On February 18, 2020, Medterra CBD filed a motion to dismiss a lawsuit alleging that it had misappropriated Healthcare Resources Management Group LLC’s (“Healthcare Resource”) proprietary formula for a CBD cream aimed at treating pain. In its motion, Medterra argued that Healthcare Resource failed to allege that it had provided or that Medterra had otherwise acquired any proprietary information. Additionally, Medterra claims that even if Healthcare Resource could establish that it had provided its propriety CBD cream formula to Medterra, Healthcare Resource did not take adequate steps to protect its trade secret by mandating Medterra sign a non-disclosure agreement.
Medterra was founded in 2017 and sells a host of CBD products aimed at treating a variety of symptoms and issues. On its website, Medterra claims that it sells “100% natural, THC free, 99% pure CBD” that is grown in accordance to guidelines set by the Kentucky Department of Agriculture. Medterra contacted Healthcare Resources in March of 2018 in search of a manufacturer for its CBD-based pain cream. Healthcare Resources responded that it was willing to produce its own cream for Medterra on a “white label” basis, thereby allowing Medterra to sell the product under the Medterra brand name. Medterra accepted this offer and Healthcare Resources engaged a third company, EcoNatura All Healthy World, LLC (“EcoNatura”), to manufacture the product.
The parties’ relationship began to sour when Medterra and EcoNatura started working directly together, including corresponding about the formulation of a variety of CBD-based products. These discussions culminated in Medterra requesting that EcoNatura stop producing Healthcare Resources’ proprietary cream for other companies. Medterra claims that Healthcare Resources was amenable to this exclusivity arrangement subject to the parties agreeing on pricing terms. Healthcare Resources attempted to have both Medterra and EcoNatura sign an NDA, but neither party ever executed one. For its own reasons, eventually, Healthcare Resources selected a new manufacturer to replace EcoNatura and sent new pricing to Medterra. Medterra never responded to these pricing terms. In its suit, Healthcare Resources claims that Medterra is still purchasing its proprietary cream from EcoNatura.
This case serves as an interesting example of how CBD companies, like companies in other nascent industries, can be embroiled in trade secret litigation. It is critical that CBD companies, particularly given the relatively uncertain and evolving regulatory landscape, consult with counsel to ensure that their products are not only compliant with existing regulations, but also that what they are seeking to do does not infringe upon another company’s protected intellectual property.