Cannabis Patents – The Elephant in the Room?

I write a lot about trademark issues within the cannabis industry, but there is another aspect of intellectual property that I believe will have a greater impact on the industry than even brand/trademark disputes, and that is patent infringement.

Cannabis-related patents have been around for years, but we’re just starting to see those patents being challenged and asserted.  Two recent examples are illustrative of what I believe will become more and more commonplace in the very near future.

Case 1:  Insys Development Co. v. GW Pharma Ltd.

This case is actually an “inter partes review” (or “IPR”) before the United States Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”).  In a nutshell, the IPR process allows a party to challenge the validity of another party’s patent prior to any claims of infringement.  The argument is that the patent never should have been issued because the invention was already known or was obvious before the application was filed.

GW Pharma owns U.S. Patent No. 9,066,920 for “Use of one or a combination of phyto-cannabinoids in the treatment of epilepsy”.  Claim 1 of the ‘920 Patent is simply this:

A method of treating partial seizure comprising administering cannabidiol (CBD), to a patient wherein the CBD is present in an amount which provides a daily dose of at least 400 mg.

Thus, if your CBD product is used to treat partial seizures and the treatment method includes CBD “in an amount which provides a daily does of at least 400mg” then you arguably infringe the patent.

Insys filed an IPR petition to cancel the ‘920 Patent based on “prior art” (i.e. relevant evidence) which Insys believes shows that the invention in the patent was already known or was otherwise “obvious” in light of other prior art that existed prior to the filing of GW Pharma’s application.  The IPR process (and patent law in general) is very complex and beyond the scope of this post, but for a very detailed and thorough treatment of the IPR process and this specific Insys v. GW Pharma case, check out this post, which is where I first learned of the matter.  It was, and still is, one of the few outlets discussing the Insys IPR.

One reason this IPR is so important is because the claims in the patent are fairly broad and could implicate many, many products that are already being marketed (albeit perhaps without the claims of treating epilepsy and seizures, which is part of what complicates these cannabis-patent issues).  So, just how easy is it to challenge a patent like this via an IPR?  Well, you’ll need over $30,000 just in filing fees to the USPTO if your petition is accepted  by the USPTO and the proceeding is instituted ($15,000 just to file the petition, and another $15,500 if the USPTO “takes the case” and starts the review process).  You read that correctly – over $30,000 just in government filing fees to get started.  That does not include the attorneys’ fees that Insys (and GW Pharma) are paying, which I conservatively estimate are already in the hundreds of thousands of dollars.  This is all to invalidate a single cannabis-related patent.

Below are some links to key documents in the IPR.  This is complicated litigation that few businesses can afford despite the fact that some of these patents affect the very ability of such businesses to exist.

There are many supplemental procedural issues involved in this case, but I expect a decision regarding the ‘920 Patent’s validity will be reached within the next couple of months.

Case 2: United Cannabis Corporation v. Pure Hemp Collective, Inc.

This case is different than the above IPR because this is a “classic” patent infringement case that is being brought within the United States District Court for the District of Colorado.  Whereas Insys brought an IPR at the USPTO to try and invalidate GW Pharma’s patent prior to GW Pharma asserting the patent against Insys, here, United Cannabis Corporation owns a patent and is alleging that Pure Hemp Collective’s products infringe the patent.  The similarity to the IPR is that it is typical practice for the defendant in a patent infringement case to defend against the infringement by counterclaiming that the patent is invalid.  Thus, the Colorado court will likely address the validity of the patent should the case proceed.

The patent at issue in this case is U.S. Patent No. 9,730,911 for “Cannabis extracts and methods of preparing and using same.”  Claim 1 is simply:

 A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is tetrahydrocannabinolic acid (THCa).

The case was just filed on Monday of this week, so it’s too early to see how Pure Hemp Collective intends to respond, but I’ve linked to the Complaint and patent below.  It is much easier reading than the above IPR documents, and it is a pretty typical example of the type of patent infringement complaint I predict we will see more and more of in the very near future as cannabis-patent owners start asserting their patents.

In sum, I expect to see more patent friction within the cannabis industry, and I also expect the media attention to increase as the gravity of cannabis-related patents becomes more well-known.  There are already “patent busting” projects out there related to cannabis-patents, and I would not be surprised to see an increased focus on those efforts.

 

 

New take on an old (infringing?) idea

I read about a recently-published patent application from Apple that will allow an audio device (presumably an i-Device) to “self-censor” explicit content.  The application is titled “Management, Replacement and Removal of Explicit Lyrics during Audio Playback,” and you can read the application HERE.

apple-fig1
Figure 1 from the patent application

Here is the abstract from the application:

Unwanted audio, such as explicit language, may be removed during audio playback. An audio player may identify and remove unwanted audio while playing an audio stream. Unwanted audio may be replaced with alternate audio, such as non-explicit lyrics, a “beep”, or silence. Metadata may be used to describe the location of unwanted audio within an audio stream to enable the removal or replacement of the unwanted audio with alternate audio. An audio player may switch between clean and explicit versions of a recording based on the locations described in the metadata. The metadata, as well as both the clean and explicit versions of the audio data, may be part of a single audio file, or the metadata may be separate from the audio data. Additionally, real-time recognition analysis may be used to identify unwanted audio during audio playback.

That description immediately reminded me of an old copyright infringement case that was brought on behalf of Hollywood movie directors who objected to a service called “CleanFlicks.”  CleanFlicks would purchase DVDs of movies, edit out the “objectionable” content, and then sell or rent the “clean” versions.  Ultimately, this practice was considered copyright infringement.  Here’s a brief analysis of the case from the Copyright Office.  From the analysis:

The court held that public distribution of edited versions of plaintiffs’ films for the purpose of eliminating objectionable content did not constitute fair use. It ruled that the edited film versions were not transformative because they added nothing new to the originals. It further held that the “amount and substantiality” factor weighed against a finding of fair use because the movies were copied in their entirety for non-transformative use. Regarding the fourth factor, plaintiffs claimed that there was no adverse effect on the market for the films because they maintained a one-to-one ratio between original and edited films, and that but for their editing, the defendants would not have sold those particular original copies. The court, however, stated that this argument ignored the defendants’ “right to control the content of the copyrighted work,” and further remarked that “[w]hether these films should be edited in a manner that would make them acceptable to more of the public … is a question of what audience the copyright owner wants to reach.” The court also found that editing the versions as a form of comment or criticism was a public policy argument that was not appropriately raised in the copyright context.

But, Apple’s technology might not be making a new copy of a song to then censor, rather, it’s merely bleeping or silencing-out a portion, so there is a decent argument that this will not be a copyright issue.  “Moral rights,” which can protect the integrity of (or cursing in) a work, are generally not recognized in the U.S., so the mere act of censoring a work isn’t necessarily copyright infringement.  But, Apple’s technology is similar to the facts of a 1970’s case wherein ABC was sued by the people behind the Monty Python program based on ABC making edits to Monty Python re-broadcasts.  There, the court found that ABC might actually be violating the Lanham Act, which forms federal trademark and unfair competition law.  By editing the episodes, ABC misrepresented the source of the episodes.  That is, by screwing around with the way that Monty Python’s writers intended the episodes to look, ABC damaged Monty Python because viewers might think that the edited, “less good,” episodes originated with Monty Python.  This is similar to a line of cases where Rolex has successfully sued after-market jewelers who add “bling” to Rolex watches.  Rolex argues that they would never add a dial full of diamonds or other tacky embellishments, and when jewelers do so, they damage the Rolex brand because consumers might think that Rolex was the source of the tackiness.

In sum, Apple may not even bring this technology to market, and even if they do, I would imagine that for artists to have their music on iTunes (the patent anticipates use in streaming environment), they will have to agree to allow the use of the technology.  But at the end of the day, this may not be legally actionable anyway.  Artists typically create a “clean” mix of a song.  I wonder if Tipper Gore would have approved?

Apple’s full application may be downloaded HERE.

(Bonus thoughts:  the idea of piecing a song together from multiple audio streams located at different sources is interesting.  The patent application doesn’t just address adding a “beep” in place of a dirty word.  The “clean” music can be seamlessly spliced into the song on-the-fly.  As we’ve recently seen with Kanye tinkering around with edits and mixes of songs from The Life of Pablo after its release, this technology may have some positive creative merit – i.e. custom MP3/audio files depending on what time of day the audio is streamed or downloaded.)

Supreme Court opinion re. induced patent infringement

The opinion in Commil USA, LLC v. Cisco Systems, Inc. came out today.  The issue was whether or not a good faith belief as to the invalidity of a patent may serve as a defense to an induced infringement claim under 35 U.S.C. 271(b).  The Supreme Court said “no,” because, in part, that would undercut the presumption of validity that comes with an issued patent.  Other reasons were provided as well.

However, the more interesting issue in my view is the final section of the opinion, which seems to be a shot across the bow at “patent trolls” (or “non-practicing entities” (“NPEs”), depending on your sympathies).

The Court stated:

The Court is well aware that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 396 (2006) (KENNEDY, J., concurring). Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous. This tactic is often pursued through demand letters, which “may be sent very broadly and without prior investigation, may assert vague claims of infringement, and may be designed to obtain payments that are based more on the costs of defending litigation than on the merit of the patent claims.” L. Greisman, Prepared Statement of the Federal Trade Commission on Discussion Draft of Patent Demand Letter Legislation before the Subcommittee on Commerce, Manufacturing, and Trade of the House Committee on Energy and Commerce 2 (2014). This behavior can impose a “harmful tax on innovation.” Ibid.

 

No issue of frivolity has been raised by the parties in this case, nor does it arise on the facts presented to this Court. Nonetheless, it is still necessary and proper to stress that district courts have the authority and responsibility to ensure frivolous cases are dissuaded. If frivolous cases are filed in federal court, it is within the power of the court to sanction attorneys for bringing such suits. Fed. Rule Civ. Proc. 11. It is also within the district court’s discretion to award attorney’s fees to prevailing parties in “exceptional cases.” 35 U. S. C. §285; see also Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___, ___–___ (2014) (slip op., at 7–8). These safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity. This dichotomy means that belief in invalidity is no defense to a claim of induced infringement. The judgment of the United States Court of Appeals for the Federal Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion. It is so ordered.

 

The Court is seemingly reminding litigants, attorneys, and lower courts that the recent Octane Fitness case made it less burdensome to find that a patent case is “exceptional” for purposes of collecting attorney’s fees under 35 U.S.C. 285.  Lower courts now have lots of discretion to determine exceptionality, without the need to meet a specific standard of proof other than that the case “stands out” from others, and, under the “totality of the circumstances,” is an “exceptional” case.

Is the Supreme court suggesting that patent troll/NPE cases might be good candidates for “exceptional” cases in the future?

More commentary here:

http://patentlyo.com/patent/2015/05/invalidity-defense-inducement.html

http://www.scotusblog.com/case-files/cases/commil-usa-llc-v-cisco-systems-inc/

Invicta Goes on the Offensive

Update on the ongoing Invicta saga…

I’ve been made aware that Invicta has actually filed suit against Plasticase now.  (See THIS POST for the back-story.)  I haven’t had a chance to review the pleadings in depth, but the complaint is based on Plasticase’s alleged “false marking” of its cases.  False marking occurs when someone marks an item as “Patented” when, in fact, it is not covered by a patent.  See statute HERE.

False marking is the current hot topic in patent law since there is uncertainty over whether the false marking statute allows for a penalty based on each individual item that was falsely marked or whether the penalty applies to the occurrence (i.e. a single penalty for an entire manufacturing run).  Also, the statute allows anyone to file suit, so suing under the statute is like a new flavor of patent trolling.

Plasticase v. Invicta – Update

Interest in this case has been very high, so I’m going to update it more often than most cases.

Invicta was served with the Complaint on April 8th.  An answer or other motion tolling the time to answer should be filed in the next couple of days.

Apparently Invicta’s registered agent (the person listed with the Florida Department of State as responsible for accepting a summons) is deceased, so Invicta’s “Financial Controller” accepted service of the complaint.

Invicta’s corporate information via the Department of State showing David Feldman as registered agent.

Copy of the proof of service.

Invicta Gets a 55mm-sized Lawsuit

Invicta evokes a polarizing response from “watch geeks.”  Some appreciate the value-priced quality while others sniff that Invicta is merely a “TV brand” due to its ubiquitous presence on ShopNBC.  Still others delight in the (fictional) misfortunes of its CEO from disgruntled purchasers.  More recently, Invicta has been blazing a trail in the oversized watch market.  (For reference, the typical Rolex “Submariner” style dive watch case is about 40 millimeters.  Invicta is now regularly producing watches with cases over 50 millimeters in size and 20 millimeters thick.)

Video capture from 4/11/2010

Me – I’ve grown tired of the typical home shopping TV doublespeak.  “One time only” prices that magically get lower the next month; “limited editions” that are offered again and again with slight deviations in design; a “Reserve” line that was supposed to be, uh, reserved, for extra-premium timepieces that now cost less than the non-Reserve line.  I could go on.  And on.

The Invicta shows on ShopNBC do make for an entertaining evening at home.  Whether it’s the host’s thinly-veiled, juvenile jokes about “brown eye” dials and “slapping a beaver” on your wrist, or the feigned astonishment and gasps that precede “that price must be a mistake,” you can’t beat live home-shopping TV.

So I might be biased as I write about this new lawsuit against Invicta.  I take it personally.  Invicta’s CEO, Eyal Lalo, seems to be a pretty ethical guy.  Back when the host of ShopNBC’s watch shows was known as “OompaLupah” on a watch forum that I frequented, Eyal personally responded to customer questions and even sent a bunch of us a fancy Invicta watch box.  (I’ll sell mine to anyone interested if the price is right…)

Eyal also constantly remarks about how he is the named inventor on multiple patents covering the designs of Invicta watches.  He recognizes the importance of patents, and he should.  The Invicta Lupah design is widely copied by other manufacturers.

So, that’s why reading this Complaint is so tough.  Despite my love/hate relationship with Invicta and its marketing channels, I tend to support the brand overall.

A few months ago they started selling a new watch design with several interchangeable straps and bracelets.  The whole thing was packaged in a “submarine case.”  If my memory is correct, they also use a little animation that looked like a CAD drawing of the case opening up to reveal the watch and straps.  They also offer the case by itself, and I believe that several other Invicta models are shipped out in this style case now.

Imagine my surprise, then, when I saw:

Plasticase, Inc. v. Invicta Watch Company of America

(Complaint HERE, Exhibits HERE)

Damn.  The case was filed April 6, 2010 in the United States District Court for the Southern District of Florida.

The allegations are straightforward.  Eyal calls company to see about having some plastic storage cases customized for use with watches.  Company sends sample cases to Eyal.  Eyal never responds with an order or “no thanks.”  Company sees its patented case design on national TV.  Company calls Eyal to see if he intends to order any cases based on the samples.  Eyal says he is “passing on the opportunity.”  Oops.

If true, the allegations paint a very disappointing picture of this watch company and its charismatic CEO.  Plasticase is basically saying that Eyal ordered some sample cases then, rather than order from the company that designed the cases, he shipped them off to China to have them made cheaper.

As you already know from reading this blog, fairly recent changes have occurred in the infringement analysis for design patents.  In a “knockoff” case like this, the patentee-friendly Egyptian Goddess standard might not even matter.  If the case doesn’t settle soon, Plasticase should get everything it needs for a slam dunk via discovery requests.  Invoices from China and Eyal’s own conduct in ordering the samples is 80% of this case.  Add in plaintiff’s design patents and proper marking of the cases, and this should be over.

Of course, Invicta hasn’t answered yet, and the Complaint is obviously slanted to one side.  Invicta is innocent until proven guilty.  This is definitely one case that I’ll be following with interest.

I’ll even make this deal – if the case goes in Plasticase’s favor on summary judgment or via a jury verdict, via multiple choice, I’ll let my readers choose the fate of one of my Invicta watches, and I’ll post a video of the destruction.

Florida IP Trends Cracks the Crocs Case

One of the very first cases featured on Florida IP Trends was International Seaway v. Walgreens, in which Walgreens was sued for some allegedly infringing Crocs-like shoes (original post HERE).

The case involved design patent infringement and was one of the first cases in Florida to handle the Federal Circuit’s Egyptian Goddess opinion.

This is text from my original post.  I thought the Southern District misapplied the Contessa precedent:

In addition to that technicality(?), I think the court missed the overall point of Contessa.  The court used Contessa to justify excluding the insoles of the sandals from the comparison of the designs.  The reasoning was that “when a shoe is in use, it’s[sic] insole is, obviously, hidden by the user’s foot…[a]s such, this Court will not consider any aspects of the insoles of the shoes, but will consider the sole of the shoes as those are visible during use.”  Uh, except when someone happens to be WALKING ON THE SOLES!

The Court also stated that “the law requires a court to consider only those portions of the product that are visible during normal use, regardless of whether those portions are visible during the point of sale.”  While this might be true, in the case of Crocs-like shoes, I believe that the sole and insole are both visible during normal use – INCLUDING at the point of sale.  All of the Crocs and Crocs-like shoes I’ve seen for sale are hanging on a rack without boxes, thus, all sides and features are visible.  Because a feature that is more visible at the point of sale might be less visible later does not mean that the feature should be excluded.  Contessa said that the analysis should include “all ornamental features visible at any time during the normal use of the product.”  (emphasis added).  To me, this would include when the owner has the sandals sitting next to him or her on the beach, in which case the insole would be visible.

So, imagine my delight when I found out that on December 17, 2009, the United States Court of Appeals for the Federal Circuit agreed! (Fed. Cir. opinion HERE.)  Note that appeals of patent cases go directly to the Federal Circuit – that’s why we’re not discussing the 11th Circuit here.  (I also have to apologize for letting this slip through the cracks for so long.  I honestly missed the appeal.  I found out about it at the Florida Bar 1st Annual IP Symposium last week in Tampa.)

From the Federal Circuit’s opinion:

The district court here misconstrued Contessa as requiring that the normal use of a clog be limited to the time when it is worn. Contessa did not exclude the point of sale from the normal use of a product. Rather, it emphasized that normal use should not be limited to only one phase or portion of the normal use lifetime of an accused product. Id. at 1380 (citing KeyStone Retaining Wall Sys., Inc. v. Westrock, Inc., 997 F.2d 1444, 1450 (Fed. Cir. 1993)). The sale of a clog occurs after it has been manufactured and before it is ultimately destroyed. Thus, the point of sale for a clog clearly occurs during its normal use lifetime. At the point of sale, the insole is visible to potential purchasers when the clog is displayed on a shelf or rack and when the clog is picked up for examination. Similarly, removing a clog from a wearer’s foot also occurs after manufacture and before destruction of the clog, so it also falls squarely within the clog’s normal use lifetime. The wearer may remove the clog temporarily to stretch out his or her toes, leave the clogs on the beach to go for a swim, or engage in countless other activities that would leave the insole exposed.

Ok, who thinks the appellate court reads Florida IP Trends?  Me neither, but it’s still great to see the same analysis show up in the appellate opinion!