Trademark Practitioners Prepare for Changes in Light of Canada’s Tobacco & Cannabis Acts

The Canada Subcommittee of the Legislation and Regulations Committee (Subcommittee) has studied Canadian plain packaging regimes pertaining to both the Tobacco and Vaping Products Act and the Cannabis Act. Both laws follow election commitments to introduce plain packaging for tobacco products, especially cigarettes, and to legalize cannabis. The Subcommittee has provided comments on both, which were used in INTA’s consultations and written submissions to the Canadian government.

The Tobacco and Vaping Products Act and Regulations

The Tobacco and Vaping Products Act (Tobacco Act), which was enacted on May 23, 2018, restricts the use of specific brand elements in the promotion of tobacco products, including elements that could appeal to young persons, display endorsements and/or show animals, characters or persons, real or fictitious. In addition, branding elements may not evoke a lifestyle, such as one associated with glamour, recreation, excitement or daring. Specific plain packaging restrictions are now included in the draft regulations.

The Subcommittee provided comments used by INTA in submissions to the Canadian government, both before and after the Tobacco Act was formally introduced in Parliament, and in response to the regulations. The Subcommittee focused on points consistently made by INTA in responding to plain packaging legislation in other jurisdictions, namely that brands, regardless of the goods or services, inform customers about their source and quality, and are key tools in deterring counterfeits.

The subcommittee emphasized that brands, regardless of the goods or services, inform customers about their source and quality, and are key tools in deterring counterfeits.

With respect to tobacco plain packaging specifically, INTA has made the following submissions:

  • Plain packaging increases the ease of copying and counterfeits, and makes it more difficult for brand owners, consumers and regulators to identify counterfeits;
  • Within Canada, most jurisdictions already regulate tobacco sales by storing products in sealed, non-transparent containers behind retail counters. Consumers and retail employees rely on visual brand elements such as package design and colour to select products. These brand elements are particularly important in a multilingual environment;
  • Many tobacco brands are decades, if not hundreds of years, old with very considerable goodwill at risk if use is prohibited;
  • Canada’s trademark regime currently insists on use for registration, and trademarks can be cancelled for non-use;
  • Non-use will also affect enforcement. Brand owners that cannot use registered marks and/or trade dress will be hampered by competitors selling tobacco products or those selling unauthorized merchandise (such as caps, hats and mugs); and
  • Plain packaging laws offend international treaties such as TRIPS, NAFTA and the Paris Convention.

One concession was made by the government after the initial draft Tobacco Act was reviewed—namely to add Section 42.3, to protect a registration from expungement on grounds relating to abandonment or non-distinctiveness “as a result of compliance with this Act.” Subsection 2 adds “for greater certainty” that compliance constitutes special circumstances that excuse such non-use. However, the usefulness of this section is uncertain since it does not refer to the most common means of cancellation. Expungement for abandonment is rare, since it requires both non-use and intent to abandon. Much more common is cancellation under summary non-use provisions, not mentioned in the Tobacco Act. Also, practically, it is not clear that allowing the Register to become clogged with hundreds, if not thousands, of registrations for unused tobacco marks is beneficial to the public.

The regulations were published on June 23, 2018. They set out requirements for “plain and standardized appearance, shape and content of tobacco product packages,” and add the following:

  • Permissible brand names may be displayed once only on each exterior surface (for example, the six sides of a box);
  • Only the first letter in the brand name may be capitalized, and the name may appear on one line only;
  • Brand names may not evoke a colour or filtering technology;
  • Brand names must be displayed in matte finish, in a specific size font and in the colour Pantone Cool Gray 2C;
  • Package backgrounds (interior, exterior and secondary) must be a brown/green colour (Pantone 448C) called by some “the ugliest colour in the world,” unless metal;
  • Otherwise, colours are permitted only in health warnings or other required information;
  • Package surfaces must be matte and in a “cuboid” shape that can be opened “by one means” only. Cutout windows permitting the contents to be seen, stickers and tabs are prohibited;
  • Interior and exterior surfaces may not otherwise display brand elements, images, colours or information unless required or authorized by law;
  • Texture, such as embossing, ridges or bulges, features that permit packaging to change colour or surface area, scents or sounds are not permitted; and
  • Package “overwrap” must be transparent and colourless and cannot display a brand element.

The Subcommittee prepared comments for submission on behalf of INTA, reiterating the importance of branding, and addressed specific issues posed by the regulations, such as obstacles in commercial transactions, impact on new entrants to the market (which may not already have established brand names, and will be more significantly impacted by trade dress restrictions) and the absence of exceptions to facilitate both counterfeit detection and accessibility, including for the visually impaired.

The Cannabis Act and Regulations

Canada will officially legalize recreational cannabis on October 17, 2018. The Cannabis Act and regulations also contain limitations on brand selection and use on packaging, labelling and promotion, especially with a view to appeal to young persons (those under the age of 18).

The Subcommittee prepared submissions raising concerns over brand selection before the Cannabis Act was finalized, and as part of the regulations consultation. INTA noted in particular that brand restrictions that impede the development of brand awareness seemed unnecessary at such an early stage in the legalization process. The published regulations include the following key branding restrictions:

  • Brand elements on packaging, labels and in promotions may not appeal to young persons, include an endorsement or testimonial, depict a real or fictitious person, character or animal, evoke a way of life, including of glamour, recreations, excitement, vitality or risk, or be false or misleading;
  • Shapes of cannabis products and accessories may not appeal to young persons;
  • Cannabis product brands may be displayed on labels only;
  • Labels may display only a brand name and one additional brand element (word or design trademark, trade dress, colour, etc.);
  • The size, font style and colours of any packaging brand elements may not be more dominant than the required official cannabis symbol and mandatory health warnings;
  • Texture and/or embossing is not permitted, except for counterfeiting detection or ease of opening.

Such limitations will impede the development of trade dress rights in cannabis products.

Despite Cannabis Act limitations on brand selection and usage, the Canadian Intellectual Property Office has informally indicated that it will not examine new applications for compliance with the Cannabis Act (or the Tobacco Act). Currently, there are hundreds of pending trademark applications for cannabis and cannabis accessories—including many that appear to be in violation of Cannabis Act brand restrictions.

INTA noted that brand restrictions on cannabis that impede the development of brand awareness seemed unnecessary at such and early stage in the legalization process.

Also regulated is the use of cannabis brands on other “things.” While cannabis companies are not prevented from displaying cannabis brands on merchandise, goods may not appeal to young persons. Practically, that seems likely to significantly restrict the use of cannabis brands on common licensed merchandise, such as t-shirts, caps, etc., since even if sales channels are restricted, such goods would likely “appeal” to young persons.

It is uncertain how confusion between cannabis brands and those for other goods/services will be determined. The explosion of interest and investment in the cannabis industry has seen companies ranging from beer and other alcoholic beverage producers to coffee shop chains expressing interest in partnering with cannabis growers. Will cannabis be seen as a “likely expansion area” for some industries (particularly alcoholic beverages)? Will restricted channels of trade or the impact of brand restrictions on the development of reputations affect confusion analysis? It is too early to tell.

One of the goals of the Cannabis Act is to reduce the burden on the criminal justice system, which is reflected in the penalty regime. Unauthorized sales and distribution, particularly to young persons, remain criminal activities. Statutory violations for other non-compliance, including misuse of branding elements, may be handled by indictment with monetary and/or prison penalties, or by administrative monetary penalties. However, potential fines are not trivial; authorities have the discretion to assess amounts up to $1 million. Accordingly, brand restrictions need to be taken seriously.

Many feel that cannabis legalization has been rushed. Many provinces have not yet set up authorized retailers, and there will be uncertainty for some time over how brands might be “appealing to young persons” or evoke a “way of life.” For brand owners in all fields, uncertainty over the assessment of confusion, both by the Trademarks Office and the courts, and the absence of useful precedents, will make risk assessment difficult for some time. Meanwhile, hundreds of applications for cannabis and cannabis accessories have been filed, and billions of dollars are being invested in the cannabis industry. For trademark professionals, there are interesting times ahead.

This article first appeared in the INTA Bulletin (Vol. 73, No. 16). It was co-authored by Lorraine Pinsent, Cynthia Rowden and Sanjukta Tole, who are members of the Legislation and Regulation—Canada Subcommittee.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.