmaceuticals Co., Ltd. Some background on GW Pharma: it owns an extensive patent portfolio, many of which are directed to treat disease using cannabis-based formulations. Notably, GW Pharma made history by becoming the first entity to receive FDA approval of the drug, Epidiolex, which contains CBD. Epidiolex was approved to treat two rare forms of epilepsy: Dravet syndrome and Lennox-Gastaut syndrome.

cannabis marijuana patent

Insys Development Company, Inc. (“Insys Development”) is a pharmaceutical company that focuses on cannabinoids and drug delivery systems. Insys Development petitioned the USPTO for an inter partes review (“IPR”) in December 2016 to cancel all thirteen claims of the 920 Patent as obvious based on scientific articles as well as one of GW Pharma’s own published PCT applications.

The two patent claims that were invalidated related to dosing. Although the daily CBD dose given to epileptic patients in the studies was less than the 400 milligrams described in the 920 Patent, the PTAB said it was “logical to think” a higher dose could “increase the anticonvulsant effect.” The PTAB continued, “We find on this record that petitioner has shown sufficiently that a [person of skill in the art] would have a reason to, and a reasonable expectation of success in, increasing the dosage of CBD to at least 400 mg/day to treat partial seizure.”

The remaining eleven claims that survived PTAB review outline additional requirements for administering CBD to treat epilepsy. The PTAB disagreed with Insys Development that these claims were obvious. One claim requires that the CBD be present as a plant extract. Another claim requires the CBD be administered with the cannabinoid THCV. In sum, the PTAB concluded that “[it] find[s] that [Insys Development] has not shown sufficiently where each of the limitations of [these] claims is taught or why a [person of skill in the art] would have combined the teachings of the various references to arrive at the claimed invention with a reasonable expectation of success.”

Consistent with the UCANN case, a key thing to note is that the PTAB treated this cannabis patent IPR challenge as any other, and the fact that cannabis remains a Schedule I drug was not raised as an issue. Coming full circle, it’s likely that IPR challenges of cannabis patents are going to join the overall growing trend of cannabis patent applications and cannabis lawsuits filed.

We’ll know whether either side appeals the Final Written Decision by March 8, 2019.  If an appeal does happen, the case can go through a panel rehearing and then the Federal Circuit, or straight to the Federal Circuit.  Either way, we will keep you posted.

cannabis patent litigation
Did UCANN really get USTPO coverage for prior art?

About six months ago, we posted news of the first ever cannabis patent infringement case.  As a reminder, the case was initiated by United Cannabis Corporation (“UCANN”) in the United States District Court, District of Colorado against its in-state competitor, Pure Hemp Collective Inc. (“Pure Hemp”). The subject patent is U.S.P. 9,730,911 – “cannabis extracts and methods of preparing and using same,” which generally covers liquid cannabinol formulations using tetrahydrocannabinol (THC), cannabidiol (CBD), and various terpenes (the “911 Patent”).

Just six months into litigation, Pure Hemp has already responded by filing a Counterclaim and Motion for Partial Summary Judgment, which has yet to be heard. These filings have already raised several issues of first impression. While we plan to cover each of these issues on the blog, perhaps the most fascinating question relates to Pure Hemp’s prior art arguments, which could effectively invalidate UCANN’s 911 Patent altogether.

First, let’s back up with a high-level overview of the term “prior art.” In order to successfully obtain a patent, U.S. patent law requires the applicant to demonstrate that the invention attempting to be claimed is both (1) novel, and (2) nonobvious. Both these factors can be overcome by what is known as prior art – public knowledge, usage, or other types of disclosures. The European Patent Office puts it succinctly: “Prior art is any evidence that your invention is already known.”

Here, one of the key issues to be determined is whether the 911 Patent is obvious and could not be considered novel given the long-standing science and technology relating to cannabis extraction and preparation. In its filings, Pure Hemp makes that exact point by arguing that highly concentrated liquid CBD formulations are “ubiquitous” and “were not invented in this millennium.” One of Pure Hemp’s attorneys, Donnie Emmi, was quoted as saying he believed Pure Hemp had a good chance of invalidating UCANN’s 911 Patent if the Court agreed with their analysis.

Of course, it remains to be seen exactly what Pure Hemp plans to offer in support of its prior art argument. Typically, defendants in patent litigation produce years, sometimes decades, of scientific articles and other writings to demonstrate a given industry’s preexisting research and knowledge. It’s clear this wealth of evidence likely doesn’t exist for Pure Hemp given the general illegality of marijuana to date. This means the prior art could definitely be out there, but hard to definitively prove given that it was driven underground.

It’s also clear that that is about to drastically change for the cannabis industry. With marijuana now partially legalized in thirty-three states, each and every business is clamoring to get its newest formulations of cannabis patented before a competitor. The number of patents issued by the U.S. Patent and Trademark Office has more than quadrupled since 2016. It’s also worth noting that the parties are represented by reputable patent attorneys, and the Court seems to be paying close attention. This case will no doubt clarify and shape the field of cannabis patent litigation for years to come. Stay tuned!

SAFE banking cannabis

Six years after it was initially introduced, the House Financial Services Committee released the latest draft legislation that would create a “safe harbor” for banks to serve the rapidly expanding cannabis industry on February 7, 2019. Entitled the “Secure and Fair Enforcement Banking Act of 2019” (or, the “SAFE Banking Act of 2019”), the bill aims to prohibit federal regulators from penalizing banks and other financial institutions that provide banking services to marijuana businesses, marijuana-related businesses, and their owners and employees.

As a reminder, thirty-three states and the District of Columbia have legalized the sale and use of medical marijuana, while ten states and the District of Columbia have approved marijuana for adult or recreational use. With the fast-growing acceptance of cannabis evident as ever, the bill’s supporters claim that it would provide sorely needed legal clarity at a time when the cannabis industry faces serious financial and security risks. Accompanying the draft legislation was a memorandum prepared by the Financial Services Committee, which explains the reasoning behind this renewed push for legislation:

An increasing number of financial institutions have expressed interest in providing banking services to state authorized cannabis-related businesses as nearly all states have authorized various degrees of cannabis use, such as for medical use … However, many financial institutions are refraining from offering banking services to these businesses based on several legal and compliance risks. … As such, cannabis-related businesses have been described as a “soft target” for being robbed and assaulted, having their stores broken into, and their plants stolen” (citations omitted).

Generally, this iteration of the SAFE Banking Act pushes for even greater protections than those included in prior versions by including some new provisions, including:

1. Identifies (for the first time) and adds protections for ancillary businesses providing products or services to cannabis-related legitimate businesses (this is huge because even banks that would choose not to provide services to cannabis businesses may get caught under the present scheme);

2. Adds protections for marijuana-related “retirement plans or exchange traded funds” and “the sale or lease of real or any property [and] legal or other licensed services … relating to cannabis”;

3. Adds protections for the “distributing or deriving any proceeds, directly or indirectly, from cannabis or cannabis products”;

4. Specifies how businesses on tribal land could qualify; and

5. Requires that the Federal Financial Institution Examination Council develop guidance to help financial institutions lawfully serve cannabis-related legitimate businesses.

The general purpose and directive of the Safe Banking Act is arguably summarized by the following catch-all provision:

[P]roceeds from a transaction conducted by a cannabis-related legitimate business shall not be considered as proceeds from an unlawful activity solely because the transaction was conducted by a cannabis-related legitimate business.”

The bill is authored by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH), who have indicated that they plan to re-introduce the SAFE Banking Act by the end of the month. The House Subcommittee on Consumer Protection and Financial Institutions has already held hearings, which seem to have gone well. Looking ahead, it’s likely that the House Financial Services Committee will also hold a hearing and potentially mark up the bill. Based on the SAFE Banking Act’s reception, and with so many other cannabis-related issues on the table, we might be seeing a much more expansive bill to end federal cannabis prohibition for good in the near future.