Cannabis Branding - Part 2: Restrictions on Promotion of Cannabis in Canada

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December 02, 2020

To read part one in our series, click here.

The Cannabis Act (the “Act”), effective October 17, 2018, decriminalized the use and possession of cannabis, by persons at least 18 years of age, in Canada.

The Act and the accompanying Cannabis Regulations (the “Regulations”) contain a number of restrictions on the promotion of cannabis, cannabis accessories, and cannabis-related services. For example, unless authorized by the Act, it is prohibited to promote cannabis, cannabis accessories or any service related to cannabis, including:

• doing so in a manner that could reasonably be believed to 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 Act also contains restrictions on the use of a “brand element of cannabis” (such as a trademark, logo, slogan, distinguishing guise, etc.) for sponsorship of a person, entity, event, activity, or facility.

The Act contains certain exceptions to the above-noted general rules that, for example, permit promotion on a website where the operator takes reasonable steps to ensure that the promotion cannot be accessed by a young person.

Use of Same Trademark in Association with Cannabis and Alcohol or Tobacco

It is prohibited to make a representation, including by way of a brand element on a cannabis product, if reasonable grounds exist to believe that the representation could associate the cannabis product with an alcoholic beverage or a tobacco product. As such, manufacturers of alcoholic beverages or tobacco products would be well advised to avoid using the same trademark in association with their cannabis-related goods and services.

Use of Same Trademark in Association with Cannabis and Other Products

Aside from the alcohol and tobacco scenarios discussed above, it is generally acceptable to promote cannabis, a cannabis accessory or a cannabis-related service by displaying a cannabis brand element on things that are not cannabis or a cannabis accessory.  Such promotion is, however, prohibited on:

• a thing that is associated with young persons;
• a thing that there are reasonable grounds to believe could be appealing to young persons; or
• a thing that is associated with a way of life such as one that includes glamour, recreation, excitement, vitality, risk, or daring.

In practice, these limitations could prevent a brand owner from using a cannabis trademark on products like skateboards or sporting equipment. The situation is less clear when it comes to items like baseball caps, jewellery, and water bottles since they can, but do not necessarily, fall within categories like “glamour” and “recreation”. As such, the question of whether such usage contravenes the Act may depend on the context.

Examination of Trademark Applications

As noted in the first article in our series, the Canadian Intellectual Property Office (“CIPO”) does not examine trademark applications for compliance with the Act or the Regulations.

Therefore, it is entirely possible that a person could obtain a registration for a particular trademark for use in association with certain goods and/or services and then, by virtue of the provisions of the Act or Regulations, be prohibited from using or displaying such trademark in association with the very same goods/services or in association with advertising for such goods/services.

For example, it is entirely conceivable that a person could obtain a registration for a trademark in association with the goods “cannabis” and the services of “arranging and conducting beer-tasting events” and yet the Act would only permit use of the trademark in association with either the goods or the services but not both.

Oppositions Based on Non-compliance with the Act and Regulations

Two new grounds of opposition that were introduced into the Trademarks Act as part of the amendments that took effect in June 2019 allow an application to be opposed on the basis that:

• the application was filed in bad faith; or
• at the filing date of the application, the applicant was not entitled to use the trademark in Canada in association with the goods or services specified in the application.

Either or both of these grounds of opposition could be relied upon in circumstances where the use of an applied-for mark in association with the goods/services in the application would violate the Act.

Consider the example of an application that is filed to register a mark that has been used for many years in association with alcoholic beverages and the application lists cannabis-related goods. The application could be opposed on the basis that the applicant would not be able to actually display the mark on such goods without violating the Act.

Expungement or Invalidity of a Cannabis Trademark Registration for Non-Use

Section 45 of the Trademarks Act provides that CIPO, on its own initiative or at the request of a third party, may request that the owner of a Canadian trademark registration that is at least three years old, submit evidence showing that the mark has been used in Canada in association with the registered goods and/or services during the previous three years or, alternatively, that special circumstances exist excusing the non-use. If the registrant is unable to show use or the existence of special circumstances in respect of some or all of the goods/services in its registration, the registration is liable to be expunged for such goods/services.

Paragraphs 18(1)(b) and (c) of the Trademarks Act provide that the registration of a trademark is invalid if the trademark is not distinctive at the time proceedings bringing the validity of the registration into question are commenced or if the trademark has been abandoned.

Given the onerous restrictions in the Act on the use of cannabis brands, one can see how a registered cannabis trademark may fall into disuse either completely or in association with particular goods/services listed in registrations for the mark.

In order to address these concerns, section 132 of the Act provides that:

• a registration is not to be held invalid on the basis of paragraph 18(1)(b) or (c) of the Trademarks Act (i.e., by reason of the registered mark being non-distinctive or having been abandoned) as a result of compliance with the Cannabis Act; and
• for greater certainty, the absence of use of a trademark as a result of compliance with the Cannabis Act constitutes special circumstances excusing the absence of use for the purposes of the Trademarks Act.

The precise limits of section 132 of the Act remain to be determined by the courts.

For example, does section 132 provide perpetual protection against a non-use expungement proceeding? Or, alternatively, is a registrant to be expected to find a way to use its trademark in a manner that will comply with the Act, failing which the registration can eventually be expunged for non-use?

Additionally, what facts must a registrant prove in order to successfully argue that the Act prevents it from using its trademark in association with the goods/services listed in its registration? For example, must the registration expressly list cannabis-related goods or services? What if the registration describes the goods generally such as “chocolate bars” or “non-alcoholic beverages” but the registrant argues that it only intended to use its mark in association with cannabis-infused chocolate bars or non-alcoholic beverages?

Is it relevant that the registration in question raises an unlawfulness issue on its face? Consider, as an example, a registration for a cartoon character for use in association with cannabis cigarettes. The Act would clearly prohibit the use of such trademark in association with cannabis cigarettes. Could the registrant nevertheless argue that section 132 makes its registration impervious to a non-use attack under section 45 of the Trademark Act or would the fact that it should never have registered the mark in the first place prevent it from making this argument?

Enforcing Cannabis Trademarks

A trademark that has been registered or used in association with cannabis-related goods and/or services can be enforced against third parties in the same manner as a non-cannabis trademark.

For example, in Canivate Growing Systems v. Brazier 2020 BCSC 232, a judge of the Supreme Court of British Columbia held that the plaintiff had established passing off by the defendant’s decision to appropriate to itself a domain name that had previously been used solely in association with the plaintiff’s business.

In Trans-High Corporation v. Conscious Consumption Inc. et al. 2016 FC 949, a judge of the Federal Court held that a registered trademark’s goodwill had been depreciated by the defendant’s actions even though the registration covered cannabis-related goods and services.

There is one area where the owner of a cannabis trademark may need to tread carefully in asserting its rights against third parties. Given the restrictions in the Act and Regulations on the use of a cannabis trademark, it is entirely possible that the defendant in an enforcement proceeding may point to the plaintiff’s violations of such restrictions as serving to weaken its trademark rights or perhaps even disentitle it to relief.

For example, if a plaintiff seeks to assert its rights in a cannabis mark in a passing-off action, when it comes time to prove the existence of its reputation in its trademark, it will most likely not be able to rely upon use that contravened the Act and Regulations.

Lastly, it should be noted that section 132 of the Act, discussed above, raises an interesting issue with respect to an amendment to the Trademarks Act that has been approved by Parliament but not yet been proclaimed in force. This amendment provides that if the owner of a trademark registration that is not yet three years old commences a legal proceeding alleging infringement or depreciation of goodwill, it is not entitled to relief unless the trademark was in use in Canada at any time during the period between registration of the mark and commencement of the litigation or that special circumstances exist that excuse the absence of use in Canada during that period.

If this amendment is eventually proclaimed in force, section 132 of the Act may allow the owner of a registered mark to avoid the consequences of the amendment by arguing that it was not able to commence use of its mark after registration and before commencement of legal proceedings because of the Act’s restrictions on the promotion of cannabis.

Summary

Given that recreational cannabis has only been legal in Canada for a little over two years now, it will take some time for a body of law to develop with respect to the principles discussed above. In the meantime, owners of cannabis trademarks should give serious consideration to applying to register their trademarks in this country in order to take advantage of a growing market.

 

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