Canopy Growth has filed a lawsuit against GW Pharmaceuticals for infringing on its subcritical extraction patent. GW Pharma manufactures Epidiolex, the only FDA-approved CBD-based drug on the market, accounted for $366 million in sales during the first nine months of 2020. Photo courtesy GW Pharmaceuticals
A patent lawsuit over extraction methods involving two of the largest cannabis companies in the world
sent ripples of worry through the industry earlier this year but attorneys and industry experts say it may be more bluster than anything else.
In the case, filed late last year, Canadian giant Canopy Growth Corporation asserts ownership over a process used by GW Pharmaceuticals in the making of Epidiolex, the only cannabinoid-based medicine approved for use in the United States by the Food and Drug Administration. But while the lawsuit seems narrow in scope, a second patent, mentioned briefly in the case, could have ramifications for the entire extraction sector.
“It’s a way of grabbing a headline,” Dale Hunt, founder and senior patent attorney at Plant & Planet, said of the lawsuit, before adding, “This is the pre-shock. This is the footsteps around the corner before the bad guy jumps out at you.”
The lawsuit, Canopy Growth Corporation v. GW Pharmaceuticals PLC, was filed December 22, 2020, in a U.S. District Court in Texas, the same day Canopy was granted the patent in question, which was originally filed by a scientist named Adam Mueller in 2000 and purchased by Canopy on December 4, 2020, as part of a group of patents.
The suit seeks to assert Patent No. 10,870,632, or “the 632 patent.” Canopy claims that GW Pharma uses its patented process to produce the cannabinoid-based, anti-epileptic Epidiolex, which the filing said made GW Pharma $366 million in net sales in the first nine months of 2020 alone.
But because the 632 patent has a short term and deals only with subcritical extraction, it may not be as meaningful to the industry as first reported. However, the potential for asserting a second patent, which covers supercritical extraction, could become an income source for the Canadian giant.
While experts speculate that Canopy Growth’s lawsuit is simply posturing to garner attention, there are concerns about the company owning a patent on supercritical extraction methods. Photo courtesy GW Pharmaceuticals.
Supercritical
While the lawsuit focuses on the 632 patent’s subcritical process, a procedure that uses low temperature and low pressure to extract sensitive chemicals, essential oils and terpenes, mentioned briefly in the lawsuit is a second patent Canopy purchased at the same time that may have larger implications.
Though mentioned only twice in the current suit, Patent No. 8,895,078, or “the 078 patent” covers a supercritical extraction process that could end up being an industry-wide problem because of the scope of its claims and the length of its term, which does not expire until 2027.
“It stakes a position in supercritical extraction,” Hunt explains. “At least at first blush it does look like this is a fairly broad claim.”
Unlike subcritical, supercritical extraction is a commonly used process involving high heat and pressure to pull large quantities of extract from plant matter. The vast majority of cannabis businesses using CO2 for extraction are using a supercritical process.
According to Hunt’s reading of the 078 patent, it claims ownership of any process to extract cannabinoids that uses pressure between 75 bar and 500 bar at a temperature between 31 degrees Celsius and 80 degrees Celsius.
GW Pharmaceuticals’ extraction process is not publicly available but the company says it is “confident” in its position regarding the lawsuit. Photo courtesy GW Pharmaceuticals.
He said that while it’s possible Canopy can “shake down the whole industry,” the company is not yet doing that and instead seems to be asserting its intellectual property against GW Pharma. Because of the two patents, GW Pharma could be in a difficult position if it is doing any CO2 extraction.
According to promotional material from GW Pharma, the company uses CO2 extraction in the processing of Epidiolex, though it is not publicly known exactly how.
According to Fritz Chess, founder of Eden Labs, a maker of extraction equipment, the “sweet spot” for supercritical extraction is at about 3,000 psi, or about 204 bar, and 70 degrees Celsius, which would certainly fall in the range of the patent’s claims. He said many extractors run their machines around 2,000 psi or about 136 bar.
However, Chess also expressed confidence that Eden Labs could produce evidence proving it had used the process before the patent was issued, known as “prior art” in the IP world, and that he was unconcerned for now for his own business about the lawsuit and its reach (Eden Labs was founded in 1994).
However, Joshua Masur, an attorney and head of the intellectual property group at Zuber Lawler, said that if he were an extractor using a similar, subcritical extraction process, he might be paying more attention to the suit and to Canopy’s next moves and recommended that anyone in the industry who had concerns should speak with an IP or patent attorney.
Fritz Chess, founder of Eden Labs, said subcritical extraction is rarely used in the industry and if Canopy asserts the supercritical patent, he is confident his company can produce “prior art” and would not be affected. Photo by Garrett Rudolph.
Subcritical
As for the lawsuit itself, patent attorneys and industry experts say its narrow scope make it less of a worry for the extraction sector on its own due to its assertion of only the 632, or subcritical, patent, a process that is not particularly popular in the cannabis industry due to its longer extraction time and smaller yields.
“Nobody’s doing that, really,” said Chess.
Chess called the suit a “publicity stunt” and said the subcritical procedure asserted in the case is only really good for extracting terpenes, not cannabinoids.
In addition, attorneys noted the patent expires in March 2022, meaning Canopy can only collect royalties from when it received the patent in December to when it expires early next year.
According to Masur, the case is unlikely to even get before a judge before the patent expires. He agreed the suit appears to be a “headline grab,” but said it is possible the company also wants to “scare people off.”
“It’s a warning shot to the industry,” Masur said.
Patients who rely on Epidiolex, however, should not be concerned, according to the lawsuit, which states Canopy is not attempting to prevent access to the drug, but rather to stop GW from using the IP from the patent.
“We have no interest in restricting access to Epidiolex, but the company should be fairly compensated for GW’s use of our intellectual property,” Phil Shaer, Canopy Growth’s chief legal officer, reiterated in an email to Marijuana Venture.
Canopy declined to comment further, stating that all other questions would be answered in “due process.”
GW Pharma also declined to comment on the pending litigation, but added in an email from a company spokesperson, “based on our preliminary review of the complaint, we are confident in our position and will vigorously defend against this lawsuit.”
Extracted cannabis oils at different stages of processing. The 078 patent owned by Canopy Growth has some potential to disrupt a broad range of the cannabis industry. Photo by Greg James.
Slow process
Masur said the process moving forward would be “pretty slow.” Masur noted that Canopy filed the case in Waco, Texas, and said that means the company specifically wanted the case in front of Judge Alan D Albright, though he did not speculate as to why. Masur said the case will probably come down to working out a “reasonable royalty” if GW is found to be violating the patent.
Based in England, GW Pharmaceuticals was founded in 1998 and immediately began work researching the medical uses of cannabis. In 2010, the company released in the UK Sativex, a cannabinoid-based multiple sclerosis treatment which has not been approved for use in the United States. However, in 2018, the company received FDA approval for Epidiolex, a cannabinoid-based medicine designed to treat epilepsy. It is the first cannabinoid-based drug approved for use in the United States.
Canopy Growth Corporation was founded in 2013 as Tweed Cannabis and renamed after a merger with Bedrocan Canada in 2015. A publicly traded company, Canopy received a $3.8 billion investment from the alcohol conglomerate Constellation Brands (giving it 38% ownership). By 2019 Canopy was considered the largest cannabis company in the world by market capitalization, though by year’s end the company’s stock had dropped 32%.
If nothing else, Hunt said, the suit is definitely a way for Canopy to put its ownership of the patent onto the industry’s radar, though he notes that the suit certainly puts the company into “patent troll” territory. And despite the narrow claims of the 632 patent, the potential for asserting the 078 patent, which covers supercritical extraction in the future could become an income source for the Canadian giant.
“Somebody is about to get paid for this invention,” he said.