The Cannabis Conundrum

It is one of the most popular psychoactive drugs in history, and legalization of cannabis products worldwide is now truly gaining pace. Rory O’Neill looks at what it means for the IP field.

Whatever your thoughts are on cannabis, or its legal status, there can be no doubting the drug’s staying power. Its use by different societies throughout human history is well documented, dating to ancient times in many regions.

Archaeologists at the Chinese Academy of Sciences have discovered evidence of the use of cannabis as part of burial rites in central Asia 2,500 years ago, according to a study in the June 2019 edition of Science Advances, a journal of the American Association for the Advancement of Science.

Whether for recreational, medicinal, or religious purposes, consumption of cannabis has been a fixture of human activity. Yet the past decade and the decade to come are likely to prove a watershed in the drug’s legal status.

Legal cannabis is potentially one of the most lucrative new markets on the horizon. Business consulting firm Grand View Research estimates that the U.S. cannabis market will be worth US $66.3 billion by the end of 2025. In comparison, in 2016, it estimated the size of the entire U.S. tobacco industry—which is far older and more established—at US $100.3 billion.

To date, Uruguay and Canada, in 2013 and 2018, respectively, are the only two countries to pass federal or central legislation formally legalizing cannabis for recreational use, although 15 U.S. states and the Australian Capital Territory have adopted their own local laws. In other countries, such as Georgia and South Africa, courts have issued judgments permitting use of the drug.

More numerous are countries that have legalized cannabis for medicinal purposes only, or, as is common across Europe and South America, have decriminalized its possession.

The distinction between legalization and decriminalization can, at a glance, appear trivial—neither approach will send anyone to prison for smoking marijuana. But it is a significant difference for those interested in commercializing the drug. A decriminalized drug is not necessarily “legal” in terms of producing or marketing it.

Under decriminalization, possession of cannabis for personal use will not result in a criminal record, but there may be other sanctions. And, importantly, the cultivation and/or sale of the drug may still be an outright criminal offense.

The decriminalization approach can range from turning a blind eye to what is happening behind closed doors or underpinning an interventionist, harm reduction-focused approach to drug use. Either way, decriminalization carries greater restrictions on how such a product can be marketed and branded than does outright legalization.

The legal nuances are worth noting for any company involved in the industry. For Christelle Gedeon, Chief Legal Officer at Aphria Inc. (Canada), these concerns are central to the cannabis company’s business strategy.

“We tend to enter markets where it’s federally legal to sell the product,” Ms. Gedeon said. “We’re very concerned about staying compliant with the laws of any jurisdiction.”

As an example, she pointed to Aphria’s presence in Lesotho in Southern Africa, where the government has permitted cultivation of cannabis for medicinal use.

With more countries, or states in the case of the U.S., choosing to legalize cannabis outright, there is the promise of a new world of commercialization and branding opportunities.

“It has to be decriminalized, and then it has to be legislated for in a way that fosters an economy.”
Christelle Gedeon, Aphria

Waiting for the Law to Catch Up

In 2018, the Constitutional Court of Georgia ruled that personal cultivation and consumption of cannabis was protectable under the “right to free personality.” That mirrored a 2018 ruling by South Africa’s Constitutional Court, which stated that the cultivation of cannabis for personal consumption was permitted.

According to South African trademark experts, the decision may open up new frontiers to commercialize cannabis in the country. But it is far from clear what will be the shape of new regulations and legislation arising from the court’s decision. Legislators have not yet adopted a formal regulatory regime.

“The judgment has really muddied the waters,” suggested André Maré, Executive at law firm ENSafrica (South Africa).

Charles Webster, Partner at Spoor and Fisher (South Africa), added: “On one level, the judgment was fairly limited; on another level it could potentially open the floodgates.”

Lawyers agree that South Africa’s Companies and Intellectual Property Commission (CIPC), which regulates IP, has dealt as well as it could with the uncertainty.

Previously, CIPC held that no cannabis-related marks could be obtained but, Mr. Webster said, CIPC was quick to react when the Ministry of Health provided guidance, clarifying that goods containing less than 20mg of cannabidiol (CBD) were permitted. (The guidance does not apply to goods which contain the psychoactive ingredient of cannabis, tetrahydrocannabinol [THC].)

In light of this, CIPC subsequently issued amended guidelines last year. Now, the Commission acknowledges that, per the court ruling, marks containing the word “cannabis” or other references “shall no longer be deemed to be contrary to law.”

However, trademarks for goods and services including cannabis itself, or other related goods, are still illegal.

To resolve the problem, CIPC reserves the right to ask applicants filing cannabis-related marks for a written undertaking that the goods and services covered by the mark comply with the Health Ministry’s regulations.

“This is a smart, pragmatic approach, but it does raise some important points which applicants and practitioners should bear in mind during the filing process,” Mr. Webster said.

“The advice would be that the mere fact that cannabis forms part of the trademark is no longer problematic, but when it comes to your specifications of goods and services, be very careful,” he warned. “Do not make any specific reference to cannabis, CBD, or THC in the specification; rather you should refer to it in general terms.”

This points to something of a contradiction which has yet to be resolved through legislation.

Applicants cannot directly specify cannabis-based products in their trademark filings, but they must still ensure that they comply with all the usual registration requirements. This includes ensuring that the mark is not misleading.

Highlighting this Catch-22, Mr. Webster said that applicants can’t file cannabis trademarks for goods and services which don’t contain cannabis. “With food and beverages, there’s an expectation that if the mark says cannabis, the products are made from cannabis too,” he added.

Ultimately, he said, it will require legislation to fully clarify the legal status of cannabis products in South Africa. For now, his advice is to go ahead and file, but proceed with caution when it comes to exact specifications.

“The mere fact that cannabis forms part of the trademark is no longer problematic, but when it comes to your specifications of goods and services, be very careful.”
Charles Webster, Spoor and Fisher

Mixed Messages in Thailand

Thailand is also in something of a limbo when it comes to permissible use of cannabis. The country amended legislation in February 2019 to allow for use of the plant for medicinal purposes.

But cannabis has still not been formally decriminalized. For that to happen, the Thai Food and Drug Administration (FDA) must implement regulations putting the amendment into effect for purposes of registering cosmetics, feed, food, and pharmaceuticals.

According to Alan Adcock, Partner and Deputy Director, IP at Tilleke & Gibbins (Thailand), the current position of the Thailand Department of Intellectual Property (DIP) is that while goods related to cannabis for medicinal purposes are acceptable, marks containing words and images relating to cannabis are not.

“Our current understanding of the position is that once cannabis has been fully legalized for certain licensed uses as prescribed by the Thai FDA, they will consult with the DIP about the acceptability of trademark applications with cannabis-related symbols,” he said, noting that until then, any such marks are likely to be refused.

This puts brand owners involved in cannabis-related enterprises in an uncertain position.

“The challenge for cannabis product and service brand owners is whether they should rebrand now or strategically wait for updates in cannabis legislation so that they can submit their trademark applications once the Thai Registrar adopts a uniform protocol in approving cannabis trademarks,” Mr. Adcock said.

He said cannabis brand owners can also decide to adopt an approach like that of their counterparts in the U.S., where cannabis brand owners strategically register marks to cover all products instead of just cannabis-related products.”

For example, brand owners who sell cannabis-infused cosmetics may want to register their marks for the purpose of selling cosmetics in general, instead of specifically cannabis-infused cosmetics, he added.

Thailand and South Africa are just two examples of an international trend toward the liberalization of cannabis regulations.

Ecuador’s parliament legalized medicinal use in September 2019, and possession of up to 10g is decriminalized.

In Brazil, the National Health Surveillance Agency last December permitted the importation and sale of medicinal CBD products. There has been movement on the rules for cannabis trademarks as well, with a July 2020 decision from the Regional Federal Court of the Second Region approving the filing of marks containing the words “cannabis” and “marihuana.”

“The challenge for cannabis product and service brand owners is whether they should rebrand now or strategically wait for updates in cannabis legislation.”
Alan Adcock, Tilleke & Gibbins

Federal Versus State

When it comes to regulating cannabis marks, some of the most complex problems arise in the U.S. This is because of a fundamental contradiction between federal law and the laws of a rapidly growing number of U.S. states where the drug has been legalized or decriminalized to some extent.

At present, 35 states have legalized the drug for medicinal purposes; 15 of those allow recreational cannabis use. Arizona and Montana became the latest states to permit use of cannabis for medicinal purposes earlier this month, after a public ballot on Election Day.

Despite this, the federal law has remained unchanged: a near-blanket ban on commercial THC-containing cannabis products.

The authorities responsible for approving medicinal goods and trademarks—the U.S. Patent and Trademark Office and the U.S. Food and Drug Administration—are both federal agencies. This creates a problem for cannabis brands in states where their enterprise is fully legal.

“In the U.S., we need something very similar to what we have in Canada: a single legal system,” Ms. Gedeon suggested. “It has to be decriminalized, and then it has to be legislated for in a way that fosters an economy.”

Canada is one of only two countries (alongside Uruguay) to pass legislation permitting recreational use of cannabis, making it an obvious location for Aphria, one of the world’s largest cannabis companies. Just on its doorstep across the border is one of the biggest potential markets in the world. But inconsistencies in U.S. law continue to present challenges for Aphria and other cannabis brand owners.

“It’s quite difficult to get a mark through in the U.S.,” Ms. Gedeon noted. “For quite some time, they weren’t allowing any at all. The examiners are trying to stay compliant with federal drug laws, as well as the 2018 Farm Bill, which legalizes the cultivation and sale of hemp at the federal level.”

That’s not to say that full legalization, such as in Canada, necessarily makes it easy to protect and enforce your IP.

“It’s just as hard as it is for any other brand. We’re struggling with a lot of transition, and there’s a lot of crowding from other cannabis brands. The laws limit very narrowly what you can do with packaging and promotion,” Ms. Gedeon said.

The brand restrictions are comparable to plain packaging rules on tobacco, and on other products, which are increasingly being enacted in various regions worldwide.

For example, according to the federal law in Canada, authorized cannabis sellers cannot use product packaging that associates their brand with a “way of life” that includes “glamour, recreation, excitement, vitality, risk, or daring.”

Further, brands can feature only a “single uniform color” on the packaging and are prohibited from using “decorative ridges” and “raised features,” except where necessary to assist the visually impaired.

Perhaps most significantly, the law contains stringent controls on the “brand elements” on any cannabis products. Brand names can be in any typeface but cannot be bigger than the type displaying the required medical warnings on the label. Image and graphics, meanwhile, must be equal to, or smaller than, the surface area of the standardized cannabis symbol featured on all cannabis products in Canada.

Brand restrictions aside, in terms of legalizing the product, Ms. Gedeon believes Canada’s legal regime presents “a good blueprint” in terms of legislating for the cultivation, distribution, and consumption of cannabis.

Given the piecemeal way in which the cannabis legalization regime is changing in jurisdictions around the world, it is no surprise that the common factor in each of them is a large degree of uncertainty.

The legalization of cannabis for commercial purposes has been a rather slow process. It is picking up pace in many jurisdictions, but until regulatory and legal problems are resolved, brand owners are likely to be remain in limbo.

Video courtesy of Envato Elements / StockSeller

Thursday, November 19, 2020

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