Canada: Don't Let Your Brand Go To Pot (Part I): 4 Things That Cannabis Brand Owners Need To Know

The Canadian federal government is moving quickly towards legalizing the possession and consumption of cannabis for recreational purposes. However, Canada's cannabis industry is already "overgrown" with many licensed (and unlicensed) producers, all vying for the attention of consumers with different brands and strains of cannabis in a market that is heating up very quickly. In fact, there are already nearly 1,700 trademark applications and registrations on the Canadian Trademarks Database covering "cannabis" or "marijuana".

In this two-part series, we explore some of the unique challenges faced by brand owners, start-ups and "ganjapreneurs" in Canada's cannabis industry. In our view, such parties ought to know the following "buds" of information and strategize accordingly, ideally before launching a cannabis brand in Canada.

  1. The Canadian Intellectual Property Office accepts trademark applications covering "cannabis" and "marijuana"

    In order to obtain registered trademark rights in Canada, one must file a trademark application with the Canadian Intellectual Property Office (CIPO). Among other things, the application must include a description, in "ordinary commercial terms", of the goods and/or services with which the applicant has used or intends to use the applied-for trademark. In Canada, CIPO will accept descriptions that explicitly refer to cannabis or marijuana, such as "dried cannabis", "live cannabis plants" or "medicinal marijuana for temporary relief of seizures".

    However, in the United States, the U.S. Patent and Trademark Office (USPTO) will not allow an application that lists "cannabis" or "marijuana" among the goods associated with an applied-for trademark, because these substances cannot be lawfully distributed or dispensed under U.S. federal law. Indeed, a July 2016 decision of the USPTO Trademark Trial and Appeal Board suggests that even a trademark application covering "retail store services featuring herbs" may be refused if the "herbs" in question are "marijuana".

    Not so in Canada, where "medical marijuana" may be lawfully distributed or dispensed under Canada's Controlled Drugs and Substances Act (the "CDSA") and Access to Cannabis for Medical Purposes Regulations. Cannabis brand owners in Canada and abroad should therefore apply to register their trademark rights with CIPO and thus obtain the exclusive right to use their marks in Canada in association with controlled substances like "cannabis" or "marijuana".

  2. A trademark registration can serve as both a sword and a shield

    Besides entitling its owner to the exclusive use of the subject trademark in Canada in connection with the registered goods and/or services, a trademark registration also entitles its owner to prevent others from using the same mark, or a confusingly similar mark, in Canada in connection with the same or similar goods and/or services. Those seeking to enforce their trademark rights against others would be wise to register those rights with CIPO. Otherwise, a brand owner is limited in its ability to prevent others from using a confusingly similar mark, and instead must rely on its common law rights and earned reputation in Canada, which can be costly and difficult to prove in Court and thus enforce.

    Furthermore, a registered rights holder can obtain permanent injunctive relief against an infringer even if the rights holder's mark is not in use in Canada. While the registration of a trademark that is not in use is vulnerable to summary cancellation, it is generally not so vulnerable when the registration itself is less than three years old. Moreover, a nationwide injunction against an infringer can be obtained even if the infringer is carrying on business in areas of Canada in which the rights holder is not currently using its trademark.

    Finally, certain applicants are already applying to register what appear to be third-party trademarks, covering all or almost all classes of goods and services. Indeed, one particular entity has filed over 300 applications in the last two years to register trademarks that may in fact be owned by third parties. Thus, brand owners in the cannabis industry that have yet to register their trademarks should consider filing applications as soon as possible, so as to prevent others from attempting to register their marks. In most cases, it is simpler – and less expensive – to be proactive than reactive.

  3. Unlicensed producers' and distributors' trademark applications may be susceptible to third-party oppositions

    If and when an applicant's trademark application is approved by CIPO, it is advertised in the Canadian Trademarks Journal for opposition purposes. Thereafter, third parties have an extendible, two-month opposition period within which to oppose the trademark application on a number of statutory grounds.

    One of those grounds is that the applicant could not have been satisfied that it was entitled to use the applied-for trademark in Canada in association with the goods or services described in the application as of the filing date.

    The Trademarks Opposition Board has found that an applicant could not have been so satisfied where the use of the applied-for trademark in Canada in association with those goods or services would violate federal law.

    In Canada, unlicensed producers and distributors of cannabis are not legally permitted to produce or distribute cannabis under Canada's CDSA. Insofar as these producers or distributors apply to register the trademarks under which they unlawfully produce or distribute cannabis in Canada, their applications are susceptible to third-party oppositions and subsequent refusals.

    Notwithstanding the future legalization of cannabis for recreational purposes, and the upcoming changes to Canada's Trademarks Act, discussed below, this ground of opposition will remain a significant hurdle for any applicants in the cannabis industry that are operating outside the boundaries of the law.

  4. Changes to the Trademarks Act present exciting opportunities for brand owners in Canada's cannabis industry

    a. The "use requirement" goes up in smoke

    Recent amendments to the Trademarks Act (the "Act") are not expected to come into force until early 2019, when the law will undergo its most significant revision in over 50 years.

    Among the most important changes to Canada's Trademarks Act is the repeal of the "use requirement". Currently, an applicant's trademark application will not issue to registration until the applied-for trademark is used in Canada or elsewhere in the world. As a result, an applicant must claim that it has in fact made bona fide use of the applied-for trademark in association with the goods or services described in the application before it obtains the exclusive right to use the mark in Canada. However, once the amendments to the Act come into force, an applicant will be permitted to register a trademark without using it anywhere in the world.

    The repeal of the use requirement presents a unique opportunity for licensed producers and distributors of cannabis in Canada. The complexion of the cannabis market is currently a source of great speculation among brand owners and investors alike. It is not yet clear which products will fly off the shelves, and which products will crash and burn. And since cannabis may be consumed in different ways, licensed producers are now hedging their bets by investing significant time and capital in the development and production of a wide array of cannabis products, from dried and fresh cannabis to cannabis oils and edibles, to patches and vapours and more.

    With the repeal of the use requirement, licensed producers will be able to file extremely broad trademark applications, covering all manner of cannabis products, and subsequently obtain exclusive rights to use those trademarks (and preclude other traders from adopting the same or confusingly similar marks) in Canada in association with all of those products, regardless of whether or not they have in fact used the marks in Canada. The scope of a trademark application is therefore only as limited as an applicant's imagination, as licensed producers continue to dream up new ways of consuming cannabis. While the amendments have not yet come into force, cannabis brand owners can file these broad applications now, and leverage the broad protection afforded by them when the use requirement is eventually repealed.

    b. Distinctive scents and tastes will become registrable trademarks

    Another notable amendment to the Act is that Canada's trademark system will protect a broad range of non-traditional marks previously unregistrable by brand owners. Once the new Act comes into force, CIPO will begin to accept applications for non-traditional marks, such as colours (without delineated contours), holograms, moving images, scents, tastes and textures, which have become distinctive of their owners at the time of filing. These amendments will be especially valuable to brand owners in the cannabis industry, where scent and taste are likely to serve as primary distinguishing features of producers' brands.

    Indeed, the amendments to the Act will present licensed producers with an exciting and invaluable opportunity to register particular scents and tastes as their own indicators of source. For example, a licensed producer may apply to register for its own exclusive use of a brand of cannabis that smells like pine trees, or tastes like peanut butter.

    Under the amended Act, however, an applicant will be required to furnish evidence to establish that the applied-for scent or taste is distinctive of the applicant as of the filing date. Such evidence may include, for example, sales records, advertising and promotional spends, and sample advertisements and promotional materials that show that the applied-for scent or taste is distinctive of the applicant and no other person.

  5. Conclusion

    As in any "budding" industry, getting a head start in Canada's cannabis market may be the difference between commercial success and failure. Licensed producers need a comprehensive brand protection strategy to help grow their business, and would do well to consult local trademark counsel to better understand how to leverage Canada's trademark law to "weed out" the competition.

For further information on how to best protect your cannabis brand in Canada, please contact Kwan Loh, Graham Hood or a member of our firm's Trademarks group.

The second part of our series on the intersection of cannabis and intellectual property rights, which explores the importance of plant breeders' rights in Canada, will follow shortly.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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Graham Hood
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