Cannabis oil is the viscous, sticky, THC or CBD-rich sludge found in popular vaporizer pens and oil cartridges. To make cannabis oil, processes using liquid carbon dioxide to extract the active ingredients from the plant material is one of the most popular techniques.
And anyone using a particular CO2 extraction method is using technology owned by Canadian cannabis giant Canopy Growth and potentially owes them money, the company claimed in a recently acquired US patent and in a potentially blockbuster lawsuit filed on Tuesday.
News of the lawsuit was first reported Wednesday by Marijuana Moment.
If Canopy Growth prevails in its suit against GW Pharmaceuticals, the wildly successful UK-based firm that manufactures and markets Epidiolex, a CBD-based drug now available over-the-counter, the implications for the recreational cannabis industry in the US, as well as the global CBD business, are immense.
After obtaining a ruling that GW Pharmaceuticals used its intellectual property to extract CBD into Epidiolex, Canopy would be in a strong position to claim further patent infringement—including against almost every major cannabis-oil manufacturer in the United States, multiple experts said Wednesday.
The patent “really broadly covers CO2 extraction, which is the most widely used, and perhaps most important extraction technique,” said Larry Sandell, a Washington-DC patent attorney who is not involved in the lawsuit.
“I don’t know how much CO2 extraction falls outside the scope of the patent’s claims,” he added. “This is why people should care.”
“Potentially, everybody who does CO2 extraction may be infringing.”
Canopy Growth did not immediately respond to a phone message and an email seeking comment on Wednesday.
In an email, a spokesperson for GW Pharmaceuticals said the company was aware of the suit but would not comment on pending litigation.
The value of shares in GW Pharmaceuticals, traded on NASDAQ, dropped about 3.5 percent on Tuesday, to $118.43.
Shares in Canopy, also traded on NASDAQ, increased about 4.5 percent to $27.01.
To prevail, Canopy will have to prove that its patent is the first recorded example of the use of the technology described.
For GW Pharmaceuticals to win, the company will have to demonstrate that its method, described in broad terms on its website, uses technology not claimed in Canopy’s patent—or that the technology that Canopy’s new patent claims were “known or obvious” in 2000, when the patent application was filed.
The list of potential cannabis companies who could be on the hook to Canopy for a licensing fee or other damages is vast. It includes just about anyone making CBD oil, which is legal in all 50 states, as well as THC oil for the multi-billion-dollar recreational cannabis market, experts contacted for this article said.
“Given that the patent in question is part of a patent family dating back more than twenty years to October 2000, it stands to reason that a significant portion of cannabis companies use Canopy’s extraction process to produce CBD,” said Meital Manzuri, a Los Angeles-based cannabis law attorney familiar with industry technology patents.
Canopy is one of the biggest players in legal cannabis in Canada, and has made significant steps to expand to the United States.
Beverage giant Constellation Brands, which owns many popular alcohol brands, has invested billions into the company beginning in 2018.
Canopy also boasts a global CBD business, including one line of CBD products marketed under the Martha Stewart brand name.
Earlier this month, on Dec. 4, Canopy obtained the rights to a nearly 20-year-old patent application filed by a German company called Spectrum Therapeutics, public records show.
According to a document filed with the US Patent Office, Canopy paid $1 for the technology, plus “other good and valuable consideration, monetary and non monetary.”
On Tuesday, the US Patent Office issued Canopy the patent, for a “Process For Producing An Extract Containing Tetrahydrocannabinol And Cannabidiol From Cannabis Plant Material, And Cannabis Extracts,” records show.
The patent application, first filed by an inventor named Adam Mueller in October 2000, describes broadly the process of using CO2 at “subcritical” temperatures to extract THC and CBD from raw cannabis flower.
On the same day Canopy received the patent, the company filed a patent lawsuit in federal court in Waco, Texas.
The timing suggests Canopy had the lawsuit ready, and may have obtained the patent with the specific intent to file such a potentially industry-disrupting lawsuit, experts contacted for this article said.
In the lawsuit, Canopy states that Mueller’s extraction method, described in the October 2000 patent filing, is the same method that GW Pharmaceuticals describes as part of the Epidiolex manufacturing process on its website.
According to the suit, GW Pharmaceuticals had to have been aware of the earlier patent filing, since, as Canopy claims, GW Pharmaceuticals tried to license it. Instead, “in 2017, GW declined a license” for the patent, the suit claims.
“This case is not about restricting patient access to Epidiolex,” the suit claims. “Rather, Canopy brings this action to put a stop to GW’s knowing and unauthorized use of Canopy’s intellectual property.”
To use the patent to sue GW Pharmaceuticals—technically a cannabis company but as a pharmaceutical company that makes a CBD-based medicine, a more stable investment—rather than a smaller competitor in the commercial recreational cannabis space is a bold choice.
It suggests that Canopy could be preparing to enter the global CBD-based medicine game, said Avis Bulbulyan, a Los Angeles-based cannabis consultant who sits on a committee that advises the California state Bureau of Cannabis Control, which regulates in the industry in that state.
It could also mean that Canopy is serious about competing with GW Pharmaceuticals. Or it could be a very strategic play to own a piece of almost every existing cannabis company.
“I don’t think it’s a quick money grab,” he said. “If it was, Canopy would try to pick off a smaller competitor rather than go against a giant like GW Pharma.”
“And if GW Pharma settles or loses,” he added, “everybody’s fair game at that point.”
