The cannabis market continues to grow with Canada legalizing cannabis for recreational use last fall. The retail value of the recreational cannabis market is estimated to be $6.5 billion by 2020. Due to the large market value, cannabis companies are racing to protect their brands. A keyword search in the Canadian Intellectual Property Office (CIPO) trademark database for active trademark applications or registrations wherein the description of goods and services contains “cannabis” or “marijuana” revealed 4419 results, 2788 of which were filed since last year.
Rights holders and potential rights holders of cannabis brands now need to adapt to several regime-changing amendments to the Trade-marks Act that will come into force on 17 June 2019. These amendments aim to modernize Canadian trademark law and practice, as Canada moves to accede to major international IP treaties, including the Madrid Protocol and the Nice Agreement. These amendments will affect how trademark applications are filed, examined, registered and maintained.
Use and Cannabis Brands
Currently, a trademark application is generally filed on the basis of actual use or proposed use in Canada. A trademark application based on proposed use will not mature into a registration until the mark is used in Canada and a declaration of use is filed.
For goods, “used” means that (i) the goods are sold in Canada in the normal course of trade; and (ii) the trademark is displayed on the goods themselves or on their packaging, or at the point of sale of the goods in such a way that the trademark is clearly associated with the goods at the time the consumer takes possession. For services, “use” means (i) the services are provided in Canada in the normal course of trade; and (ii) the trademark is displayed in the advertising or performance of the services. The requirement for use of the trademark in Canada prior to registration has historically acted as a deterrent to the filing of overly-broad trademark applications in Canada, and has meant that many foreign companies with no concrete plans to enter the Canadian market have not secured their trademarks in Canada via a registration.
The amendments that will come into force on 17 June 2019 eliminate filing grounds and commencement of “use” as a registration requirement. An application can be filed without identifying any filing grounds and may mature into a registration even if the mark has not been used in Canada. To build a defensive trademark portfolio, some businesses have filed applications for marks that they may never use. A search in the CIPO trademark database for active trademark applications covering all 45 Nice classes of goods and services revealed more than 150 applications filed since last year, some of which cover cannabis-related goods and services. The filing of 45-class applications is generally indicative of an overly broad trademark filing in which the trademark owner cannot possibly intend to sell all of the goods and provide all of the services covered in Canada, since few (if any) companies actually sell goods and services spanning all 45 Nice classes.
In the absence of a use requirement, the legislative amendments may lead to more broadly registered marks. However, registrations can be challenged via an opposition proceeding where the applicant was not using and did not intend to use the mark in association with the listed goods and/or services at the time of filing. Further, use is required to enforce a trademark registration within three years of registration.
It may be advantageous for cannabis brand owners to carefully prepare trademark applications now to include broad lists of goods and/or services but be mindful that an intention to use is required, i.e. an overly broad filing may impact the validity of any eventually granted registrations. Further, it would be advantageous to file such applications early to block the registration of later-filed confusing marks by others. This strategy would help to minimize any negative impact from trademark “trolls” filing overly broad applications before the new cost structure (as explained below) comes into force in June.
Application Fees and Renewal Fees
Currently, filing and renewal fees are flat and not based on the number of Nice classes of goods and services. When the legislative amendments come into force, the filing and renewal fees will be assessed on a fee-per-class basis. For example, the new filing fee will be $330 for the first class and $100 for each additional class of goods and services. This is to be contrasted with the currently flat filing fee of $250 combined with a $200 registration fee, regardless of the number of classes of goods and services.
It would be cost effective to file multi-class trademark applications before the amendments come into force on 17 June 2019 to benefit from the current flat filing fee. Similarly, payment of renewal fees prior to 17 June 2019 will allow holders of multi-class registrations to benefit from the current flat fee regime regardless of the number of Nice classes covered by their registrations, whereas payment of renewal fees after 17 June 2019 will involve higher costs for multi-class registrations.
The Madrid Protocol provides a centralized system for filing, registering, and managing trademarks worldwide. A single application under the Madrid Protocol can afford trademark protection in up to 119 countries. The legislative amendments permit Canadian applicants to file applications under the Madrid Protocol with the International Bureau of the World Intellectual Property Association starting on 17 June 2019.
To use the Madrid Protocol, a trademark application needs to first be filed with the office of origin, i.e. the basis application in the applicant’s home country. Canadian cannabis brand owners may wish to develop filing strategies to secure key trademarks in Canada first, and then expand their trademark portfolios worldwide via the Madrid Protocol to minimize foreign filing fees.
Identifiable IP assets, such as goodwill and trademark registrations, are very valuable for cannabis brand owners. It would be desirable for cannabis brand owners to understand how the upcoming amendments to the Trade-marks Act will affect their rights and build a defensive trademark portfolio to protect their brands and deter encroachment from their competition.