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
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