AND PATENT LAW: LESSONS FROM A CANADIAN CANNABIS CASE STUDY

KATHERINE MINORINI*

Abstract: Cannabis is illegal under federal law in the United States, yet individual states have legalized it for both medicinal and recreational use. Additionally, the United States Patent and Trademark Office (USPTO) routinely issues patents for cannabis-related inventions despite the drug’s federal prohibition. As the prospect of federal legalization becomes more likely, patent protection will play a crucial role in the budding cannabis market. By evaluating Canada’s legal cannabis system, this Essay identifies lessons the United States can take from the Canadian legalization framework. Ultimately, this Essay asserts that the United States should take quick action and legalize cannabis to stay competitive with the growing Canadian market.

INTRODUCTION

Mary Jane, lettuce, weed, cannabis, marijuana, no matter which name used, the leafy, green plant is one of the most common, consumed, and trafficked drugs in the world.1 The call for legalization has grown louder in recent years, but the dark shadow cast by marijuana regulation in the United States will present unique challenges to the drug’s legalization.2 Despite being federally illegal, fifteen states and Washington D.C. have legalized recreational cannabis use for adults and thirty-six have legalized use.3 Cannabis’s increased ubiquity has not led to substantial change at the federal level, and it remains a Schedule I drug.4 Schedule I drugs are those that have high potential for abuse, have no accepted medicinal use, and lack adequate

______Copyright © Boston College Intellectual Property & Technology Forum, Katherine Minorini * J.D. Candidate, Boston College Law School (expected 2023) B.S., Political Science, Boston College (2020). 1 See Mary Barna Bridgeman & Daniel T. Abazia, Medicinal Cannabis: History, Pharmacology, and Implications for the Acute Care Setting, 42 PHARMACY & THERAPEUTICS 180, 180 (2017) (relying on WHO annual prevalence rates derived from Cannabis Substance Abuse studies). 2 See Douglas Berman & Alex Kreit, Reforming Arizona Criminal Justice: Ensuring Marijuana Reform Is Effective Criminal Justice Reform, 52 ARIZ. STATE L. J. 741, 741–43 (2020) (stating “in less than a decade, marijuana legalization has gone from unthinkable to seemingly unstoppable”); id. at 766–67 (explaining that steps beyond mere legalization must be taken to address cannabis prohibition’s lingering effect, especially on the criminal justice system). 3 Jeremy Berke et al., All States Where Marijuana is Legal–and 5 More That Voted to Legalize it in November, BUS. INSIDER (Jan. 6, 2021), https://www.businessinsider.com/legal-marijuana- states-2018-1. 4 Id.; see Bridgeman et al., supra note 1, at 186 (defining Schedule I drugs as those that have a high potential for abuse, no accepted medicinal use, and lack of data for the substance’s use under medical supervision).

1 2 Boston College Intellectual Property & Technology Forum [BC IPTF safety standards.5 Schedule I drugs include heroin, LSD, ecstasy, and cannabis.6 Further, the drug’s illegal federal status limits research on and development of cannabis’s medicinal capabilities.7 It seems, however, that change is near because on December 7, 2020, the U.S. House of Representatives affirmed the Marijuana Opportunity Reinvestment and Expungement Act (MORE).8 The MORE Act legalizes cannabis and expunges the records of those previously convicted of minor cannabis violations.9 Cannabis legalization will impact a broad array of industries and laws in the United States, including private enterprise, interstate commerce, criminal, and employment law.10 Additionally, cannabis legalization brings about intellectual property concerns, as legalization will likely increase competition in the cannabis industry as agricultural and pharmaceutical corporations vie for a controlling stake in the emerging market.11 The United States’ path to legalization is markedly different and slower than its northern neighbor, Canada, which legalized cannabis in 2018 with the Canadian Cannabis Act.12 The Canadian Cannabis Act is a progressive legalization effort that leaves most of the retail regulation to the individual provinces’ discretion.13 The Canadian model provides a useful case study for United States legalization efforts because of the similarities between the two countries.14 These similarities include global positioning, comparable federalist systems between the national and provincial governments, and the role of the free market in both economies.15

______5 21 U.S.C. § 812(b)(1)(A)–(C). 6 Drug Scheduling, U.S. DRUG ENF’T ADMIN., https://www.dea.gov/drug-scheduling (last visited May 7, 2021). 7 See Bridgeman & Abazia, supra note 1, at 186 (elaborating how cannabis prohibition can negatively impact clinical trials, reliable background studies, and academic scholarship of drug studies, thus hindering scientific research and medicinal development). 8 Marijuana Opportunity Reinvestment and Expungement Act of 2020, H.R. 3884, 116th Cong. § 2(a)(2), 2(d) (2020) (referred to the Senate on Dec. 7, 2020). 9 Id. 10 See Hailey A. Barnett, High Risk, High Reward: Patent Law's Effects on the Medical Marijuana Industry, 22 TUL. J. TECH. & INT’L. PROP. 125, 126–27 (2020) (arguing that marijuana legalization has a wide impact across a variety of sectors such as medical practices, criminal law enforcement, and employment discrimination). 11 See id. at 127 (highlighting that the number of cannabis patents being granted by the USPTO is increasing, which will continue to grow as competition in the market increases). 12 See Antonia Eliason & Robert Howse, A Higher Authority: Canada’s Cannabis Legalization in the Context of International Law, 40 MICH. J. INT’L L. 327, 328 (2019) (describing why Canadian cannabis legalization was internationally important due to Canada’s statute in the international economy, membership in international organizations, and commitment to the international law); Silvia Irimescu, Legalizing Marijuana: State And Federal Issues: Marijuana Legalization: How Government Stagnation Hinders Legal Evolution And Harms A Nation, 50 GONZ. L. REV. 241, 283–84 (highlighting that conflicting state and federal cannabis regulations in the United States has a detrimental effect on citizens, states, and the federal government). 13 See Eliason & Howse, supra note 12, at 333 (explaining that the Task Force behind the Act recommended a provincial regulatory scheme similar to the existing provincial alcohol distribution networks). 14 See id. at 328, 333 (highlighting how Canada is an important analogue because of its membership in the G7 and because the Act gives broad discretion to provincial governments in implementation of the Act’s licensing programs). 15 Id. at 333.

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This Essay explores intellectual property considerations of cannabis legalization, specifically how the availability of cannabis patents will affect the budding market.16 The effect Canadian cannabis legalization has on the United States market may be significant.17 Part I provides a history and overview of cannabis regulation in the United States.18 Part II briefly explains patent law as it relates to cannabis.19 It then analyzes the Canadian cannabis framework, and compares the regulatory systems in the United States and Canada.20 Finally, Part III identifies benefits and drawbacks of ending the federal cannabis prohibition in the United States.21 This Essay identifies lessons that the United States can take from Canada’s legalization and emphasizes the necessity of ending federal cannabis prohibition so that the United States’ market can compete with its northern neighbor.22

I. U.S. CANNABIS REGULATION & PATENT LAW

Prior to the twentieth century, manufacturers and producers used in crafting textile and canvas materials, and pharmacies used the substance in over- the-counter medicines.23 Throughout the first half of the twentieth century, however, cannabis regulation was largely motivated by racial prejudice and false assertions of the drug’s adverse effects.24 This misinformation inspired resentment of cannabis, which was underscored by middle class America’s disfavored perception of minority groups.25 It further led to an increasingly punitive system handling cannabis-related crimes.26 Section I.A will address the state regulatory schemes currently in place.27 Section I.B will provide background on federal

______16 See Barnett, supra note 10 at 128 (asserting the patent system will be necessary to ensuring sustainable market development and growth for a legal cannabis market). 17 See Eliason et al., supra note 12, at 329 (explaining how analysis of the Canadian legalization model presents exposes various legal challenges for cannabis legalization worldwide). 18 See infra notes 23–49and accompanying text. 19 See infra notes50–93and accompanying text. 20 See infra notes 94–97 and accompanying text. 21 See infra notes 121–125 and accompanying text. 22 See infra notes 146–151 and accompanying text. 23 See Marijuana Timeline, PBS FRONTLINE, https://www.pbs.org/wgbh/pages/frontline/shows/dope/etc/cron.html (last visited May 7, 2021) (explaining that hemp is the plant from which marijuana is derived and can be used for “production of rope, sails, and clothing”). 24 See Richard J. Bonnie & Charles H. Whitebread II, The Forbidden Fruit and the Tree of Knowledge: An Inquiry into the Legal History of American Marijuana Prohibition, 56 VA. L. REV. 971, 1021 (1970) (discussing how public perception of marijuana was largely misinformed and provoked an adverse association with the drug). 25 See id. at 1034 (explaining that regulation was “attended by little publicity, no scientific study and even more blatant ethnic aspirations” than previous state cannabis regulations). 26 See id. at 1063 (stating that the Boggs Act, a major narcotics legislation passed in 1951, “provided much harsher penalties for all drug violators” and treated cannabis just as all other narcotics despite contemporary testimony against equating the substance with others). 27 See Berman et al., supra note 2, at 743–45 (providing a brief overview of state cannabis regulation, focusing specifically on Arizona’s regulatory scheme throughout the article).

4 Boston College Intellectual Property & Technology Forum [BC IPTF regulation of cannabis and will provide a brief analysis on the future of federal regulation.28

A. State Regulation

Today, the states act as examples of what federal cannabis legalization may entail, just as they were examples for what cannabis prohibition and regulation could be in the early twentieth century.29 State level marijuana prohibition quickly followed after an immigration surge to southern and western states following the Mexican Revolution in 1910, which coincided with the introduction of recreational cannabis.30 The states were the first to pass laws criminalizing the substance, with Utah being the first to enact a statewide prohibition in 1915.31 Federal legislation came shortly after in two notable legislative actions toward a nationalized cannabis regulatory scheme: the Uniform Controlled Substances Act of 1932, and the Marijuana Tax Act of 1937.32 Despite federal regulations criminalizing cannabis, California legalized medicinal use of the drug when it passed the Compassionate Use Act of 1996.33 Since then, there has been a wave of legalizations, with a number of states establishing their own regulatory schemes, either for recreational or medicinal use.34 In 2012, cannabis violations accounted for 46.6% of total arrests reported for drug violations throughout the United States despite a trend toward more progressive regulatory programs among the states.35 Nevertheless, cannabis use has steadily increased with various state legalization and decriminalization efforts, but the varying regulatory schemes fail to provide ordinary citizens notice of what is and is not legal .36 ______28 See Marijuana Timeline, supra note 23 (giving a brief overview of notable federal actions relating to cannabis regulation). 29 See Bonnie, supra note 24, at 1021–22 (highlighting that state legislators found little problem banning the drug associated with ethnic minorities and the lower class, which they had little knowledge about). 30 Marijuana Timeline, supra note 23; see Bonnie, supra note 24, at 1021 (stating that increased concern about cannabis coincided with the growth of the Mexican-American minority in the western states). 31 See Berman, supra note 2, at 743–44 (elaborating that between 1910 and 1931, 22 states across the U.S. adopted prohibition laws); Bonnie, supra note 24, at 1012 (explaining that the first statewide cannabis prohibition, enacted by Utah in 1915, was “attended by little publicity”). 32 See Bonnie, supra note 24, at 1028 (detailing the nationalization of cannabis regulation in the 1930s). 33 See Compassionate Use Act, CAL. HEALTH & SAFETY CODE § 11362.5 (Deering 1996) (legalizing medicinal use of marijuana within the state). 34 Berke, supra note 3. 35 See Irimescu, supra note 12, at 249 (explaining that 16% of the total state prison population were drug offenders); Downloads and Documentation: Arrest Data–Reported Number of Drug Arrests, FBI CRIME DATA EXPLORER (Jan. 1, 2017), https://crime-data- explorer.app.cloud.gov/downloads-and-docs, (breaking down the reported arrest data for drug manufacturing and possession, with marijuana manufacturing and possession arrests comprising 581,008 out of the 1.247 million arrests reported in 2012). 36 See Irimescu, supra note 12, at 264 (describing how the continued federal prohibition coupled with increased legalization and regulation among states creates confusion for citizens regarding what constitutes as legal and acceptable cannabis use).

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B. Federal Regulation

Early cannabis policy decisions were largely influenced by racial prejudice against immigrants and unsubstantiated assumptions about the effects of cannabis, such as addiction and impaired cognition.37 Nevertheless, when middle class America’s cannabis consumption increased in the 1960s, the nature of cannabis use changed, and those changes had social consequences.38 The Marijuana Tax Act of 1937, the first piece of federal legislation that directly addressed cannabis, was hard to enforce and did not directly criminalize cannabis use and production.39 By the mid-1960s, a shift in perspective accompanied the counterculture movements of the decade, and cannabis use among America’s middle class increased, with some estimating that twenty-five million had used the illicit drug at least once by 1967.40 This shift triggered more scientific research into cannabis’s effects.41 Despite the changing societal perceptions of the drug, Congress passed the Controlled Substances Act in 1970 and listed cannabis as a Schedule I drug.42 The cannabis prohibition was strictly enforced, especially during the Nixon administration when the President first declared a war on drugs.43 During the 1980s, federal funding for enforcing drug prohibition increased significantly, and the government established new mandatory minimums that applied to a wider range of activities.44 Between 1990 and 2002, drug-related arrests increased by 450,000, with cannabis accounting for 82% of the growth, and 79% of arrests for mere possession.45 The cost of the cannabis steadily decreased, and the purity and perceived availability of the substance increased despite strict enforcement throughout that period.46 Additionally, the increasingly punitive enforcement regime disproportionately impacted African American communities.47 Over half of

______37 See Bonnie, supra note 24, at 1011–12 (1970) (explaining the major motivating factors behind the initial legislative efforts to control marijuana). 38 See id. at 1098 (explaining the drug’s association with counterculture and the increase in medical inquiry of the drug’s benefits). 39 See Berman, supra note 2, at 744–45 (explaining that the Act was difficult to enforce due to the Court’s constrained view of Congress’s Commerce Clause power); see, e.g., Gonzalez v. Raich, 545 U.S. 1, 22 (2005) (holding the Controlled Substance Act was a proper exercise of Congress’ commerce clause power because regulation of local, intrastate activity was necessary to regulate the interstate market). 40 See Bonnie, supra note 24, at 1096–97 (highlighting that public perspective shifted as the middle-class began to use cannabis as a euphoriant and as curiosity about the drug grew in academia). 41 See id. at 1171 (detailing how public opinion became more operative on cannabis issues in the late 1960s which generated “massive scientific inquiry” into cannabis’s effects). 42 See 21 U.S.C. § 812(d) (classifying Cannabimimetic agents under Schedule I). 43 Berman, supra note 2, at 745. 44 See Alex Kreit, Drug Truce, 77 OHIO STATE L. J. 1323, 1332–33 (2016) (explaining the dramatic changes in drug legislation and funding that occurred throughout the 1980s). 45 Ryan King & Marc Mauer, The War on Marijuana: The Transformation of the War on Drugs in the 1990s, HARM REDUCTION J. 3, 2 (2006). 46 See id. at 4–5 fig. 5 (showing as arrests steadily rose, price of cannabis decreased). 47 See id. at 5 (explaining how, in 2002, Black Americans accounted for 30% of marijuana violation arrests despite making up only 14% of regular cannabis users).

6 Boston College Intellectual Property & Technology Forum [BC IPTF the federal prison population incarcerated between 2001 and 2013 served at least a year for a past drug offense.48 In 2018, total cannabis-related arrests were more than 20% higher than were arrests for violent crimes notwithstanding the trend toward state level legalization.49

II. CANNABIS, CANADA, AND PATENTS

The Constitution grants Congress the power to promote science by securing inventors exclusive rights to their discoveries for a limited duration.50 Congress has used this enumerated power and passed legislation regarding the patentability of such discoveries.51 Section II.A provides background on the types of patents for cannabis-related activities.52 It then contemplates some legal considerations for patenting cannabis given the substance’s federal criminalization.53 The section concludes with an analysis of patent availability and its effect on research and development.54 Section II.B describes and evaluates the Canadian legalization scheme as an analogue to the United States.55

A. Patenting Cannabis

The United States Patent and Trademark Office (USPTO) issues patents to those who claim an invention or discovery that adheres to the rules of patentability.56 Patents provide inventors a twenty year monopoly on the claimed invention beginning the date the patent application is filed.57 Part II.A.1 discusses the patents available to aspiring cannabis business owners.58 Part II.A.2 posits the legal complexities underlying cannabis patents given their illicit status.59 Part II.A.3 evaluates the effect patents and prohibition play in the research and development of cannabis. 60

______48 Irimescu, supra note 12, at 249. 49 Berman, supra note 2, at 747. 50 U.S. CONST. art. 1, § 8, cl. 8. 51 See 35 U.S.C. § 100–05 (articulating definitions and defining what may be patented and conditions for patentability). 52 See infra notes 5670–75and accompanying text. 53 See infra notes 76–78 and accompanying text. 54 See infra notes 88–94 and accompanying text. 55 See infra notes 94–120 and accompanying text. 56 General Information Concerning Patents, U.S. PAT. & TRADEMARK OFF.,, (Mar. 14, 2018) https://www.uspto.gov/patents/basics. 57 Id. 58 See Dustin Boone, Puff Puff Patent: Identifying and Addressing the Tensions Between the Medical Marijuana Industry, Patent Law, and the Controlled Substances Act, 38 CARDOZO ARTS & ENT. L. J. 473, 488 (2020) (describing the different patents available to developers). 59 See Basics of Marijuana Patent Law, COHEN IP LAW GROUP, https://patentlawip.com/basics- marijuana-patent-law/ (last visited May 8, 2021) (explaining how the USPTO treats patent applications that relate to cannabis). 60 See Spencer Keller, How Small Cannabis Businesses Can Survive the Hurdles of IP Protection, 8 TEX. A&M L. REV. 199, 204 (2020) (explaining how cannabis prohibition impacts the emerging cannabis industry’s development).

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1. Patenting Cannabis: Methods and Motives

There are three types of patents available to inventors: utility patents, design patents, and plant patents.61 Those applying for a cannabis-related patent can apply for either a plant patent or a utility patent.62 There are three general requirements for the subject matter.63 First, there is a utility requirement, meaning the claimed invention has a nontrivial, beneficial use and operates for the intended purpose established in the patent.64 This also means that the subject matter cannot merely be an idea or suggestion.65 Second, there is a novelty requirement, meaning the claimed subject matter is not already patented or within public domain.66 When determining the patentability of an invention, the courts apply the Alice Test, a two-part test to determine whether a patent meets the novelty requirement: Is the claim at issue a non-patentable subject (law of nature, natural phenomena, abstract idea)? If so, does the claim offer an inventive concept that transforms the nature of the claim into a patent-eligible application?67 Third, there is a nonobvious requirement.68 The subject matter in the claimed invention cannot be obvious to a person having ordinary skill in the art to which the patent pertains.69 The most commonly granted patent is a utility patent due to its broad categorization.70 Those who invent or discover a useful new process, machine, manufacture, or composition of matter can apply for a utility patent.71 Plant patents are granted to those who invent or discover a distinct new variety of plant that can naturally reproduce.72 Fewer than one percent of active cannabis patents are plant patents because they offer a more limited scope of coverage to the patent holder than utility patents.73 Conversely, utility patents protect plants among other ______61 Boone, supra note 58 at 488. 62 See id. at 489 (highlighting that utility patents and plant patents provide better protection than design patents, “which only protect the way something looks,” because they protect the invention itself not merely its appearance). 63 General Information Concerning Patents, supra note 57. 64 Id. 65 Id. 66 See 35 U.S.C. § 102(a)(1) (detailing the conditions for patentability related to the novelty of the invention). 67 See Alice Corp. Pty. Ltd. v. CLS Bank Int’l., 573 U.S. 208, 217–18 (2014) (adjudicating a dispute about a computer-implemented scheme for mitigating financial risk). 68 35 U.S.C. § 103; see General Information Concerning Patents, supra note 57 (elaborating how the application’s subject matter may not have a similar variation, already known and available to the public). 69 Keller, supra note 60, at 204; Jonathan Darrow, The Neglected Dimension of Patent Law’s PHOSITA Standard, 23 HARV. J. OF L. & TECH. 227, 232 (2009). 70 Boone, supra note 61, at 488. 71 35 U.S.C. § 101; see Boone, supra note 61, at 488 (explaining how utility patents protect an invention’s method of functioning or operation). 72 35 U.S.C. § 161. 73 Basics of Marijuana Patent Law, supra note 59; see Clinton South & Brian Shortell, Patenting Cannabis: Possibilities and Pitfalls, IP WATCHDOG (Feb. 7, 2020), https://www.ipwatchdog.com/2020/02/07/patenting-cannabis-possibilities-pitfalls/id=118615/ (detailing how the protection afforded by plant patents is limited because the difficulty of proving infringement of an asexually reproduced plant).

8 Boston College Intellectual Property & Technology Forum [BC IPTF cannabis inventions and offer broader protection to the patent holder.74 Both utility and plant patents last for twenty years, but utility patents cover any functional invention whereas plant patents are only available to one who discovers and successfully asexually reproduces a new plant variety.75

2. Legal Considerations for Cannabis Patents

The subject matter in a patent application must have a lawful use to qualify for a U.S. patent, meaning it must not violate any federal statute or regulation.76 Although there is a lawful use requirement, the USPTO has a history of turning a blind eye for cannabis-related patents.77 This is likely because of the precedent set by the United States District Court of Northern Texas in 1988 in Whistler v. Autotronics.78 In Whistler, the court adjudicated a patent infringement suit involving U.S. Patent no. 4,315,261, which covers a radar signal detector.79 The defendant, Autotronics, claimed the primary purpose of plaintiff’s patent (Whistler) was to circumvent law enforcement, and therefore lacked utility.80 Nevertheless, the court declined to invalidate Whistler’s radar patent because the patent covered an invention relating to an illicit activity, not the illicit activity itself, and was therefore entitled to patent law protection.81 Insofar as this holding remains intact, cannabis patent hopefuls should make sure their patent claims something other than a strictly illegal purpose, which will provide more protection in potential court battles should the patent be granted.82

______74 See General Information Concerning Patents, supra note 57 (explaining that patent holders possess the right to exclude others from the invention for 20-years after the application is filed and detailing the requirements to obtain each type of patent). 75 See South, supra note 73 (explaining how utility patents offer broader protections than do plant patents, but they also involve a more rigorous application process). 76 See 35 U.S.C. § 101 (detailing the limitations on the issuance of patents for claims directed to human organisms and that which is naturally occurring). 77 See Basics of Marijuana Patent Law, supra note 59Error! Bookmark not defined. (stating the USPTO looks the other way and grants the patents despite its federal classification as a Schedule 1 Drug). 78 See Whistler Corp. v. Autotronics, Inc., No. CA3-85-2573-D, 1988 U.S. Dist. LEXIS 17302, at *15 (N.D. Tex. July 28, 1988) (holding the defendant was willfully infringing on Whistler Corp’s radar detector patent); Keller, supra note 60, at 206–07 (elaborating how the court handles patent litigation concerning subject matter related to an illicit product, emphasizing the importance of seeking a patent for a cannabis-related invention). 79 Whistler Corp., 1988 U.S. Dist. LEXIS 17302, at *1. 80 Id. at 4. 81 See id. (explaining that, although the court is resistant to “referee a contest” between entities who manufacture a product with a primary purpose of circumventing law enforcement efforts, it is unwilling to “withdraw patent protection from them” where congress has not done so). 82 See Keller, supra note 60, at 206–07 (explaining that “this strategy provides a safe route for cannabis patentees if courts invalidate their cannabis patents to the extent they serve only illegal purposes”); see, e.g., United Cannabis Corp. v. Pure Hemp Collective, No. 18-cv-1922-WJM- NYW, 2019 U.S. Dist. LEXIS 66092, at *13 (emphasizing at the outset of a cannabis patent dispute that the claim at issue described a liquid formulation involving cannabis, but no part of the claim states “a purpose or use” of those formulations).

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3. Cannabis Patents, Research & Development

During the imminent cannabis renaissance, those wishing to enter into the industry once occupied by the illicit black market must be strategic and efficient in securing their intellectual property.83 The majority of cannabis-related inventions seeking patent protection fall into four broad categories: (1) distinct cannabis plants and strains; (2) products used for ; (3) methods of processing cannabis and their active ingredients; and (4) medicinal cannabis used for disease and pain management.84 The USPTO granted the first cannabis-related patent in 1942.85 The 1970 classification of cannabis and its derivatives as a Schedule I drug did not stop the USPTO from granting additional cannabis-related patents, and since 2012, the office has issued over 400 cannabis-related patents.86 Notably, the U.S. Department of Health and Human Services holds a cannabis patent even though it continues to ban the substance.87 Federal legalization of cannabis would allow domestic research and development of the emerging global industry, a significant benefit for the growing market.88 The drug’s Schedule I classification hinders cannabis research and development.89 The difficulty has pushed American companies to conduct their research internationally in countries such as Israel, where cannabis-related research is encouraged and fewer regulatory hurdles exist.90 For example, Israel hosts fifteen U.S.-based companies focusing on cannabis research because Israel has one of the most well developed cannabis research programs in the world.91 Legalizing cannabis would allow research into the drug on United States soil and would encourage small business innovation.92 Additionally, the legalization would position the budding United States industry to better compete with nations that have established cannabis research programs, such as Israel.93

______83 Keller, supra note 60, at 201. 84 See Basics of Marijuana Patent Law, supra note Error! Bookmark not defined. (explaining the four most common types of cannabis patents including the most common cultivation products such as extracts, oils, edibles, and veterinary products, among others). 85 See U.S. Patent No. 2,304,669 (filed Aug. 16, 1940) (patenting the process for isolating from red oil obtained from hemp). 86 Keller, supra note 60, at 205. 87 U.S. Patent No. 6,630,507 B1 (filed Apr. 21, 1999) (patenting cannabis compounds for pharmaceutical use as antioxidants and neuroprotectants). 88 See Keller, supra note 60, at 211 (detailing how the CSA regulates who can grow cannabis for research and who can conduct cannabis research due to the strenuous procedural requirements). 89 Id. (explaining that the DEA consistently rejects applications for licensing to grow and research marijuana). 90 See id. at 212 (explaining that Israel is a favorable destination for cannabis research because the government has one of the most well-developed cannabis research programs in the world). 91 Id. 92 See id. (stating that overseas research is “nearly impossible” for small businesses whereas larger corporations have the resources and incentive to move their operations overseas). 93 See id. (explaining that the more lenient procedural barriers for cannabis research abroad incentivizes large cannabis corporations to “move their operations there”).

10 Boston College Intellectual Property & Technology Forum [BC IPTF

B. The Case of Canadian Cannabis

In 2018, Canada became only the second country in the world to legalize recreational cannabis use after Uruguay legalized it in 2013.94 Legalization of recreational cannabis provides lucrative investment opportunities and has potential to bring in substantial tax revenues for the government.95 Part II.B.1 provides a brief background of cannabis legalization in Canada. Part II.B.2 discusses the effects of legalization on the Canadian economy.96 Part II.B.3 analyzes the Canadian case and identifies overlaps with the emerging United States market.97

1. National Legalization

Despite its illegal classification in Canada, cannabis was the second most used psychoactive substance in the country in 2017, behind alcohol.98 Prior to legalization, significant debate surrounded the proper means of legalization due to moral, ethical, and public health concerns.99 Prohibition was costly and, in 2014, the criminal justice system spent $1.761 billion on enforcement related to the cannabis prohibition.100 Finally, on October 17, 2018, Canada legalized recreational use of the cannabis plant through the Cannabis Act (the Act).101 The Act is an innovative law legalizing recreational cannabis use and regulating the substance through a licensing regime.102 The Act had three overarching purposes: to prevent exposure of cannabis to young people, to deter black market cannabis participation, and to provide a safe, legal route for the adult public to access and consume cannabis.103

______94 See Byron Adinoff & Amanda Reiman, Implementing Social Justice in the Transition from Illicity to Legal Cannabis, 45 AM. J. OF DRUG & ALCOHOL ABUSE, 673, 673 (2019) (stating Uruguay legalized personal use in 1974 and cultivation and sale in 2013). 95 Id. 96 See Eliason et al., supra note 12, at 329–30 (explaining how the Canadian legalization scheme is an interesting case study because it created an ambitious regulatory scheme compared to the efforts of other countries in the international community). 97 See Canadian Drug Summary: Cannabis, CANADIAN CTR. ON SUBSTANCE USE & ADDICTION 1, 3 (May 2020), https://www.ccsa.ca/sites/default/files/2020-08/CCSA-Canadian-Drug-Summary- Cannabis-2020-en.pdf (providing an overview of cannabis use in the year following legalization). 98 See id. at 8 (showing that, in 2017, cannabis was the second most used mind-altering drug in the general population). 99 See Mohammad Hajizadeh, Legalizing and Regulating Marijuana in Canada: Review of Potential Economic, Social, and Health Impacts, 5 INT'L J. HEALTH POL'Y & MGMT. 453, 453 (2016) (explaining why the legalization of cannabis, as opposed to merely decriminalization, is such a controversial subject). 100 See Canadian Drug Summary, supra note 97, at 12 (stating “the majority of costs of cannabis in 2014 was borne by the criminal justice system ($1.761 billion), followed by other costs ($481 million), lost productivity ($368 million) and the health system ($208 million)”). 101 Cannabis Act, S.C. 2018, c. 16 § 69(1) (Can.). 102 Eliason, supra note 12, at 329–30; S.C. 2018, c. 16§ 61(1)(a)-(d) (Can.). 103 Cannabis Legalization: What has Changed?, STATISTICS CANADA (Feb. 19, 2020) https://www150.statcan.gc.ca/n1/pub/11-627-m/11-627-m2020014-eng.htm#moreinfo; S.C. 2018, c. 16, §7(a)-(g) (Can.).

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The Act expressly prohibits the import and export of cannabis.104 Additionally, it legalizes cannabis for individual possession and authorizes the Canadian Minister to issue licenses for production, manufacturing, and distribution processes.105 Although the Minister is given authority to issue, renew, and amend licenses, the provinces and territories retain broad discretion to reduce or alter the conditions under which a person may obtain a license.106

2. The Effect of Canadian Legalization

When the Cannabis Act opened the legal recreational market, many aspiring business owners turned to intellectual property protection for their claimed inventions.107 Canadian cannabis companies can acquire United States cannabis patents, which is what Canopy Growth, a Canadian corporation, successfully did in January 2021.108 Legalization allowed big pharmaceutical companies to take advantage of the new market through patent acquisition.109 Seven of the top ten medical cannabis patent holders in Canada were international pharmaceutical conglomerates, with the remaining three being United States corporations.110 Additionally, the legalization has allowed Canadian cannabis companies to go public, allowing for substantial capital gains and providing Canadian companies a competitive advantage over their American neighbors.111 When the drug was legalized in 2018, there was a surge in investment into the newly legal recreational market that has contributed to the young industry’s rapid growth.112 During the first twelve months of legalization, for example, there were more than $908 million of cannabis products sold and more than 400 brick- and-mortar stores established.113 Legalization provided a lucrative new source of

______104 S.C. 2018, c. 16 § 11(1) (Can.). 105 See id. at § 62(1) (authorizing licensing for testing, packaging, labeling, sending, delivering, transporting, selling, possessing, or disposing of cannabis). 106 See id. at § 69–70 (outlining the federal authorization, legislative measures, and the administrative and enforcement activities of provincial Acts). 107 Elizabeth Raymer, Protecting Cannabis IP, CANADIAN L. MAG. (Jan. 14, 2019), https://www.canadianlawyermag.com/news/general/protecting-cannabis-ip/275743. 108 See U.S. Patent No. 20,210,000,791 (filed Sept. 17, 2020) (patenting water soluble formulations and the methods of production). 109 Matej Mikulic, Top 10 Medical Cannabis Patent Holders in Canada as of 2019, by Number of Patents, STATISTA (Aug. 16, 2019), https://www.statista.com/statistics/1038237/medical-cannabis- companies-canada-by-number-of-patents/. 110 See id. (depicting the 2019 top 10 cannabis companies in Canada based on the number of cannabis patents held by the entity). 111 Luke Scheuer, The : The Public Marijuana Securities Market, 26 WIDENER L. REV. 53, 59 (2020). 112 See id. at 79 (explaining that the legalization reduced the investment risk for Canadian cannabis companies as opposed to American companies, which operate where the drug remains illegal). 113 Canadian Drug Summary, supra note 97, at 12; The Retail Cannabis Market in Canada: A Portrait of the First Year, STAT. CAN. 1, 3 (Dec. 11, 2019), https://www150.statcan.gc.ca/n1/en/pub/11-621-m/11-621-m2019005-eng.pdf ..

12 Boston College Intellectual Property & Technology Forum [BC IPTF revenue for the federal government as the emerging industry contributed $5.71 billion to Canada’s GDP in 2018.114

3. Comparison of the United States and Canadian Systems

The Canadian example shows apparent economic incentives to legalize cannabis.115 U.S. companies take on less risk when investing in the Canadian companies participating in a legal market.116 This, coupled with the Canadian cannabis companies’ ability to acquire USPTO patents, gives the Canadian companies a competitive advantage over their U.S. counterparts.117 Thus, a legal cannabis market incentivizes international investment into the domestic industry.118 Canada is also a good example of what a successful shared-regulation system looks like in a country with a federalist system of governance.119 Although the recency of Canadian legalization makes it hard to identify all the pros and cons of the Canadian Cannabis Act, the United States has much to learn from Canada about regulation and licensing of a budding legal cannabis market.120

III. CONSIDERATIONS FOR U.S. CANNABIS PATENT LAW DEVELOPMENT

The United States’ most promising path forward is to remove cannabis’s classification as a Schedule I drug, a move that has been discussed and legislated in Congress with hemp (a variety of the cannabis plant).121 Similar measures must be taken with cannabis containing higher amounts of THC because the illusive promise of not enforcing cannabis’ federal prohibition is not enough to support and sustain an industry with so much growth potential.122

______114 See Cannabis Income Account, STAT. CAN. (Mar. 12, 2021), https://doi.org/10.25318/3610060101-eng (showing Cannabis 2018 total income data in Canada for medical and non-medical cannabis use). 115 Scheuer, supra note 111, at 74; see Hajizadeh, supra note 99, at 454 (detailing the impact cannabis legalization may have on the economy). 116 See Scheuer, supra note 111, at 89 (elaborating the advantage Canadian companies have by their ability to list a cannabis company on both Canadian and American stock exchanges). 117 Id. at 74. 118 See id. at 73–74 (explaining Canadian legalization gave the Canadian companies complete access to U.S. securities laws, national exchanges, and insurance services among other things). 119 See Eliason, supra note 12, at 333 (explaining how some Canadians advocated a government monopoly over cannabis retail while others wanted a private enterprise model). 120 See Canadian Drug Summary, supra note 97, at 3 (providing a summary of Canadian cannabis regulatory scheme since its legalization in 2018). 121 See Hemp Production and the 2018 Farm Bill: Hearing on H.R. 2 Before the S. Comm. On Agric, Nutrition, & Forestry, 115th Cong. 4, 10 (2019) (statement of Amy Abernethy, Deputy Comm’r Food and Drug Admin.) (detailing the distinction between cannabis and hemp and the positive effect that hemp’s removal from CSA Schedule 1 listing would have on research and development). 122 See David DuTremble, Next Dance with Mary Jane: An Argument for The Patentability Of Specific Genetic Strains Of Marijuana Under Federal Patent Law, 10 CHARLESTON L. REV. 445, 471–72 (2016) (explaining that the current loophole in CSA cannabis prohibition, which allows cannabis-related patents, fails to provide sufficient security for the cannabis market).

2021] Cannabis and Patent Law: Lessons from a Canadian Case Study 13

Section III.A discusses the impact of legalization on research and development.123 Section III.B highlights the monetary and market benefits of cannabis legalization.124 Section III.C analyzes the United States position in the current cannabis market and how the United States can become a more competitive player in the market.125

A. Legalization’s Effect on Research & Development

Patent laws encourage growth and innovation, but cannabis’s long history of prohibition has hindered industry development.126 The USPTO grants cannabis- related patents despite the federal cannabis prohibition.127 Distinguishing which plant strains and cultivation methods are new from those already in existence is difficult, and there is scarce data on the existing methods and strains because the cannabis industry has operated in the shadows for so long.128 Nevertheless, the USPTO promotes research and development by granting these patents and puts other cannabis inventors on notice of industry trends and progress, potentially leading to better understandings and applications of the drug.129 Industry monopolization by large conglomerate companies with the economic cushion to decrease prices and squeeze out the competition is a notable concern as federal legalization seems more likely and cannabis patents become more common.130 The developing industry will be adversely affected if a small number of companies possess numerous, broad cannabis patents because their patent protection would raise the barrier of entry into the market.131 For example, on August 4, 2015, the USPTO granted the first cannabis breeding related patent to Biotech Institute, a California-based company.132 In addition to two other wide-reaching cannabis patents, the company has filed applications for many others.133 Cumulatively, Biotech Institute would have

______123 See infra notes 126–129 and accompanying text. 124 See infra notes 137–141 and accompanying text. 125 See infra notes 146–151 and accompanying text. 126 See Keller, supra note 60, at 208 (describing how cannabis prohibition has discouraged and suppressed innovation in the cannabis industry). 127 Emily Pyclik, Obstacles to Obtaining and Enforcing Intellectual Property Rights in the Marijuana Industry, 9 AM. U. INTELL. PROP. BRIEF 26, 32–33 (2018). 128 See id. at 44–45 (explaining the difficulty of identifying existing strains due to lack of a public database about what was in public domain). 129 See Manuela Cabal Carmona, Dude, Where’s My Patent?: Illegality, Morality, and the Patentability of Marijuana, 51 VAL. U. L. REV. 651, 692 (2017) (emphasizing the important role that the USPTO plays in disseminating information about important cannabis-related discoveries). 130 See Basics of Marijuana Patent Law, supra note Error! Bookmark not defined. (explaining how larger conglomerate companies can influence market prices and how these companies’ actions suggest an effort to do so). 131 See id. (detailing how “patent trolls” and large, patent-hungry corporations are a threat to the market and small business development in the emerging industry). 132 See U.S. Patent No. 9,095,554 (filed Mar. 17, 2014) (patenting the compositions and methods for breeding, production, processing and use of specialty cannabis strains). 133 See Boone, supra note 61 at 492 (explaining that the Biotech Institute’s patents are utility patents, and the scope of protection is so broad that growers, shops, cultivation hopefuls and researchers could encounter licensing fees by coming in contact with the plant).

14 Boston College Intellectual Property & Technology Forum [BC IPTF immense control over the industry if the USPTO granted patents for all the claimed subject matter, which would pose significant risks to further industry development.134 Biotech Institute has positioned itself to be an industry giant if cannabis is federally legalized.135 Their push to pursue patents should signal to smaller businesses hoping to cement their presence in the industry to pursue patents so as to avoid being crowded out of the emerging market by pharmaceutical companies with ample resources to file patents.136

B. Economic Effects of Legalization & Patent Protection

Patent protection for cannabis inventions provides needed security for small businesses.137 Many growing businesses require venture capital investment to get off the ground.138 The benefit of a patent portfolio is twofold: it provides the company with product protection and it reassures the potential investors that their money is supporting a unique, patented venture.139 In fact, obtaining a patent reduces the time needed to secure initial venture capital investment by seventy-six percent.140 Cannabis legalization would allow room for a new area of development, create more research opportunities within the United States, and incentivize black market participants to transition over to the legal market, which happened in Canada.141 Apart from the social and international trends urging legalization, there are massive economic benefits to be derived from cannabis’s legalization.142 Some estimates suggest that federal legalization would result in a $61.6 billion federal tax revenue increase.143 Cannabis sales totaled $13.6 billion in 2019, and they are

______134 See id. (stating that Biotech Institutes taken together “could cover 50 to 70 percent of all strains on the market” because the specifications outlined in the patents are so broad). 135 See Natali De Corso, Obtaining Marijuana Patents, B.C. INTELL. PROP. & TECH. F., 8 (2018) (urging smaller companies to patent their marijuana strains before larger companies such as Biotech Institute “renders them ineffectual competitors”). 136 See id. at 8–9 (asserting that the staunch competition in the cannabis industry between small businesses and large pharmaceutical companies is a good incentive for cannabis breeders to seek patents before the federal prohibition is eventually lifted). 137 See Keller, supra note 60, at 213 (explaining that even having a “patent pending” mark on a product can increase consumer confidence in a product, although there are costs that accrue when seeking such patent protection). 138 See Scheuer, supra note 111, at 58 (describing how young, growing businesses acquire the capital necessary to grow and compete). 139 See Keller, supra note 60, at 213 (explaining that the patent provides investors some security because they are able to secure the patent portfolio should the investment fold). 140 Carolin Haeussler et al., To Be Financed Or Not… The Role of Patents for Venture Capital Financing 2 (Ctr. for Eur. Econ. Rsch., Discussion Paper No. 09-003, 2009). 141 See Keller, supra note 60, at 222 (predicting the numerous beneficial effects that federal cannabis legalization would have in the United States); A Society in Transition, an Industry Ready to Bloom: 2018 Cannabis Report, DELOITTE, 6 (2018) (explaining how the Canadian black market for cannabis has significantly decreased since the Cannabis Act was passed in 2018). 142 Mrinalini Krishna, The Economic Benefits of Legalizing Weed, INVESTOPEDIA (Apr. 29, 2021), https://www.investopedia.com/articles/insights/110916/economic-benefits-legalizing-weed.asp. 143 See Bertie Song, Cannabis Taxes Could Generate 106 Billion, Create 1 Million Jobs by 2025, NEW FRONTIER DATA (Mar. 13, 2018), https://newfrontierdata.com/cannabis-insights/cannabis-

2021] Cannabis and Patent Law: Lessons from a Canadian Case Study 15 expected to increase by 32% annually with estimates predicting they will reach $29.7 billion by 2025.144 If the federal government legalizes the drug and imposes a 15% tax on the substance, the combined total federal tax revenue could be $105.6 billion.145

C. Positioning the United States to be a Competitive Cannabis Player

Today, some form of cannabis is legal in 43 states.146 Despite the majority of states allowing the substance, federal prohibition persists.147 There have been notable changes to federal treatment of cannabis, exemplifying the increased openness of the federal government to the drug throughout the years.148 Patent protection will be integral to industry growth because it will incentivize investment into small businesses and protect the intellectual property of cannabis-related inventions.149 Legalizing cannabis would incentivize American investors to channel their money into emerging domestic companies rather than into Canadian companies.150 United States’ companies are the second-largest funding source for cannabis companies listed on the Canadian Stock Exchange, evidencing the desire of United States’ companies to invest in the legal cannabis market.151 Legalizing cannabis would also increase clarity for courts when litigating cannabis IP disputes, especially patent disputes.152 Litigants will likely run into trouble finding an attorney willing to litigate a case related to an illicit substance.153 Additionally, it is difficult to identify prior art necessary to invalidate a patent for failure to meet the novelty requirement because cannabis has been developed in secret for so long.154 Moreover, legalization would give cannabis patent holders more security because it would eliminate uncertainty of whether the court will

______taxes-generate-106-billion-create-1-million-jobs-2025/ (highlighting a potential $61.6 billion increase in federal tax revenue should cannabis be fully legalized). 144 Chris Hudock, U.S. Legal Cannabis Market Growth, NEW FRONTIER DATA (Sept. 8, 2019), https://newfrontierdata.com/cannabis-insights/u-s-legal-cannabis-market-growth/. 145 Song, supra note 143 (“[C]ombining the business tax revenues, the payroll withholdings based on the theoretical employment required to support the industry, and the 15% retail sales tax, one can calculate the total federal tax revenue potential of legalization: . . . $105.6 billion.”). 146 See Map of Marijuana Legality by State, DISA, https://disa.com/map-of-marijuana-legality-by- state (last visited Jun. 15, 2021). 147 See id. (showing that 16 states have fully legalized the substance, 15 have decriminalized cannabis, and 12 have legalized medicinal use of cannabis). 148 See Keller, supra note 60, at 201 (highlighting how, despite the variety in regulation throughout the States and government, cannabis remains a promising new industry in the United States). 149 Id. at 213. 150 See Scheuer, supra note 111, at 92 (explaining how American investors are “buying up securities at an alarming rate”). 151 Id. 152 See Pyclik, supra note 127, at 54 (identifying the burden imposed on marijuana patent dispute litigants because of the difficulty of finding prior cannabis research and inventions because it has been a “secret business” for so long). 153 Id. at 37. 154 Id.

16 Boston College Intellectual Property & Technology Forum [BC IPTF enforce the patent and punish infringements for cannabis patents.155 As long as the federal cannabis prohibition remains, the chimerical security provided by cannabis- related patents will be insufficient to sustain the potential growth of the industry.156

CONCLUSION

Unless and until the federal government changes the classification of cannabis as a Schedule I drug, the protection afforded to cannabis-related inventions will be seriously limited. This, in turn, will limit economic benefits accrued from the industry and hinder research and development opportunities. Absent a change in the United States cannabis prohibition policy, the American cannabis industry will fall further behind other countries. Canadian cannabis legalization offers an apt example of what a federal regulatory scheme could encompass in the United States. Because Canada and the United States are closely connected economically and Canadian companies can patent their inventions with the USPTO, the United States should take swift action to legalize cannabis before Canadian companies crowd out U.S.-based ventures from the market. Creating a legal market for a substance already in wide circulation will provide cannabis patent holders more security in their inventions, incentivize investment into the new domestic industry, and promote domestic research and development.

Recommended Citation: Katherine Minorini, Cannabis and Patent Law: Lessons From A Canadian Cannabis Case Study, B.C. INTELL. PROP. & TECH. F. (July 2, 2021), http://bciptf.org/2021/07/cannabis-and-patent-law.

______155 See Carmona, supra note 129, at 692 (explaining that courts do not enforce illegal rights, so cannabis patents may not provide sufficient protection for inventors so long as the drug is federally illegal). 156 Id.