Federal Government Holds Cannabis Patent Amid Legal Restrictions

ACKRELL CAPITAL CHAPTER IV U.S. Legal Landscape A trade or business that consists of unlawful cannabis trafficking may comprise a separate division of a single taxpayer, as was found by the U.S. Tax Court in its 2007 decision in Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner, in which case Section 280E does not prevent the taxpayer from deducting business expenses attributable to other lawful trades or businesses it conducts. Or, all of a taxpayer's activities may constitute a single trade or business subject to 280E even though the taxpayer conducts some lawful business transactions not involving cannabis, as was found by the U.S. Court of Appeals for the Ninth Circuit in its 2017 decision in Canna Care, Inc. v. Commissioner. Patent Act Title 35 of the U.S. Code (Patent Act) is the federal statute that governs patents in the United States. A patent issued under the Patent Act is the right to exclude others in the United States from mak- ing, using, importing, offering for sale or selling an “invention or discovery” and, if the invention or discovery is a process, products made by that process. U.S. patents are issued by the U.S. Patent and Trademark Office (USPTO), a federal agency established by the Patent Act. A U.S. patent lasts from the date of issuance until 20 years after the date on which the application for the patent was filed with the USPTO. Patent Act remedies available to the holder of an infringed U.S. patent include damages, recovery of lost profits and recovery of legal fees. “Inventions and discoveries” eligible for a patent under the Patent Act generally include any machine, manufacture, composition of matter, process, art or method, or any improvement thereto that is novel, useful and non-obvious. Newly developed plants, plant varieties, seeds, plant parts, plant genes or plant production processes are generally recognized as inventions or discoveries eligible for a U.S. patent if they satisfy certain criteria. The Patent Act also provides specifically for a “plant patent” that precludes others from asexually reproducing, selling or using a distinct and new variety of plant (other than a tuber) that has been invented or discovered and asexually reproduced. The Patent Act does not expressly prohibit the issuance of U.S. patents for inventions or discover- ies that are unlawful or designed to serve an unlawful purpose, and the USPTO has issued a range of cannabis-related patents. Cannabis-related inventions or discoveries for which the USPTO has issued a patent include a cannabis strain named “Ecuadorean Sativa” (U.S. Plant Patent 27,475), cannabis cultivation and processing methods (U.S. Patent 9,095,554), a vaporizer (U.S. Patent 9,220,294), THC-infused shea butter for topical application (U.S. Patent 8,425,954), a THC extraction method (U.S. Patent 6,365,416) and equipment and methods for biosynthetic production of cannabinoids (U.S. Patent 9,587,212). U.K.-based GW Pharmaceuticals holds multiple cannabis-related U.S. pat- ents. And despite the federal government’s position for purposes of the CSA that marijuana has no currently accepted medical use in treatment in the United States, the U.S. federal government itself holds a patent for methods of treating certain diseases with cannabinoids (U.S. Patent 6,630,507). Plant Variety Protection Act The Plant Variety Protection Act (PVPA) establishes certain legal protections (or “breeders’ rights”) for the breeder of a sexually reproduced or tuber-propagated plant variety that is new, distinct, uniform and stable within the meaning of the PVPA. A breeder who so develops such a plant variety and satis- © 2017 Ackrell Capital, LLC | Member FINRA/SIPC 83 HOUSE_OVERSIGHT_024719