June 28, 2018
By Micheline Gravelle and Herman Cheung
Canada has become the first G7 country to legalize nationwide the purchase and use of recreational cannabis. On June 19, 2018, the Canadian Senate passed the final version of the Cannabis Act (“the Act”), also known as Bill C-45, by a vote of 52 to 29, ending Canada's 95-year prohibition on cannabis. The law will come into force on October 17, 2018. The Act permits recreational use by individuals 18 and over and possession of 30 grams of dried cannabis, but provinces and territories could further restrict possession, sale and use such as public smoking. Further, edible cannabis will not be legal until at least 2019. Each province and territory is also approaching legalized cannabis differently in terms of whether point of sale will be publicly or privately owned stores. See here and here for further discussions.
The retail value of the recreational cannabis market in Canada has been estimated to be from $4.9 billion to $8.7 billion per year. For comparison, the size of the beer market is $9.2 billion and the wine market is $7 billion. The total potential economic impact could be about $22.6 billion. Due to the large market value, it is increasingly important that companies producing cannabis, cannabis products and devices seek to protect their Intellectual Property (IP) in Canada.
The different types of IP rights available for cannabis and related products in Canada include plant breeders’ rights, patents, industrial designs, trademarks, trade secrets and contracts such as in-sourcing agreements and licensing. In addition, cannabis suppliers should be aware of the packaging, labelling and marketing requirements. Information on trademark protection, packaging, labelling, advertising and marketing can be found here, here and here. This article will focus on patents and plants breeders’ rights.
A patent provides a monopoly to the owner to exclude others from making, using or selling the invention during the term of the patent, which is 20 years from the filing date. A patent is awarded to inventions that are new, useful and inventive. To obtain a Canadian patent, a patent application must be prepared that fully describes the invention and filed at the Canadian Intellectual Property Office (CIPO) where it undergoes examination for a period of 1-3 years. During examination, CIPO typically rejects an application resulting in back and forth arguments between the patent agent on record and CIPO.
In the cannabis area, patents can be awarded on many aspects of the technology. For example, patent applications can be filed for 1) novel or modified active ingredients extracted from the cannabis plant or chemically synthesized; 2) novel formulations comprising cannabis active agents such as patches and gels or new combinations of ingredients; 3) new uses of the cannabis or cannabis extracts for example new indications that were not previously treated with cannabis products; 4) new methods of extracting cannabis active ingredients from the plants; and 5) new devices for delivery of the cannabis products, such as vaporisers and patches. Although in Canada, “higher life forms” such as the cannabis plants themselves are not patent eligible, patent protection is available for genetically modified cannabis plant cells as well as novel isolated genes that produce cannabis active agents.
Novel cannabis varieties may be protected under the Plant Breeders' Rights Act administered by the Canadian Food Inspection Agency. For a variety to be eligible for PBRs, the variety must be new, as well as being distinct, uniform and stable. With respect to being “new”, the variety may be sold in Canada for up to 1 year prior to the date its PBR application has been accepted for filing in the PBR office. If the variety has been sold only outside Canada, there is a 4-year window for it to be considered “new”. Comparative tests and trials are required to determine if the candidate variety is distinct, uniform and stable. Canada has a breeder-run testing system, in which the trials are conducted by the breeder/applicant, agent or someone contracted by the applicant. In terms of being distinct, a variety must be measurably different from all varieties cultivated or exploited for commercial purposes, or described in a publication, at the time the application was filed. A variety must also be sufficiently uniform in its relevant characteristics, and any variation should be predictable and commercially acceptable. Further, a variety must remain true to its description over successive generations, that is to say, stable. Once granted, the cannabis breeder gets exclusive rights to the propagating material of their variety for a period of 20 years. These exclusive rights include the right to sell, produce and reproduce, import and export propagating material of the variety as well as the right to authorize others to do the same.
Due to the impending legalization of cannabis, it is expected that patent and PBR filings will escalate. A survey at the Canadian Intellectual Property Office (CIPO) shows cannabis-related patent applications only averaged just above 85 per year in 2015-2016. In addition, a source at the PBR Office has stated that very few PBR applications have been filed for cannabis varieties. The low filings may be due to the fact that at present only medical uses of cannabis are legal in Canada. It is expected that the number of patent and PBR applications will significantly increase as cannabis is approved for all uses.
In anticipation to legalization, many companies have formed or moved into the cannabis industry. The number of significant players is a moving target due to new entries and consolidations in this space. By last count, there are at least 60 companies in the cannabis industry listed on the Toronto Stock Exchange, the TSX Venture Exchange and the Canadian Securities Exchange. Interestingly, patent applications before CIPO by these companies appear to be low, i.e. 13 in total from the year 2002-2016 although these numbers are expected to increase. In addition, patent applications are not made public until 18 months from filing so there is a lag time before the information is available.
For a plant that has been used since at least classical Greeks and Romans times, its latest status for legal recreational use in Canada represents opportunities as well as challenges for businesses in this industry. In the coming of age of legalized recreational cannabis, obtaining effective intellectual property protection is important to help position businesses for commercial success.
We like to thank Aaraf Dewan for compiling CIPO statistics.
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