Chapter 1 – The Double-Edged Nature of the FDA Approval Process

2018 proved to be a very busy (and frankly dizzying) year for the cannabis industry as three more states, including Missouri, passed laws legalizing some form of cannabis use, bringing the total number of such states and U.S. territories to well over thirty, despite the fact that cannabis, and its use, remains unlawful, under federal law that is. Today, there are thirty-three states that allow for medical use of cannabis, while ten states have legalized the recreational use of cannabis.  What is more, several state governments and governors are expected to prioritize new cannabis-related policies in 2019. As more states decide to permit various uses of cannabis, one issue that remains generally unanswered lies at the intersection of these emerging state laws and U.S. patent law, which falls within the exclusive purview of the federal government, both statutorily and in enforcement of patent rights.

Last fall, a Colorado company United Cannabis Corporation (UCANN), filed a federal law suit to enforce its cannabis-related patent (the “‘911 patent”) against in-state competitor Pure Hemp Collective Inc. While this lawsuit raises several issues of first impression, the questions surrounding validity of the cannabis-related patent, particularly what can qualify as invalidating prior art, are particularly intriguing.

Under U.S. patent law, to receive letters patent, an applicant must demonstrate that the invention attempting to be claimed is both novel and non-obvious. That is, the claimed invention is new (i.e., not previously used or known) and that the invention would not be obvious to a person having ordinary skill in the art to which the patent is directed. Both novelty and non-obviousness are generally disproved by and through what is commonly referred to as “prior art.” Although very rule-specific and somewhat complicated, and well past the scope of this post, any public use and knowledge, as well as other types of public disclosures, are generally referred in the patent business as “prior art,” which can come from any corner of the globe.

Generally speaking, for patents filed after March 16, 2013, this means that no one—other than the inventor or someone with knowledge traceable to the inventor—previously used or otherwise knew of the claimed invention before the subject application inventor was filed. If a prior art reference covers the invention and existed prior to the filing of date of the application, the United States Patent and Trademark Office (USPTO) may conclude that the subject applicant failed to demonstrate that the invention is “new” or “non-obvious” and refuse to issue letters patent for the claimed invention. Not uncommonly however, the USPTO fails to discover invalidating prior art references during prosecution. When that happens, third parties can attempt to invalidate an issued patent by raising alleged prior art references in certain proceedings, including as part of federal court-based patent infringement litigation or post-grant proceedings before the USPTO.

UCANN’s ‘911 patent claims a filing date of October 21, 2014, and covers several liquid cannabinoid formulations, including formulations consisting of at least 95% of non-synthetic tetrahydrocannabinol (THC), the principal psychoactive component of cannabis, or cannabidiol (CBD), a non-psychoactive derivative of cannabis. Generally speaking, and specific to the ‘911 patent, this means that possible invalidating prior art references must relate to highly concentrated liquid cannabinoid formulations and (i) exist prior to October 21, 2013, or (ii) if not traceable to any of the inventors of the ‘911 patent, exist prior to October 21, 2014.

Cannabis and most cannabinoids are currently classified as Schedule I controlled substances under U.S. federal law through the Controlled Substance Act (the “CSA”). On one hand, and as a practical matter, the unlawful nature of cannabis, at least on a federal level, means that prior art consisting of public use of cannabis and cannabinoids could be limited or hard to come by. On the other hand, this creates a delicate situation for a cannabis-related patent owner when enforcing its patent in federal court, which could require the owner to admit to its own use or sale of an illicit controlled substance.

Here, UCANN relies on a recent decision by the Food and Drug Administration (“FDA”) to approve GW Research Ltd.’s (“GW Research”) medical use of Epidiolex, a non-synthetic CBD oral solution for treating epilepsy, to take the edge off of asserting patent rights in an illicit controlled substance.

In the past, FDA approval of a pharmaceutical would spur the Drug Enforcement Administration (DEA) to reclassify the pharmaceutical under the CDA. However, FDA approval of a pharmaceutical related to or derived from THC or CBD has not meant a general reclassification of THC or CBD, or even the pharmaceutical product’s active ingredient. Instead, the DEA usually opted to reclassify the subject pharmaceutical narrowly by excluding all forms of the product and active ingredient not specifically covered by the FDA approval order. In the case of Epidiolex, this was no different.

Before Epidiolex, however, the FDA had only reviewed and approved cannabis-related pharmaceuticals containing synthetic forms of THC and CBD for medical use. UCANN’s ‘911 patent, on the other hand, claims non-synthetic forms of THC and CBD, which underscores the importance of the FDA’s approval of Epidiolex to UCANN’s case and the ‘911 patent. In fact, in its complaint filed July 30, 2018—a mere thirty-five days after the FDA announced its approval of Epidiolex—UCANN specifically referenced the approval of Epidiolex to suggest that CBD would be entitled to reclassification under the CSA.

When the DEA reclassified Epidiolex on September 28, 2018, as expected, it specifically excluded non-FDA-approved CBD extracts from the reclassification order. Although this was the first time that the DEA has reclassified a non-synthetic form of THC and CBD, and UCANN’s gamble paid off, the DEA’s reclassification only partially addresses the legal status of the subject matter of the ‘911 patent.

However, this may not be the end of the FDA approval order in this case. While it may appear to be a promising strategy to get into federal court, cozying up to FDA-approved pharmaceuticals could also have its drawbacks for a patent owner. For one, the FDA approval process could produce “prior art” references that can be used against the asserted patents in federal court or in a post-grant proceeding before the USPTO.

For example, with respect to the FDA approval process for Epidiolex, GW Research had to demonstrate the pharmaceutical’s medical value and low potential for abuse through extensive testing and review, which consisted of clinical trials in Poland, Romania, and the United Kingdom as far back as February 2014, which straddles the two key dates relative to the ‘911 patent: October 21, 2013, and October 21, 2014. If GW Research lacked traceable knowledge to the inventors of the ‘911 patent, these clinical trials could amount to problematic prior art if they cover any of the key claims in the ‘911 patent.

And therein lies the rub. By relying on a DEA reclassification order that is dependent on a related FDA approval process, UCANN must maneuver not only the traditional types of prior art but also any prior art arising out of the research and clinical testing of the subject pharmaceutical, which is a source of prior art particularly applicable to contemporary cannabis patents. So, unless a cannabis patent owner is willing to specifically address the unanswered jurisdictional issues associated with asserting property rights in a product utilizing or comprising an illicit substance—or is willing to engage in the lengthy and costly FDA approval process itself—relying on a FDA approval order, from a strategical standpoint, could be a double-edged sword.

The case of United Cannabis Corp. v. Pure Hemp Collective Inc. raises many questions for practitioners, professors, and the like to consider and analyze from every angle. To the extent that the U.S. District Court for the District of Colorado endeavors to directly resolve any of these questions, this case could provide importance guidance in the field of cannabis-related patent litigation, a space that has been mired in uncertainty. We will watch carefully and report on any important ruling that may impact you and your business.