In late July, United Cannabis Corporation (UCANN), a biotech company, filed a patent lawsuit against Pure Hemp Collective Inc., a cannabis products company. The two Colorado-based cannabis companies are now fighting what appears to be the first patent lawsuit in the industry.

UCANN asserts that Pure Hemp manufactures and distributes a tincture that infringes on its patent, U.S. Patent No. 9,730,911: "Cannabis extracts and methods of preparing and using same." In alleging Pure Hemp’s “willful infringement,” UCANN’s attorneys write that company personnel purchased Pure Hemp’s Vina Bell 500mg product and tested it to confirm.

The company found that Pure Hemp’s product infringed on one of the claims in the UCANN patent—namely, “[a] liquid cannabinoid formulation wherein at least 95% of the total cannabinoids is cannabidiol (CBD).”

Read the full civil complaint below.

UCANN’s patent also includes similar claims for “liquid cannabinoid formulations wherein at least 95% of the total cannabinoids” is THCa THC, a combination of THCa and CBDa, and a combination of THC and CBD. Other claims include certain ratios of cannabinoids to terpenes and flavonoids.

David Gold, intellectual property attorney at Cole Schotz, says that this case is important to the industry on two levels. 

“There’s this case in particular, which has to do with this particular patent that’s going to impact companies that are creating these types of products. Obviously, that’s a huge issue for them,” he says. “The bigger issue that we’re all going to be looking at is just how the courts are going to deal with a cannabis-related patent.”

Cannabis, of course, remains a Schedule-I substance in the eyes of the federal government, which includes the courtrooms in the District of Colorado. Despite UCANN’s attorneys’ insistence that “the reclassification of CBD will likely occur by the end of September 2018,” citing the recent FDA approval of Epidiolex, there’s no clear indication that the Drug Enforcement Administration will do such a thing anytime soon.

“It could be construed as an over-broad patent that's going to impact a lot of companies creating these types of products,” Gold says. “The second question ... is whether any of these products—there could be a very sophisticated, unique, new, novel, non-obvious product that is very much patentable that there's no prior art on that at some point is going to be the subject of litigation. Are the courts going to hear it? How is the judge going to treat it when it's clearly used in connection with these controlled substances?”

A conference hearing in UCANN v. Pure Hemp is scheduled for Oct. 3.

Because of the nature of this lawsuit and this patent, cannabis companies across the industry will be watching this docket closely. Whether the judge dismisses this lawsuit, or the parties reach a settlement or an invalidity claim is filed against the UCANN patent—the outcome of this case could have far-reaching consequences. Businesses should take heed.

Were the judge to issue a favorable ruling for UCANN, the company would then be armed with case law in any future legal action against other companies that manufacture high-potency cannabis extracts.

Gold says that, while we’re waiting for this case to progress, those other businesses “could do a survey of their products and see whether any of those products potentially infringe and see if they can be tweaked in a way that may not infringe. They can do their own research as to whether what they have is protectable. They can be proactive and seek out licenses for any technology that perhaps is patented. There are proactive and defensive mechanisms to position themselves.

“If somebody's already been in the business of creating these high-potency cannabis liquids that they know that they were doing it certainly before this other company, then they may even join in the case in an invalidity suit,” he says. “Or they might bring the third-party re-examination action knowing that they're sort of next in line to be attacked on this.”

UCANN v. Pure Hemp by sandydocs on Scribd

Top photo courtesy of Adobe Stock

As with most business strategies in the cannabis industry, social media marketing requires a certain level of creativity for cannabis businesses.

Although Canada and an increasing number of U.S. states have embraced cannabis legalization, legal cannabis companies often face tight restrictions when advertising on social media platforms. Facebook and Google, for example, have simply banned any advertising for cannabis products, according to Jasmine Pickel, VP of social media for North 6th Agency (N6A), a public relations and social media firm with a division dedicated to social media marketing strategies for cannabis companies.

“[Facebook has] really taken an approach to err on the side of caution and [has] taken a blanket approach to prohibit cannabis advertising on its platform,” she says. “Cannabis legalization, even though it’s a reality, you can’t advertise online.”

Facebook’s advertising policy outlines prohibited content and states that ads cannot promote the sale or use of illegal prescription or recreational drugs, Pickel says, meaning that cannabis-related ads promoting medical or recreational use and products are completely prohibited.

However, Pickel adds, Facebook has the best advertising capabilities, along with its subsidiary, Instagram, and social media is an essential part of online promotion for cannabis businesses.

“For any company that wants to sell online, social media really is one of the most cost-effective ways to reach very targeted but also very broad audiences,” she says. “We’ve seen a huge uptick in inquiries from cannabis companies because social media certainly is the easiest way and a cost-effective way to direct traffic to an online entity like a website, … especially when online is your only means of promotion.”

Business-to-business companies within the cannabis space—such as labs—can generally set up advertisements with an educational focus on Facebook and other platforms, but companies selling direct to consumers typically cannot advertise at all, Pickel says.

“This all just comes down to [the fact that] social media companies have grown so quickly over the past so many years, and really they’re just playing a little bit of catch-up now and seeing opportunities to add in a little enhanced security and safety for their users,” she says. “So, sometimes companies in newly emerging spaces like … cannabis face strict restrictions, but working with the right agency that knows how to promote you in a way that complies with those rules will really help you grow.”

N6A develops best practices for promoting cannabis companies within its social media and public relations divisions, and most of its original social media strategies focused on gaining earned media for its clients. “That was a really great fit for cannabis companies because with strict advertising restrictions, they really had to use an earned media approach as opposed to paid,” Pickel says.

Unfortunately, social media algorithms have changed over the years, limiting the organic reach of commercial pages and media organizations’ posts. Most organic content is only shown to about 15 percent of a business’s audience, Pickel says, to encourage companies to pay for advertising.

Here, Pickel outlines her top tips for navigating social media platforms’ strict advertising guidelines to ensure your brand has a strong presence and that your page does not get shut down.

1. If you choose to work with an agency, select one that is cannabis-specific.

Before joining N6A, Pickel founded her own social media agency, Atlas Communications, which focused heavily on organic content.

“If your page had 1,000 followers and you posted a post, 1,000 people would see it,” she says. “But over the years—Facebook led the way, but all other social media platforms followed along—[and] … they would really limit the organic reach of your posts as part of their business model to force businesses to pay and set up ads in order to reach their audiences.”

And while a large portion of most social media clients’ strategy would be paid advertising, cannabis companies cannot access paid ads, so a cannabis-specific agency is needed to help these unique clients find another way to promote their brands.

N6A has had cannabis clients approach them with tales of working with other agencies who did not have experience in the industry, and who were not familiar with the tight restrictions around setting up ads online.

“I’ve heard horror stories like, cannabis companies who had built up over the years six-figure followings on social media sites that had been wiped out overnight because Facebook or Instagram had shut down their pages because they worked with an agency that set up ads that contravened Facebook’s advertising guidelines, and then overnight, just like that, their followings were eviscerated,” Pickel says. “So, it really is important to work with a company that knows these policies inside out and knows practices that would support the business.”

2. Use influencer marketing.

One way to get around Facebook’s limits on organic reach and restrictive paid advertising policies is to use influencer marketing, Pickel says, which allows companies to go beyond their current social media following and reach new audiences through a designated spokesperson, so to speak.

Cannabis companies should be very strategic when choosing an influencer, she adds. The company’s target market should be identified, and then an influencer with a following that resembles that target market’s characteristics should be chosen.

“It’s not as obvious or as blatant as just going after a ‘mainstream’ cannabis influencer,” Pickel says. “An example would be if middle-aged suburban moms—who might be interested in dabbling in edibles for the first time—could be the target market of let’s say, a microdose edibles company. But suburban moms wouldn’t be likely to follow a hardcore cannabis influencer—that’s just probably not someone that they would follow on either Facebook or Instagram.”

In this case, an influencer in the health and wellness space who would be open to experimenting with a cannabis edibles company could be chosen.

“Influencer marketing for cannabis companies comes down to—like any other industry, really—matching the company’s target market with whatever sort of following the influencers have, and making sure there’s a really good fit there.”

3. Post high-quality content that provides value to your audience.

“If you’re limited to sharing organic content, you want to make sure that your organic content is really, really high-quality,” Pickel says.

N6A advises its clients that someone will follow a page on social media if it provides value, but not if the brand is overly promotional.

“If you think of the social media pages you follow, you never want to follow a page that’s just purely advertising, trying to promote themselves all the time,” Pickel says. “You would want to follow a page that provides value, whether that was entertainment value in the form of industry pot humor, or educational.”

4. Use brand ambassadors.

Another social media strategy that N6A provides its cannabis clients is appointing a brand ambassador, Pickel says. A brand can turn its customers into brand ambassadors on social media who can spread content about the company on their pages and reach more people.

“Think of how you can make your storefront, for example, more Instagram-able, or really encourage your customers to share content and say great things about you to their own network,” Pickel says.

5. Build a presence on multiple platforms.

Cannabis brands should be active across several social media platforms, Pickel says.

“If your page does get shut down—maybe due to some mismanagement—if you’ve built up a following across other platforms, as well, then in those cases, you’re really not starting from ground zero again,” she says. “You’ve already got a following on other platforms, as well.”

Facebook and Instagram are Pickel’s top picks for platforms to engage with. “Facebook and Instagram have the same ownership and they’re the preeminent social media company, and they really do provide great ROI generally for consumer-facing companies, compared to other counterparts like LinkedIn or Twitter.”

And cannabis businesses should approach Twitter with caution, she adds. “Twitter has taken less of a hard stance on cannabis advertising,” Pickel says. “Some brands have gotten away with spending hundreds of thousands on advertisements on Twitter, … but it’s not generally a strategy that we would recommend just because there is a lack of clarity there. Running the risk of having your page shut down, in our opinion, isn’t worth it when there are so many different effective strategies you can employ just purely on the organic side to promote your company on social media.”

6. Invest in video.

Although advertising remains the best way to promote brands on social media when possible, some of N6A’s clients have been very successful with videos on platforms like Snapchat, Pickel says.

“The video content will only go so far, but in general, video content does perform better than static images, for example, so any time you can promote video content, it’s always a good investment,” she says.

7. Post educational content.

“For cannabis, I would say education is always No. 1, and that’s an approach that we take within our social media division and within our PR division here at N6A because there is still a lot of misinformation out there,” Pickel says. “Any sort of investment cannabis companies can make into that kind of content is always beneficial.”

Especially with all the advertising regulations around promoting cannabis brands, a company can never go wrong with an educational focus, she adds. “Within the cannabis industry, there are so many different types of cannabis companies, from software companies that we’ve worked with, analytics companies, finance, direct-to-consumer—the best type of campaign would really depend on what type of business you have in the cannabis space, but I would say across the board, any kind of educational content always does really well.”

Top Image: © niroworld | Adobe Stock

Washington -- PRESS RELEASE -- New Frontier Data,  a data, analytics and business intelligence company in the cannabis industry, in partnership with Scale Microgrid Solutions and Resource Innovation Institute, is producing a comprehensive analysis of current energy consumption in today’s fast-growing and quickly evolving cannabis industry. The study will examine cultivators’ and operators’ energy consumption across North America and will provide operational insights and cost indicators that can immediately be used to assess both the efficiency and profitability at the root of the cannabis ecosystem of an operation.

“Data is the basis to any business’ ability to optimize, if not to measure efficiency and profitability. In the cannabis industry, where electricity is the second highest expenditure in a cultivation operation, lowering energy costs can make the difference in whether a business survives in this increasingly competitive environment. Wholesale pricing has now dropped by over 50 percent in most key markets across the United States; having the ability to manage cost could not be more timely for both new and existing businesses touching the plant,” said Giadha Aguirre De Carcer, New Frontier Data CEO and founder.

“Baseline usage data is the key for cannabis producers to see where they currently stand, and to help them make decisions about best practices and technology upgrades that drive a lower cost per pound,” said Derek Smith, executive director, Resource Innovation Institute. “The data will also help local governments and utilities provide incentives to help reduce energy use by this new industry.”

"As growers and their regulators become increasingly aware of the cannabis industry's energy footprint, a lack of data-driven analysis has consistently hindered efforts to mitigate this issue. We are excited to be a part of this groundbreaking effort to quantify the economic and environmental impacts of the industry's energy practices, and we hope this report will serve as the foundation of a thoughtful and productive dialog moving forward." said Ryan Goodman, Scale Microgrid Solutions CEO.

Using data compiled from Resource Innovation Institute’s (RII) non-profit Cannabis PowerScore tool, New Frontier Data, Scale Microgrid Solutions and RII will analyze the North American cannabis market for its energy consumption and will provide insights on the following areas:

• Average energy usage per square foot of flowering canopy and per gram produced across a range of cultivation settings and geographies.
• Energy costs and carbon footprints across a range of cultivation settings and geographies.
• What defines an efficient cannabis cultivation operation?
• What approaches can be used to improve cannabis’ energy economics?

Investors will be able to assess investment opportunities and determine how efficient those opportunities are in their operation. Regulators will now have the broadest benchmark associated with current cannabis energy and resource usage. Finally, operators can determine how they compare to the rest of the industry when it comes to energy use and efficient cultivation.

Are you a cultivator and would like to participate in the energy study? Go to CannabisPowerScore.org.