CANNABIS
Navigating a Young Market
While several countries have moved somewhat toward legalizing cannabis for recreational use, only two—Canada and Uruguay—have fully legalized its sale at a national level. Peter Scott looks at the implications for brands.
Uruguay and Canada legalized the consumption, possession, purchase, and sale of cannabis for recreational use in 2013 and 2018, respectively. While several other countries have taken steps toward permitting consumption, cultivation, and possession, they do not allow and regulate the sale of cannabis for recreational use.
The situations in the two countries, therefore, provide an interesting comparison for brand owners who might reasonably expect other countries to follow suit over the next few years, including potentially in the United States where a federal prohibition remains although an increasing number of states have already legalized recreational cannabis.
Perhaps unsurprisingly, while Canada and Uruguay allow the sale of cannabis and have very few restrictions on trademarks for cannabis products per se, they do severely restrict the use of any trademarks for advertising, packaging, or other promotion.
In Uruguay, “brand owners have the total freedom to apply for and obtain registration of trademarks for cannabis products as for any other trademark,” explained Viviana Cervieri, head of regulatory affairs, Cervieri Monsuarez (Uruguay).
Before the 2013 law—Law 19.172 Regulation and Control of Cannabis—that marked Uruguay as the first country in the world to legalize recreational cannabis, trademark applications for cannabis brands were rejected on public morality grounds.
Since, several cannabis-related trademarks have been granted by Uruguay’s trademark office, covering a range of related products, although the actual words “cannabis,” “marijuana,” and other names for the product itself cannot be granted exclusive protection.
However, Ms. Cervieri said, the value of these trademarks is substantially less than in other industries in Uruguay, principally because the law that regulates the production and sale of the product in the country also totally prohibits “the possibility of any form of advertising with respect to psychoactive cannabis products, so that the trademark could not be advertised in the case of products of that kind.”
That said, she noted that it is still important for companies to secure their trademarks in the market, primarily because they permit “easy recognition of the products or services” and serve to “differentiate national brands from foreign ones.”
Perhaps most importantly from a promotional perspective, though, securing trademarks can lead to “inclusion in the language and knowledge of Uruguayan consumers” and allow international brands to gain a foothold in the market in terms of consumer recognition.
“Despite the general restrictions, branding is playing a big role in the legal cannabis market.”
Alison Hayman, Cassels, Brock and Blackwell LLP (Canada)
The Liberal North?
The picture in Canada is quite different. The Cannabis Act, which was passed in 2018, does restrict how companies are allowed to use their trademarks and branding, most notably in packaging restrictions and prohibiting any kind of promotion to young people. But compared to the situation in Uruguay, trademark owners have more leeway.
Evident of the restrictions in Canada, cannabis brands are not allowed to advertise in public places or to use real or fictional characters in promotions. Neither are they allowed to use celebrity endorsements, sponsorships, or to undertake so-called “lifestyle marketing.”
As Stephanie Melnychuk, senior legal counsel, Intellectual Property at Aurora Cannabis Inc. (Canada), said, the restrictions are “a big factor when developing products and brands.”
However, Alison Hayman, partner at Cassels, Brock and Blackwell LLP (Canada), noted that one way brands have been able to navigate around the prohibition of celebrity endorsements is to “form investor relationships or hire the celebrities to work for the company.”
Last month, for example, cannabis brand Bullrider (Canada) announced that rapper Audrey Drake Graham, more popularly known as Drake, had joined the company as co-owner, advisor, and partner.
Aurora previously entered into a partnership agreement with martial arts promotion company Ultimate Fighting Championship in the United States, but had to develop wholly new brands for the U.S. market due in part to Canada’s restrictions on foreign promotion for domestic cannabis brands.
“We’ve since steered away from any kind of sponsorship endorsements,” Ms. Melnychuk said.
Despite the general marketing restrictions, branding is playing a big role in the legal cannabis market in Canada.
Noted Ms. Hayman:. “Branding has become a very important way to distinguish products even though the companies are having to work within a narrow range of possibilities. There are lots of different brands, and lots of legal dispensaries, which in turn have their own brand names.”
“We might see some changes around the stringency of packaging.”
Stephanie Melnychuk, Aurora Cannabis Inc. (Canada)
Yet, advertising is typically “very low key and minimalist,” she said. Packaging is also sparsely decorated, with strict limits on branding that will be familiar to those who have followed the evolution of plain packaging in the tobacco industry and in other sectors in many jurisdictions worldwide.
Brand names themselves have to be very carefully chosen. In June 2020, cannabis brand Organigram Holdings Inc. (Canada) announced in a statement that after “reviewing perception around our Trailer Park Buds brand with Health Canada, the Corporation is making some changes to its newly launched brand and logo.
“In the immediate term, Organigram will move to a modified version of the logo. Longer term, the corporation is exploring options for a permanent logo and brand name combination for its large format value brand.”
The Trailer Park Buds name was seen by many as reminiscent of popular Canadian TV show Trailer Park Boys. Health Canada found the brand was in contravention of subsection 17[1] of the Cannabis Act, which prohibits the promotion of a cannabis product “by means of the depiction of a person, character or animal, whether real or fictional.”
At Aurora, most of the marketing that does happen is directed toward “budtenders,” the term for people who serve customers at cannabis dispensaries, Ms. Melnychuk said, noting: “We hope the budtender likes our products and passes it on to consumers.”
Additionally, she added, some advertising is permitted, for example at point of sale or on cannabis-related websites that operate strict age gates (cannabis remains prohibited for those under 18).
“Brand owners have the total freedom to apply for and obtain registration of trademarks for cannabis products as for any other trademark.”
Viviana Cervieri, Cervieri Monsuarez (Uruguay)
Brand Restrictions
In Uruguay, the market is very tightly regulated and public health is the primary objective of the law, according to Ms. Cervieri. While there is not widespread discussion of relaxing the rules on how trademarks and brands can be used for cannabis, recent developments could have an impact.
She said she expects news of an explicit regulation for the promotion and advertising of non-psychoactive cannabis brands in the near future. Currently, the regulation explicitly prohibits only the advertising of psychoactive cannabis. Since 2013, that has largely been observed as a blanket ban on all cannabis advertising, but there are signs of change.
“In the past year or two, we have started to see some advertisements on TV for yerba mate with hemp, for example,” Ms. Cervieri noted, adding that “for psychoactive cannabis, the situation will remain unchanged.”
In Canada, Ms. Melnychuk observed, there is some debate about how stringent restrictions should be. Health Canada conducted a public consultation at the beginning of the year on product labeling requirements, and “we might see some changes around the stringency of packaging,” she said.
More broadly, with the law now three years old, she noted, there has been time to see whether it is working in the way it was supposed to, and to understand “the intent behind the regulations.”
Whatever may or may not change in the future, it is clear that in the cannabis industry, trademark professionals need to be more than just intellectual property experts. As Ms. Hayman put it, “We need to understand the marketing rules and regulations, and what impact those have on your rights.”
For more on IP rights in the cannabis industry and other regulated industries, join Cannabis, Gambling, and Alcohol—Navigating a Minefield of Perception, Protection, and Politics in Regulated Industries (today, November 16, 2:30 pm–3:30 pm EST).
Moderator: Alison Hayman, partner, Cassels, Brock and Blackwell LLP (Canada)
Speakers:
- Silvia Lazzarotto, European trademark and design attorney, Caramelli Lazzarotto Associati s.r.l. (Italy)
- Jeanette Lee, deputy general counsel & corporate secretary, Arterra Wines Canada (Canada)
- Stephanie Melnychuk, senior legal counsel, Aurora Cannabis Inc. (Canada)
- Judith Schvimmer, general counsel, EVP, The Parent Company (US)
- John C. Wilson, senior vice president & assistant general counsel, Caesars Entertainment Corporation (US)
Video courtesy of Envato Elements / Eleven52
Tuesday, November 16, 2021
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