It's actually Chief Stoker who is the closest to the truth, but the Legion bullies people in thinking otherwise and they relent to avoid the threatened bad press of appearing to be going against "veterans" (as the Legion thinks of itself).
Trade marks protect the exact and specific mark that has been registered or anything that is trying to mimic it closely enough to cause confusion of the mark. It does not, and especially with something that is otherwise a common object of specific meaning, protect against all such objects being used by someone else nor does it protect the meaning of the object.
For instance, Dove soap has a specific dove design trademarked, but they cannot stop anybody else using a dove - not of that design or close to it -to convey purity, or peace. No more than Apple can prevent people from using the word apple or photos/drawings of apples in their publicity so long as it causes no confusion with their trademarked logo.
So the Legion has no right to prevent people using drawings in general of poppies, or even less so actual pictures of poppies, so long as their design falls sufficiently far enough from their own design to avoid confusion with theirs, nor can they sue anyone merely for using such other poppies in an association to remembrance of war dead.
For instance, I could make a site dedicated to Canadian soldiers who died in Afghanistan and start it, at the top with a title printed on top of a full width picture of a field of blooming poppies, and there is nothing the Legion could do successfully to contest such use. Similarly, I could take a picture of fields of poppies in bloom and print and sell ties made with the picture and they would be up schitt creek the same way. This is even more so when you consider (and court would!) that the association of the poppy with remembrance of the war dead did not originate with the Legion, but with John MacRae's poem.