How patents affect the value of a cannabis license and investor interest

Be the first to know when new content like this is available!

Subscribe to our newsletter to receive notifications of new posts, local news and industry insights.

Many Thanks! Your submission has been received!

Oops! There was an error submitting the form.

One of the most effective ways to get investors’ attention is to offer the market something useful and unique that is not easy to copy. Patents help you do this by proving that you’ve created something completely new that gives you long-term government protection of your competitive advantage.

What is a patent?

A US Patent and Trademark Office (USPTO) patent gives you (the inventor) the legal right to prevent others from making, using, or selling your invention for a period of time. In other words, as an inventor, you are given a limited monopoly to exploit your invention by making, using and selling it for profit in the commercial market.

You can only obtain a patent for inventions that:

• Useful (i.e. offers an advantage in terms of its functional purpose)
• Novel (i.e., new, unknown to the public, not yet sold, or used in public)
• Not obvious (i.e. not easily predictable)
• Allow someone with “average expertise” to make it (e.g. an attachment manufacturer must be able to make the device based on the information in the patent application).

In order to obtain a patent, inventions must also be patentable items, which Congress defines as processes, machines, articles of manufacture and compositions of matter. Processes define an action that requires multiple steps, while machines, articles of manufacture and compositions of matter define products such as: B. a machine used for growing or the composition of a medical marijuana product.

After you have determined whether your invention is patentable, you need to decide what type of patent you want to apply for. There are four types of patents:

1. Utility model

The widest range of inventions is given utility models that protect an invention of a method or process, a machine, an article of manufacture, a composition of matter or an improvement thereof. This patent protects an invention for 20 years from the date of the patent application.

2. Design patent

This type of patent only protects the aesthetic value of a new, original and decorative design for an article of manufacture. For example, Coca-Cola is an article of manufacture that is protected as a trade secret rather than a patent, while the iconic Coca-Cola bottle shape is protected by a design patent. A design protects an invention for 14 years from the date the patent was granted.

3. Plant patent

New plant varieties (not wild plants) that have been created can be protected with a plant patent. This patent protects an invention for 20 years from the date of the patent application.

4. Business method patent covered

A business method patent protects a unique method, device, or operation that is used to do or manage something related to a product or service that provides useful, tangible, and tangible results (e.g., the 1-Click Shopping System, patented in 1999 from Amazon). It is not often given, so many inventors protect business practices as trade secrets instead. A business method patent protects an invention for 20 years from the date of filing the application.

Patent examples for the cannabis industry

The number of patents in the cannabis industry continues to grow every year as the industry matures and companies look for ways to gain a protectable competitive advantage in the marketplace. In fact, Aurora Cannabis formed a Science & Innovation Business Group in May 2021 with the sole aim of commercializing patented and patent-pending technologies that the company will use to develop cannabinoid biosynthesis and plant genetics.

The bottom line is that companies invest a lot of money in inventions and protect these inventions with patents.

The first thing many people think of when they hear the term “cannabis patents” is plant patents, which are used to protect new varieties of the cannabis plant. However, cannabis plant patents are actually less common than cannabis utility models. According to The National Law Review, fewer than 50 applications for plant patents had been published by January 2021, but thousands of use patents related to cannabis had been published. Remember that utility models are the broadest type of patent.

The National Law Review reports that there are only 12 patents on cannabis plants. One was granted in 2016. Two were granted in 2019 and nine in 2020. The trend shows that more cannabis plant patents are likely to come in the near future.

With regard to utility models, these were issued along the supply chain – to licensees and subsidiary companies. Patents have been granted for everything from machinery and equipment to cultivation and extraction methods. The USPTO has even issued patents for food preparations and extract compositions.

Many of Cannabiz Media’s customers have received patent protection for their inventions in the cannabis industry. Some examples are:

• Boveda, Inc. holds several patents protecting systems and methods for monitoring and controlling humidity and a container assembly for maintaining a predetermined humidity for the storage of products.
• Bio365The parent company of Full Circle Biochar, Inc. holds several patents covering the soil compositions and application methods of Biochar offered by bio365 to cannabis growers.
• Precision Extraction Corporation holds a patent for an extraction device and a process for the production of extracts.
• Greenbroz, Inc. holds patents for apparatus and related methods for trimming dried cannabis flowers.
• N2 Packaging Systems, LLC holds several patents for containers with child-resistant lids.
• Vitalis Extraction Technology Inc. holds a patent for a superfluid extraction device.

How patents affect cannabis licensing value

Companies involved in or with the cannabis industry will face a changing landscape in the near future as markets continue to open and, eventually, state legalization takes place. Competition will increase and mergers and acquisitions will still be the order of the day.

Smart companies will look for ways to differentiate themselves in the marketplace – ways to prove they are positioned for survival and success. Patents instantly show investors that a company has a quantifiable and valuable advantage that cannot be easily copied.

In fact, patent value can be calculated by evaluating six key factors:

• The importance of the invention
• How well the patent is structured (i.e. how much protection does it actually offer based on its spelling)
• Its marketing value
• The term of the patent
• How often is the patent cited in other patent applications?
• How much money can be made from the patent through potential sources of income such as licenses and royalties?

This must be taken into account with patents and all forms of intellectual property. Cannabis and cannabis products cannot cross national borders today, but ideas can. Patents protect ideas that become inventions, and those inventions can be used and monetized in the United States.

In other words, companies that are now starting to spread their ideas across the country will be best able to dominate their markets in the future when state legalization finally takes place and competition increases significantly. These are the companies investors are looking for, and larger companies will seek acquisition.

The central theses

While patent litigation costs time and money, investors will notice if you can secure one to protect your novel invention. Make sure you work with an experienced patent attorney to not only ensure that your application has the best chance of getting approval, but also to make your patent as valuable as possible.