Canadian cannabis growers and retailers are expanding their businesses, in part through mergers and acquisitions, while more players are entering the market. All are turning to intellectual property lawyers to help protect their patents, trademarks and plant breeder’s rights.
The growth and use of cannabis in Canada isn’t new; it’s been legal for regulated medical use since 2001 and has been used recreationally for much longer, albeit illegally. But with the federal Cannabis Act coming into effect on Oct. 17, which legalized recreational use, activity in the cannabis sector has been soaring.
Global consumer spending on cannabis is expected to reach $32 billion by 2022, according to two U.S. market research firms, while another firm estimates the global legal cannabis market value will reach as high as US$146 billion by 2025.
Not surprisingly, Canadian cannabis growers and retailers are expanding their businesses, in part through mergers and acquisitions, while more players are entering the market. All are turning to intellectual property lawyers to help protect their patents, trademarks and plant breeder’s rights.
Phillip Shaer, chief legal officer of Smiths Falls, Ont.-based Canopy Growth Corporation — the world’s second-largest cannabis company by market value — calls the IP activity at his own company “rather prolific” in the past year and a half. Including Canopy’s foreign counterparts (the company has operations in Germany, South Africa, Denmark and Jamaica), “we’ve filed over 80 [applications for] patents,” he says. “And in terms of trademarks, I can’t even guess at the number; but it’s massive.”
New players are also entering the sphere. “We’re seeing a lot more Canadians getting into the game and starting to file an application” for a patent, says Micheline Gravelle, managing partner of intellectual property firm Bereskin & Parr LLP in Toronto. “People have been filing patents for cannabis products for a long time,” largely for medical use, she says, “but there’s been a huge uptake in the past year.”
And as patent applications aren’t made public for 18 months until after filing, the types of applications that have been made recently — and the volume — are still unknown.
“We haven’t seen a lot of litigation yet,” says Gravelle. “It’s still a pretty new industry.” However, she says, she knows from the number of people who have contacted her firm in the past year that interest in patent applications has “really increased. But we won’t have actual numbers until 18 months out, when [applications] start to get published.”
Cannabis is now cultivated for both the medical (therapeutic) and commercial markets, and although a marijuana plant itself can’t be patented, varieties, or strains, of it can be.
Jennifer Marles, a partner in Oyen Wiggs Green & Mutala LLP in Vancouver, says she is seeing new developments in protecting intellectual property rights related to cannabis “across all sectors,” not only in the medical and recreational sectors.
“I have one client who does waste-processing technology,” Marles says, “that can actually be used to process all of the waste plant material that [is] resulting from all this cannabis production.” Cannabis waste can’t be disposed of while it retains active pharmaceutical compounds, she explains. “You have to destroy the active compounds” before the waste is discharged into the environment. Another client is working on a roadside breathalyzer to test for marijuana intoxication.
Industrial design, such as the esthetics of packaging, can also be protected.
For the medical use of cannabis, there’s research being conducted in cannabinoids — the chemical substances found in cannabis — and the Israelis have done a good deal of work, Marles says, around patenting medicinal applications of cannabidiol — CBD — a type of cannabinoid that does not produce a “high.” British company GW Pharmaceuticals, which develops cannabinoids for therapeutic use, recently got approval in the U.S. for one of its therapeutics.
“The medical application area is just starting to be explored,” she says.
Shaer says his company is looking for patents or trademarks for “a myriad of things,” some related to plant genetics, some to formulation and extraction-like technology and some to vape technology.
Cannabis products to be protected include new topical creams, beverages and edible products, says Gravelle, noting that edibles will be legal for recreational use in a year or so. In August, Constellation Brands, an international producer and marketer of beer, wine and spirits, announced it was increasing its ownership interest in Canopy Growth.
“Constellation Brands is infusing a lot of money into the sector” in the form of cannabis-infused beverages, she says.
The Trade-marks Act and the Plant Breeders’ Rights Act both give registrants exclusive rights to use registered trademarks and registered denominations to distinguish their plant varieties in the marketplace.
Under the Plant Breeders’ Rights Act, a plant breeder can apply to the Canadian Food Inspection Agency for protection of a new plant variety, defined by a set of unique genetic characteristics that will not change upon reproduction of the plants in the grouping.
For example, a variety of plant could be bred to produce higher levels of CBD, says Marles. “Companies tend to be more interested in dissecting the plant and creating new formulations.”
Pascal Archambault, a business law practitioner with expertise in intellectual property at Langlois in Montreal, says, “We expect a surge in patent and breeders’ rights applications.” Currently, on the Canadian Patents Database, there are two active breeders’ rights granted for hemp, three pending and two for marijuana (pending), all dated 2018.
The Canadian Intellectual Property Office currently has more than 500 trademark applications pending for cannabis, says Mylany David, head of the cannabis group at Langlois.
“This is truly giving us an idea of what’s happening in the industry.”
Trademarks and trade secrets
Under Canada’s new regime, branding, packaging and advertising of cannabis are severely restricted, like those for tobacco, prescription drugs and alcoholic beverages. Every product label must include a standardized cannabis symbol with a specified size, appearance and placement. Mandatory health warning messages and THC content are required on packaging, and images or graphics besides the brand name and logo are prohibited. Packaging must be plain, with a background of a flat uniform colour.
Still, says Marles, cannabis companies will want to distinguish their brands from others. “Cannabis regulations limit how you can market and advertise cannabis products in Canada at present . . . but trademarks will still be important” as consumers must distinguish the brands. She also predicts “a lot of online advertising.”
Indeed, IP and trademarks will continue to be more relevant than ever, says David. “Considering the number of applications that are increasing [for companies] to be licensed producers of cannabis, yes, we expect more trademarks to be registered.”
Given the restrictions on advertising, cannabis producers will also rely on brand preference, adds her colleague Archambault. “Brand preference promotion is one of the types [of advertising] that’s allowed.”
Many businesses also rely on trade secrets to protect their intellectual property, Archambault notes. Strict confidentiality guidelines will be required in a company, especially those involved with dosage formulations, for example.
As well, Canada’s Trade-marks Act will undergo substantial changes in the next two years. The revised legislation will eliminate the need to include filing grounds in an application. So, whether an applicant has used a trademark or intends to use it will no longer matter, and the applicant will no longer need to declare that they are using the trademark in Canada to achieve registration of a mark.
These impending changes mean that people will be able to file broad applications that cover a vast array of products, whether they use the trademarks or not. “It opens up the possibility of more trolls in Canada, guessing what companies want, because [the trolls] won’t have to show ‘use’ [of a mark] either,” says Melanie Baird, a litigator at Blake Cassels & Graydon LLP in Toronto.
Canada and the global marketplace
Shaer says he’s proud that Canada legalized marijuana for recreational use, becoming only the second country in the world (after Uruguay) to do so. But the medical market in marijuana internationally makes the Canadian market look very small, he says. Eighty per cent of those who have prescriptions for medical marijuana in Germany are insured for the drug, he says, and Germany has a very large population.
Canopy Growth was founded in 2013, “and we do have the most medical patients of any of the licensed producers in Canada.” Still, Canada has a much smaller population, and about 300,000 patients are registered to use it here, Shaer says. “If you think of a country the size of Germany or Brazil . . . those are much bigger marketplaces.”
Archambault sees Canada as having an advantage because cannabis trademarks are allowed here, while they are not always available in the U.S., for example. This means American producers might choose to register their trademarks here if they can’t in the U.S.
“If you look at the change in attitude coming slowly and surely . . . there will come a day when it becomes legalized in the U.S. and other countries, and having filed in Canada gives you a formal precedence in use of your mark. . . . That’s a great opportunity.”
Marles concurs. Americans now “have an interest as well, especially in the medical market, and especially in California,” she says. “But it’s still federally illegal. That positions Canada better for investments that are coming in this sector because the climate is a little more permissive.”
Sector ‘flush with cash’
Commercial disputes have already started, says Baird, in terms of litigation over supply and distribution channels. Once corporate IP assets become public, “you’re going to start to see the patent and trademark battles come and I think those are going to be quite heated. . . . It’s not unlike the early days of . . . pharmaceutical battles,” she says. “You can make an analogy to over-the-counter and prescription products. . . . Now, there’s a lot of companies involved, big and small, in the new cannabis industry. And so, for some of those companies, these IP issues could be make or break” them.
The more exciting battles will be the patent rather than the trademark ones, Baird predicts. “I think there’ll be interesting patent applications that will lead to some very interesting cases. . . . It’s a fascinating industry [and] a lot of people will want exclusivity over particular things.
“It’s flush with cash, so a lot of people will be fighting over it.”