How strategic IP helped propel Hexo into a multimillion-dollar cannabis powerhouse

When Canada legalized the recreational use of cannabis in 2018, locally headquartered HEXO Corp (HEXO) saw an opportunity to transform the company from a medical marijuana producer into one of the largest adult-use cannabis companies in the country.

For licensed producers such as HEXO, legalization unleashed an opportunity to introduce new smokeless cannabis products such as oral sprays, softgel capsules, vape pens and edibles, in addition to carefully cultivated cannabis strains aimed at providing users a variety of effects.

To be successful in this new industry, HEXO knew it had to be proactive in securing a strategic portfolio of intellectual property (IP) assets – including patents, trade secrets, trademarks and copyrights.

Shortly before legalization, HEXO began working with Smart & Biggar LLP, Canada’s largest intellectual property firm, for strategic advice on how to leverage and maximize the value of the company’s IP and grow its brand. The partnership with Smart & Biggar has evolved with the company’s growth and continues to flourish as Hexo reaches new heights in Canada’s increasingly competitive cannabis industry.

“IP and innovation has played an important part in HEXO’s strategy to grow as a business,” says Catherine Lemay, assistant general counsel – IP at HEXO. “Because we took the time to create an IP-centric business model and work culture, we are able to catch issues earlier and ensure that the IP generated across the organization is identified and well-protected.”

Protecting your space

Since entering the recreational cannabis market, HEXO has grown its sales by millions of dollars by rolling out new brands and product lines.

As the company created new products tailored to various consumer groups and price points, Daniel Anthony, a lawyer and trademark agent with the Smart & Biggar team in Ottawa, helped the company take steps to secure trademark rights for its new brands – such as Hexo, Hexo Plus, Original Stash, UP Cannabis, and more recently, Bake Sale – and he provides ongoing counsel to ensure the brand names HEXO brings to market are available and protected.

In addition to helping HEXO protect their IP assets, Anthony and his colleagues in the firm’s patent practice team keep a diligent eye on the fast-paced cannabis sector, and work with HEXO to secure broad patent protection on their innovative products and methods and ensure they aren’t infringing on other companies’ trademarks, patents and copyrights – avoiding potentially lengthy legal processes or expensive product launch delays.

The Smart & Biggar litigation team has also handled several disputes where “someone stepped on HEXO’s lawn and we had to tell them to get off.”

“IP in a competitive market like cannabis is so important because you want to own rights to what you make and be able to defend these rights to stand out amongst the crowd,” says Anthony. “When companies like HEXO are innovating so quickly, it’s imperative to have IP protection in place and to be proactive in monitoring the market.”

Leveraging IP

The company has also leveraged its IP in various partnerships and joint ventures with consumer product companies such as Molson Coors.

The duo teamed up in 2018 to create Truss Beverages Co., a beverage company that developed a line of cannabis-infused sparkling beverages and tonics, further contributing to HEXO’s growth in the legalized market.

“IP plays an important role in our discussions with large companies,” says Lemay. “Because we have a protected technology to bring to the table, that creates business value and reduces risk, it makes it much more interesting for prospective partners [and investors].”

As HEXO continues to grow through the development of new brands, partnerships and products, the Ottawa company is relying on the expertise from Smart & Biggar to help ensure it gains – and preserves – its market share by leveraging its IP in joint ventures, licensing agreements, and to attract capital investment and in M&A deals.

With cannabis poised to become legal in more jurisdictions around the world, HEXO and other producers will face fresh competition from new industry players. As the cannabis sector matures, it will be firms like HEXO that took a strategic approach to cultivating and managing their intellectual property that emerge as global leaders, says Anthony.

“It’s really exciting to see how HEXO has managed to turn its IP into something so valuable,” he adds. “There are many other companies that are leaving that value by the wayside instead of capitalizing on the opportunity in the race to the top.”