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Cannabis IP strategy in an uncertain regulatory environment

Consider protections available before going to market.
Powered By Canadian LawyerBusiness & Legal Issues||Written By Charles Boulakia & Joanna Pitkin
Cannabis IP strategy in an uncertain regulatory environment

We are witnesses to the birth of an entirely new industry in Canada: the legal production and distribution of cannabis for recreational purposes. Struggles for market dominance are already underway as contenders scramble for the pole position before the starter pistol sounds on Oct. 17. 

Participants have reason for concern over not only the sheer number of regulatory hurdles littering the course but the uncertain and unstable form of those regulations even as the date for legalization approaches.

Despite this regulatory uncertainty, any business hoping to participate in the new industry is well advised to plot its market strategy now, lest more risk-tolerant competitors gain a lead in what promise to be tumultuous months and years ahead.

A key part of any competitive business strategy in the recreational and/or medical cannabis industry in Canada involves a well-considered leveraging of any intellectual property assets that the business has developed or plans to develop in relation to cannabis-related products, services or brands. Companies entering this new market should consult with experienced IP counsel early, ensuring that all aspects of IP have been considered.

Companies can protect their position in the cannabis market through trademarks, patents, industrial designs, plant breeders’ rights and copyrights covering various aspects of their products and brands.

Identifying patentable subject matter in a cannabis-related invention can be a complex undertaking, whether the invention pertains to a new plant cell or gene, uses (including new medical uses or indications) of cannabis, specific cannabinoids, cannabinoid ratios, formulations, administration methods, methods of manufacturing and purifying or almost anything else novel and innovative. 

Although there is a general restriction in Canada against patents covering plants and other multi-cellular life forms, there are often strategies for obtaining commercially relevant claims for such inventions.Cannabis plants can also often be patented in other jurisdictions, with foreign patent rights acting to reduce the size of competitors’ potential international market.Plant breeders’ rights can also be obtained in Canada for new varieties of cannabis plants, though these must be applied for with care and in co-ordination with a company’s trademark strategy.

Trademarks can be obtained for both cannabis and related wares and services. 

The regulatory requirements to become a licensed producer, to obtain a dealer’s licence or to sell, import or export cannabis products are evolving, and they can be quite complex, comprising legislation including the Cannabis Act, Access to Cannabis for Medical Purposes Regulations, the Food and Drugs Act and, in some cases, the Controlled Drugs and Substances Act and Narcotic Control Regulations. The interaction of these regulations with various IP laws may affect the timing and/or availability of various IP rights as they apply to various types of products and services in Canada and elsewhere. 

Producers and distributors also need to consider insurance and other strategies for mitigating the risk of product liability in a largely untested product space.

Both Canadian and foreign companies doing business in Canada should develop and leverage IP assets in Canada to protect their competitive advantage.  Canada is also an ideal home base for holding IP and other assets of companies doing business outside of Canada in jurisdictions less favourable to cannabis-related commerce (such as the U.S., where federal law places severe limitations on running cannabis-related businesses even in states where recreational use is legal). At present, U.S. federal trademark registration cannot be obtained for cannabis trademarks, since registrations are only granted in connection with lawfully regulated goods/services. Applicants may be asked to confirm that their goods/services do not violate the federal Controlled Substances Act. State registrations are available in some jurisdictions, and federal applications for ancillary lawful commerce goods/services can be obtained. Obtaining Canadian registrations may be able to help, should U.S. federal law change. 

Charles Boulakia, partner, and Joanna Pitkin, associate, are professionals in the Cannabis IP Group at Ridout & Maybee LLP, in the firm’s Toronto office