IP issues involving the Cannabis Industry. Topical Cream Maker sues CBD Company over Trade Secret

April 17, 2020

Trade Secret litigation in the CBD and Cannabinoid industries continues to grow and players need to apply tried and true methods of trade secret protection to a business coming of age. Florida-based Healthcare Resources Management Group LLC has been given the go ahead to proceed with its suit against Medterra CBD, despite Medterra's contention that Healthcare Resources hadn't sufficiently alleged that Medterra stole the formula for the topical cream. Healthcare Resources alleged that it had a deal with manufacturer EcoNatura to make CBD cream using Healthcare Resources' formula before EcoNatura started selling Healthcare Resources' formula to Medterra, according to court records.

Healthcare Resources said that Medterra knowingly relied on another manufacturer, EcoNatura All Healthy World LLC, and Rejuvenol Laboratories Inc., with which Healthcare Resources said it had a nondisclosure agreement and a confidential relationship, respectively.

Healthcare Resources claimed that since 2017, it had a deal with EcoNatura to make CBD cream using Healthcare Resources' formula. The suit claims that Healthcare Resources was contacted by Medterra in 2018 about making a CBD cream using the Healthcare Resources formulation of CBD cream as a "white label" product, meaning Medterra could sell the cream under its own branding. Medterra agreed, and Healthcare Resources had EcoNatura manufacture the CBD cream for Medterra, according to the suit. But pretty soon, EcoNatura and Medterra began communicating directly, and Medterra asked EcoNatura to stop making the cream for other companies. As the business partnership shifted, Healthcare Resources said it asked both EcoNatura and Medterra to sign a nondisclosure agreement to ensure that its intellectual property was protected, according to the suit. But neither signed it.

Had Healthcare Resources employed early techniques to secure its IP through written agreements and good practices, its chances of prevailing would be greatly enhanced. The case is Healthcare Resources Management Group LLC v. EcoNatura All Healthy World LLC et al., case number 9:19-cv-81700, in the U.S. District Court for the Southern District of Florida.

Anton “Tony” Handal is a Partner in Murchison & Cumming, LLP and Co-Chair of the firm’s IP Practice Group.

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