Last year, the French alcohol maker Remy Cointreau REMYY sued Canopy Growth Corporation CGC for alleged trademark infringement over its CBD-infused sparkling water brand Quatreau.
Cointreau (pronounced KWAN'troh) claimed that Canopy used Quatreau, (KWA'troh) to "trade-off the market dominance and fame of the Cointreau mark," arguing that 'only the "n" sound' differentiated the two brands, Spirits Business reported earlier.
The Canadian cannabis giant and its U.S. subsidiary denied fully or partially 112 of the 115 claims Cointreau and its U.S. subsidiary made in the complaint and jury demand in October.
Now, according to a filing in Manhattan federal court, the France-based producer of Cointreau orange liqueur has settled the trademark dispute, reported Reuters.
After both parties asked the court to put an end to the case, U.S. Judge Edgardo Ramos dismissed it on Monday.
Cointreau initially accused Canopy of using Quatreau, "in order to unfairly capitalize on the goodwill and reputation of the Cointreau mark," adding that "(The) defendants' wilful actions will not only confuse consumers as to their affiliation with plaintiffs and the Cointreau brand but will blur the exclusive association plaintiff enjoys between Cointreau and a single source of orange liqueurs."
Canopy, based in Smiths Falls, Ontario said in a New York court filing on Sept. 21 that its Quatreau brand has "not infringed any applicable trademarks under federal or state law," and is not "confusingly similar to" Cointreau's trademarks and name and has not diluted it.
Besides asking for profits that Canopy has made on products with the allegedly infringing trademarks, including court costs and attorneys' fees, Cointreau sought a permanent injunction to prevent Canopy from infringing on its trademarks and using any word, term, name, symbol or device on any product, which is likely to confuse.
Canopy's Quatreau launched in the U.S. in March 2021, following its debut in Canada. Shortly after, the Canadian cannabis producer partnered with Southern Glazer's Wine & Spirits to distribute its CBD-infused beverages in the U.S.
Canopy’s Financials & Analysts' Take
In the meantime, Canopy Growth was one of the top three Canadian companies reporting earnings in May, despite a 5% year-over-year decrease in net revenue which amounted to CA$520 million ($408,15 million) in the fourth quarter ended March 31, 2022.
The company also reported that adjusted EBITDA was a loss of CA$415 million in fiscal 2022, representing a CA$75 million increase in adjusted EBITDA loss versus a year ago. The free cash flow in fiscal 2022 was an outflow of CA$582 million, representing an 8% decrease in outflow versus fiscal 2021.
Cantor Fitzgerald’s analyst Pablo Zuanic said in his recent note that the company’s cost-saving measures and efforts to pivot away from value in the domestic recreational business should help the firm reach its target of positive EBITDA in the fiscal year 2024. However, he noted that "more clarity on the pace of cash burn" would help the cannabis company.
Fitch Ratings downgraded Canopy Growth, adding that it is “highly doubtful that Canopy can improve EBITDA trends to reach operating cash flow breakeven in fiscal 2025 (by March 31, 2025) as Fitch previously expected, and creates greater uncertainty around capital structure sustainability,” reported Marijuana Business Daily.
Fitch said that their move reflects substantial market-share losses in the cannabis market in Canada as well as execution missteps and challenges around the company’s cultivation strategy.
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