U.S. Canna-Patents After the 2018 Farm Bill

Almost one year ago, the 2018 Farm Bill was signed into law, and, for the first time, hemp and hemp-derived cannabidiol (CBD) were federally legalized. Under the statute, legal hemp is defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.”[1] This law was an important first step in legitimizing a large sector of the cannabis industry under federal law, marking an important step forward for companies that produce or cultivate hemp and/or manufacture, market, and sell CBD products derived from hemp. In the months following the enactment of the 2018 Farm Bill, the United States Patent and Trademark Office (USPTO) issued guidelines on how it will examine federal trademark applications for CBD, which previously had no legal use in commerce due to CBD falling under the Schedule I classification of the Controlled Substances Act.[2] However, there have also been developments on the canna-patent side in the past year, perhaps fueled by hemp legalization.

U.S. Canna-Patents

By way of a brief background, the USPTO grants patents for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”[3] However, unlike some other federally granted intellectual property rights (e.g., federal trademarks), U.S. patents do not confer a right to use the invention, rather they confer the right to exclude others from making, using, and selling the invention in the United States.[4] Thus, although many patented cannabis inventions are currently illegal to practice under federal law, the USPTO has had a long history of granting all types of U.S. cannabis-related patents (utility and design), as well as patents on the cannabis plant itself.

Because the subject matter of many such canna-patents is still illegal to practice under federal law, there is a litany of potential issues with enforcing them in U.S. federal courts. However, with the passing of the 2018 Farm Bill, many prior-issued canna-patents may no longer have enforcement issues in federal courts. As such, the industry may expect to see an increase in the filing of patents directed to hemp-derived CBD as well as patent infringement lawsuits to enforce canna-patents involving legal CBD products.

U.S. Plant Patent PP30,639

In July 2019, a new plant patent, U.S. Plant Patent PP30,639, entitled “HEMP PLANT NAMED ‘CW2A’” was granted to CWB Holdings, Inc. (aka “Charlotte’s Web”). CWB Holdings markets itself as “an industry-leading pioneer creating whole-plant hemp health supplements.”[5] This plant patent was granted within the year following the enactment of the 2018 Farm Bill. The claimed invention of this patent covers “[a] new and distinct cultivar of hemp plant named ‘CW2A’ substantially as shown and described herein.”[6]

PP30,639 recognizes the nuances of the Farm Bill and the USPTO’s guidelines on the same. It notes that federal law requires protectable hemp contain “no more than three-tenths of one percent (i.e., 0.3%) concentration of tetrahydrocannabinol (THC),” and that the claimed invention “relates to a new and distinct hemp (Cannabis sativa L.) cultivar designated as ‘CW2A’.”[7] As described by the patent, the extracts of CW2A “contain an assortment of phytocannabinoids (e.g., CBD), terpenes, flavonoids and other minor but valuable hemp compounds that work synergistically to heighten effects of products produced from ‘CW2A.’”[8] The patent also specifies that “[t]he primary goal of the breeding program [for CW2A] was to develop a new hemp variety with high cannabidiolic acid (CBDA) concentrations and low tetrahydrocannabinolic acid (THCA) concentrations in its mature female flowers.”[9]

But, importantly, with the described growing conditions, the patent notes that the following THC and CBD contents of CW2A can be achieved at harvest maturity: “(i) Total THC content: 0.13% to 0.27%; (ii) Total CBD content: 4.50% to 6.24%.”[10] As a comparison, the cannabis plant, “ECUADORIAN SATIVA,” which is described by U.S. Plant Patent No. 27,475, contains 12.45% total THC content.[11] Thus, at maturity, the claimed invention in the CW2A patent appears to comport with the carve out requirements of the 2018 Farm Bill, and, thus, also appears to be federally legal to practice, which could prove beneficial if CWB Holdings ever attempts to enforce the patent in U.S. federal courts.

However, this patent does not wholly foreclose the path forward for other hemp producers seeking to develop and protect other varieties of high-CBD/low-THC cannabis. That is, by its very nature, U.S. Plant Patent PP30,639 only covers the specific plant it claims. It is not, for example, a utility patent that could potentially broadly cover several different varieties of hemp plants depending on the breadth of the claims and disclosure in the specification.      

U.S. Hemp-Related Patent Enforcement

Although one of the first cannabis patent infringement lawsuits is still underway in the U.S. District Court for the District of Colorado, United Cannabis Corp. v. Pure Hemp Collective Inc. (1:18-cv-01922), patent infringement litigations involving patents covering cannabis plant-touching products (e.g., CBD/THC formulations) or methods (e.g., CBD/THC extraction techniques) are still rare.

However, there was at least one example of a hemp-related patent infringement lawsuit that was filed this past year. On September 25, 2019, AFAB Industrial Services, Inc. v. Apothio, LLC was filed in the U.S. District Court for the Eastern District of California involving techniques and equipment for extracting CBD from hemp. In that case, Plaintiffs AFAB Industrial Services, Inc., NewBridge Global Ventures, Inc., EcoXtraction, LLC, and CleanWave Labs, LLC (collectively, AFAB) sued Apothio, LLC, Apothio, Bakersfield, LLC, and one of Apothio’s managing members (collectively, Apothio) for patent infringement of six utility patents related to hemp/CBD oil processing methods and equipment.[12] Of the six patents asserted in this case, U.S. Patent No. 10,011,804 (the “’804 patent”), entitled “Method of Extracting CBD, THC, and Other Compounds From Cannabis Using Controlled Cavitation,” explicitly disclosed cannabis extraction methods. Claim 1, the only independent claim of the ‘804 patent, recites:

1. A method of extracting oils from the cannabis plant comprising the steps of:

(a) drying the cannabis plant;

(b) chopping or grinding the dried cannabis plant into pieces;

(c) combining the pieces of cannabis plant with a fluid to form a mixture;

(d) passing the mixture through a cavitation zone;

(e) causing cavitation events in the fluid that produce shock waves and pressure variations in the cavitation zone, the cavitation zone being defined between the outer peripheral surface of a rotor and an interior surface of a housing within which the rotor is rotatably mounted, the rotor having cavitation inducing structures on its outer peripheral surface, and wherein the step of causing cavitation events comprises rotating the rotor within the housing as the mixture passes through the cavitation zone;

(f) as a result of step (e), liberating oils from the pieces of the cannabis plant, the liberated oils becoming entrained within the fluid; and

(g) separating the oils from the fluid; where in step (e), the shock waves and pressure variations are controlled by varying the rotation rate of the rotor to reverse hornification caused by step (a).

The remaining patents in the case related more broadly to cavitation devices and methods for biomass processing.

According to the Complaint, NewBridge and Apothio entered into a business arrangement whereby Apothio would grow hemp crop and NewBridge would produce CBD oil using the patented equipment and extraction methods.[13] In particular, the patented technology involved processing hemp “in a continuous oil extraction process using water as a medium, rather than batch extraction using ethanol and CO2 as is currently used today.”[14]

Following a change in the business arrangement, AFAB demanded that Apothio return the hemp extraction equipment, which at the time was contained in a facility operated by Apothio, and Apothio refused.[15] AFAB then sued Apothio for patent infringement as well as filed a motion for a temporary restraining order (TRO) and preliminary injunction to permit AFAB to access and seize the equipment that could be used by Apothio to infringe the patents.[16] In response, Apothio argued, in part, that there was no proof that it had infringed (or will infringe) because the equipment at issue had been idle during the dispute.[17] While the court preliminarily concluded based on AFAB’s filings that they demonstrated a likelihood of success on at least one of their patent claims, the court ultimately denied the AFAB’s motion and vacated the prior TRO Order. The court was persuaded by Apothio’s arguments that the equipment was in a “shuttered” state and that a key component of AFAB’s equipment was not present at the facility, and therefore, the situation did not “indicate use or threatened use” of the patented technology.[18] Shortly after the Order denying the TRO and preliminary injunction, the parties settled the case.[19]

While the AFAB Industrial Services v. Apothio patent infringement case ended quickly, it is likely one of many hemp-related lawsuits to unfold over the next few years. Put simply, now that companies comporting with the 2018 Farm Bill have far more opportunities to leverage U.S. court systems based on the legality of their products and services under federal law, it will be exciting to see how hemp-related patents begin to play a bigger role in disputes between companies in this space. And, with CBD sales projected to reach $20 billion in the U.S. by 2024, patent protection of new hemp plant varieties and hemp-derived CBD inventions is as important as ever for canna-businesses to stake (and protect) their place in this expanding industry.[20]

[1] 7 U.S.C. 1639o(1).

[2] See George “Trey” Lyons, III et al., USPTO Issues CBD Trademark Guidelines in Light of 2018 Farm Bill: Key Takeaways, Patent Docs (May 8, 2019), https://www.patentdocs.org/2019/05/uspto-issues-cbd-trademark-guidelines-in-light-of-2018-farm-bill-key-takeaways.html.

[3] 35 U.S.C. § 101.

[4] See 35 U.S.C. § 154.

[5] Our Company, Charlotte’s Web, https://investors.charlottesweb.com/our-company/default.aspx (last visited Dec. 8, 2019).

[6] Like all plant patents, PP30,639 has a single claim drawn narrowly to the specific plant variety disclosed in the patent. Here, the claim specifically calls out “hemp,” another likely reference to the Farm Bill.

[7] Hemp Plant Named ‘CW2A,’ PP30,639, col. 1, ll. 14-16, ll. 26-27.

[8] Id. at col. 1, l. 28 – col. 2, l. 3.

[9] Id. at col. 2, ll. 22-25.

[10] Id. at col. 19, ll. 43-45.

[11] Id. at col. 16, ll. 25-31.

[12] See Complaint, AFAB Industrial Servs., Inc. v. Apothio, LLC, No. 19-01355 (E.D. Cal. Sept. 25, 2019). The patents asserted in this case were Method of Extracting CBD, THC, and Other Compounds From Cannabis Using Controlled Cavitation, U.S. Patent No. 10,011,804, Continuous Hydrodynamic Cavitation Crystallization, U.S. Patent No. 9,469,548, Method of Extracting Starches and Sugar from Biological Material Using Controlled Cavitation, U.S. Patent No. 8,430,968, Controlled Cavitation Device with Easy Disassembly and Cleaning, U.S. Patent No. 7,507,014, Highly Efficient Method of Mixing Dissimilar Fluids Using Mechanically Induced Cavitation, U.S. Patent No. 6,627,784, and Method and Apparatus for Hydrogenating Substances Using Controlled Mechanically Induced Cavitation, U.S. Patent No. 10,220,365.

[13] See Complaint, AFAB Industrial Servs., No. 19-01355 at ¶¶ 16-17.

[14] Id. at ¶ 17.

[15] Id. at ¶ 29.

[16] See Plaintiffs’ Notice of Motion and Motion for Temporary Restraining Order, Preliminary Injunction and Expedited Discovery, AFAB Industrial Servs., Inc. v. Apothio, LLC, No. 19-01355, (E.D. Cal. Oct. 2, 2019).

[17] Defendant’s Opposition to Motion for Temporary Restraining Order, Preliminary Injunction, and Expedited Discovery; Memorandum of Points and Authorities in Support Thereof, AFAB Industrial Servs., Inc. v. Apothio, LLC, No. 19-01355, at 2 (Oct. 6, 2019).

[18] Order Denying Motion for Temporary Restraining Order and/or Preliminary Injunction and Vacating Prior TRO Order in its Entirety, AFAB Industrial Servs., Inc. v. Apothio, LLC, No. 19-01355, at 2 (E.D. Cal. Oct. 7, 2019).

[19] See Order, AFAB Industrial Servs., Inc. v. Apothio, LLC, No. 19-01355 (E.D. Cal. Nov. 26, 2019).

[20] Iris Dorbian, CBD Market Could Reach $20 Billion By 2024, Says New Study, Forbes (May 20, 2019), https://www.forbes.com/sites/irisdorbian/2019/05/20/cbd-market-could-reach-20-billion-by-2024-says-new-study/#5041c2a49d05.