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Food for Thought?

In Canada’s increasing liberalization of its cannabis related laws, the manufacture and sale of THC-containing edibles (food, beverages, extracts and topicals) will become legal on October 17, 2019, although these products will not find their way (legally) onto the market until the middle of December. That’s because producers must apply to Health Canada for a license 60 days prior to commencing the sale of these products, and the government is not going to begin accepting these applications until October 17, 2019. Last week, the government released the regulations that will govern the manufacture, advertising and sale of the noted edible products (including vape cartridges), once adopted. Anyone interested in this market needs to know what will and will not be allowed, as the consequences of noncompliance are significant (e.g. up to 5 years in prison and a $1 million fine). The description of the new regulations below is not exhaustive, and summarizes only the key points at a high level. Under…

Investing in the Cannabis Industry and Picking the “Next Hot Pot Company” from an Intellectual Property Perspective

There has been explosive growth in the cannabis industry, and there is a dizzying array of choices for those looking to invest in this emerging industry. Who will be hot and deliver strong returns? Who will fizzle and fail in the wake of growing competition? Who is investing in innovation and differentiation? In our view, one way to measure the prospects of a cannabis company’s future success is to look at its level of innovation and its commitment to securing intellectual property rights (IP) for those innovations. While cannabis companies may face issues with respect to the enforceability of their IP rights in the US since cannabis remains illegal at the Federal level, ignoring the potential value of IP in a quickly evolving global landscape could leave investors empty handed. IP-savvy cannabis companies can and should use utility patent protection to protect new and useful things they develop, where they are sufficiently valuable. For example, a utility patent might cover new…

Cannabis Excise Duties in Canada

One argument in favor of legalizing recreational cannabis was that it would allow the government to collect taxes on previously black-market activity. Concurrent with Canada’s de-criminalization of recreational cannabis production, sale, and use in October 2018, the federal government imposed taxes on cannabis sales. Specifically, the government levied excise duties on all purchased cannabis products in Canada pursuant to the Excise Act, 2001, subject to certain exemptions (“Cannabis Duties”). This post provides a brief overview of this regime. Calculation and payment of Cannabis Duties takes place at the producer level. The government requires licenced cannabis producers to package cannabis products sold to consumers in Canada with duty-paid excise stamps. Companies can only sell cannabis products packaged with duty-paid stamps to consumers in Canada. Licensed producers are responsible for purchasing and applying the stamps, calculating the duty on sales, and reporting and remitting the appropriate Cannabis Duties to the Canada Revenue Agency. Canada calculates Cannabis Duties as the greater of: (1) a…