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Canada: Trademarking Cannabis Products Before Legalization: A Proactive Step Or An Illegal One?



As businesses in Canada scrambled to market their cannabis products when recreational cannabis use was legalized in 2018 (“Legalization“), some brands filed trademark applications for cannabis-related goods and services prior to Legalization. While filing an application to register a trademark can certainly be seen as a proactive step, there are legitimate questions about whether the move was permitted by the Trademarks Act (the “Act“) at the time.

Prior to the legislative overhaul of the Act in June 2019, section 30(i) read as follows:

30 An applicant for the registration of a trade-mark shall file with the Registrar an application containing

(i) a statement that the applicant is satisfied that he is entitled to use the trade-mark in Canada in association with the goods or services described in the application.

Sections 38(2)(f) of the current Act provides that an opposition may be based on the ground that “the applicant was not entitled to use of the trademark in Canada in association with those goods or services.”  Importantly, the relevant time for this ground of opposition is “at the filing date of the application in Canada.”

How can a party applying to register a mark prior to Legalization be “satisfied that he is entitled to use the trademark in Canada” when, at the time of filing, the goods and services their proposed mark is associated with were illegal?

Whereas the Trademark Opposition Board (the “Board“) has commonly discarded oppositions based on the former section 30(i), successful allegations can result in the refusal of an application. Successful challenges to trademarks using section 30(i) fell into two general categories: (1) trademarks filed in bad faith; and (2) trademarks that could not be legally used by the applicant due to contraventions of federal statutes such as the Bank Act, Canada Post Corporation Act, Food and Drugs Act  and Copyright Act.

A more recent decision from the Board may provide us with a window into how early-adopter cannabis trademarks may be considered.

Into the weeds

Weeds Glass & Gifts Ltd v Kenneth Kinnear, 2021 TMOB 261 is a decision about a trademark application filed on June 29, 2017, for the mark WEEDS WORLD (the “Mark“) based on its proposed use in Canada in association with the good “dried marijuana.”

The Mark was opposed on October 22, 2018, with the Opponent alleging that the Applicant was not entitled to register the Mark. In response to the opposition, the Applicant alleged that the use of WEEDS and WEEDS & Design by the Opponent in association with cannabis-related goods and services prior to Legalization was unlawful.

The Board noted that medical cannabis use was legalized in 2001 and recreational cannabis use was legalized on October 17, 2018. Without determining whether the Mark had been used in association with medical or recreational cannabis, the Board was not prepared to declare that the Opponent’s use of its WEEDS marks had been unlawful. Absent a court finding that the Opponent’s use of the WEEDS marks had been unlawful, the Board was reluctant to make such a finding. In other words, unless it is absolutely clear that a party would be unable to use a trademark without breaking the law, the Board will not conclude that an Applicant is not entitled to use the trademark.

The Board referred to the Federal Court’s decision in Sunbeam Products Inc. v Mister Coffee & Services Inc., 2001 FCT 1218 (“Sunbeam Products“), where the Court provided comments regarding the Board’s inability to make findings of legality without a full hearing with viva voce evidence. The Court held that the Board does not have jurisdiction in trademark opposition proceedings to make findings of lawfulness, particularly where the matter is within the jurisdiction of another decision-maker, except in clear circumstances.

Spectre of invalidation still looms

For early adopters of cannabis trademark registrations, the Board’s inability to make determinations of illegality except in clear circumstances should provide some relief. In effect, the Court’s holding in Sunbeam Products may function as a shield in opposition proceedings against trademarks that were filed before Legalization despite the use of such trademarks potentially being illegal as of the date of application.

By now, many pre-Legalization cannabis trademark applications have been registered, rejected or abandoned. However, even after a cannabis trademark issues, the spectre of invalidation still hangs over these registered trademarks. While the Board may be unable to entertain complex questions of legality regarding the use of a trademark, the Federal Court might tackle such questions. In particular, the Federal Court may consider the validity of a trademark, including whether it was registrable at the date of registration under section 18(1)(a) of the Act.

To date, there have been no reported Federal Court decisions involving attempts to challenge a pre-Legalization cannabis trademark on the basis of use of the trademark being illegal at the date of filing. Further, there are no provisions within the Act or the Cannabis Act that preclude the Federal Court from invalidating pre-Legalization cannabis trademarks by virtue of the illegality of their use (though section 132 of the Cannabis Act  does remove two other grounds to challenge validity).

However, now that recreational cannabis, including cannabis edibles, is legal, there may be a way to avoid prospective trademark attacks based on past illegality. Having effectively cornered the market associated with their trademarks, pre-Legalization trademark owners may simply file new applications with respect to their trademarks. By doing this, they may be able to avoid the uncertainty associated with the registrability and validity of older cannabis trademarks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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How can it help distressed cannabis companies today?




Without the option to declare bankruptcy—due to federal illegality—the only recourse for cannabis businesses in distress to become solvent and / or distribute assets to creditors is to enter into an expensive and difficult judicial cannabis receivership. Receiverships are inherently adversarial, and the required input from third-party experts, lawyers and regular engagement with the courts can be incredibly costly.

Meanwhile, businesses operating in mainstream sectors have the ability to declare bankruptcy. This is also a court-ordered procedure that allows companies to satisfy lenders by liquidating assets, restructuring operations and finances, and to enjoy a break of sorts to make deals with creditors and renegotiate contracts and leases. Without a change to federal banking laws, cannabis companies are blocked from the benefits of bankruptcy, and the situation is only getting worse.

Given the current tight capital market environment, the increase in cannabis distressed assets, and the shortage of options to cannabis operators to address said challenges, is there a possible alternative option to alleviate the rather dire situation?


Genesis—Transition from Equity Financing to Debt Financing

Equity financing has been the most prominent way to raise capital in cannabis for the last several years. However,recent data collected by Viridian Capital Advisorsreveals that debt currently makes up 93% of capital raised by U.S. cannabis cultivation and retail companies, compared to 55.7% in U.S. industries overall.

This change in the capital-raising environment, which has led to an increased number of creditors in the sector, combined with continued market pressures on cannabis businesses to remain competitive, make it highly likely that the industry will inevitably see more receiverships.

Ultimately, while debt financiers are willing to lend cannabis businesses money, they expect to be paid back on time and often with high interest. If the business begins to struggle and enters a distressed phase that leads to receivership, the business assets will be sold off and the secured lenders will be the first to get paid, while the business itself is likely not to recover much.

Consider an Administrative and Collateral Agent

With receiverships punishingly expensive and the debt financing landscapebordering on predatorial, distressed cannabis businesses are desperate for any assistance or support available.  An Administrative and Collateral Agent (ACA) could be the alternative support required, benefitting borrowers, lenders and regulators alike, and offering a more cost-effective and less punitive option to courts, receivers and lawyers.

Instead of dealing with the courts and an expensive court-appointed receiver, cannabis companies seeking relief could turn to an ACA to facilitate mediation between parties and create alignment within the industry, which does not exist today.

An ACA could create a level of trust, transparency and complementary positioning with industry participants that simply has not yet existed in cannabis. The use of an ACA could challenge the competing perceptions that there is already alignment between regulators, operators and lenders, or that a useful alignment between these parties could ever exist.

An ACA could be a real and valuable tool for state governments and regulators as they begin to understand that it is in their best interests to assist cannabis businesses in their states in the face of continued federal illegality and restrictions. Under a private agreement between parties, the ACA would conduct something more akin to an administrative receivership as opposed to the traditional judicial receivership that is the only current option for insolvent cannabis businesses to seek relief.

Building upon a Cannabis Credit Rating Framework

Ideally, an ACA would work within an industry-specific credit rating system for cannabis businesses in distress in order to work within an established framework for potential investors. If cannabis companies are ranked across an equitable, systematic and formulaiccredit rating system, borrowers, lenders and regulators would benefit from the quantifiable transparency afforded by said rating, and debt financing would have an inherent regulatory-like structure to prevent predatory lending. By avoiding the courts, the distressed cannabis company would save time, money and create a more attractive scenario for potential lenders.

Initial Path to Mitigating Solutions

While the current challenges facing cannabis businesses today are well documented and have risen to both creditors and regulators attention, a viable solution has yet to be identified. Most likely no one solution exists beyond waiting for the economic and capital environments to evolve. Yet, mitigating options do exist.

The introduction of an ACA is one such option. Questions remain as to the mechanics, regulatory, operative and fiscal alike, as well as who to trust to take it on. The introduction of a credit rating framework is the first step to creating a solid foundation from within which an ACA can operate transparently and equitably. Any potential buy-in from regulators, creditors and operators remains an open question.

All of that said, there is today an unprecedented set of market forces that is pushing all cannabis stakeholders to think outside of the box. The still growing opportunities in the cannabis industry, the will of operators to survive and succeed, as well as the increasing exposure from creditors, all point to not only an acceptance for the need of an alternative, but to the drive to do things differently.

Is your cannabis business in distress? Would you benefit from expert guidance and support in deciding on whether to enter into a receivership?Reach out to United CMC today.

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United States: Alex Malyshev And Melinda Fellner Discuss The Intersection Of Tax And Cannabis In New Video Series – Part VI: Licensing (Video)




Carter Ledyard is pleased to announce the launch of our short-video series on the cannabis industry focusing on business and legal issues for those companies and entities interested in doing business in New York.

This series offers a perspective on tax policy and specific statutes affecting cannabis businesses today. Our cannabis shorts are a great way to get to know our professionals, Alex Malyshev and Melinda Fellner, in quick and easy to watch clips, packed with the salient information you need.

In Part VI of our series, Alex and Melinda discuss licensing for cannabis businesses in New York. Watch below!


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Pennsylvania Court Holds that It Is “High Time” Employers Reimburse Employees Who Use Medical Marijuana to Treat Work Related Injuries




On March 17, 2023, the Commonwealth Court of Pennsylvania issued a decision regarding employee use of medical marijuana in the workers’ compensation context.  The decision in Fegley v. Firestone Tire & Rubber (Workers’ Comp. Appeal Bd.) addresses an issue of first impression.  The court held that an employer’s failure to reimburse an employee’s out-of-pocket costs for medical marijuana to treat his work-related injury was a violation of the Pennsylvania Workers’ Compensation Act (“WC Act”).  The decision is significant for Pennsylvania employers.  Given this decision, Pennsylvania employers could be subject to penalties under the WC Act if they do not reimburse employees for medical marijuana use—even though marijuana is illegal under federal law and cannot be prescribed by any doctors.


The employee in the underlying case sustained a work-related injury to his back.  After decades of taking prescribed opiates and narcotics, the employee began using medical marijuana at the recommendation of his doctor.  His pain level improved through use of marijuana, to the point that he was able to wean himself off of the prescription drugs.  An entity responsible for evaluating the appropriateness of treatment for work-related injuries under the state workers’ compensation system found that the employee’s medical marijuana use was reasonable and necessary.  However, the employer refused to reimburse the employee for the cost of his medical marijuana treatment.

The employee filed a claim seeking penalties for the employer’s alleged violation of the WC Act by failing to pay for the cost of his medical marijuana use.  The employer prevailed at the agency level on the grounds that the Pennsylvania Medical Marijuana Act (“MMA”) says that coverage is not required for medical marijuana and requiring an employer to fund marijuana use would violate federal law and did not violate the WC Act.  The employee then appealed to the Commonwealth Court of Pennsylvania.


In a 5-2 decision, the Commonwealth Court of Pennsylvania disagreed with the agency ruling below, and thus reversed and remanded.  In reaching its decision, the Court analyzed the contours of, and the relationship between, the WC Act, the MMA, and related federal law.

Starting with the basics, the Court observed that the WC Act requires reimbursement to employees for reasonable and necessary medical expenses resulting from work-related injuries.  The Court also observed that the MMA deems marijuana to be a legitimate therapy for treatment of medical issues under proper circumstances.  And the MMA seeks to protect individuals who use medical marijuana by stating that medical marijuana patients shall not be “denied any right or privilege, . . . solely for lawful use of medical marijuana . . .”

The MMA, however, also has a section entitled “Conflict”, which provides that “[n]othing in [the MMA] shall be construed to require an insurer or a health plan, whether paid for by Commonwealth funds or private funds, to provide coverage for medical marijuana.”  This did not end the Court’s inquiry.  The Court found that the absence of the word “reimbursement” in this Conflict provision is significant.  While a well-reasoned dissenting opinion described “coverage” and “reimbursement” as “two sides of the same coin”, the majority disagreed.  The Court held that “coverage” and “reimbursement” have materially distinct definitions.  The Court reasoned that the MMA does not require coverage for medical marijuana, but there is no language in the MMA precluding a WC carrier from reimbursing a claimant for medical expenses that are reasonable and necessary to treat a work-related injury.  In the Court’s view, employers must therefore reimburse employees for medical marijuana treatment that is reasonable and necessary for work-related injuries.  This conclusion, the Court noted, is consistent with the WC Act’s reimbursement requirement, along with the MMA’s endorsement of medical marijuana and corresponding prohibition against the denial of rights or privileges based solely on medical marijuana use.

The Court also addressed the relationship between state and federal law.  The MMA contains a provision stating that [n]othing in [the MMA] shall require an employer to commit any act that would put the employer or any person in violation of federal law.”  Under federal law, it is unlawful for “any person knowingly or intentionally – [] to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance[.]” 21 U.S.C. § 841(a).  The Court did not find this to be a persuasive reason for reaching a different decision because reimbursement is not the same as manufacturing, distribution, or dispensing of marijuana.  Thus, reimbursement is not illegal.

In her dissent, Judge Christine Fizzano Cannon discussed the interplay between state and federal law.  She wrote that “[a]lthough the MMA legalizes the use of medical marijuana in Pennsylvania, a provider still cannot legally dispense medical marijuana under federal law” because it is illegal.  She reasoned that an illegal treatment cannot be reasonable or necessary under the WC Act and, in turn, an employer should not be responsible for reimbursement.


This decision—unless it is overturned or superseded—has immediate impact on employers in Pennsylvania.  Indeed, they are now required to reimburse employees for medical marijuana treatment for work-related injuries under the WC Act.  Failure to do so could result in penalties.  This holding is consistent with holdings in New Mexico, New Jersey, New Hampshire, New York and Connecticut.  However, it is contrary to holdings in Massachusetts, Maine, and Minnesota.

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