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Field of Hemp

Congress has passed the 2018 Farm Bill by an overwhelmingly majority and the President is expected to sign it into law. The Farm Bill has huge implications for the industrial hemp industry because it removes hemp from the federal list of controlled substances and enables farmers to apply for crop insurance. Hemp is a variety of the cannabis sativa plant that contains very low levels – 3 percent or less – of THC found in marijuana, and doesn’t have the psychoactive effects associated with its biological cousin. Hemp has a vast range of industrial uses that include textiles, clothing, plastic substitutes and as an additive to food and drink. Many proponents contend it can also be used to treat conditions such as chronic pain and anxiety. If the President signs the bill, hemp would be regulated by the U.S. Department of Agriculture, much like any other crop, and farmers will legally be able to grow, process and sell the plant and its derivatives such as CBD oil. The Farm Bill presents massive opportunities and a potential boon to the industry that produces and markets cannabidiol, or CBD oil, which has become increasingly popular in recent years. Last year, hemp sales reportedly reached $820 million in the U.S. and that was without it being completely legal. Some analysts now project hemp could grow into a multi-billion dollar industry by 2020 and that the global hemp market could increase to $10 billion by 2025.

John Shaeffer writes:

Light bulb symbol composed of cannabis, illustrating concept of cannabis-related patentsOn July 30, 2018, United Cannabis Corporation (“UCNN”) filed a lawsuit in Federal District Court in Colorado against Pure Hemp Collective Inc. (“Pure Hemp”) alleging that Pure Hemp infringed U.S. Patent No. 9,730,911 (“the ‘911 Patent”), which is entitled Cannabis Extracts and Methods of Preparing and Using Same.  The ‘911 Patent issues on August 15, 2017, based on an application filed on October 21, 2015.

As is typical in a patent case, the complaint tells us little.  The ‘911 Patent, however, describes its invention as “relat[ing] to the extraction of pharmaceutically active components from plant materials, more particularly [a] botanical drug substance (BDS) … comprising cannabinoids … extracted from cannabis.”  ‘911 Patent at 1:14-17.  The ‘911 Patent’s claims are limited to formulations of what is extracted.  For example, Claim 1 of the ‘911 patent is “[a] liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is terahydrocannabinolic acid.”  ‘911 Patent at 18:29-31.  For UCNN to prove that Pure Hemp infringes Claim 1 of the ‘911 Patent, UCNN must prove that Pure Hemp makes, sells, or uses a product that is or contains this specific formulation.

Now patent law does not protect anything discovered.  Specifically, Section 101 of Patent Act provides:

Whoever invents or discovers any new and useful … composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. § 101.  The United States Supreme Court has “long held that this provision contains an important implicit exception[:] Laws of nature, natural phenomena, and abstract ideas are not patentable.” Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66, 70 (2012). (internal quotation marks and brackets omitted).  In a fairly well-known case, the United States Supreme Court held that the discovery of the location and sequence of genes that dramatically increased a woman’s risk for developing breast cancer was not patentable because all that was discovered is something that already exists in nature. Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 590 (2013).

While there may be something unique and inventive about the way UCNN extracts cannabinoids from cannabis, the ‘911 patent does not claim any such method, even though methods are described in the patent’s specification.  During the examination of the application that matured into the ‘911 Patent, its examiner initially rejected its claims as being not patentable because all that was claimed were compounds already found in the cannabis.  Counsel who prosecuted the ‘911 Patent overcame the examiner’s rejection by arguing that the ‘911 Patent claims a liquid and the compounds in the cannabis are a resin.  While the examiner found this distinction significant enough to allow the ‘911 Patent to issue, we should expect that Pure Hump will argue that what the ‘911 Patent claims are simply a natural phenomena and not entitled to patent protection.  Simply that the distinction between the natural resin form and a liquid is not sufficiently significant to warrant awarding a patent here.  So even if UCNN can prove that Pure Hemp infringing one or more claims of the ‘911 Patent, Pure Hemp can still prove the patent invalid because it does not claim a patentable invention.

In addition to the requirement that the invention claimed in the ‘911 Patent be protectable under Patent Law, Pure Hemp has other roadblocks it can raise in an effort to stop the patent’s enforcement.  Patent Law requires that the patent specification include a written description of the invention and explain how to make – enable – the invention.  Pure Hemp has some strong arguments that the ‘911 Patent fails in both respects.  While the specification of the ‘911 Patent describes a variety of ways to extract all cannabinoids from cannabis, each of its claims assert specific concentrations of particular cannabinoids – e.g. “[a] liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is terahydrocannabinolic acid.  The specification fails to describe how to achieve any of the specific concentrations claimed.  The reason for this disconnect may stem from the fact that during the prosecution of this patent, the examiner argued that the methods for extracting cannabinoids described in the patent were already well-know.  The examiner rejected all the claims based on a generic composition of such extracts as being obvious and/or anticipated.  To overcome, this objection, the patent’s claims were amended to claim specific concentrations of specific cannabinoids even though the specification failed to describe how to obtain such concentration.  This disconnect means that the reader of the patent is not told how to make the invention and raises question as to whether the inventor could so isolate extracted cannabinoids – i.e.  the invention is not enabled and lacks and adequate written description.

John Shaeffer is a partner in the firm’s Litigation Department, based in its Los Angeles office.

Citrus greening, a disease that has been slowly spreading throughout Florida since 2004, has been putting the squeeze on Florida’s key agricultural crop (the citrus industry in Florida is worth $10.7 billion).  Citrus greening impairs the citrus trees ability to produce fruit and eventually kills the trees.  Many Florida citrus farmers are turning to other crops to replace their orange juice and citrus fruit business including olives, hops (for beer), pomegranates, and even pongamia (a type of legume).

Another crop that has been proposed for the Florida agriculture industry as a replacement for oranges is hemp.  Hemp can be used in the industrial market for fibers, rope, construction, paper, insulation materials and clothing.

Hemp was a key crop in the early years of America providing rope, clothing and sail material among other materials.  Hemp was a favored crop because it grew quickly with little cultivation and, even today, can be found growing wild in many parts of the mid-west.  President Thomas Jefferson invented the hemp brake which was used to separate fibers from the stalk of the hemp plant.  It has also been reported that Thomas Jefferson said this about hemp:

Hemp is of first necessity to the wealth and protection of the country.

In 1937, the cultivation of hemp was made virtually impossible with the passage of the The Marijuana Tax Act.   And, hemp was banned for good in 1957 mostly because it looked too similar to marijuana despite the fact that it produces little to no THC.

With medical marijuana and recreational marijuana being legalized on the state level across the country, hemp has also slowly started to make a come back.

In 2017, the Florida Legislature took the baby step of passing Florida Statute s. 1004.4473 which has created an industrial hemp pilot program in Florida.  The pilot program permits the two Florida land grant universities — University of Florida and Florida A&M University — to develop public-private partnerships to produce hemp, analyze results and report back to the Legislature.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.