Considerations for Canna-Patent Owners and Applicants in Light of Insys Development Co. v. GW Pharma Ltd.

by McDonnell Boehnen Hulbert & Berghoff LLP
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For companies in the cannabis industry seeking to protect their innovations, patent protection is typically available for cannabis-related inventions (including the plant itself), just like it is for any other invention—they just have to be new, useful, and nonobvious.  Many canna-patent owners understand and are concerned with the uncertainty they currently face in U.S. courts for enforcing their rights on a potential infringer—namely whether U.S. courts will enforce these patents given that cannabis is still federally classified as a controlled substance.  But to date there have been no cannabis-related patent infringement cases that have gotten far enough in district court to indicate how courts will treat these cases.

One area that seems to be outpacing U.S. courts, and one that canna-patent owners should be aware of, is the possibility of challenging the validity of the patent itself via post-grant proceedings before the U.S. Patent and Trademark Office.  Of particular note are inter partes review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB), in which any third party can file a petition to institute, provided that they have not previously challenged the validity of the patent in a civil action or been served with a complaint alleging infringement in the year prior can challenge a granted patent.  In essence, this party (referred to as the "petitioner"), makes a case before the PTAB that the USPTO should have never issued the patent in the first place because it is not new or nonobvious in the face of other preemptive ("prior art") patents and printed publications (e.g., technical documents, trade papers, etc.).  In this way, the petitioner can only challenge a patent in an IPR on grounds of anticipation under 35 U.S.C. § 102 or obviousness under 35 U.S.C. § 103.  If a petitioner is successful in invalidating one or more claims in a patent in an IPR proceeding, the scope of the canna-patent owner's right to exclude others from practicing the patented invention will be reduced or lost entirely.[1]

On this point, the PTAB recently conducted a trial and heard oral arguments from a canna-patent owner and a party seeking to invalidate that patent in a cannabis IPR currently pending before the PTAB.  Specifically, IPR2017-00503 (previously flagged here) involves one of GW Pharma's patents related to treating seizures with cannabidiol (CBD), the non-psychoactive cannabinoid found in the cannabis plant.  GW Pharma is a British biopharmaceutical company known for its cannabis-based products, which it protects, in part, with its large cannabis-related patent portfolio (comprising around 100 patents and published applications in the U.S. alone), many of which are directed to treating diseases with cannabis-based compounds.  GW Pharma is also currently pursuing FDA approval for its cannabinol drug for treatment of seizures and is well on its way to having the first drug derived from the cannabis plant approved in the U.S.

Turning to the petition originally filed in this case, on December 16, 2016, Insys Development Company, Inc., a pharmaceutical company that focuses on cannabinoids, filed a petition to cancel all thirteen claims of U.S. Patent No. 9,066,920 ("the '920 patent," entitled "Use of One or a Combination of Pyto-Cannabinoids in the Treatment of Epilepsy") for obviousness based on three different combinations of several different references.

Claim 1 of the '920 patent (the only independent claim) is directed to "[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."  In its preliminary response, GW Pharma asserted that a person of ordinary skill in the art at the time of invention would not have been motivated to increase the dosage of CBD taught by one of the primary prior art references and would not have had a reasonable expectation that higher CBD dosages would treat partial seizures.

Nevertheless, the PTAB instituted the IPR of the '920 patent on July 7, 2017, finding that Insys had established a reasonable likelihood that it would prevail in showing that claim 1 was unpatentable based on two of the three asserted combination of references.  The PTAB recently modified its institution decision in light of the Supreme Court's April 24, 2018 decision in SAS Inst., Inc. v. Iancu, to institute on all of the grounds presented in Insys' Petition that each address all of the challenged claims.  Absent further briefing on this subject, a final determination (known as a "Final Written Decision") is expected from the PTAB by July 7, 2018—the one-year statutory deadline for the decision (although that deadline may be extended by up to six months in view of the Supreme Court-mandated change in PTAB practice regarding partial institution decisions).

While many in the cannabis industry wait for the PTAB's determination in this IPR, the broader, but perhaps more subtle, implications of this IPR are worth carefully examining in the meantime, as they exemplify the unique issues for challenging and enforcing patents in this space.

First, although enforcement of cannabis patents seems uncertain in U.S. courts, what does seem clear based on the PTAB's institution of this case is that cannabis patents can be challenged via IPR proceedings.  Perhaps this is unsurprising given the USPTO's historic willingness to examine and grant cannabis patents despite the plant's current classification as a Schedule I narcotic; but it does present a mechanism for challenging the patent itself (an enforcement strategy in its own right) via a quasi-judicial proceeding.  And nothing seems to be barring challengers from bringing other USPTO post-grant proceedings to bring future canna-patent challenges.

Second, as we've previously analyzed with regards to Biotech Institute's patents, finding prior art that can be used to petition IPR of patents directed to the chemical makeup of cannabis plants may prove difficult, as such publications do not seem readily available and would be the only path to substantiating an IPR (short of a patent or patent application directed to the same).  But with regard to patents directed to methods of treatment using cannabinoids (e.g., the '920 patent), there are likely far more research-based scientific publications and patents available to third parties to initiate such challenges.  Therefore, the industry may see more challenges to cannabis patents surrounding the plant (e.g., growth, cannabinoid compounds, uses, etc.) as opposed to patents directed to the plant itself.

Third, if viewed myopically, this case presents what many may see as yet another challenge (and potential disadvantage) to canna-patent owners and applicants in the current legal landscape.  Specifically, at first blush it may seem, as Justice Gorsuch recently quipped in Oil States, that after "much hard work and no little investment . . . you endure the [] cost and effort of applying for [and being granted] . . . [a] patent that affords you exclusive rights to the fruits of your labor for two decades . . . [only to have] someone later emerge[] from the woodwork, arguing that it was all a mistake and your patent should be canceled" via an IPR—all without any certainty that you would be able to even enforce that patent in U.S. courts.  And this scenario potentially presents a unique challenge to canna-patent owners because if U.S. courts begin declining to hear cannabis patent infringement cases, then an unfortunate circumstance may arise where cannabis patents are challenged and invalidated via an IPR without the owner's ability to ever enforce them in U.S. courts.  But all is not lost because, like any other industry, if the canna-patent can withstand an IPR challenge, the value created for the owner is tremendous.  For example, surviving an IPR strengthens the patent itself by proving its validity over the challenging references, and also demonstrates the canna-patent owner's commitment to protecting their intellectual property, which can add leverage value when attempting to license patents.

Fourth, and finally, the very existence of the PTAB's willingness to engage in IPRs such as IPR2017-00503 presents further confirmation for everyone participating in the canna-patent process (e.g., judges, attorneys, examiners, etc.) that the property rights bestowed in canna-patents are no different than those created in any other patent.  In turn, canna-patents, like the cannabis industry as a whole, will continue to normalize in the American judiciary (as it has in the American psyche)—and, hopefully, some of these recurring challenges will be alleviated along the way.

And the takeaway for canna-patent owners and applicants moving forward should remain unchanged.  Obtaining canna-patents is still highly valuable for companies in this industry and will serve as irreplaceable stakeholders in this ever-normalizing and expanding market.

[1] And, although a controversial subject to many, the Supreme Court recently confirmed the constitutionality of IPRs in Oil States Energy Services, LLC v. Greene's Energy Group, LLC.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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