Timely trademark applications, due diligence are essential for cannabis industry IP

The future may be green, but as the cannabis industry in Canada expands by leaps and bounds since recreational use of the plant was legalized here in October, cannabis growers and retailers alike will need to move to protect their intellectual properties sooner rather than later, and to ensure they are complying with regulations.

Timely trademark applications, due diligence are essential for cannabis industry IP
There are many forms of IP rights that can be utilized to protect cannabis technology, says Bereskin & Parr managing partner Micheline Gravelle.

 

The future may be green, but as the cannabis industry in Canada expands by leaps and bounds since recreational use of the plant was legalized here in October, cannabis growers and retailers alike will need to move to protect their intellectual properties sooner rather than later and to ensure they are complying with regulations.

That was what participants heard at a Bereskin & Parr LLP seminar on intellectual property rights held in Toronto last week.

There are many forms of IP rights that can be utilized to protect cannabis technology, says Bereskin & Parr managing partner Micheline Gravelle, who moderated the cannabis section of the seminar and presented the overview of IP rights in the sector. These include patents, plant breeders rights, designs, trademarks and trade secrets.

“The market is big, and you want to ensure you secure your rights to keep competitors out,” says Gravelle.

Bereskin & Parr partner Jennifer McKenzie presented on the regulatory side of the cannabis industry, including trademarks and promotions.

“If you have a desired mark, get an application on file now,” McKenzie told Legal Feeds. The trademark landscape is “becoming very crowded, [with] every variation on ‘can’” imaginable being filed for trademark protection.

There are many good reasons to file an application now, she says. For example, as of June 17th Canada will be joining the Madrid System, an international trademark registration and management system. This will allow a licensed producer in Canada to file a home country application in other jurisdictions around the world, including ones where the regulations on use of marks may be more lenient, she says.

Businesses should also be prepared for doing the due diligence needed for investment, partnering and mergers and acquisitions, says Gravelle. “Ensure you have ownership,” she says, and have updated lists of your rights on hand. “Diligence can happen at any time.”

The legal cannabis industry is expected to generate US$40 billion in economic impact by 2021 (according to a U.S. study from January 2018), and 48 deals were conducted last year in the sector, said Bereskin & Parr partner Melanie Szweras in her presentation on due diligence.

Intellectual property may be a minor factor in some cases, but in others, it may be key to due diligence, and a business must be able to assess IP strengths and weaknesses.

“Make a list of confidential ‘know-how’ and trade secrets,” Szweras said. “Understand the other company’s value and understand your own.”

For ownership to be established, a chain of title needs to be complete, she said. “Who owns the title? Who owns the invention?” An inventor owns the invention unless it is assigned or there is an obligation to assign. A chain of title must be complete, Szweras said, and it must include: assignment; an employment agreement; a consultant agreement; and consideration of whether an inventor has any other agreements (if a consultant, consider whether the inventor is employed elsewhere, for example, as a university professor, in which case the university may have rights over the invention).

Also ensure your activities don’t run afoul of regulatory requirements regarding using and selling cannabis, said Gravelle. “Do you have the proper licences?”

Under the Cannabis Act, informational promotion, brand-preference promotion, point-of-sale promotion regarding available and price, brand elements on ”things” that aren’t cannabis products, and sponsorships (though not promotion of sponsorships) are permitted, says McKenzie.

Businesses may share factual information about their product, but Health Canada hasn’t defined factual information or brand characteristics, she noted.

Information and brand preference promotions are permitted provided they are communicated in prescribed ways. For example, these limited promotions may be addressed to individuals 18 years and older, by name, or in a place where there is a law restricting access to individuals over 18. That means distribution in a bar may be permitted, because those under 18 are not permitted there by law. Promotions can also be made via telecommunication provided that “reasonable steps” have been taken to ensure those promotions can’t be accessed by those under 18.

So, a brand element on a billboard outside of a sports centre would likely not be permitted now, McKenzie said,  in part because there is all-age access to sports centres.

Nor can promotions present cannabis, a cannabis accessory or related service as promoting a lifestyle “that “includes glamour, recreation, excitement, vitality, risk or daring.”

The Cannabis Act also provides that a person who is authorized to sell cannabis may promote it at the point of sale if the promotion is limited to its availability, price, or availability and price. This is subject to provincial regulations and limitation set by private retailers.

In packaging and labeling, there are size restrictions on the name/logo; the packaging can’t be metallic or fluorescent; marks can’t evoke either a positive or negative lifestyle (e.g., “flying high” may be offside); and no person, character or animal, whether real or fictional, can be depicted (so, no “Joe Camel”-style mascot of Camel cigarettes fame would be permitted).

 

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