The legalization of cannabis for recreational use in Canada has resulted in massive investment and speculation. To quote a pithy headline from The Economist : “The main high from Canada’s cannabis legalisation is financial”.
A 2018 report by CIBC analysts estimated that legal cannabis sales in Canada could reach $6.5 billion in retail sales by 2020 and that cannabis sales could exceed sales of spirits and approach that of wine. Those involved in this sector are hoping to use this growth in domestic sales as a springboard to international markets.
Canadian Cannabis Companies Are Thinking Globally
Elizabeth Raymer, a journalist with Canadian Lawyer, spoke recently with Jennifer Marles , a partner at our firm and IP lawyer, about this burgeoning market. Rapid growth is leading to thorny patent and trademark issues which companies will need to overcome if they are to protect their IP and scale their operations.
Many companies who are developing their products, production systems, and brands here in Canada have global aspirations. Because Canada is one of the first large countries to legalise cannabis for recreational use, there is widespread optimism that companies in Canada will have a first-mover advantage.
While the Canadian recreational market will never be a behemoth (it is smaller even than the Californian market) cannabis remains federally illegal in the U.S. “That positions Canada better for investments that are coming in this sector because the climate is a little more permissive,” Marles noted in her discussion with Raymer.
Canadian Lawyer reported that “Global consumer spending on cannabis is expected to reach $32 billion by 2022, according to two U.S. market research firms, while another firm estimates the global legal cannabis market value will reach as high as US$146 billion by 2025.” Canadian companies are hoping for an outsized piece of the action.
To Plant A Field, First Protect the Seed
In anticipation of increased consumer spend, companies are rapidly expanding operations. Buoyed by eager investors, companies are also increasing investment in developing new intellectual property while seeking to protect their innovations through patent and trademark applications.
Raymer noted that The Trade-marks Act and the Plant Breeders’ Rights Act both give registrants exclusive rights to use registered trademarks and registered denominations to distinguish their plant varieties in the marketplace.”
The Plant Breeders’ Rights Act allows breeders to protect new plant varieties. While Canada has placed strict limits on how cannabis can be branded, packaged, and advertised, Marles noted that “trademarks will still be important”. Consumer preference will ultimately determine which new products are successful; much of that will come down to brand preference.
For this reason, Marles predicts a surge in online advertising. Some of this is likely to run afoul of regulators. The Ottawa Citizen observed that “there appears to be a game of regulatory chicken emerging”.
Growth Beyond Recreational and Medical
Marles and Raymer discussed how all this activity has lead to new developments ‘“across all sectors,’ not only in the medical and recreational sectors.”
As an example, Marles mentioned a client who is working on waste-processing technology, designed to process the waste plant material that results from cannabis production. Because cannabis retains its active pharmaceutical properties for some time, the waste requires specialized methods to break down the active compounds and render it fit for disposal. Activity in other adjacent sectors is also likely to increase, including innovation in law enforcement technology.
This new industry is raising numerous intellectual property issues for Canadian companies, entrepreneurs, and investors. We invite you to attend a one-day seminar on Feb 21st in Richmond on protecting IP in the cannabis industry.
More details on this seminar can be found here: Grow Your Assets – Intellectual Property for the Cannabis Industry: Are you Ready?