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Why Intellectual Property Protection is Critical To Your Cannabusiness 

May 26, 2020

For any business to be successful it must constantly strive to maximize diverse revenue-generating streams while minimizing the costs of doing so. For most businesses, the development and monetization of an intellectual property portfolio that encompasses patents, trademarks, copyright, brands, goodwill, and trade secrets is an extremely profitable source of passive income that far exceeds the costs of administering and enforcing the portfolio. However, for the elite subset of cannabusinesses seeking to form and monetize their intellectual property portfolios, there are unique limitations, trials, and tribulations in doing so that need to be considered as the cannabusiness pursues intellectual property generation and protection. 

At the outset, not all cannabusinesses are equal in the eyes of the law.  Some cannabusiness are more equal than others. U.S. law recognizes these differences by further classifying cannabis into two areas of legal review: marijuana vs. hemp and regulates them differently.  Marijuana is illegal under federal law whereas hemp is not; therefore, hemp is entitled to federal intellectual property protection and marijuana is not.  Seems simple but as with most legal schemes there are always exceptions and exemptions and for cannabis products and services that remain true; particularly as applied to U.S. intellectual property law. Under U.S. Federal and State law, there are unique limitations and qualifiers that need to be considered as a cannabusiness pursues intellectual property registrations and protection that apply to the specific form of intellectual property the cannabusiness seeks to protect. 

To address this inequality under the law cannabusinesses must be extremely vigilant as to what intellectual property they are developing, what intellectual property protections are available to them under federal and state law at any given time, and perpetually reformulating their intellectual property portfolio strategy to anticipate changes in the law while taking advantage of those changes in real-time. If a cannabusiness has not developed a structured and staged plan to develop their intellectual property portfolio then they run the risk of disqualifying the subject matter from intellectual property protection completely, failing to sufficiently document the genesis and ownership of their intellectual property, or weakening their intellectual property rights position in the onslaught of a more ambitious competitor. 

To illustrate the importance of formulating an intellectual property portfolio strategy let us look at one example.  A marijuana cultivator produces a unique and novel line of marijuana genetics.  U.S. patent law permits an applicant to file for patent protection for certain types of marijuana patents; however, the applicant loses this right if the applicant places the marijuana patented material for public sale or use and does not apply for the patent within twelve months. If a marijuana cultivator produces a new strain of marijuana plant genetics those genetics may be eligible for patent protection provided they meet certain criteria for patent protection. If the cultivator introduces those marijuana plant genetics into the stream of commerce and fails to file for patent protection for those genetics within one year of doing so the marijuana cultivator forever loses that right to patent those genetics. Any competitor may simply obtain possession of those genetics, propagate their own line of those genetics, and offer their identical genetic line under their own branding without incurring any research and development costs. In hindsight, the marijuana cultivator should have sought the services of a Hoban Law Group patent attorney to advise them of the patentability of their marijuana genetics. 

To take our example one step further. Our marijuana cultivator did seek the advice of Hoban Law Group and it was determined that the marijuana genetics were not patentable.  Our next level of analysis is to see if our marijuana cultivator can protect marijuana genetics through trade secret measures. As a creature of state law, trade secret protection is available to subject matter legal under state law even if the subject matter is illegal under federal law.  However, it is incumbent upon the owner of the trade secret to take steps to keep the subject matter secret through policies, procedures, and contracts.  Our marijuana cultivator may be eligible to protect the marijuana plant genetics by implementing security measures to limit access to the marijuana plant genetics and impose contractual limitations when selling the genetics on the open market.  As a provider of genesis marijuana plant genetics, our marijuana cultivator may contractually prohibit purchasers of the genetics from propagating additional plants or charge a fee to do so. Buyers’ failure to do so is a breach of contract and actionable in state court and subjects the Buyer to hefty contractual penalties. 

A final layer to our analysis is to recognize trademark, copyright, branding, and goodwill intellectual property protections our marijuana cultivator is able to associate with the marijuana plant genetics. There are strategies to implement federal and state protections in the immediacy and set the groundwork for federal protection in the near future when marijuana is eventually legal under federal law. These strategies require firm understandings of what intellectual property protections are available now and what groundwork can be implemented now for intellectual property protection in the future. 

In this article, we used marijuana plant genetics as our example, but this example applies to other areas of marijuana and hemp products and services that face similar obstacles in intellectual property protection; such as ingestible CBD products, marijuana flower, and marijuana-infused products. All forms of marijuana and hemp products and services have some form of intellectual property protection available to them on a state and/or federal level.  The common thread in all intellectual property protection is that it requires the owner of the intellectual property to take affirmative action to protect and enforce their intellectual property rights; the law will not passively protect it for them.  To that end, it is critical that a cannabusiness understand what intellectual property they are creating (even inadvertently) and take steps to incorporate that intellectual property into an intellectual property portfolio for registration, protection, monetization, and enforcement. 

Our attorneys have the training and expertise to advise and guide cannabusinesses through intellectual property portfolio creation, registration, and enforcement in both domestic U.S. and international markets. 

The views and opinions expressed in the article represent the view of the author and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is intended to be a substitute for professional legal advice.

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