Cannabis Patent Litigation Update: Canopy Growth Sues GW Pharma

We’ve written previously about the basics of cannabis patents, which are a substantial area of growth within the cannabis industry, and we’ve written extensively about cannabis trademark litigation (see some of our posts here, here, and here), which has been prolific in the last couple of years, but we’ve seen very little in the way of cannabis-related patent litigation. This is beginning to change.

Last month, Canopy Growth Corporation, based out of Canada, filed a lawsuit in the U.S. District Court for the Western District of Texas against GW Pharmaceuticals, the UK-based producer of Epidiolex, the first cannabis-derived CBD-based anti-seizure medication approved by the U.S. Food and Drug Administration (FDA).  The lawsuit was filed on December 22, 2020, the same day the USPTO issued U.S. Patent No. 10,870,632 (the “’632 Patent”) titled “Process For Producing An Extract Containing Tetrahydrocannabinol And Cannabidiol From Cannabis Plant Material, And Cannabis Extracts” to Canopy.

The scope of the ‘632 Patent is much broader than a previous patent issued to Canopy in 2014, and the issuance of overly broad patents has been an issue of great concern to the cannabis industry for quite some time now. To the extent that the extraction process covered by the ‘632 Patent is widely used throughout the industry, Canopy’s enforcement of its patent rights could have huge implications. The ‘632 Patent is set to expire in about a year and a half, but could allow Canopy to profit off of patent litigation like this case against GW Pharmaceuticals, and could have a chilling effect on the industry that could result in a significant competitive edge.

In an interview with Larry Sandell, a patent attorney, by Marijuana Moment:

It really could be a major threat to the extraction industry. Once they know about [the patent], companies might be considered to be willfully infringing the patent, which can potentially triple damages if they are sued … Although there are steps that can be taken to reduce infringement liability risks, CO2 extractors may essentially have this anvil hanging over their head as the business continues on—at least until the patent expires or someone succeeds in knocking it out.

And knocking it out is what we expect GW Pharmaceuticals to attempt. According to Phil Shael, the Chief Legal Officer of Canopy:

The lawsuit asserts that GW manufactures CBD—the active pharmaceutical ingredient in Epidiolex, GW’s leading cannabinoid product—using Canopy Growth’s patented CO2-based extraction process … We have no interest in restricting access to Epidiolex, but the company should be fairly compensated for GW’s use of our intellectual property.

According to the complaint filed by Canopy:

GW is aware, or should be aware, that the extraction process it uses to manufacture Epidiolex infringes the claims of the ‘632 Patent. Although the ‘632 Patent recently issued, on information and belief, GW has been monitoring the ‘632 Patent family for over fourteen years. In May 2006, for instance, GW proactively challenged the issuance of a European counterpart application (European Patent No. EP 1 326 598) by filing an opposition before the European Patent Office. By the time GW filed its opposition, the parent application of the ‘632 Patent—U.S. Patent Application No. 10/399,362, which issued as U.S. Patent No. 8,895,078 (the “’078 Patent”)—had already been filed. In light of its monitoring and proactive steps to invalidate a European counterpart, GW knew, or should have known, of the existence of the U.S. counterpart applications in the ’632 Patent family.

Based on the foregoing, Canopy alleges that GW Pharmaceuticals infringement of the ‘632 Patent is willful and deliberate. Under 35 U.S. Code § 284:

[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court … the court may increase the damages up to three times the amount found or assessed.

Note that according to the complaint, “GW reported approximately $366 million in net product sales of Epidiolex in the United States in the first nine months of 2020.” Canopy is seeking compensation that could amount to three times a “reasonable royalty” for the use made of the ‘632 Patent, together with attorneys’ fees, which may be awarded to the prevailing party in “exceptional cases.”

The implications of this lawsuit may have a profound effect on the cannabis industry as a whole, and we will be following its progress closely.

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Author: Alison Malsbury