Patents play an important role in American business by encouraging innovation and investment. The Cannabis industry, which has obtained thousands of patents, is no exception. At least one owner of Cannabis patents has filed a patent infringement action to enforce those patents against a competitor (United Cannabis Corp. v. Pure Hemp Collective, Inc., Case No. 18-cv-01922(WJM-NYW) D. Colo., filed July 30, 2018). Unfortunately, under a long line of authorities going back to The Highwayman’s Case in 1725, the illegality of the use, possession, and distribution of these products probably creates an insurmountable barrier to the enforcement of most Cannabis product or use patents.
The US PTO has issued patents on Cannabis products, despite Cannabis’ status as a Schedule 1 controlled substance. The PTO has a longstanding policy of issuing patents claiming inventions that may be illegal under federal laws, including the Food Drug and Cosmetics Act (In Re: Brana, 51 F.3d 1560 (Fed Cir 1995)) and the Federal Insecticide, Fungicide, and Rodenticide Act, or which may result in acts of unfair competition (Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, 1366-67 (Fed Cir 1999)). The PTO and the U.S. Court of Appeals for the Federal Circuit take the position that the PTO should defer to the regulatory and law enforcement agencies charged with responsibility in these areas. Those agencies should decide whether the products or uses claimed by these patents are illegal and enforce the laws that are within their particular responsibilities.
Owners of Cannabis patents will face different problems in court. Federal courts will not resolve disputes concerning the fruits of illegal activity, nor will they enforce rights or agreements in furtherance of a crime. As early as 1886 in Higgins et al. v. McCrea, 116 U.S. 671, the Supreme Court held that a court will not aid a party who founds his action on acts which are “illegal, criminal, and void … [in] a court whose duty it is to give effect to the law which the party admits he intended to violate.” The Higgins decision relied on earlier English decisions, including The Highwayman’s Case, where two highwaymen committed a series of robberies and one sued the other, claiming that he had been cheated out of his share of the proceeds. The Court refused to consider the suit, turned the highwaymen over to the sheriff, and fined their lawyers for bringing a suit “both scandalous and impertinent.” Higgins also relied upon Holman v. Johnson (1775), 1 Cowp. 341, where Lord Mansfield wrote that “If, from the plaintiff’s own stating or otherwise, the cause of action appears to arise ex turpi causa,or the transgression of a positive law of this country, there the court says that he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.”
This refusal to adjudicate disputes founded in illegality remains a robust feature of American jurisprudence. In 1961 the Supreme Court held in U.S. v. Mississippi Valley Generating Co., 364 U.S. 520 (1961), that a contract made in violation of a criminal conflict of interest statute would not be enforced. In 1966, the Supreme Court held in U.S. v. Acme Process Equipment Co., 385 U.S. 138 (1966), reh. den. 385 U.S. 1032, that a contract made in violation of the criminal provisions of the Anti-Kickback Act would not be enforced. In 2001 in Formby-Denson v. Dept. of the Army, 247 F.3d 1366 (Fed. Cir 2001), the Federal Circuit (which has exclusive appellate jurisdiction over patent cases) refused to enforce a settlement agreement that would have required the parties to conceal criminal acts from law enforcement, which would itself be a crime.
The distribution and sale of Cannabis products are crimes under Federal law, notwithstanding repeal by states of their own Cannabis laws. Gonzales v. Raich, 545 U.S. 1 (2005). The plaintiff in a patent infringement action will be asking a Federal court to enforce the plaintiff’s exclusive right to commit certain crimes by protecting his criminal enterprise from competition by another criminal enterprise. The inconsistency of this position will not be lost on a Federal judge who may have that very day sentenced someone to jail for distributing Cannabis products.
This topic is more fully explored in a recently published article, which is available here.