Determining how best to protect intellectual property essential for players in Canadian, U.S. cannabis space

Licensed producers (LPs), retailers and others already in the Canadian or U.S. cannabis industry—or looking to take the plunge—should be thinking about how they will distinguish their businesses, products and services from others. In what is quickly becoming a crowded and competitive marketplace, intellectual property (IP) could prove key and IP protection available under Canadian and U.S. laws should be an important part of any strategy moving forward.

 

 

Canadian Law

Trademark considerations

To register a trademark, it currently takes at least 14 months in Canada

Unlike in the U.S., the Canadian Intellectual Property Office (CIPO) will register trademarks for cannabis products and services. To register a trademark—a process that currently takes at least 14 months in Canada—an applicant submits an application listing the trademark and the goods and services for which registration is sought. If the trademark is not confusingly similar to another registered trademark or previously filed application, as well as meets CIPO’s other criteria (this includes not being a descriptive word or the name of a person or place), the application will be published for third parties to oppose. If no oppositions are filed, a registration will be issued.

The cost to apply to register a trademark is $250, plus legal fees to prepare the application if a trademark agent is engaged. Application fees are scheduled to increase as of June 17, 2019, so filing before then would be advantageous.

To give them a competitive edge, LPs, private sector retailers, service providers and others are investing heavily in brand protection and novel forms of brand promotion that comply with Canada’s restrictions on cannabis promotion. There are currently more than 2,000 active trademark applications and registrations on record with CIPO for trademarks for cannabis goods and services.

Applications often claim a range of products and services from dried flower and cannabis oil to edibles (food and beverages), topicals (skin, hair and beauty products) and retail services. In Canada, an application can be filed before use of a trademark commences, so edibles and topicals are being included based on anticipation that they will become legal in the near future.

Trademarks can be registered for company names, key brands, sub-brands and taglines. They can also be registered for a wide range of trading indicia, including words, logos, colours, sounds, shapes of goods or packaging, and the layout and design of retail stores. For example, see Apple Inc.’s registration for the Apple Store Trade Dress. The list is expected to expand to include holograms, scents, tastes and textures in 2019.

Companies offering analysis and testing services for cannabis products can also create and register certification marks that they license to others whose goods and services meet a defined standard. There are a variety of things that can be registered as trademarks, as detailed in CIPO’s Guide to Trademarks.

A business that may want to protect its brands in other countries later should take into account restrictions on registering trademarks with cannabis goods and services in those countries when developing its Canadian trademark filing strategy. Filing separate applications in Canada for cannabis and non-cannabis goods and services is wise, as the non-cannabis applications can more easily be used as a basis for filing abroad in countries where trademarks cannot be registered for cannabis specifically.

Likewise, businesses that have protected their trademarks outside Canada, should consider filing more specific applications in Canada to take advantage of the country’s more permissive laws, which allow for registration of trademarks with the most cannabis products and services.

Companies in the cannabis sector can also use the Canadian patent system to protect novel processing or harvesting techniques (such as extraction processes), novel product features and unique product formulations. However, in Canada, there are limits on the extent to which the patent system can be used to obtain a monopoly on a seed or plant.

 

Patent considerations

As noted in CIPO’s Guide to Patents, patent applications are complex and typically take a minimum of two years to issue into a patent. Once issued, a patent gives its owner a monopoly on the covered intention in Canada for 20 years from the date the patent application is filed.

Plant breeders’ rights protections are an interesting option for those creating new strains of cannabis. They are a form of IP rights by which plant breeders can protect new, distinct, uniform and stable plant varieties for up to 25 years for a tree or a vine and up to 20 years for all other plant varieties.

The holder of plant breeders’ rights obtains exclusive rights in relation to the propagating material of the variety. A variety may be sold for as long as a year in Canada and for up to four years outside of the country prior to a plant breeders’ rights application filing.

 

Copyright available to prevent the unauthorized copying of original artistic materials

There has been limited use of plant breeders’ rights for cannabis strains—as outlined in the Canadian Food Inspection Agency’s Guide to Plant Breeders Rights—but growth in this area is expected as companies compete to develop new strains. In 2018 and 2019 to date, several new applications for cannabis sativa were filed, many by MedReleaf Corp.

Any business offering a product or product packaging with a unique shape, pattern or other ornamentation that does not serve a utilitarian function, can obtain industrial design protection in Canada for those features for up to 10 years.

Copyright, which may be registered or unregistered, is available to prevent the unauthorized copying of original literary and artistic materials, including manuals, packaging, logos and some aspects of websites.

 

IP: meet promotion restrictions

The cannabis industry in Canada is highly regulated and government restrictions impede the exploitation of some IP rights. For example, the Cannabis Act, together with provincial legislation, contains restrictive rules on branding, packaging and promotion.

The federal legislation prohibits the promotion of cannabis, cannabis accessories and services related to cannabis in a manner that could be appealing to young people, by way of testimonial or endorsement, by way of promotions that depict a person, character or animal, or that are associated with “a way of life,” including glamour, recreation, excitement, vitality and risk. There are similar restrictions on sales of cannabis and cannabis accessories with an appearance, shape or other sensory attribute or function that could be appealing to young people. Any trademarks, packages or labels for cannabis, cannabis accessories or cannabis-related services must also meet these criteria.

In addition, Ottawa has imposed restrictive rules on the look and content of cannabis product packaging, which further constrain the use of artistic works, colours and trademarks on packaging and make it all the more difficult for LPs to differentiate their products and appeal to consumers through branding. As a result, producers are forced to look to more novel ways to communicate the attributes of their brands to consumers, including those online communications directed to adult-only audiences.

 

U.S. law

Trademark considerations

Compare the Canadian experience to IP protection in the cannabis industry under U.S. law. To do so, it is best to start with a discussion of trademarks, as that is where the law restricts the ability to obtain certain protection. As previously mentioned, a federal trademark for cannabis “plant-touching” goods/services cannot be registered because of marijuana’s classification as a Schedule I drug under the U.S. Controlled Substances Act. As such, a person cannot federally register a mark like Marlboro or a particular cannabis strain.

Steps need to be taken to protect goods and services at home and elsewhere

That being the case, plant-touching businesses are exploring alternatives means of trademark protection. In order to arguably back their way into federal rights, a number of plant-touching businesses apply and obtain registrations for non-plant-touching goods/services, such as smoking accessories or even blogs.

Plant-touching businesses also frequently seek state trademark registrations to prevent infringement, but the protection offered by these registrations extends as far as the boundaries of the state, and with few exceptions, states require use of the mark.

Since each state is a self-contained unit for legal purposes, whenever these businesses expand, they effectively have to create a new business infrastructure from scratch, and then can register a state trademark once they have actual use within the new state.

If a business’ logo contains sufficient originality, it could be possible to obtain copyright protection for the logo, to prevent infringement of the logo itself (but not any term contained in the logo in relation to specific good/services, as that is trademark law’s purview).

It should be noted that as trademark rights flow through use in the U.S., any use of a mark in relation to goods/services acquires certain common law rights in the geographic area where the use occurs.

 

CBD considerations

CBD products are exploding in popularity, and the ability to register federal trademarks for CBD goods is in a state of flux. The passage of the latest Farm Bill in December 2018 effectively made hemp legal, and, therefore, hemp-derived CBD that meets certain requirements theoretically legal by association. While this may soon open up federal registration for marks for certain CBD goods, the US. Food and Drug Administration has released a statement that shows that certain CBD products are not in the clear legally yet. For its part, the United States Patent and Trademark Office (USPTO) could continue to use this basis to refuse certain trademark applications.

 

Patent considerations

In the U.S., there are limited restrictions as to the patents that can be obtained in the cannabis industry

As for patent law, there are limited restrictions as to the patents that can be obtained in the cannabis industry. It is possible to obtain a plant patent for a particular strain of cannabis if it meets certain requirements. Yet, most of the patents granted in the industry are for extracted formulations of cannabis, and the first litigation alleging an infringement of a cannabis patent was recently initiated.

As patents cannot be granted to items that are not sufficiently novel based on “prior art” in the marketplace and being “non-obvious”, and cannabis strains have been circulating illegally for decades, there is concern that potential patent trolls or major corporations will attempt to monopolize the industry by acquiring patents of limited or no originality. Organizations such as the Open Cannabis Project are, therefore, creating an open-source repository of genetic strain data so that USPTO can examine the “prior art” when deciding whether or not to grant a patent.

 

Acquisitions and strategic partnerships

For businesses developing cannabis-related IP, global protection of those valuable assets should be top of mind, as they can be sold or licensed to businesses in other countries.

The federal illegality that restricts U.S. companies from exporting cannabis products beyond their state borders has led to a trend in which these U.S. manufacturers seek strategic partnerships and IP licensing arrangements with well-funded Canadian cannabis businesses and vice versa.

On both sides of the border, there are frequent announcements about acquisitions and strategic collaborations between cannabis producers and others, many of which are IP-driven.

For all of the aforementioned reasons, it is extremely important to consult with an IP attorney seasoned in the cannabis industry to determine how best to protect, license and/or sell these valuable IP assets.

 

Alison Hayman, a partner in the Intellectual Property Group at Cassels Brock in Toronto, and Jonathan Purow, a principal whose focus is trademark, copyright and trade secrets at Gottlieb, Rackman & Reisman, P.C. in New York, NY.

 

Want to keep up to date on what’s happening in the world of cannabis?  Subscribe to the Cannabis Post newsletter for weekly insights into the industry, what insiders will be talking about and content from across the Postmedia Network.