Our last update on the first-ever cannabis patent case, United Cannabis Corporation (“UCANN”) v. Pure Hemp Collective, Inc. (“Pure Hemp”) was back in July 2019. A lot has changed in the world since then (although the case was largely unremarkable), and the possible ending to this once-deemed “pivotal” case for the industry may now face a pretty anti-climatic ending, at least for now: bankruptcy.
UCANN has filed a “Suggestion of Bankruptcy,” indicating that it filed for relief under Chapter 11. The fact that it has filed for bankruptcy automatically acts as a stay – basically, a pause button, in any other judicial proceeding.
Section 362 of the Bankruptcy Code provides:
“… a petition filed … operates as a stay, applicable to all entities, of—
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title …”
Interestingly, UCANN noted in its filing that it fully intended to continue prosecuting its claims in the patent infringement case.
The Court had a different opinion. Judge William Martinez noted that the automatic stay not only applied to UCANN’s claims against Pure Hemp, but also Pure Hemp’s claims against UCANN. UCANN only indicated it intended to continue prosecuting its own claims – and Martinez ruled it would be “extremely inefficient, and perhaps nonsensical” to go forward on UCANN’s claims without being able to simultaneously go forward on Pure Hemp’s counterclaims. Ultimately, pursuant to a Local Rule that allows the Court to close a civil action subject to reopening for good cause, Judge Martinez did exactly that. The case is now officially closed – although the parties may seek to reopen the case if or when the bankruptcy court lifts the stay or once the bankruptcy matter resolves.
We’ll report back with an update if this case gets reopened. It’s a sad ending, and probably all too familiar for a lot of businesses right now. Hope everyone is staying safe and, as always, we’re here to help.