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Pot lab: Health Dept. gave away our trade secrets

SANTA FE — One of the three laboratories that determines if medical marijuana products are safe for New Mexico patients claims that the state Department of Health improperly gave away its secret trade practices to a competing laboratory through a public records request.

Steep Hill Labs filed the suit against DOH, its Secretary Lynn Gallagher, Scepter Lab LLC and its owner, Kathleen O’Dea, in state District Court Monday.

The suit says Scepter used the state Inspection of Public Records Act to request and recive Steep Hill’s confidential standard operating procedures (SOPs) from DOH.

Steep Hill has also filed a restraining order to halt Scepter from viewing or sharing Steep Hill’s SOPs and prevent DOH from further disclosing any trade secrets.

A lawyer representing Scepter says the company only made the records request to see if the DOH was making the other labs submit SOPs and added that no one at Scepter actually has looked at Steep Hill’s procedures. Attorney Jason Marks also said there was nothing malicious about making a public records request.

All producers of medical cannabis products in the state are required to have their products tested by one of three labs in New Mexico. The labs are required to submit their SOPs every year when they reapply for certification.”Steep Hill had no option other than to provide trade secret information to DOH in order to maintain its regulatory approval,” the lawsuit states.

Steep Hill had worked for over 10 years to develop a system that uses high-performance liquid chromatography to test marijuana products, according to the suit. The company claims a competitor seeking to match Steep Hill would have to invest years and millions of dollars and have “high-level scientific expertise.” The suit says labs around the world pay millions of dollars to license their SOPs and are contractually bound to keep them confidential.

Last month, Scepter sent the Health Department a records request for SOPs Steep Hill submitted and proficiency tests submitted to DOH by any medical cannabis laboratory or laboratory applicant.

Steep Hill says in the suit that it learned Thursday that the DOH had disclosed the proprietary SOPs and proficiency tests. The DOH also gave Scepter social security numbers and results of criminal background checks for Steep Hill employees, even though Scepter didn’t even ask for those, according to the suit.

“With access to Steep Hill’s SOPs, Scepter could skip years of investment, a seven-figure licensing fee, and set up an HPLC machine almost overnight to turn out Steep Hill-quality testing,” the suit says.

There is an IPRA provision that makes an exception for records that contain trade secrets. DOH spokesman Paul Rhien said Tuesday the department won’t comment on pending litigation.

Scepter’s lawyer Marks, said Scepter wanted to know if the DOH was making all three labs submit SOPs. “The only way to find out was to ask for the SOPs to see if the Department of Health had them,” Marks said in an telephone interview. “They had no idea they could be trade secrets until they were served with this lawsuit.” He says no one at Scepter has looked at the Steep Hill SOPs.

Marks also said Scepter has been using the same process as Steep Hill for about a year and purchased the SOPs for the method from a third party. “They (Scepter) have no reason for wanting to use Steep Hill’s trade secrets,” he said. “… Making a public records request is an activity that any person has the right to do. For Steep Hill to describe that as something nefarious is offensive.”

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