Tag Archives: proprietary

german flag

Does Germany Have a Gray Market Problem?

By Marguerite Arnold
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german flag

Tilray just did something very interesting. In addition to announcing that it was shipping product to German distributor Cannamedical via its Portuguese facility, it also announced that it had begun outdoor cultivation.

Groovy.tilray-logo

Even more intriguing: the company is claiming that somehow, via its proprietary technology (apparently), this kind of crop will be legit for distribution within the EU medical system.

There is only one problem with this. Outdoor growing does not sound remotely GMP-certified.

Here is the next bit of exciting news. Tilray, apparently, is not the only large Canadian cannabis company now operating in Europe that appears to be trying to get around GMP certifications for medical market penetration. Or appear oblivious to the distinctions in the international (and certainly European market).

german flag
Photo: Ian McWilliams, Flickr

And things are a bit smelly on that front, not only in Denmark post CannTrust, but in truth even in Germany, the supposed “Fort Knox” of regulatory consumer and pharmaceutical standards.

In fact, at least according to insiders, there is apparently quite a bit of gray market product sloshing around in the Teutonic medical market. Even though so far, at least not publicly punished for the same, nobody has been caught. Or at least publically reprimanded.

And who is on the hot seat at least according to most of the licensed if not just pre-licensed indie producers and distributors who were contacted for this story? Sure, there are dark horse “start-up” indie violators, but they are not the only problem. Many who talked to CIJ named big public Canadian companies too. And potentially Bedrocan beyond that.

Who Is Who And What Is What?

Part of the problem, beyond any kind of deliberate flouting of regulations on the part of many companies who are at least trying to understand them, is that global standards are different. “GMP certifications” of every country, even within a region like Europe, are in fact, not uniform. That is why, for example, the new EU-US MRA agreement had to be signed first regionally and then on a state-by-state level across the EU.

Beyond Germany of course, there are other problems that are coming to the fore.In the medical cannabis space, in particular, right now, that is causing problems simply because many with pharma experience are not hip to the many risks in the cannabis industry itself. On the Canadian, Australian and American side, there is also a lot of bad advice, in particular, coming from consultants who should know better.

To be properly EU and German GMP-certified, one of the required steps is to have German inspectors walk your production floor. It is also not good enough to have “pesticide-free” or national organic certification at the crop cultivation site, and add GMP cert at time of “processing.” That piece of misadvise has been showing up not only in Canada, but Australia too. And creates a nasty reality if not expensive retooling upon entering the legitimate market in Europe, for starters.

These Issues Affect Everyone In The Industry

German Parliament Building

In an environment where ex-im is the name of the game, and even the big guys are short of product, compliance is getting granular as smaller players step up to the plate – and many if not most hopeful Canadian producers (in particular) now looking to Europe for sales are not (yet) up to speed.

A big piece of the blame also lies in the lack of proper administration at the federal and state level too – even auf Deutschland. To get a distribution license, a company must actually get three licenses, although there are plenty in the market right now who begin to describe themselves as “distributors” with less than the required certs.

The lack of coordination and communication, including which certs to accept as equivalent and from where is creating a market where those who know how to game the system are.

For example, several people who contacted CIJ, claimed that uncertified product was making its way into Germany via Central and Latin America, through Canada, picking up “GMP cert” along the way. In other words, not actually GMP-certified but labelled fraudulently to make it appear that way.

The same claims were also made by those with on-the-ground industry knowledge in South Africa (Lesotho).

Beyond Germany of course, there are other problems that are coming to the fore. As CIJ recently learned, a firm authorized by the Dutch government to provide cannabis packaging, including for exports, was not GMP certified until July 2019 – meaning that all product they shipped internationally even within Europe before that date potentially has labelling issues. Cue domestic importers. If not regulators.

Grey Market Product Is Making Its Way In Through Official Channels

For those who are taking the time to actually get through the legal registration and licensing process, it is infuriating to see others who are apparently fairly flagrantly buying market position but are in no position to fulfil such obligations. It is even more infuriating for those who intend to meet the requirements of the regulations to realize that the vast amounts spent in consulting fees was actually money paid for inaccurate information.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.German distributors are so aware of the problem that they are starting to offer gap analysis and specific consulting services to help their import partners actually get compliant.

Government agencies also might be aware of the problems, but they have been reluctant to talk about the same. CIJ contacted both BfArM and the local Länderauthorities to ask about the outdoor grow in Portugal and the lack of GMP cert for a Dutch packager. After multiple run-arounds, including sending this reporter on a wild rabbit chase of federal and state agencies (who all directed us back to BfArm) and an implication by the press officer at BfArM that the foreign press was not used to talking to multiple sources, CIJ was redirected back to state authorities with a few more instructions on which bureau to contact. The state bureau (in Berlin) did not return comments to questions asked by email.

Here is the bottom line that CannTrust has helped expose this summer: the entire global cannabis industry is trying hard to legitimize. Not every company is shady, and there are many who are entering it now who are playing by the rules. But those who are hoping to exploit loopholes (including “name” if not “public” companies) are also clearly in the room.

And the only way ultimately the industry can combat that, is by standing up, as an industry, to face and address the problem.


Editors Note: This is a developing story. CIJ has been contacted by the Dutch Cannabis Agency as it investigates what appears to be an intra-government debate over qualification of EU-GMP cert, acceptance of audit documents and other matters within European countries that appear to have caused much of this confusion with regards to Bedrocan and its packager Fagron. Many reputable, licensed sources within the industry spoke to us on deep background, out of concern that they too would be held liable. That said, so far, nobody can explain why the only licensed Dutch packager, was issued a new EU GMP cert document on July 9, 2019, the same day that Danish authorities halted CannTrust product entering Denmark. That is a government decision. Further it is also still unclear why rival cannabis companies would attempt to contact the cannabis media with a certain (and misguided) spin on this situation.

extraction equipment

The Ever-Growing Importance of Protecting Cannabis Extraction Innovations

By Alison J. Baldwin, Brittany R. Butler, Ph.D., Nicole E. Grimm
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extraction equipment

With legalization of cannabis for medicinal and adult use occurring rapidly at the state level, the industry is seeing a sharp increase in innovative technologies, particularly in the area of cannabis extraction. Companies are developing novel extraction methods that are capable of not only separating and recovering high yields of specific cannabinoids, but also removing harmful chemicals (such as pesticides) from the concentrate. While some extraction methods utilize solvents, such as hydrocarbons, the industry is starting to see a shift to completely non-solvent based techniques or environmentally friendly solvents that rely on, for example, CO2, heat and pressure to create a concentrate. The resulting cannabis concentrate can then be consumed directly, or infused in edibles, vape pens, topicals and other non-plant based consumption products. With companies continually seeking to improve existing extraction equipment, methods and products, it is critical for companies working in this area to secure their niche in the industry by protecting their intellectual property (IP).

extraction equipment
Extraction can be an effective form of remediating contaminated cannabis

Comprehensive IP protection for a business can include obtaining patents for innovations, trademarks to establish brand protection of goods and services, copyrights to protect logos and original works, trade dress to protect product packaging, as well as a combination of trade secret and confidentiality agreements to protect proprietary information and company “know-how” from leaking into the hands of competitors. IP protection in the cannabis space presents unique challenges due to conflicting state and federal law, but for the most part is available to cannabis companies like any other company.

Federal trademark protection is currently one of the biggest challenges facing cannabis companies in the United States. A trademark or service mark is a word, phrase, symbol or design that distinguishes the source of goods or services of one company from another company. Registering a mark with the U.S. Patent and Trademark Office (USPTO) provides companies with nationwide protection against another company operating in the same space from also using the mark.

As many in the industry have come to discover, the USPTO currently will not grant a trademark or service mark on cannabis goods or services. According to the USPTO, since cannabis is illegal federally, marks on cannabis goods and services cannot satisfy the lawful use in commerce requirement of the Lanham Act, the statute governing federal trademark rights. Extraction companies that only manufacture cannabis-specific equipment or use cannabis-exclusive processes will likely be unable to obtain a federal trademark registration and will need to rely on state trademark registration, which provides protection only at the state-level. However, extractors may be able to obtain a federal trademark on their extraction machines and processes that can legitimately be applied to non-cannabis plants. Likewise, companies that sell cannabis-infused edibles may be able to obtain a federal trademark on a mark for non-cannabis containing edibles if that company has such a product line.

Some extraction companies may benefit from keeping their innovations a trade secretSince the USPTO will not grant marks on cannabis goods and services, a common misconception in the industry is that the USPTO will also not grant patents on cannabis inventions. But, in fact, the USPTO will grant patents on a seemingly endless range of new and nonobvious cannabis inventions, including the plant itself. (For more information on how breeders can patent their strains, see Alison J. Baldwin et al., Protecting Cannabis – Are Plant Patents Cool Now? Snippets, Vol. 15, Issue 4, Fall 2017, at 6). Unlike the Lanham Act, the patent statute does not prohibit illegal activity and states at 35 U.S.C. § 101 that a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”

For inventions related to extraction equipment, extraction processes, infused products and even methods of treatment with concentrated formulations, utility patents are available to companies. Utility patents offer broad protection because all aspects related to cannabis extraction could potentially be described and claimed in the same patent. Indeed, there are already a number of granted patents and published patent applications related to cannabis extraction. Recently, U.S. Patent No. 9,730,911 (the ‘911 patent), entitled “Cannabis extracts and methods of preparing and using same” that granted to United Cannabis Corp. covers various liquid cannabinoid formulations containing very high concentrations of tetrahydrocannabinolic acid (THCa), tetrahydrocannabinol (THC), cannabidiol (CBD), THCa and cannabidiolic acid, THC and CBD, and CBD, cannabinol (CBN), and THC. For example, claim 1 of the ‘911 patent recites:

A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is tetrahydrocannabinolic acid (THCa).Properly crafted non-disclosure agreements can help further ensure that trade secrets remain a secret indefinitely.

Although the ‘911 patent only covers the formulations, United Cannabis Corp. has filed a continuation application that published as US2017/0360745 on methods for relieving symptoms associated with a variety of illnesses by administering one or more of the cannabinoid formulations claimed in the ‘911 patent. This continuation application contains the exact same information as the ‘911 patent and is an example of how the same information can be used to seek complete protection of an invention via multiple patents.

An example of a patent application directed to solvent-based extraction methods and equipment is found in US20130079531, entitled “Process for the Rapid Extraction of Active Ingredients from Herbal Materials.” Claim 1 of the originally filed application recites:

A method for the extraction of active ingredients from herbal material comprising: (i) introducing the herbal material to a non-polar or mildly polar solvent at or below a temperature of 10 degrees centigrade and (ii) rapidly separating the herbal material from the solvent after a latency period not to exceed 15 minutes.

Claim 12, covered any equipment designed to utilize the process defined in claim 1.

Although now abandoned, the claims of this application were not necessarily limited to cannabis, as the claims were directed to extracting active ingredients from “herbal materials.”

Other patents involve non-toxic extraction methods utilizing CO2, such as Bionorica Ethics GMBH’s U.S. Patent No. 8,895,078, entitled “Method for producing an extract from cannabis plant matter, containing a tetrahydrocannabinol and a cannabidiol and cannabis extracts.” This patent covers processes for producing cannabidiol from a primary extract from industrial hemp plant material.

There have also been patents granted to cannabis-infused products, such as U.S. Patent No. 9,888,703, entitled “Method for making coffee products containing cannabis ingredients.” Claim 1 of this patent recites:

A coffee pod consisting essentially of carbon dioxide extracted THC oil from cannabis, coffee beans and maltodextrin.

Despite the USPTO’s willingness to grant cannabis patents, there is an open question currently regarding whether they can be enforced in a federal court (the only courts that have jurisdiction to hear patent cases). However, since utility patents have a 20-year term, extractors are still wise to seek patent protection of the innovations now.

Another consideration in seeking patent protection for novel extraction methods and formulations is that the information becomes public knowledge once the patent application publishes. As this space becomes increasingly crowded, the ability to obtain broader patents will decline. Therefore, some extraction companies may benefit from keeping their innovations a trade secret, which means that the secret is not known to the public, properly maintained and creates economic value by way of being a secret. Properly crafted non-disclosure agreements can help further ensure that trade secrets remain a secret indefinitely.

Regardless of the IP strategy extractors choose, IP protection should be a primary consideration for companies in the cannabis industry to ensure the strongest protection possible both now and in the future.

Enforcement of Intellectual Property Rights for Cannabis Put to Test in Federal Court

By Dr. Travis Bliss
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A number of cannabis businesses have pursued federal intellectual property protection for their cannabis-related innovations, such as U.S. patents that protect novel cannabis plant varieties, growing methods, extraction methods, etc. Enforcement of such federal IP rights requires that the IP owner file suit in federal court asserting those rights against another cannabis company. However, given that cannabis is still illegal under federal law, the industry is uncertain about whether a federal court will actually enforce cannabis-related IP rights. This question might be answered soon.

The potential impact of this case goes way beyond the two parties involvedOrochem Technologies, Inc. filed a lawsuit in federal court in the Northern District of Illinois on September 27, 2017, seeking to assert and enforce trade secret rights against Whole Hemp Company, LLC. According to the complaint, Orochem is a biotechnology company that uses proprietary separation methods to extract and purify cannabidiol (CBD) from industrial hemp in a way that produces a solvent-free and THC-free CBD product in commercially viable quantities.

The complaint goes on to say that Whole Hemp Company, which does business as Folium Biosciences, is a producer of CBD from industrial hemp and that Folium engaged Orochem to produce a THC-free CBD product for it. According to the allegations in the complaint, Folium used that engagement to gain access to and discover the details of Orochem’s trade secret method of extracting CBD so that it could take the process and use it at their facility.

The complaint provides a detailed story of the events that allegedly transpired, which eventually led to an Orochem employee with knowledge of the Orochem process leaving and secretly starting to work for Folium, where he allegedly helped Folium establish a CBD production line that uses Orochem’s trade secret process. When Orochem learned of these alleged transgressions, it filed the lawsuit, claiming that Folium (and the specific employee) had misappropriated its trade secret processes for extracting and purifying CBD.

While the particular facts of this case are both interesting and instructive for companies operating in the cannabis industry, the potential impact of this case goes way beyond the two parties involved.

If it moves forward, this case will likely provide a first glimpse into the willingness of federal courts to enforce IP rights that relate to cannabis. Orochem is asserting a violation of federal IP rights established under the federal Defend Trade Secrets Act (DTSA) and is asserting those rights in federal district court. As a result, the federal district court judge will first need to decide whether a federal court can enforce federal IP rights when the underlying intellectual property relates to cannabis.

If the court ultimately enforces these federal trade secret rights, it could be a strong indication that other federal IP rights, such as patent rights, would also be enforceable in federal court. Since the outcome of this case will likely have a far reaching and long lasting impact on how the cannabis industry approaches and deals with intellectual property, it’s a case worth watching.