Next week, voters in five states, including California, Arizona, and Massachusetts, will consider whether to legalize recreational marijuana. Four other states will decide whether to allow medical use. But regardless of the outcome on November 8, marijuana will remain prohibited under US law. Despite being illegal at the federal level, the US marijuana industry is worth over $5 billion, and it’s becoming increasingly dependent on technology. Wherever there is technological innovation, inventors use patent law to protect what they create. Yet few people realize that marijuana-related inventions can be patented. The upcoming votes may not change the federal status of marijuana, but they will attract people to the industry, create new jobs, and support growing businesses. These trends will drive innovation and create new patentable technology.
In fact, several companies have already been granted marijuana-related patents. The UK-based company GW Pharmaceuticals owns more than 25 US patents that range in scope from methods of growing and processing cannabis to protocols for treating disease. Even the US Department of Health and Human Services, an agency charged with protecting the health of all Americans, obtained a patent on using cannabis compounds to treat conditions like cancer, cardiovascular disease, and Alzheimer’s.
Despite these developments, many players in the legal marijuana industry are skeptical of the patent system. Some view patents as an ugly instrument of big business linked to over-priced drugs and other abuses. At a recent event for cannabis entrepreneurs in San Francisco, marijuana growers, manufacturers, and retailers gathered to discuss the current state of their industry. At one point the conversation turned to patent law. Many participants expressed anger and disbelief at the notion of patenting cannabis technology. One attendee stood up and exclaimed, “At least you can’t patent plants! They are part of nature!” But her assertion was incorrect. There is no prohibition against patenting plants and other living organisms. In fact, nearly any invention can be patented as long as it meets a few basic requirements—and surprisingly, being legal under federal law is not one of them.
Patents are intellectual property rights granted by the federal government. The holder of a patent can exclude competitors from making, using, or selling the patented invention for a limited time (typically 20 years from the date of filing an application). In theory, this period of exclusivity rewards innovation and promotes the spread of useful ideas. It is given to an inventor in exchange for developing new technology and revealing it to the public.
To be eligible for a patent, an invention must be new, non-obvious, adequately described by its inventor, and of some minimal use to society. But even if an invention satisfies these requirements, it cannot be patented if it falls into one of three categories: laws of nature, abstract ideas, and natural phenomena.
Although plants that occur in nature, such as Cannabis sativa, are considered natural phenomena, the boundary between natural phenomena and patentable inventions is frequently debated. In the landmark US Supreme Court case Diamond v. Chakrabarty, the Court concluded that any living organism produced by human intervention is patent eligible. Therefore, in order to patent a cannabis plant—as distinct from the patenting of cannabis-related compounds or processes—an inventor must show that the plant is so altered by human hands, for example through selective breeding or genetic engineering, that it should no longer be considered a natural phenomenon.
At least one patent applicant has made this argument successfully. In August 2015, a California company called Biotech Institute obtained a patent on several hybrid cannabis plants. According to Dr. Erich Veitenheimer, an attorney and former plant scientist who drafted the application, “We broke new ground [with the Biotech Institute patent]… Many people were skeptical of whether we could succeed.” Dr. Veitenheimer secured a second patent for the company in June, and others are in the pipeline.
These patent filings are only the beginning. Recent changes in US drug policy and mounting evidence for legitimate medical use will facilitate cannabis research. In July the Drug Enforcement Agency considered whether to remove marijuana from its list of Schedule I substances. This reclassification could have increased nationwide acceptance of medical cannabis and been a first step toward ending federal prohibition, but ultimately the agency declined to make the change. Instead it announced plans to reduce longstanding restrictions on growing cannabis for research purposes. In the past, scientists who wished to study cannabis in their own labs were obligated to obtain it from a DEA sanctioned farm at the University of Mississippi. Now any research organization can apply to grow its own plants.
Because it has been difficult to legally obtain cannabis, many researchers avoided it. As a result, the science of this plant is in its infancy, and there is much to be discovered. Nevertheless, there is mounting evidence that cannabis can help manage a variety of illnesses such as epilepsy and multiple sclerosis. Preliminary research in animals suggests that cannabis-derived compounds have anti-inflammatory and tumor inhibiting properties. In many cases, the mechanism through which cannabis exerts its effects is poorly understood. The recent DEA policy change will allow more institutions to grow the plant, which should promote research, accelerate innovation, and increase the number of cannabis-related patent applications.
In addition to the recent DEA change, the record number of states voting to legalize marijuana will affect patent filings. Consider the upcoming vote in California. If Proposition 64 (the Adult Use of Marijuana Act) passes, California stands to become the largest legal market for cannabis in the world. Polling suggests the measure has a good chance of being approved. Legalization in California will create an influx of cannabis growers, product manufacturers, and testing laboratories. All of these groups will create intellectual property that can be patented.
Legalization movements in states like Colorado and Washington have already helped the US cannabis industry grow rapidly. ArcView Market Research predicts the market could reach $7.1 billion in 2016, an increase of 25 percent over 2015. The industry’s success is attracting investment from mainstream companies. Last year, Y Combinator, the Silicon Valley incubator that launched Dropbox and AirBnB, backed an Uber-like cannabis delivery service called Meadow and a software platform named Confident Cannabis. This year the equity firm Tautara Capital raised $93 million to invest in legal cannabis. One of Tautara’s investments Teewinot Lifesciences recently obtained a patent on a method for synthesizing cannabinoids using biotechnology. In June, tech giant Microsoft announced it will help develop government compliance software for the legal cannabis industry. As more groups like Tautara and Microsoft enter the cannabis business, they will safeguard their investments through patent protection.
Journalists make frequent analogies between the growing cannabis industry and the California Gold Rush. During the Gold Rush, prospectors flocked to California to make their fortunes. But the mining industry quickly evolved, and individual miners found themselves competing with larger corporations. Many small-scale operations had to close up shop. Today, cannabis entrepreneurs are working to earn their place in the developing Green Rush. Meanwhile, a variety of companies are staking claims to the intellectual property in this unexplored frontier.
Whether you approve of cannabis patents or not, they are taking root in this multi-billion dollar industry. The upcoming votes and changing regulatory landscape will likely help them grow. To be fully prepared, anyone entering the cannabis industry should learn the fundamentals of patent law.