Introduction
The medical cannabis industry around the world is rapidly growing, fuelled by regulatory changes in many parts of the world legalising the use of cannabis for medical and/or recreational purposes. In the latest report around 30+ countries have either legalised the use of cannabis for medical use, decriminalised personal use and cultivation of the plant, or totally legalised cannabis whether for medical or personal use.
Global Market Insights estimate the global medical cannabis market to be worth US$7 billion in 2017 and is expected to grow at 36.0% CAGR from 2018 to 2024. The data suggests enormous investment into the sector and with that high levels of new product development. With new product development comes increased intellectual property activity. A quick search for the term “medical cannabis” in the World Intellectual Property Office Patentscope database shows patent publications containing this term rising from around 6 patents per year from 2008 to 2011 to around 20 per year in 2016 to 2018.
Our objective is to provide inventors, cannabis companies and professionals supporting them with a clear view on how to approach intellectual property protection for medical cannabis businesses.
Applying Intellectual Property in Medical Cannabis Businesses
Intellectual property refers to registered or unregistered ownership rights over certain intangible assets, including inventions and technology underpinning a new product or packaging, new plant varieties, processing methods or equipment, and brand names. Although intangible, the law recognises that these intellectual property rights can be sold, licensed, damaged or unlawfully converted or detained. These rights include patents, registered designs, copyright, plant variety rights, trade marks and trade secrets.
The medical cannabis industry is a rich source of new intellectual property. There are opportunities to secure strong IP positions in relation to:
- New cannabis cultivars bred for certain characteristics, such as high or low THC (the psychoactive component), high CBD (one of hundreds of non-psychoactive cannabinoids) or preferred terpenes (which give smell and flavour characteristics);
- Genetic modification or gene editing of cannabis varieties to enhance beneficial characteristics, such as bacterial resistance, growth rates, colour or cannabinoid profile;
- Processes, methods and equipment for growing or harvesting cannabis, for example indoor growing set-ups, fertiliser regimes, security, etc;
- Technology for processing cannabis plant material into cannabinoid extracts and isolates, such as optimising CO2 extraction parameters;
- New compositions targeting certain functionality or medical conditions, including new pharmaceutical drugs (e.g. for suppressing epileptic seizures), or nutraceutical preparations (e.g. for suppressing or stimulating appetite);
- New form factors for consumption or administration of medical cannabis, e.g. vaporising apparatus, inhalers, sublingual pills, patches, lozenges, etc;
- New packaging products or processes; and
- Branding
Confidential Information and Trade Secrets
The legal basis for protection of confidential information is a relationship of confidence or a contractual relationship. The law will protect certain information from misuse or disclosure if the information is of such a nature that it is obviously commercially sensitive, or is disclosed in circumstances that impose confidentiality, or there is a contract imposing confidentiality.
The owner of confidential information cannot stop a third party who independently develops identical or similar information from using or disclosing it, where there is no relationship with that third party. A further limitation is that the right to confidentiality in respect of the information will usually cease once that information enters the public domain.
It is important at first to keep ideas and research as confidential information and trade secrets. It is highly recommended to use confidentiality agreements (also known as non-disclosure agreements) with any person external to your business who is required to work on your new product, process or technology. This ensures that you have the option of obtaining patent protection in future for inventions or processes that you do not wish to retain as trade secrets, and discourages intentional or inadvertent disclosures of commercially sensitive information.
Retaining a trade secret is actually a very difficult task, however there are practical steps you can take to minimise trade secret leakage:
- Include education within employee induction on IP and trade secrets
- Ensure employment agreements for staff having access to trade secrets contain robust confidentiality and restraint of trade provisions
- Implementing internal policies, including protocols for remote wiping lost devices or locking access
- Review physical and cyber security
- Establish access logs recording when secrets were accessed and by whom
- Monitoring file sharing and downloading
- Implement password protection and local encryption on files
- Consider trade secret central register
- Consider implementing Employee Share Option Plan to retain staff with trade secret knowledge
- Employee exit interviews.
Technology for processing cannabis plant material into cannabinoid extracts and isolates, such as optimising CO2 extraction parameters, might be an example of something that could be kept as a trade secret, rather than patented. Such knowledge may have been built up over a very long period or was perhaps discovered in a moment of serendipity but would be easy for competitors to replicate if it is published in a patent specification. In addition, detecting patent infringement would be practically very difficult as you are unlikely to be able to determine whether competitors are indeed using the same process optimisations.
Patents
A patent protects the ideas embodied in novel and inventive technologies, products and processes for a period of 20 years. Patents cover a principle or idea rather than a single physical embodiment of an invention, and provide the exclusive right to make, use, sell and import the invention.
Patentable subject matter varies from country to country. Australia, US and some other countries permit patent claims directed to new plant varieties that are novel and inventive, whilst in New Zealand, Europe and other countries, this is solely the realm of plant variety rights.
In some countries (including New Zealand) it is not possible to patent a method for treating a human being for a medical condition. As such, in these countries within the field of medical cannabis products, patents are more likely to be sought for inventive combinations of actives, new drug compositions, or for methods of genetically creating beneficial characteristics in medical cannabis.
Patents may also be suitable for protecting:
- Processes, methods, and equipment for growing, producing, trimming or harvesting cannabis
- New uses for the plant material, or new uses for cannabinoids or terpenes within the plant material
- Extraction processes or equipment, to produce resin, oil or isolated cannabinoids or terpenes
- Technology or production methods involved in new form factors for consumption or administration of medical cannabis, e.g. vaporising apparatus, inhalers, sublingual pills, patches, lozenges, etc.
- New packaging products or processes
- Software controlling processes described above.
To be patentable, inventions in these fields must be novel (not known, used or published anywhere prior to the patent filing date) and inventive. What constitutes “inventive” differs from country to country, but the general concept is: having regard to everything that has ever been published, used, or patented previously (the “prior art”), are the novel features of the invention obvious in light of the prior art? To the extent any feature involved an inventive spark, rather than being obvious, then that feature may be patentable.
The requirement for novelty has important ramifications for medical cannabis businesses that hope to acquire patent rights – you must not sell or offer for sale (even confidentially) the product or equipment you hope to patent before you file your patent application, otherwise you will destroy patentability in all but a handful of countries (such as the US and Australia, where there is a 12 month grace period). It is expected that New Zealand will soon adopt a similar grace period, but this should be viewed as a backstop, due to the limitations in obtaining valid rights in other significant markets, such as Europe.
Please take note that in some countries, including Australia and New Zealand, another requirement for patentability is that the invention should not be “contrary to law”, thus patents outside legalised medical use for cannabis may not be granted whilst those countries prohibit the use of cannabis for non-medical purposes.
Plant Variety Rights
Plant variety rights (also known as plant breeders rights) are available in New Zealand and Australia for new or recently exploited varieties of plants. A plant variety right will be granted if the variety is new, distinct, homogenous and stable.
A plant variety right gives the holder the exclusive right to produce for sale and to sell propagating material of the protected variety. In the case of vegetative propagated fruit and flowers the right-holder is granted the additional exclusive right to propagate the protected variety for the commercial production of fruit, flowers or other products of the variety. In Australia, the exclusive rights include producing and reproducing the plant material, conditioning (i.e. cleaning, coating, grading, sorting and packaging) the material of the plant for the purpose of propagation, selling, importing and exporting the plant material.
PBR/PVR is a strong IP protection for medical cannabis, as it gives you exclusive rights to commercialise your “new and distinct” plant. In just a year (2017 to 2018) the applications for Cannabis Sativa (a type of cannabis in the cannabis genus)jumped from 0 granted PBRs to 16 granted PBRs. Although most appear to be for industrial hemp rather than medicinal cannabis strains, the indications are that PBR/PVR will be important in this field.
In New Zealand, PVR filings for cannabis varieties are still few, but we would expect to see this grow quickly with impending changes to the regulatory framework.
Across the world PBR/PVR applications and grants are increasing rapidly, with Europe leading the number of applications and granted PBRS.
PBRs/PVRs are a strong IP protection for medical cannabis but should be used in conjunction with other IP rights, like patents, trade secrets and trade marks to protect all forms of competitive advantage.
Trade Marks
A trade mark is any sign intended to indicate a connection in the course of trade between certain goods and services and the trade mark owner. These may include distinctive words, phrases, symbols, pictures, colours, labels, three dimensional shapes, or even sounds and smells.
Trade marks can be registered or unregistered.
Unregistered trade marks can only be enforced under the tort of passing off or fair trading and competition legislation. Such actions rely on proving a significant goodwill and reputation in the trade mark, which can be an expensive exercise.
The owner of a trade mark registration can sue for trade mark infringement, which does away with the necessity to prove goodwill and reputation.
Non-distinctive matter, such as words that directly describe or give praise to the products or services, common surnames or geographical names are not eligible for registration. For example, words that describe a characteristic of the product, like green, weed, sativa and such like would be difficult to register without adding other more distinctive matter.
Examples of registered trade marks within New Zealand or Australia for cannabis products include: TILRAY, BEDROCAN, FINOLA Logo and CONSTANCE THERAPEUTICS.
With the ability to register smells as trade marks, we would expect to soon see some terpene based smell trade marks applied to certain medical cannabis products.
In a highly competitive consumer market like medical cannabis, trade marks are very important. They indicate a trusted source of product, a badge of origin that consumers will seek out. We recommend registering your trade mark in key markets.
Consider registering the marks across all potentially relevant classes of goods and services, thinking about not only the primary product but also brand extensions or associated product classes. Consider class 5 for medical products and nutritional products, class 31 for seeds and live plants, class 32 for non-alcoholic beverages and preparations for making beverages, and class 30 for tea, coffee and confectionery products. You might also consider class 44 for medical and health services, and class 35 for dispensary and retail services.
Copyright
Copyright is an automatic right extended to any original artistic or literary works and including software. Copyright may protect the visual design of your packaging, software code used to control processes within your business, or text-based works used within your business, such as user manuals, regulatory applications, and website copy.
As this is an automatic right, you do not have to give it too much consideration. You should ensure that any third party creating artistic or literary works for your business signs an agreement acknowledging that you will own copyright in works they create on your behalf. You should also apply a copyright legend, like “© 2018, Simon Rowell” to your works.
Intellectual Property Strategy for Medical Cannabis Commercialisation
There’s no one size fits all strategy for medical cannabis products/technologies.
However, there are some steps that most if not all cannabis businesses should take:
- Ensure that you are not investing in a product or technology that someone else has prior rights to by conducting appropriate IP searching.
- Choose a distinctive brand, do trade mark clearance searching in key markets to ensure you are free to use it, and then file trade mark applications in key markets.
- Review your products and processes to identify where there could be inherent IP, and ensure you proactively decide whether to protect it and how.
- If you are retaining trade secrets, then really review your physical and IT environments to determine security and improve where possible.
- Whenever you engage with third parties in the development of your products or processes, ensure that the subject of IP ownership is addressed explicitly in writing upfront.
Conclusion
Intellectual property is an extremely important and valuable business asset. To ensure the asset generates an appropriate return on investment to your company, you need to implement an intellectual property management programme.
With the global medical cannabis market forecast to grow at 36% CAGR from 2018 to 2024, to ensure you secure and maintain your market share, give careful consideration to your IP strategies.
This article is co-authored by Ace Acosta.
