August 2022 – just another month in the evolving psychedelics industry featuring another issue with Compass Pathways.
The new legal spat comes on the heels of Compass being granted two patents for their form of psilocybin: U.S. Patent No. 10,954,259 granted on March 23, 2021, and U.S. Patent No. 10,947,257, granted on March 16, 2021.
Freedom to Operate challenged the patents, but it was denied by the U.S. Patent Trial and Appeal Board in June. FTO asked the board to reconsider.
Now Terran Biosciences is suing Compass for what could be a more egregious foul.
Terran Biosciences is a bioscience company developing a portfolio of drugs, an imaging device and a precision medicine platform to treat a variety of neurological and psychiatric illnesses. Like every other bioscience company in the psychedelics space, they are trying to be first to market with something, anything, that will make them money and began to pay off on the billion-dollar business dream they had about psychedelics.
According to court documents filed Aug. 5, the issue revolves around Compass’ misappropriation of highly confidential and sensitive proprietary information that Terran and the University of Maryland-Baltimore (UMB) spent years and substantial resources to develop.
Dr. Scott Thompson, professor and chair of the Department of Physiology at the University of Maryland School of Medicine, theorized that psychedelic responses are not required for an antidepressant response to psilocybin.
He reportedly spent several years researching and developing this idea into a potential therapeutic product, the results of which are the “Psilocybin Trade Secrets” in question, according to the court documents.
Starting in August 2019, Thompson filed patent applications disclosing and claiming certain of his then-trade secret inventions. Before filing his patent applications, Thompson kept his research confidential.
Then in May 2019, Compass reached out to pursue a potential partnership ostensibly to further Thompson’s research. For seven months, in reliance on a nondisclosure agreement signed by both parties, Thompson and Compass had a number of substantive discussions and negotiations regarding a potential partnership.
Thompson, encouraged by the excitement that Compass demonstrated about his trade secrets and the results of his research, spilled the beans about his findings – and then the trouble began.
“Compass milked Thompson for all the information it could about his confidential research,” the court documents said.
According to the filing, Compass misappropriated the psilocybin trade secrets for itself, and then, in August 2019 while Compass was stringing Thompson along, it secretly filed its own patent application claiming for the first time “[a] method of reducing the negative side effects associated with traumatic psychedelic experience in a patient undergoing treatment with psilocybin” by administering psilocybin and “one or more 5-HT2A specific antagonists.”
In other words, Compass claimed Thompson’s invention for itself. Compass quickly ended negotiations and stated that it would not enter into a collaboration agreement with Thompson or UMB for psilocybin research.
Terran, outraged, sued Compass. According to their complaint, Terran has been damaged “in an amount yet ascertained,” and Compass “were willful and malicious, and with the deliberate intent to injure Terran’s business, thereby entitling Terran to exemplary damages and/or attorneys’ fees in an amount to be proven at trial.”
More to come on this. But there is other patent-related history with Compass.
There was the infamous back and forth beginning in 2017 between Compass and the nonprofit medical research organization Usona Institute, where Compass applied for three patent applications for the use of psilocybin against treatment-resistant depression to help prop up interest in the company before their initial public offering.
One of those patents, filed in October 2018, was revised and later resubmitted with the patent granted by the United States Patent Office on Dec. 31, 2019. That decision spurred a wave of protest based on the perception that such protection could prevent medical, traditional or recreational uses of psilocybe mushrooms by others. The patent expires Oct. 9, 2038.
In a defensive move before the patent was approved, Usona kept publishing publicly available papers about various psilocybin formulations so Compass couldn’t claim it.
Usona collaborates with Imperial College London, Heffter Research Institute, MAPS Public Benefit Corporation, MIND Foundation and other research organizations, all working under a philosophy of open science for research on substances like psilocybin. They believe that nobody should own it or lock it up in a patent scheme to block other scientists from studying it.
In the Compass versus (fill in the blank) realm to date, the industry has already witnessed a for-profit fighting a not-for-profit, and a big money bully allegedly stealing another company’s intellectual property, all in an effort to be first to market and rake in untold billions of revenue.
But is this also just business as usual in the tough, competitive bioscience world? Did Compass overstep its bounds? Are they just playing hardball like any bioscience business in an attempt to get ahead?
Or are they simply offending an outraged medical community where some believe there should be no obstacles to making better mental health medicines available to any fellow human?
In its filings with the Securities and Exchange Commission, Compass spells out what it is up against: “We face substantial competition and our competitors may discover, develop or commercialize therapies before or more successfully than us, which may result in the reduction or elimination of our commercial opportunities.”
Compass is also a psychedelics company that seems to be doing what any player hoping to succeed in a nascent industry does: advancing the industry further and faster than any other company.
Its Comp360 psilocybin therapy, for example, is headed to Phase III clinical trials sometime later this year, a first for psilocybin research.
But there has always been something a bit unsettling about Compass, dating back to their formation and their major financial backer, entrepreneur billionaire Peter Thiel, co-founder of PayPal and a political activist.
Compass opened its doors in 2015 as a nonprofit, then switched to a for-profit two years later, causing some consternation among industry watchers about its true intentions.
Compass officially went public on Sept. 18, 2020, with a $146.6 million IPO.
In its inaugural trading session, shares of CMPS stock soared over 70%, easily becoming the most successful psychedelics IPO to date.
Maybe the aggressive stance Compass is showing is just about survival. Like any top psychedelics company today, Compass knows that the name of the game is patents. They are the true lifeblood of psychedelics companies today since most are still in the startup, research and development phase.
Secured patents and, to a certain extent, the bioscience depth and expertise of a company’s personnel, are pretty much all an investor can use to make investment decisions in a psychedelic company today.
Compass now has 10 patents overall: five in the U.S., two in the U.K., one in Germany and two in Hong Kong.
But the question remains: Is Compass Pathways, one of the biggest psychedelics companies in the world, a force for good … or not? Is it inspiring competition or undermining it?
“Our vision is a world of mental wellbeing,” Compass says on its LinkedIn website. And it recently demonstrated that it wants to play nice by pioneering a multiyear partnership with King’s College London and South London and Maudsley NHS Foundation Trust, a nonprofit organization, to create The Centre for Mental Health Research and Innovation in the UK.
Sounds like a good move. But there is another potential Compass patenting issue brewing, arising from the development of a therapist training program outlined by Compass in a paper.
What’s next? Stay tuned.