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What began as a bizarre lawsuit between California cannabis testing facility personnel is highlighting how the emerging legal cannabis industry is hampered by confusion over intellectual property and the industry's lack of standard operating procedures.

The eventual outcome could initiate a recall of the tested products and cause labs to further evaluate how closely they guard their proprietary lab procedures.

The root of the new drama comes from a lawsuit involving two Sacramento cannabis testing labs, Green Leaf Lab and 2 River Labs. The case revolves around former Green Leaf Lab employee Renee Engle-Goodner, now employed by 2 Rivers Labs. Green Leaf is accusing Engle-Goodner of taking its testing methodology with her to 2 Rivers Labs. She denied the claim and countered that Green Leaf faked potency test results.

If Engle-Goodner's claims can be substantiated, it could kick off a recall similar to what happened with Sequoia Analytical Labs in December 2018. Sequoia's lab director was discovered to be faking tests for 22 pesticides. As a result, 29 cannabis distributors and retailers had to recall products, causing thousands of pounds of flower, edibles, and other marijuana products to be returned and either destroyed or retested, according to the San Francisco Chronicle. One industry expert who spoke off the record said some companies had to spend $100,000 to retest their recalled products.

Falsification Allegations

Engle-Goodner had originally been hired to run Green Leaf's Sacramento location. Her training took her north to the company headquarters in Portland, Oregon. That was where things allegedly started to get weird, according to a cross-complaint filed by Engle-Goodner's personal attorney, Matthew Ruggles of Sacramento.

In the lawsuit, she accused Green Leaf CEO Rowshan Reordan of asking Engle-Goodner during her Portland training if she would falsify potency test results. The attorney representing Green Leaf didn't respond to repeated requests for comment.

“Ms. Reordan described a process where they artificially inflate the numbers so the weed comes out at a higher THC percentage,” Ruggles said. “Because, and this is my explanation, not hers, but anyone who works in a dispensary will tell you — the higher the THC, the more it's worth.”

Engle-Goodner told Reordan that what she was asking her to do was illegal in California.

Engle-Goodner resigned, giving two weeks' notice. Upon her departure, she noted the workplace environment, which according to Ruggles, included an atmosphere that featured practices not essential to operating a scientific laboratory, such as monk chants on the loudspeakers and in-office chakra readings for new hires.

Tensions escalated. Engle-Goodner was fired before her two weeks' notice elapsed, yet she shortly landed a new job at 2 Rivers in Sacramento. Green Leaf proceeded to take action saying Engle-Goodner had stolen its testing protocols and taken them to 2 Rivers. Ruggles called the accusation false.

“Two Rivers has its own protocols. They never used any from Green Leaf or anything like that,” Ruggles said. “They sued her and her current employer because they want to shut down 2 Rivers because then they'd be the only lab in Sacramento.”

Trade Secrets are Paramount

For many of the oldest cannabis labs in the U.S., protecting the practices they've developed is serious business. SC Labs CEO Josh Wurzer, who is not involved in the lawsuit, explained how labs must determine where to draw the line between best practices and intellectual property in operating a cannabis laboratory.

For many of the oldest cannabis labs in the U.S., protecting the practices they've developed is serious business. Click To Tweet

Wurzer said today's cannabis industry is different from others that may be testing for things such as heavy metals because those other industries can go by a standard method of analysis. Those methods are basically accepted recipes to perform the required tests.

“Now a laboratory could make improvements to that analysis, and then that would become proprietary for them,” Wurzer said. “The difference for [the cannabis industry] is we don't have any published reference methods.”

Wurzer said standardized methods are starting to be established.  SC Labs is in the Association of Official Agricultural Chemists working group helping to develop those benchmarks.

Wurzer said most of the work of a cannabis lab should be proprietary because they've had to develop their own methods. Some hardware manufacturers will offer training on a basic operating methodology of the equipment, but labs will adapt the process to the point where it becomes proprietary.

Wurzer noted that SC Labs has taken the opposite approach with its methods in hopes of helping raise the bar for all.

“We see it as a benefit to us if the other cannabis testing laboratories are doing a good job with their testing,” Wurzer said. “It's much more difficult for us to compete against laboratories that aren't doing a good job — just giving everybody passes, or they don't have reliable data.”