China-based Shenzhen Smoore Technology Limited (parent company of CCELL) filed a complaint in October 2021 with the U.S. International Trade Commission (“ITC”) alleging that 38 North American cannabis vaporizer companies, including AVD (Advanced Vapor Devices), infringed upon three patents owned by them. The ITC ruled in April that the brands did not infringe on CCELL’s intellectual property related to ceramic core vape cartridges, which is a victory not only for the U.S. cannabis vaping sector but the entire cannabis industry.
If CCELL won the lawsuit, it would have eliminated a large portion of its competition and seized control of the market and pricing, leading to higher prices and slower innovation.
To discuss this case, Benzinga spoke with Doug Fischer, AVD general counsel.
Doug Fischer, AVD general counsel
Benzinga: Is it fair to call this lawsuit a rushed patent trolling case?
Fischer: CCELL’s case exemplifies bullying because they used their immense resources to bring questionable claims. One could argue the case was designed to drain smaller competitors’ resources and eliminate competition, as opposed to being a valid attempt to protect CCELL’s IP. I say “bullying” instead of “trolling” because patent trolling typically refers to parties that buy up patents solely to collect licensing fees or bring enforcement actions, with no intent to sell products or innovate
Benzinga: What does this victory mean for the cannabis industry?
Fischer: This case is a preview of things to come. In my view, intellectual property may be the second most significant factor in shaping the industry’s future, following policy. We expect that companies from both inside and outside the cannabis industry will prosecute more patents and bring more infringement cases.
Benzinga: Does this ruling set a precedent for the future?
Fischer: All patent cases are different, so its precedential power is limited. But the ITC proceeding should be a catalyst for companies to focus on IP going forward. Because it protects differentiation, IP promotes competition in the marketplace.
Benzinga: As the marijuana industry develops, can we expect more similar lawsuits?
Fischer: Yes. This case demonstrates that cannabis companies need to be forward-looking about IP strategy.
Benzinga: What advice do you have on how cannabis businesses can prepare for or avoid patent lawsuits like this one?
Fischer: Be proactive and diligent in obtaining your IP and ensuring you don’t infringe upon others’ IP. Many lawsuits can be avoided by getting legal advice in the early stages of product design and by companies having more stage gates at which IP issues are considered.
If you face a bullying or trolling lawsuit, you need to work with strong advisors. In some cases, you may need to take a stand on principle. In others, even if you have the upper hand, the certainty of a settlement may be the smarter move.
