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Richard Naiberg
Quality From Canada

Protecting Intellectual Property in Canada: A Practical Guide, Part 6

By Richard Naiberg
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Richard Naiberg

Editor’s Note: This is the sixth and final article in a series by Richard Naiberg where he discusses how cannabis businesses can protect their intellectual property in Canada. Part 1 introduced the topic and examined the use of trade secrets in business and Part 2 went into how business owners can protect new technologies and inventions through applying for patents. Part 3 raised the issue of plant breeders’ rights and Part 4 discussed trademarks and protecting brand identity. Part 5 took a detailed look at copyright laws for cannabis companies and how they can protect works of creative expression.  

In Part 6, the conclusion of this series, we take a look at nine key takeaways from the series:We hope you enjoyed this series and found the information provided to be useful. If you’d like to learn more about intellectual property law in Canada as it relates to the cannabis industry, feel free to reach out to Richard Naiberg at rnaiberg@goodmans.ca 

Summary of Practical Considerations For Cannabis Producers

  1. Cannabis producers should establish procedures by which the technological innovations achieved by their employees are kept confidential and are quickly reported to management for consideration as to whether the innovation should be protected as a trade secret, by patent, by plant breeder’s right or not protected at all.
  2. If a trade secret protection is desired, the producer must invoke systems that limit knowledge of the secrets to those in the company with a need to know it, and make sure that departing employees understand their obligations of confidentiality and do not take any documentation of the secrets with them when they go.
  3. The nature of the innovation under consideration will drive the choice between a patent and a plant breeder’s right. Plant breeder’s rights only protect whole plants. Patents protect other innovations, subject to the limitations described above. Patents may be drafted to protect whole plants, albeit indirectly: a patent on genetic sequences or engineered cell can be infringed by a whole plant that incorporates those sequences or cells.
  4. The decision as to whether to file an application for a patent or a plant breeder’s right, and in what jurisdiction(s), should be made with careful consideration of whether the producer will employ the invention/variety in its business (and in what countries), as well as the potential value of the invention/variety to other producers who may eventually become licensees of the resulting patent(s) or plant breeder’s right.
  5. Cannabis producers must remain up-to-date on patent and plant breeder’s rights applications that are filed in the jurisdictions in which they operate so as to be in a position to identify patents and plant breeder’s rights that will potentially affect their freedom to operate. Such due diligence will also allow the producer to predict the technological and business focuses of their competitors.
  6. Cannabis producers must select a trademark that is immediately distinctive or can quickly become distinctive of its goods and services. The trademarks ought to be fully available, in the sense that they are not in use by any competing business in any of the jurisdictions in which the producer intends to do business. Ideally, the trademark ought to be available as a domain name to ensure that there is no confusion on the Internet.
  7. Once the trademark is selected, the cannabis producer should make consistent and extensive use of that trademark. The more consistent and ubiquitous the use, the stronger the producer’s brand and trademark will be.
  8. The owner of the trademark must routinely conduct searches to ensure that no third party is using a trademark that is similar that of the owner. If such unauthorized use is discovered, the owner must act quickly to restrain that use or potentially license the use.
  9. Cannabis producers ought to contract to ensure that they are the first owners or assignees of any copyright subsisting in the artwork, literature and websites the company creates or hires other to create. Producers ought also to obtain waivers of the moral rights of any authors of this work.

We hope you enjoyed this series and found the information provided to be useful. If you’d like to learn more about intellectual property law in Canada as it relates to the cannabis industry, feel free to reach out to Richard Naiberg at rnaiberg@goodmans.ca

Ellice Ogle headshot

Designing a Recall Plan for Your Company

By Ellice Ogle
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Ellice Ogle headshot

Bearing through four voluntarily recalls in the first two months since the transition window ended, the California cannabis industry showed its commitment to providing safe goods for its consumers. Recalls are considered the removal of products deemed unsafe at the point of retail. With unsafe product already on shelves, it is that much more important to have a thought out strategy if a recall need arises. Currently, the California Department of Public Health-Manufactured Cannabis Safety Branch is the only regulatory agency in the state of California with recall stipulations for California cannabis companies. Thus, the onus is on individual cannabis companies to initiate their own recall plans.

Why establish a recall plan if one is not compulsory? To start, a cannabis product recall is more challenging than recalls in other industries because of the classification as a Schedule 1 drug and the misunderstanding and stigma of the drug that promotes fake news. These considerations affect the way both the government officials and consumers perceive cannabis recalls – not preparing ahead of time could be devastating to your brand. Furthermore, a recall is not just a one day headache – in December 2017, the Inspector General of Department of Health and Human Services  found that food companies took 57 days on average to initiate a recall after the Food and Drug Administration (FDA) first learned a product was potentially hazardous. Not only is a recall tricky to navigate and time intensive, a recall can also be costly – a joint study by the Food Marketing Institute (FMI) and the Grocery Manufacturers’ Association (GMA) in the USA found that 77% of the study respondents estimated the financial impact to be up to $30 million dollars; 23% reported even higher costs. One major factor of the financial impact to consider is that many retailers do not remove only the affected products, instead sweeping entire lines and brands. To estimate how much a food recall would cost your company, researchers Moises Resende-Filho and Brian Burr developed a model to estimate the direct costs of a food recall. To take a step back, it is true that, while recalls can be tricky to navigate, time intensive and costly, recalls are generally infrequent. At the same time, you never know where or when a recall could happen. For example, your manufacturing process might be flawless, but a supplier may suddenly issue a recall or the retail facility is compromised. Moreover, not all recalls are equal – imagine that consumers would react differently to an undeclared allergen on the label versus a life threatening pathogen in a product distributed to patients with weakened immune systems. Ergo, it is strategic for every cannabis company (grower, manufacturer, retail, etc.) to have a recall plan to be ready for any type of recall situation.

Take these 6 tips in designing a recall plan:

Food processing and sanitation
Product recalls due to manufacturing errors in sanitation cause mistrust among consumers.

Before a Recall

1) Be familiar with how recalls work by staying up to date with recalls

2) Write a recall plan. Select a recall template and fill in your company information, but also take into consideration any regulations on recalls at the federal, state, and county levels.

During a Recall

3) Record everything that was said and done. If there was no prewritten recall plan, during a recall is a good time as any to begin documenting all actions and communication – internal within the management team and external with business partners (suppliers, retailers) and external with the consumers.

4) Find the flaw in the product. Why is the product being recalled? This is important to know, whether it was your item or not, to better answer the next question of “What happens with the recalled product?” The most common causes for a recall in the USA are identified in the joint study mentioned above by the FMI and GMA.

After a Recall

5) Reevaluate the recall plan. Compare to a reputable third-party auditing standard (example here is Safe Quality Food Institute’s SQF Food Safety Code for Manufacturing Edition 8). Updates to the recall plan are inevitable and constant. The changes may be due to updates in company products, adjustments in the recall network or the experience gained when going through a recall. Also keep an eye out for updates to templates of recall plans. Conduct mock recalls with different recall origins.

6) Reevaluate the food safety plan. After finding the flaw in the product, identify the flaw in the process and improve. Examples to improve the food safety plan may be to: amend the supplier approval program, refine process flow, polish the sanitation program or revise the preventative maintenance program. The foundation of a recall plan is having a robust food safety plan to minimize the risk of running a recall.

FSC logo

Edibles Discussion Comes To Food Safety Consortium

By Aaron G. Biros
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FSC logo

The Food Safety Consortium, taking place November 13-15 in Schaumburg, Illinois, will host a series of talks geared towards the cannabis industry this year. The newly launched Cannabis Quality Track features a number of panels and presentations designed to highlight the many intersections between food safety and cannabis.

Jenna Rice, Director of Operations at Gron Artisan Chocolates
Jenna Rice, Director of Operations at Gron Artisan Chocolates

The track will have presentations discussing food safety planning in cannabis manufacturing, HACCP, GMPs, regulatory compliance and supply chain issues among other areas.

Ben Gelt, board chair of the Cannabis Certification Council, is moderating a panel titled What’s In My Weed? that will delve into issues like supply chain, production and other difficulties in creating cannabis products and the challenges inherent in teaching consumers to be more discerning.

Ben Gelt, Board Chair of the Cannabis Certification Council
Ben Gelt, Board Chair of the Cannabis Certification Council

Panelists will include:

Kimberly Stuck, Founder of Allay Compliance Consulting
Kimberly Stuck, Founder of Allay Compliance Consulting

Ben Gelt and the Cannabis Certification Council orchestrated the development of this panel to help promote their #WhatsInMyWeed consumer awareness and education campaign. “The Cannabis Certification Council believes consumer education campaigns like #Whatsinmyweed are critical to drive standards and transparency like we see in food,” says Gelt. “What better place to discuss the food safety challenges the cannabis industry faces than the Food Safety Consortium”

Before Kim Stuck founded Allay Compliance Consulting, she was the first Marijuana Specialist for a public health authority in the nation, where she was working with regulators in Denver, Colorado. She is currently a cannabis food safety expert and a Certified Professional of Food Safety (CP-FS) through NEHA. She has helped Colorado and California develop cannabis food safety requirements. “I will discuss pitfalls we have experienced in the regulation of cannabis in Denver and what mistakes not to make,” says Stuck. “I’d also like to talk about how to be prepared for when those regulators start to come in to facilities.”

Kristen Hill, MIP Director at Native Roots Dispensary
Kristen Hill, MIP Director at Native Roots Dispensary

Kristen Hill is the MIP Director at Native Roots, arguably one of the largest dispensary chains in the world. She oversees 30 employees in Native Roots’ MIP facility where product testing and quality assurance of products are all led under her guidance. Her background includes managing quality assurance and regulatory compliance with FDA regulations, among other areas. She said she’s particularly excited to talk about implementing manufacturing best practices in the cannabis space. “Cannabis is maturing and is beginning to shape operations around long standing best practices in other industries,” says Hill.

Leslie Siu, Founder and CEO of Mother & Clone
Leslie Siu, Founder and CEO of Mother & Clone

Leslie Siu brings to the panel 17 years of liquor, tobacco and pharma marketing and operational oversight plus global digital and experiential campaigns. Her company, Mother & Clone, produces infused, sublingual cannabis sprays. Based in Colorado, Mother & Clone’s team of biochemists are Merck alumni, currently working towards GMP standards in preparation for Canada, slated to be on shelf in the spring of 2019. Her main consideration for cannabis product development comes from what she has learned from the FDA in traditional industries- what they will and will not tolerate.

To learn more about the panel, other topics presented and see the full agenda for the upcoming Food Safety Consortium, click here.

East Coast Market Update

By Lindsay Engle
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There are going to be some states that are less progressive in the pro-cannabis movement, the same way there were states that were slow to move past alcohol prohibition. This is normal for any country moving towards change, better economic standing and safer healthcare.

There are only four states that completely ban recreational and medical cannabis altogether, and those states are Idaho, Kansas, Nebraska, and South Dakota. Although, there is no doubt that more and more states are moving towards a pro-recreational and medical cannabis stance. There are some states in the Northeast that are making strides to legalize cannabis.

Most of the states in the Northeast already have some form of medical cannabis law in the books already, but some are moving towards recreational legalization surprisingly quickly. Massachusetts already has legalized recreational cannabis and is setting up their regulatory framework currently while Vermont, New Jersey and New York, all of which already have medical laws, appear to be just steps away from legalizing it recreationally.

Northeast States Moving Towards Legalization

With Canada’s recent recreational legalization, a number of states just south of the border appear to be eyeing the issue for themselves. While some of these states have somewhat strict regulations in place, they look like promising emerging market opportunities.

New Jersey

New Jersey is closer than ever to legalizing recreational cannabis. Governor Phil Murphy built his campaign on the pledge to end cannabis prohibition. Murphy says having recreational cannabis legalized this year is his goal.

Murphy says that he wants legal recreational cannabis to be available because he believes it is a way to improve social justice in New Jersey and to bring the state new tax revenue. The biggest issue is what the legislation will look like and how it can be tied to expanding the states medicinal cannabis program.

New Jersey Governor Phil Murphy
New Jersey Governor Phil Murphy

Their current medical program, while still small in market size, appears to be gaining steam and growing in terms of patients getting access. Six months ago, The New Jersey Department of Health added a number of qualifying conditions patients can get a cannabis prescription for. The program still has its limits, like a 10% THC potency cap, small selection of types of products and other various restrictions.

New York

It was just last year when Governor Andrew Cuomo said cannabis was a “gateway drug” and he was opposed to legalization. After conducting a study on cannabis legalization, the result was a July Health Department report that determined the positive effects of legalization outweighs the potential negative impacts.

The debate between Andrew Cuomo and Cynthia Nixon in the gubernatorial race has highlighted their views of cannabis as well as other important issues; it’s important that New Yorkers vote in the primary election to have the best opportunity for the future.

If New York legalizes recreational cannabis, it could open up a huge new market. Medical cannabis users will likely see a price drop in their medication. Similar kinds of restrictions that plague the New Jersey market are also affecting medical patients in New York. Currently, smoking and edibles are both prohibited even for patients. Back in 2017, the state added chronic pain to its list of qualifying conditions, undoubtedly increasing the number of patients.

Companies with large amounts of capital are planting their flags in New York, like MedMen’s dispensary in Manhattan, even if the medical market might still be in its infancy.

MassachusettsOver the next six months, this market will be one to watch closely

Recreational cannabis became legalin the last couple months for Massachusetts, while the state legalized medical cannabis some time ago. Their medical program is relatively advanced compared to New York or New Jersey. Online registration, a large number of qualifying conditions, and a less restrictive business environment seemed to encourage a much larger number of patients and businesses supporting them.

Regulators in Massachusetts are currently consideringthe option of allowing delivery operations for the recreational market. The roll out for the recreational industry might seem somewhat slow, but regulators are tackling a wide range of issues and making considerable progress towards the highly anticipated recreational market opening. Just last week, regulators issued licenses to two cannabis-testing laboratories, and, according to the Boston Globe, the debut could be just weeks away.

While the industry and regulators get ready for the recreational debut, a recent crackdown on pesticide usehighlighted some of the growing pains that come with it. Over the next six months, this market will be one to watch closely as dispensaries begin selling recreational cannabis and the industry develops.

Vermont

The recent Canadian legalization of recreational cannabis will no doubt put pressure on states sharing a border with them to consider adjusting their laws.

Legalizing recreational cannabis will likely increase tourism to Vermont, the way other states saw an influx in tourism when they legalized. Unfortunately, Vermont has only decriminalized recreational cannabis. You can possess, grow and consume cannabis, but you can’t buy or sell it, which obviously restricts the ability of any business to enter the market.

Vermont Statehouse, Montpellier, VT
Image: Tony Fischer, Flickr

However, their legal medical program is relatively laissez-faire compared to other states in the region. They allow for cultivation at home or through a caregiver and there are a number of small businesses working under the legal medical program.

Maryland

Recreational cannabis isn’t legal in Maryland yet, but medical cannabis has been legal since 2014. It’s illegal for patients and caregivers to grow their own. Attempts have been made to make recreational cannabis in 2016, but the bill didn’t move forward.

Maryland’s industry was off to a rocky start, when the application process for businesses wanting to enter the market slowed to a crawl. This month, the state just approved four new medical dispensaries and one new processor for the market. The latest round of approvals brings the total to 69 dispensaries serving patients, while back in 2016, the state pre-approved 102 dispensaries originally.

Delaware Expect to see another attempt at legalizing via the legislature in early 2019.

Delaware is looking at the possibility of legalizing the recreational use of cannabis for adults over 21 years of age. Even though medical cannabis is legal, recreational use isn’t. Back in June, lawmakers in the state were close to recreational legalization but fell short of the mark by four votes. Expect to see another attempt at legalizing via the legislature in early 2019.

The Delaware Department of Health will continue to accept applications for medical cannabis cards, which is required for patients seeking to obtain their medicine from a compassion center. Patients are not allowed to grow their own cannabis. The state’s program has been operational for quite a while, and a small number of companies have established footprints in the state, like the Israeli brand Tikun Olam.

Pennsylvania

In 2016, Pennsylvania legalized medical cannabis. In contrast to some of the other states discussed earlier, PA is off to a more streamlined start. The second phase of their medical program allowed for more businesses to enter the market, a wider range of qualifying conditions and a larger number of patients registering. The industry is maturing here fast and could make for an exciting opportunity with recreational legalization potentially on the horizon.

A state lawmaker recently introduced legislation to legalize recreational cannabis. The bill would allow adults 21 and older to possess cannabis products such as edibles and up to six cannabis plants, but not more than three mature plants that are flowering.

The bill would call for the immediate release of people jailed for cannabis-related crimes. This would also allow anyone with a criminal history related to cannabis to have that expunged.

If the bill passes, the tax imposed is estimated to generate $500 million a year.

Richard Naiberg
Quality From Canada

Protecting Intellectual Property in Canada: A Practical Guide, Part 4

By Richard Naiberg
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Richard Naiberg

Editor’s Note: This is the third article in a series by Richard Naiberg where he discusses how cannabis businesses can protect their intellectual property in Canada. Part 1 introduced the topic and examined the use of trade secrets in business and Part 2 went into how business owners can protect new technologies and inventions through applying for patents. Part 3 raised the issue of plant breeders’ rights and in Part 4, below, Naiberg discusses trademarks and how cannabis businesses should go about protecting their brand identity in Canada.


Trademarks: Protections For Brands And Goodwill

Cannabis businesses must not only protect their investments in their technical creations, but also must protect their brand identities. A cannabis producer can invest heavily in making a desirable, high-quality product, and can advertise and sell this product so as to generate customer interest and goodwill, but if the customer cannot distinguish the producer’s product from that of its competitor, this investment is for not. Trademarks become unenforceable when they are no longer distinctive.

A trademark provides its owner with the right to have the Court stop another entity from using the trademark, or using a similar trademark in a way that confuses the public. When the trademark is infringed, the Court can also make a monetary award in favor of the trademark owner.

Trademarks are identifiers of a particular source of manufacture and they can take virtually any form. Trademarks can be words, phrases, symbols, names, designs, letters, numbers, colors, three-dimensional shapes, holograms, moving images, modes of packaging, sounds, scents, tastes, textures, or any other distinguishing element. What a trademark cannot be is a mere descriptor of the goods or services themselves because such a trademark would prevent other entities from describing their products in their ordinary terms.

Trademarks can be registered, but they do not have to be. In choosing a trademark, the cannabis producer must balance competing impulses: the desire to choose a trademark that is suggestive of the product itself so as to have an immediate meaning to customers without need of an expensive marketing campaign; and the desire to coin a unique and striking trademark which is instantly eye-catching and memorable, but which must be advertised before customers can understand the product to which it refers.

For example, a depiction of cannabis leaf or a word that plays on the ordinary terms used to refer to cannabis will not make a strong mark that can be enforced against those who adopt something similar. On the other hand, a coined word, such as “Kodak”, may have no independent association with cannabis but, after a time, use of this mark in association with a cannabis product can create a very strong mark with a wider ambit of exclusivity.

All that said, even a very suggestive mark can serve as a trademark where the use of the mark is so longstanding and ubiquitous that the suggestive mark acquires a secondary meaning as an indicator of its source of manufacture. Cannabis producers can and should also consider adopting specific colors, scents or tastes of their products as trademarks, where appropriate.

Trademarks become unenforceable when they are no longer distinctive. For this reason, trademark owners must keep abreast of any use of trademarks similar to their own by third parties, and must act quickly to either license such uses or to restrain them.Cannabis businesses have been very busy applicants for trademarks. More than 1700 such applications are now on file, though a comparative few have yet been registered. 

Trademarks can be registered, but they do not have to be. When a company’s product or service becomes known to its customers or potential customers with reference to a mark through ordinary business use, a trademark has been created.

Registration does however provide certain advantages. Under the amendments to the Trademarks Act coming in 2019, a registered trademark can be obtained for without any proof of use or goodwill.  By contrast, and as noted above, an unregistered mark must be used and possess goodwill before it can be said to exist at all. A registered trademark provides protection for its owner across Canada. An unregistered trademark can only be enforced in the geographical area in which its owner has established its reputation. A registered trademark is protected from those who use it in a manner that is likely to depreciate the goodwill of the trademark. An unregistered trademark only protects against consumer confusion.

Registration under the Trademarks Act also makes it an offence to sell goods or services on a commercial scale in association with another’s registered trademark, or to traffic in infringing labels. Further, a trademark owner can request that the import or export of such goods in Canada be arrested. No similar rights accrue for unregistered trademarks.

Finally, a registered trademark is published at the CIPO web site, providing notice of its existence to new market entrants before these entrants commit to using a similar trademark. Unregistered marks are not always easily discovered and a new market entrant may commit to a mark before having any opportunity to discover that it is the unregistered trademark of another.

Registering a trademark is straightforward. The applicant prepares an application that identifies the applicant, the trademark and the goods and/or services with which the trademark is being used or is intended to be used. Once satisfied that the application complies with the Trademarks Act, CIPO publishes the application to allow potential opponents of the registration to come forward. If there is no opposition, or if an opposition proceeding is brought and dismissed, the trademark is issued.

There is an interaction between the Trademarks Act and the Plant Breeder’s Rights Act. As discussed above, when a denomination has been adopted for a plant variety under the Plant Breeder’s Rights Act, nothing similar can be adopted or registered as a trademark. This is so other traders may use the denomination in their sale of the variety after expiry of the plant breeder’s right.

Cannabis businesses have been very busy applicants for trademarks. More than 1700 such applications are now on file, though a comparative few have yet been registered. Trademark applications in this area are likely to increase further with the coming changes to the Trademarks Act and the removal of the requirement that applicants show use of the trademark prior to registration. Companies will be encouraged to apply for trademarks they may only be considering using, and for any trademarks that they think their competitors may be planning to use. There is some concern that the changes to the Trademarks Act will lead to the rise of trademark trolls.

Before adopting a particular trademark, the producer must do what it can to minimize the likelihood that a third party will assert that the trademark infringes the third party’s prior rights. Searches of Canadian and international trademarks, particularly United States trademarks, are advised. National intellectual property offices, such as CIPO and the United States Patent and Trademark Office, maintain easily searchable databases of registered and applied-for trademarks that should be reviewed. Search professionals can also assist in identifying trademarks that have never been the subject of a trademark application. With the result of the searches in hand, the cannabis producer can determine whether or not to proceed to adopt the contemplated mark and invest in its promotion.


In Part 5, Naiberg will explain how to use a copyright to protect works of creative expression. Stay tuned for more!

Richard Naiberg
Quality From Canada

Protecting Intellectual Property in Canada: A Practical Guide, Part 3

By Richard Naiberg
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Richard Naiberg

Editor’s Note: This is the third article in a series by Richard Naiberg where he discusses how cannabis businesses can protect their intellectual property in Canada. Part 1 introduced the topic and examined the use of trade secrets in business and Part 2 went into how business owners can protect new technologies and inventions through applying for patents. Part 3, below, delves into plant breeders’ rights and how breeders in Canada could protect new plant varieties.

Plant Breeders’ Rights: Protection For New Plant Varieties

Unlike the Patent Act, Canada’s Plant Breeders’ Rights Act does provide intellectual property protection for whole plants. Plant breeder’s rights are available for new cannabis plants, whether they are the product of genetic engineering or more traditional cross breeding.

The applicant must also propose a name (referred to as a “denomination”) for the new variety that is acceptable to the Commissioner.The Plant Breeders’ Rights Act focuses on the material used to propagate a new variety of plant, such as its seeds. The owner of a plant breeder’s right can stop others from selling, producing or reproducing the propagating material, conditioning the propagating material for use, exporting or importing the propagating material, repeatedly using the protected variety to commercially produce another variety, and stocking the propagating material for the purpose of doing any of the above acts. The owner can also assert these same rights to stop another’s activities as they relate to another plant variety that is essentially derived from the protected variety. The owner can also recover for the damages it suffers as a result of any infringement. For cannabis plants, the term of a plant breeder’s rights endures for 20 years from the date of its issuance.

To register a plant-breeder’s right, a breeder provides an application to the Commissioner of Plant Breeders’ Rights Office, which is part of Canadian Food Inspection Agency.

To be registrable, the plant variety must be new, meaning that the propagating material has not been sold in Canada more than 1 year prior to the application (or elsewhere more than 4 years prior to the application); it must be distinguishable from all varieties that are known to exist at date of filing of the application; it must be sufficiently homogeneous, meaning that its relevant characteristics are predictable and commercially acceptable; and it must be stable in its essential characteristics over successive generations. Registration under the Plant Breeders’ Rights Act provides plant breeders’ rights in Canada only. However, Canada is a signatory to a treaty (UPOV) that allows an application originally filed in Canada to provide priority for registration in other member countries, and vice versa.The Commissioner also has the power to require the performance of tests on a sample of the propagating material, such as to verify its stated characteristics.

The applicant must also propose a name (referred to as a “denomination”) for the new variety that is acceptable to the Commissioner. The Plant Breeder’s Rights Act puts limits on what may be chosen as the denomination. Among other things, the denomination cannot refer to characteristics the variety does not have, suggest that it is derived from another variety or bred by a particular breeder when this is not case, or comprise laudatory descriptives that could cause confusion. The denomination cannot be used or registered as a trademark and, once accepted by the Commissioner, must be used by all traders when selling the propagating material, even after the expiry of the plant breeder’s right. Indeed, the Plant Breeders’ Rights Act makes it an offence to misuse or misapply the name. The same denomination will be used for the same variety in all UPOV countries.

The application process can involve some back-and-forth with the Commissioner, as well as the opportunity for others to oppose the registration. The Commissioner also has the power to require the performance of tests on a sample of the propagating material, such as to verify its stated characteristics.

A unique feature of a plant breeder’s right is that it can be enforced even before the Commissioner finishes his or her review against infringers who are given notice of the applicant’s application.

As of this writing, there are three registered denominations of cannabis plants under the Plant Breeders’ Rights Act. Chris Griffin has registered “Big C” – cannabis sativa subsp. indica; and MedReleaf Corp. has registered MR2017001 and MR2017002, both being varieties of cannabis sativa. It is expected that further registrations will follow.

There are some important limitations to the plant breeder’s rights. Farmers who harvest the plant variety on their “holdings” are given a privilege: they can store, produce and reproduce (but cannot sell) the variety on such holdings. The Commissioner also has the power to issue compulsory licenses when a protected variety is not available to the public at reasonable rates. Further, the plant breeder’s right is not infringed when the protected variety is used for non-commercial or experimental purpose.


In Part 4 of the series, Naiberg will discuss trademarks and how cannabis businesses should go about protecting their brand identity in Canada. Stay tuned for more!

Logistics and Supply Chain Management in California

By Aaron G. Biros
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Just a couple weeks away, the California Cannabis Business Conference, taking place in Anaheim, CA October 22-23, will host a series of panel discussions where attendees can expect to learn from industry leaders on a variety of topics. As businesses in the state adjust to new regulations and the market matures, one particular topic seems to highlight a challenging new space: distribution.

Track 1 at the CA Cannabis Business Conference, Distribution, Retail and Delivery, will begin early afternoon on Monday at the show, where a panel discussion titled State of Cannabis Distribution: Scaling Cannabis Distribution and Expectations of a Distributor, will tackle a range of issues involving logistics and supply chain management in California’s cannabis industry.

Michael Wheeler, vice president of Policy Initiatives at Flow Kana, will host the panel, joined by Chris Coulombe, CEO of Pacific Expeditors, Jesse Parenti, programs director of Nine Point Strategies and Brian Roth, vice president of sales at KUDU Technologies. According to the agenda, the session will cover inventory management, shipping and transport, managing product data, order fulfillment, manifest creation and reporting on it all. Michael Wheeler says regulatory compliance is one issue they plan on discussing. “Currently the biggest pressure on compliance is the desire by some operators to live under the proposed regulations, instead of the current emergency regulations,” says Wheeler. “Add to this recently signed legislation and we have lots of opportunistic actions each with their own perception of compliance.”

Another important topic they plan on discussing is driver training and hiring practices. According to Chris Coulombe, drivers are one of the top two most important customer-facing teams in the organization. “Between the sales team and the fleet operation, drivers represent half of the face of your company,” says Coulombe. “Much like the sales team, they interface with your retail partners directly, and subsequently provide a sizable portion of the foundation that retailers will use to judge your company’s competency and efficiency.”

Chris Coulombe, CEO of Pacific Expeditors
Chris Coulombe, CEO of Pacific Expeditors

When hiring new drivers, Coulombe recommends the standard background and driver record checks, but urges looking for experience in sales and driving as well. “Find those that have leadership experience and are comfortable operating in quasi-structured environments,” says Coulombe. “To that end, we seek solution oriented candidates that are personable, experienced in troubleshooting on their feet, and understand how to operate inside the structure of an organization.”

Coulombe also emphasizes the importance of driver training in any distribution company. “We built our driver training from scratch based on collective experiences from the military,” says Coulombe. “However, creating this from scratch is not necessary at this point, some insurance companies, such as our broker, Vantreo, provide in house driver training and certification solutions as a risk mitigation measure for companies that they represent. We recommend speaking with your insurance company to find what packages they have available.” Proper training for your drivers can help increase efficiency in operations, decrease maintenance and insurance costs and provide for better employee engagement. Coulombe also says many insurance companies have standard operating procedures for drivers to help supplement your company’s protocols.

Chris Coulombe and the other panelists will dive much deeper into this issue and other supply chain topics at the upcoming California Cannabis Business Conference, taking place in Anaheim, CA October 22-23.

Richard Naiberg
Quality From Canada

Protecting Intellectual Property in Canada: A Practical Guide, Part 2

By Richard Naiberg
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Richard Naiberg

Editor’s Note: This is the second article in a series by Richard Naiberg where he discusses how cannabis businesses can protect their intellectual property in Canada. Part 1 introduced the topic and examined the use of trade secrets in business. Part 2 goes into how business owners can protect new technologies and inventions through applying for patents.


Patents: Protection For New And Inventive Technology

Patents, which are issued in accordance with Canada’s Patent Act, provide their owners with the right to have a Court prevent anyone else in Canada from making, using, selling, importing or exporting what is claimed as the patent’s invention. The owner of the patent enjoys this monopoly for a period of 20 years from the date the patent is applied for. A patent is infringed even if the infringer arrives at the invention independently, without actual copying. If a patent owner brings a lawsuit and the Court finds infringement, the Court will typically order the infringing activity to cease and require the infringer to pay the owner a suitable amount of compensation.

There are several drawbacks to applying for a patent from the point of view of the applicant.Patents are meant to protect only inventions, meaning novel, non-obvious and useful solutions to practical problems. In the cannabis field, such inventions could include engineered genetic sequences or new plant cells that lead to useful improvements in the whole plant, new cultivation processes, new methods of extraction, new methods of storage or means to enhance stability, new formulations for administration, and new uses for the plant. It would not be uncommon for a cannabis producer to hold a suite of different patents that cover a whole range of innovative technologies and innovative business methods.

Not all classes of technical innovations are protectable by patent. For example, patents are not available for a whole cannabis plant because no patents are allowed on higher, multicellular organisms. Patents are not issued for genetic sequences or cells that are the result of cross breeding. Patents are also unavailable to monopolize methods of using cannabis as a medical treatment. That said, patent agents are skilled at casting innovations in areas such as these in terms that do provide some patent rights.

To obtain a patent, the applicant hires a patent agent to prepare and submit an application to the Canadian Intellectual Property Office (CIPO). An examiner at CIPO reviews the application for compliance with the statutory requirements and enters into a correspondence with the applicant’s patent agent in a process known as a patent prosecution. Third parties also have the opportunity to oppose the grant of a patent on limited grounds. The prosecution may continue for a period of years before the application is either allowed to issue to patent, or is ultimately rejected. Separate patent applications must be filed in every country in which patent rights are sought, though there are international treaties that facilitate these separate filings and preserve early priority filing dates.there can be a significant cost in obtaining patents, particularly if patent rights are sought in multiple countries.

It is important to emphasize that if an invention had been disclosed to the public more than one year before the application for the patent is filed, a patent cannot issue. Cannabis producers must therefore ensure that disclosures of their innovative work be controlled, including when working with partners. This can typically be handled with the use of appropriate non-disclosure agreements.

The prospect of market exclusivity makes the filing of patent applications a must for cannabis businesses, including those just starting out. For a start-up, simply filing a patent application projects that the company has value and a clear vision of its business. Venture capital often seeks companies with patent applications on file because the applications can mature into assets which can be monetized either by protecting a market for the owner, or through assignment or license to others.

cannabis researchers and producers have already filed hundreds of patent applications in Canada. There are several drawbacks to applying for a patent from the point of view of the applicant. Unlike the case for a trade secret, an applicant for a patent must make full and correct disclosure of the invention and how to use it in the patent itself. This disclosure will allow competitors to understand the applicant’s technology. The public disclosure provides a blueprint for competitors to build upon the patent’s disclosure, and to design around it to avoid infringement. Also, and unlike trade secrets, patents have an expiry date after which the public is free to practice the invention. The Commissioner also has the power to issue compulsory licenses to third parties in several circumstances, including when the demand for the patented article is not being met on reasonable terms. Further, the patent right is not infringed when the patented invention is used for non-commercial or experimental purpose. Finally, there can be a significant cost in obtaining patents, particularly if patent rights are sought in multiple countries.

Disadvantages or not, cannabis researchers and producers have already filed hundreds of patent applications in Canada. These applications relate to a wide range of inventions in the cannabis field including new cannabis resins and oils, methods of producing cannabis having improved properties, specific new growing processes, new harvesting methods, new extraction techniques, new formulations for human and veterinary use as foods, medicines and supplements, new delivery devices, new purification methods, new analytical methods, and new stabilization methods. Interested companies can access these disclosures from the public record.

As cannabis companies rush to obtain patent monopolies for their technologies, minefields are created for operating companies. Cannabis producers should obtain reports on what patent applications exist and might be asserted against their operations if and when these applications mature to issuance. With that intelligence in hand, the cannabis producer can understand what threats can be safely ignored and what patents must be addressed by assignment or license, by ‘design around’ or by developing an argument as to why the patent is invalid and thus unenforceable.


Editor’s Note: In Part 3 of this series, which will be published next week, Naiberg will discuss plant breeders’ rights and protecting new plant varieties. Stay tuned for more!

european union states

The Battle Over CBD Regulation Hits Europe

By Marguerite Arnold
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european union states

With all the attention on the pending regs for the recreational industry in Canada plus the huge medical market under construction in the EU, it is easy to forget the other cannabis discussion in the room right now. Namely CBD in commercial food ingredients and supplements. Battles in the beauty space, while surfacing, are still much less avidly fought.

As a result, edible CBD is also rapidly becoming (another) big green elephant in the room. Globally. Starting with all the changing rules about mostly medical use of cannabinoids in general.

This is underway, sort of, in the United States, driven by state regulations and consumer protection initiatives, but delayed on a federal level by the fact that CBD is still scheduled, like THC, as a Schedule I drug.

In Europe, however, this is already a different animal.

The regulatory hammer also appears to be coming down in strategic country markets, with strange hybrid fights and issues emerging as a result.

For example, as cannabis crops (designed for both markets) begin to flourish in Spain buoyed by both the clubs in Barcelona and the growth of legitimate medical and other kinds of cannabis cultivation across the country – and much of that for export, authorities are cracking down on a federal level about labelling of not cannabis bound for clubs, but the CBD used in edibles.

In the last month, CBD industry blogs are reporting that the Spanish government is sending both warning letters to distributors and the police are apparently taking products off of shelves directly.

For all the direct showdowns about the cannabis plant this year, not to mention CBD, including British children ending up in hospital, this has got to make the top five list.

A Brief Modern History Of CBD Controversies On The Continent

The current complications have their roots in both the regulation of medical cannabis, health supplements and what are called “novelty” food items.

The food issue has been cooking for several years and for botanicals and additives far from cannabidiol. This year, on January 1, however, the entire EU brought in a new directive about the use of certain plants in food which seems to be affecting the edible cannabis conversation all over the continent. That said, countries are interpreting the same at different speeds and with different enthusiasm.

The EU looks poised to hop on the legalization train

Switzerland (not a member of the EU) is actually the only country on the European continent where so far, things have gone relatively smoothly. Their lack of EU membership is actually why. This also does not mean they have overcome some of the larger problems inherent in this entire discussion, but, if things go to form, it will be relatively drama free.

That is not the case in other places.

For example, at the end of 2016, British authorities made a splash about medical labelling with the Medicine and Health Care products Regulatory Agency (MHRA) also leaving the entire edibles discussion in limbo. Technically, low strength CBD can be sold in the UK but it must be labelled as a food product if not specifically made for the medical market. That flap is likely to take off again with the direct competition now of not only Tilray but Namaste and the changing scheduling of cannabis in the UK to a Schedule II in October. See the recent furore over the “unauthorized claims” supposedly made by the nascent Cannabis Trades Association in meeting, lobbying if not “working” with local authorities. The organization has literally blossomed within the last 18 months to over 300 members and 1,200 sellers in part to figure out what exactly the rules are, as authorities grapple with changing times.

tilray-logoNow jump the channel to Spain. The international focus of late has not been just the medical cannabis now sprouting in greenhouses owned by established pharmaceutical companies, or that bound for semi medical use in Barcelona, but the entire CBD edibles discussion.

Why?

On some levels, it is clearly an attempt to continue to set less than grey rules for the Spanish cannabis industry, which even in the club scene is regulating. But beyond that, this fight is altogether more complicated, and far from just regional, or even just a Spanish conversation.

European Food Regulation Meets The Cannabis Industry

CBD in edible products will, according to European regulation, make it a novel food or “additive” – namely that products containing the cannabinoid have not been used “safely”. Translated into English that crosses cultural boundaries, this definition really means that the substance in question must have been part of a regulated federal procedure – for at least 25 years in any third country. As such, it will have to be tested and regulated accordingly.In other words, until the EU can move to classify CBD as a novel food, in Spain, CBD products on the market must be labelled “external use only.”

One does not have to be an industry analyst to know this clearly excludes all parts of the cannabis plant. Everywhere. This is why the situation now unfolding in Spain is all the more worrying for the industry across Europe.

In Spain at least, the crackdown appears to be on any food item containing cannabis, which, according to European-wide regulations, has yet to be classified as a “novel food.” Namely, a food product which has not been consumed in a significant degree in the EU before May 15, 1987. See the guide for new applicants here.

In other words, until the EU can move to classify CBD as a novel food, in Spain, CBD products on the market must be labelled “external use only.”

Where Does This Leave The CBD Industry Across Europe?

As any manufacturer or vendor in any EU country could technically be required to register their new food, this means that cannabis producers and distributors in Europe need to be on their toes for the next several years as the regulatory schemata is worked out. Bottom line? Expect as much hullabaloo over this sector of the market as other places (even if over other issues).Both producers and distributors could easily face labelling problems

Here is the critical take-away. Regulation is coming to the entire industry in Europe in a way unseen in both Canada and the U.S. and from a much more granular perspective.

What “reigns in Spain” in other words right now, is a wake-up call for CBD producers across the continent, even if not involved in the medical space. Not to mention both U.S. and Canadian producers (in particular) looking for profitable market entry strategies. Labelling and standards, in other words, are clearly on the way, and beyond the drawing board, for all cannabinoids, not just those of the “medical” kind.

In the meantime, edible CBD products in Europe and in every country are ripe for the institution of new guidelines that are, as yet, formalized. Both producers and distributors, therefore, could easily face labelling problems for all their CBD products and product lines for the next several years.

Massachusetts Regulators Crack Down On Pesticide Use

By Aaron G. Biros
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Earlier this month, the Massachusetts Department of Health sent a cease-and-desist letter to Good Chemistry, a Colorado-based brand operating in Massachusetts with a dispensary in Worcester and a cultivation facility in Bellingham. The letter claimed Good Chemistry used unapproved pesticides and must close their operations in the state.

goodchem.exter
A Good Chemistry dispensary in Colorado

According to a Boston Globe article, the company used three pesticides (approved for use on organic food products by the federal government) that cannabis regulators in Nevada, Oregon, Washington and Colorado have all approved for use in cannabis cultivation. Previously, Massachusetts has allowed a number of pesticides to be used on cannabis, but since last year when the state’s Department of Agricultural Resources took over regulating pesticide use on cannabis, they decided to ban all pesticides.

Representatives from Good Chemistry insist the compounds used were safe and that the state is singling them out when the practice is widespread in the industry. “These organic compounds are safe all over the country, and they’re safe in Massachusetts,” Jim Smith, a lawyer for Good Chemistry, tells the Boston Globe. “For the state to single out Good Chemistry for using an industry-standard practice is absolutely wrong. It’s not acceptable — and we’re not going to destroy the crop, because it poses no risk to public safety whatsoever.”

Matthew Huron, CEO of Good Chemistry
Matthew Huron, CEO of Good Chemistry

Good Chemistry even disclosed to the state that they would use those pesticides when they applied for a cannabis business license. According to Telegram.com, a local Worcester publication, Matthew Huron, chief executive officer of Good Chemistry, is asking the state to reverse their decision. “The Department of Public Health has the discretion to amend or rescind their order to allow us to make the cannabis we’ve cultivated available to patients in the Worcester community,” says Huron. “Patients have let us know that they really benefited from Good Chemistry’s wide selection of high quality cannabis strains, and they would like access to it again as soon as possible. We’ve asked the state to incorporate the research, analysis and experience that led other states like Colorado, Nevada, Washington and Oregon to determine that the use of these cultivation methods are best practices and helps create healthier, contaminant-free cannabis for patients and the industry as a whole.”

On September 5, the Department of Public Health allowed Good Chemistry to amend the cease-and-desist so they could sell products from other producers in the state. “Many of our patients rely on our medicine we grow specifically and we now are only allowed to sell third party product,” Huron told Telegram.com.