Recently, I came across several news articles stating that cannabis sales hit new highs amid the Coronavirus pandemic. The Ontario Cannabis Store (OCS) reported that there was an 80% increase over an average Saturday. In the United States, cannabis sales growth peaked at 64% during the week of March 16. Though the initial pantry-loading of cannabis in late March, ended, it made me re-think the legalization of cannabis from an intellectual property implications point of view.
Canada was the first G7 nation to legalize recreational cannabis. The Cannabis Act came into force on October 17, 2018. Its stated purpose is to protect the health of young persons by restricting their access to cannabis, to protect young persons and others from inducements to use cannabis, and to deter illicit activities concerning cannabis by providing a legal supply of cannabis. While Canada’s black market has declined by 21% since recreational pot was legalized, some argue that the regulations governing the promotion of cannabis do not allow sufficient flexibility for companies to develop their brands in this emerging market due the strict provisions governing the promotion of cannabis.
The prohibitions in sections 17 to 23 of the Cannabis Act and Part 6.1 of the Cannabis Regulations can potentially apply to any person or organization engaging in relevant activities, such as the promotion of cannabis, cannabis accessories and services related to cannabis. Section 17(1) of the Act dictates that it is prohibited to promote cannabis or cannabis accessory or any service related to cannabis by communicating information about cannabis price or distribution; by doing so in a manner that there are reasonable grounds to believe could be appealing to young persons; by means of a testimonial or endorsement; by means of the depiction of a person, character or animal, whether real or fictional; or by presenting it or any of its brand elements in a manner that associates it or the brand element 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 Summary of the Act states it “prohibits any promotion, packaging and labelling of cannabis that could be appealing to young persons or encourage its consumption while allowing consumers to have access to information with which they can make informed decisions about the consumption of cannabis.” A recent survey found that almost one-quarter of those surveyed did not know the cannabis brands they regularly use, demonstrating a lack of brand preference and, subsequently, a lack of awareness of the goodwill cannabis companies have built-in their brands.
Moreover, the restrictions on the promotion and packaging of cannabis may have some intellectual property implications since they may limit the registration of trademarks associated with brands. The companies have limited ability to distinguish their cannabis products and accessories because of the restrictions on “appeal to youth” and “way of life.” For instance, some of the restrictions include not being able to display animals or characters on the packages or using fluorescent fonts. Moreover, there can be only one other brand element permitted on the display panel. This leads to companies creating products and packages using marks that are clearly descriptive or generic, through colours, fonts, texture, scent, sound, and strain names, since they are not allowed to use creative names, slogans, or logos.
The Trademarks Act sets out in sections 2, 12(1)(c) and 12(1)(d) that a trademark is not registrable if it is clearly descriptive or generic. Distinctiveness impacts not only the registrability of a mark but also its scope of protection, its enforceability and its continuing validity once registered. Moreover, the amendments that came into force on June 17, 2019, eliminated use as a registration requirement, which may help with the 5,000 cannabis-related trademarks pending at Canadian Intellectual Property Office. However, even if the company obtains the registered trademark, the marks can still be challenged if the owner does not use the mark as per section 45 of the Trademark Act. The strict regulatory framework relating to promotion, packaging and labelling might prevent the companies to “use” their trademarks on cannabis products. Cannabis companies will have to get really creative to come up with non-descriptive yet distinguishing trademarks which they can display on their cannabis products without violating the promotion regulations.
Legal cannabis is still a very novel market and industry, and the partnership between the government authorities and cannabis companies is crucial to the growth of the licit cannabis market, in doing so, eliminating the black market. Therefore, Health Canada should give clear guidance on what they deem to be appealing to minors for cannabis companies to come up with compliant trademarks and promoting their products. In the future, it will be very interesting to see how Canada is setting precedents as the first G7 nation to legalize recreational cannabis.
Written by Elif Babaoglu, IPilogue Editor. Elif is also the Co-Director of Events of the Osgoode Privacy Law Society.