Canada's legalization of recreational use cannabis is now months away. The proposed Cannabis Act will create a comprehensive national framework for the production, distribution, sale, import, export and possession of cannabis in Canada.
Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts (the Cannabis Act), was introduced by the Government on April 13, 2017 and on March 22, 2018 passed second reading in the Senate. Once the proposed legislation receives Royal Assent, the Government has indicated that it would prioritize an orderly transition to the new legal framework and allow a period of only eight to 12 weeks before the new laws come into force. Regulations are expected to support implementation of the Cannabis Act to ensure that potential risks associated with cannabis are appropriately addressed.
In anticipation of the changes, the Canadian cannabis industry has been one of fastest growing sectors in the last year, with a burgeoning number of brands of goods and services associated with cannabis - for both recreational and medicinal purposes.
A review of the over 2000 "marijuana" and "cannabis"-related trademark applications filed in the Canadian Intellectual Property Office ("CIPO") reveals several recent trends. Approximately 70% of the trademark applications are for pharmaceuticals and medicinal preparations. The number of applications for trademarks in this space more than doubled between 2016 and 2017. By April 2018, the number of new applications has already surpassed what was filed for the entirety of 2016. And as to be expected, the number of registrations granted from 2016 to 2018 is much lower than the number of filed applications, which is attributed to the typical time period of 18 months to 2 years from filing to registration of a Canadian trademark (barring any major objections from the Examiner and no third party oppositions)
Below we answer the 5 Ws for brand owners looking to launch, protect and secure their brands in Canada's cannabis space.
Brands are revenue-generating assets and therefore registering your trademark is an important aspect of protecting these assets. In what is developing into a competitive marketplace for everything related to cannabis in Canada, trademarks for your company name and key brands are a way of distinguishing your goods and services from others, and having corresponding trademark registrations provides a number of benefits. The main reason for seeking a registration is that it entitles you to the exclusive use of the mark across Canada and prevents others from using or registering the same or a confusingly similar mark in connection with the same or similar goods and/or services.
Given the expected rapid growth of the industry, it is also important to apply to register your trademarks before others beat you to it. Indeed, there are some third parties who opportunistically file applications for brand names that were first used by others. So if you do not wish to see your trademarks being registered by third parties, you may want to consider investing in trademark applications for your key brands in Canada now, in order to avoid future potential contentious proceedings to try to recover your rights.
Lastly, not only does a trademark registration provide you with proof of ownership of your mark, trademark registrations are generally incontestable based on prior use after five years and securing your ability to do business under a name or mark in the future ultimately increases the value of your business.
Material legislative amendments to the Trademarks Act and Regulations are expected to come into force in early 2019. Brand owners need to be aware of these changes when considering their filing strategies in Canada.
Under the new regime, one of the most significant changes is that there will no longer be a requirement to "use" your trademark as a prerequisite for registration. Filing trademark applications now with the expectation of approval under the amended Trademarks Act will allow you to secure your trademark registrations for a broad list of goods and services that you intend to use in association with your trademark without having used the mark before it is registered. You then have a 3 year period to ensure use of your trademarks has commenced in association with each of the registered goods and services, before your trademark may be subject to cancellation proceedings for non-use. It is best to file your trademarks as early as possible to obtain the benefit of the earliest filing date and to block other brand owners from obtaining identical or confusingly similar trademark registrations.
The amended Trademarks Act will also introduce a per-class application and renewal fee rather than a single government fee, resulting in savings if you file multi-class applications now.
In addition to legalization of recreational use cannabis, these anticipated changes to trademark law in Canada have likely also contributed to the dramatic rise of "marijuana" and "cannabis"-related trademark applications being filed with CIPO within the last year.
Choosing Your Trademark
"Brand elements" are defined in Bill C-45 as "a brand name, trademark, tradename, distinguishing guise, logo, graphic arrangement, design or slogan that is reasonably associated with, or that evokes, (a) cannabis, a cannabis accessory or a service related to cannabis; or (b) a brand of cannabis, cannabis accessory or service related to cannabis." A "label" is defined as "a legend, word or mark that is, or is to be, applied or attached to or included in, or that accompanies or is to accompany, cannabis or a cannabis accessory or a package."
The definition of a "trademark" under the new Trademarks Act will encompass both brand elements and labels as defined above and can include a word, personal name, design, letter, numeral, colour, figurative element, three-dimensional shape, hologram, moving image, mode of packaging goods, sound, scent and taste.
Understanding the restrictions to trademarks under the Trademarks Act and restrictions to brand elements and labelling under the proposed Cannabis Act should be key considerations when choosing your trademark. Selecting trademarks that may violate legislative restrictions poses risks not only to the use of your trademarks, but also to securing or maintaining registrations in Canada.
For example, under the current Trademarks Act, you cannot adopt a trademark in association with plant varieties having designated denominations under the Plant Breeders' Rights Act or adopt or use a mark so nearly resembling denominations as to be likely mistaken for it.
Further, under the proposed Cannabis Act, you will not be able to promote cannabis or any service related to cannabis that i) could be appealing to young persons; ii) includes a testimonial or endorsement; iii) depicts a person, character or animal, whether real or fictional; or iv) presents it or brand elements in a manner that associates it or brand elements with, or "evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring." The same prohibitions will apply to packaging and labelling of cannabis and cannabis accessories, with the addition of the restriction that packaging and labelling cannot contain any information that is false, misleading or deceptive or that is likely to create an erroneous impression about things such as characteristics, value and composition.
To supplement the requirements under these proposed prohibitions, on March 19, 2018, Health Canada released a report that summarized the feedback it received from its 60-day public comment period on the proposed regulatory approach to cannabis. Within the report are detailed descriptions of label content and packaging requirements proposed for the final Regulations under the Cannabis Act.
When selecting trademarks in the cannabis space, the following guidance from Health Canada is imperative to keep in mind:
Brand name and brand elements
- the brand name can be displayed in any font style and font size provided it is equal to or smaller than the health warning message;
- only one other brand element (in addition to the brand name) can be displayed. If it is a text element, the font must be no larger than the font of the health warning message, and must be a single, uniform colour. If the brand element is a graphic, image or logo, it would be required to be no larger than the standardized cannabis symbol;
- it will be prohibited to display any other image or graphic;
Label and packaging colour
- label and package backgrounds would need to be a single, uniform colour (inside and outside);
- it will be prohibited to use any fluorescent or metallic colours;
- colours must contrast with the colours of the standardized cannabis symbol and the background of the health warning messages, which will be yellow;
Label and packaging type
- labels and packaging can not have any coating (e.g. could not be glossy), embossing (raised or recessed relief images), texture, foil, cut-outs or peel‑away labels;
- any over-wrap must be clear; and
- it will be prohibited to include any insert in a package.
Amidst these proposed restrictions to colour, font and use of slogans and logos, brand owners will now more than ever want to select brand names and brand elements that will function to distinguish them from competitors in this space. Another advantage of choosing unique or distinctive names in the cannabis space is the ability to enforce those marks. Often times, brand owners choose suggestive marks that alert consumers as to the substance of the product or benefits associated with the product or service. However, marks of this nature may not serve to effectively stop competitors from using similar marks in the same space. For example, if "Canna" becomes a common prefix for coined word trademarks, small differences in suffixes may be enough to overcome an allegation of trademark infringement in the same area.
Choosing Distinctive Scents and Tastes of Cannabis Strains
As noted above, once the amended Trademarks Act is in force, registration will be possible for a variety of non-traditional marks including distinctive scents, tastes and textures, which function as indicators of source. This will add to the range of key distinguishing product features that cannabis brand owners can seek to protect. However, where registration is sought for a mark of this nature, you will be required to provide evidence to establish that these marks have become known to consumers as originating from you. It remains to be seen what kind of evidence will satisfy these requirements; however, it may include evidence of yearly sales figures since the date the mark was first used, promotional and advertising expenditures since the date the mark was first used, market share statistics, samples of advertising per year since the date of first use that emphasizes the distinctive taste, scent or texture, third party media mentions that focus on the distinctive taste, scent or texture and possibly customer attestations in the form of survey evidence or otherwise that the applied-for mark is distinctive of the brand owner.
Choosing Your Goods and Services
When a trademark application is filed with CIPO, it must include a description of goods and/or services with which the brand owner has used or proposes to use the mark in Canada. The goods and/or services must be described in "ordinary commercial terms". Currently, CIPO's Goods and Services Manual states that "dried marijuana", "dried cannabis" and "live cannabis plants" are acceptable. CIPO also accepts "medicinal marijuana" for specific treatment purposes that are listed in the Manual. Outside of the Manual, other examples of goods and services filed within the past two years that have been allowed by CIPO include "cannabis extracts, concentrates and oils", "marijuana and cannabis edibles, namely, marijuana-based snack food and cannabis-based snack food, specifically pastries, pastry squares, muffins and cookies" and "educational services in the fields of medical marijuana, medical cannabis, marijuana and cannabis".
Each country has its own trademark laws and system. Where brand owners are considering entering into the recreational and/or medical cannabis industry in Canada, CIPO currently registers trademarks that are used in association with recreational and/or medical cannabis-related goods and services.
This is different from the system in the U.S., where to qualify for federal trademark registration, the use of a mark in commerce must be lawful - and currently the Controlled Substances Act (CSA) prohibits, among other things, manufacturing, distributing, dispensing or possessing certain controlled substances, including marijuana and marijuana-based preparations.
Licensed and prospective producers and distributors of cannabis can apply for trademark registrations to protect their brand. In Canada, brand owners who apply for trademarks under the current Trademarks Act must be "satisfied that they are entitled to use the trademark in Canada in association with the goods or services described in the application". Under the amended Trademarks Act, the requirement will be that brand owners may file applications for the registration of a trademark "if they are using or propose to use, and are entitled to use, the trademark in Canada" in association with the listed goods and services. It may be that the requirement with respect to "entitlement to use" will be closely connected with restrictions in the proposed Cannabis Act that require licenses for certain activities as well as the proposed restrictions to "brand elements", packaging and labelling. Brand owners should be aware of this when applying for these trademarks and understand the risks to registration at the examination stage as well as risks of third-party objections/oppositions.