In July 2018, UCANN sued Pure Hemp for infringing U.S. Patent No. 9,730,911, which disclosed and claimed various cannabis and CBD formulations. United Cannibis Corp. v, Pure Hemp Collective Inc., No. 1:18-cv-01922-WJM-NYW (D. Colo.).

During the litigation, UCANN filed for bankruptcy, which triggered an automatic stay. 11 U.S.C. § 362(a).

Eventually, the parties stipulated to a dismissal of the infringement claims with prejudice, but the stipulation was silent as to attorneys' fees.

Following the dismissal, Pure Hemp moved for attorney fees and sanctions, arguing that UCANN's counsel had committed inequitable conduct during prosecution. Noting that the parties had stipulated to dismissal “before many of the factual disputes Defendant cites were adjudicated on the merits,” the district court denied attorneys' fees, holding that Pure Hemp was not the prevailing party, and that Pure Hemp did not prove that the case was exceptional.

Federal Circuit Appeal

On appeal, the Federal Circuit affirmed the denial of attorneys' fees because the record was undeveloped with respect to the inequitable conduct claim. United Cannibis Corp. v, Pure Hemp Collective Inc., No. 22-1363, __ F.4th __ (Fed. Cir. May 8, 2023).

The Federal Circuit found that the district court had committed harmless error about the prevailing party.

UCANN sued Pure Hemp for patent infringement and, thereby, attempted to effect a material alteration in the parties' relationship by imposing liability on Pure Hemp. This effort failed, as the case ended – by agreement – with dismissal of UCANN's patent infringement claims with prejudice. Hence, Pure Hemp successfully rebuffed UCANN's lawsuit and ensured that UCANN can never again assert the same patents against Pure Hemp's same accused products; both outcomes make Pure Hemp the prevailing party. See Raniere v. Microsoft Corp., 887 F.3d 1298, 1306 (Fed. Cir. 2018) (“Appellees ‘won' through the court's dismissal of [appellant's] case with prejudice – they prevented [appellant] from achieving a material alteration of the relationship between them, based on a decision marked by ‘judicial imprimatur.'”); Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1035 (Fed. Cir. 2006) (“[W]e conclude that as a matter of patent law, the dismissal with prejudice . . . has the necessary judicial imprimatur to constitute a judicially sanctioned change in the legal relationship of the parties, such that the district court properly could entertain [a] fee claim under 35 U.S.C. § 285.”).

Thus, Pure Hemp indeed was the prevailing party. But this was “harmless error” because of the district court's additional reasons for denying attorneys' fees, namely that the case was unexceptional.

One of Pure Hemp's inequitable conduct theories was that UCANN's prosecution counsel copied and pasted portions of prior art references into UCANN's patent application without disclosing that prior art to the USPTO. Pure Hemp argued, “The lack of disclosure is the problem here – not the copying and pasting by itself.”

Professor Dennis Crouch commented that Pure Hemp's briefing alleged that “Cooley attorneys also have a policy of withholding references until after the first office action, in direct contravention of patent office guidance,” and that “in academic circles, it is referred to as plagiarism.”

UCANN's prosecution counsel, however, explained her copying and pasting as “essentially that it was all background information well-known to a person of ordinary skill in the art – and the undeveloped record gives us no reason to disbelieve her testimony.” Furthermore, there was no finding by the district court that the copied prior art was material.

Pure Hemp argued, however, that the appeals court could make its “own findings on intent to deceive and materiality.” The Federal Circuit rejected Pure Hemp's invitation, noting that “Pure Hemp fundamentally misunderstands our role as a court of appeals.”

Appeal Not Frivolous

The Federal Circuit also sua sponte held that, “although a close call, we deem this appeal not frivolous” in part because “Pure Hemp has prevailed on its appeal from the district court's erroneous conclusion that Pure Hemp was not the prevailing party.”

We take this opportunity to remind counsel of their obligation not to lightly launch attacks on one another's integrity and most certainly not to do so without a sound basis and solid evidence. Although we are not pleased with how Pure Hemp has argued this appeal, we cannot say this appeal, as a whole, was “frivolous as argued.”

And so the Federal Circuit affirmed the denial of attorneys' fees and awarded costs to UCANN.

The patent attorneys at Thomas P. Howard, LLC enforce patents and defend against infringement in litigation nationwide including in Colorado.