[Ip-health] Lilly, Canada Clash on NAFTA Filings in $388M Patent Fight

Kapczynski, Amy amy.kapczynski at yale.edu
Thu May 5 06:21:32 PDT 2016

A report on the latest in the Lilly / Canada ISDS dispute about Canadian patent law - Lilly has responded to the various amicus briefs and filings.

Filings accessible here:

Lilly, Canada Clash On NAFTA Filings In $388M Patent Fight

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Law360, New York (May 4, 2016, 7:11 PM ET) -- Eli Lilly<http://www.law360.com/companies/eli-lilly-and-company> and Canada sparred in documents released Tuesday over how much weight to give advice on interpreting the North American Free Trade Agreement given by the United States and Mexico to the tribunal overseeing the pharmaceutical giant’s CA$500 million ($388 million) action against the country over canceled patents.

The parties responded April 22 to separate submissions<https://www.law360.com/articles/774976/us-mexico-interpret-nafta-in-lilly-s-canadian-patent-fight> by the U.S. and Mexico offering advice to an International Centre for Settlement of Investment Disputes<http://www.law360.com/companies/international-centre-for-settlement-of-investment-disputes> tribunal on how to interpret provisions of the trade agreement as it oversees the dispute. Eli Lilly & Co. is accusing Canada<https://www.law360.com/articles/472470/eli-lilly-levels-500m-attack-on-canadian-patent-law> of destroying its profits and violating NAFTA<http://www.law360.com/agencies/nafta> by canceling its patents for Strattera and Zyprexa, drugs commonly used to treat attention deficit hyperactivity disorder, schizophrenia and bipolar disorder.

Specifically, U.S.-based Eli Lilly claims the country’s application of the promise utility doctrine, which requires that patent owners involved in litigation prove that the patent has the usefulness the patent application promised, breaches the investor rights provisions in Chapter 11 of the 1994 trade pact between the U.S., Canada and Mexico. According to Eli Lilly, Canadian courts have been applying the doctrine since only 2005, and the invalidated patents were issued before that.

Canada argued that the so-called Article 1128 submissions by the U.S. and Mexico demonstrate that “the NAFTA parties agree on the interpretation of the NAFTA provisions that are at issue in this case. Those shared interpretations should be accorded significant weight by the tribunal.”

It further argued that this agreement makes clear that Lilly’s claim is beyond the scope of the tribunal’s jurisdiction and lacks merit. Lilly, it said, is trying to turn the tribunal into “a court of appeal on matters of domestic law, and also into a world court with plenary jurisdiction over all state-to-state international obligations,” exceeding the NAFTA parties’ consent to arbitration and the purview of Chapter 11.

But in its response, Lilly said the U.S. and Mexico submissions shouldn’t carry so much authority.

“Canada maintains such submissions should be entitled to special weight in the tribunal’s evaluation of questions of treaty interpretation,” Lilly said. “At the outset, therefore, it bears clarification that NAFTA tribunals have repeatedly declined to accord such status to NAFTA party pleadings of any sort, including Article 1128 submissions.”

Only the NAFTA Free Trade Commission, which is made up of senior representatives from all three nations, has the authority to issue interpretations of the treaty, Lilly argued, adding that the pact affords "no authoritative status" to Article 1128 filings.

Submissions like these reflect their respective nations’ litigation positions, not their “considered, joint view on the scope of NAFTA,” Lilly said.

Lilly and Canada each responded on April 22 to six amicus briefs<https://www.law360.com/articles/764342/experts-get-voice-in-lilly-s-370m-canadian-patent-fight> approved by ICSID in February, as well. The amicus filings came from the Canadian Chamber of Commerce, the Canadian Generic Pharmaceutical Association<http://www.law360.com/companies/generic-pharmaceutical-association-inc>, the Canadian Internet Policy & Public Interest Clinic, the Centre for Intellectual Property Policy, the National Association of Manufacturers<http://www.law360.com/companies/national-association-of-manufacturers>, a group of intellectual property law professors and a group of intellectual property scholars.

In their March 18 filings, the U.S. and Mexico agreed in many respects about the interpretation of NAFTA, saying parties to the treaty are bound by a three-year limitations period and pointing out that an investor’s claims must be based on when it first learned of the alleged breach or loss.

The two countries also agreed that denial of justice is the sole basis on which judicial measures are capable of breaching the minimum standard of treatment. The minimum standard of treatment is “an umbrella concept reflecting a set of rules that, over time, has crystallized into customary international law” that establishes a minimum “floor below which treatment of foreign investors must not fall,” they said.

Eli Lilly argued in September that Canada’s arguments are rooted in fallacies aimed at glossing over an increase in cancellations of pharmaceutical patents after the so-called promise utility doctrine went into effect around 2005.

In December, Canada said Eli Lilly had shifted focus<https://www.law360.com/articles/741500/canada-says-lilly-seeks-uber-tribunal-in-500m-ip-fight-> in the dispute and sought to use the panel convened as an “uber-tribunal” that can rewrite Canada’s laws. In January, Eli Lilly rejected Canada’s argument<https://www.law360.com/articles/751350>, saying the nation’s contention was founded on a misstatement of its claims.

Representatives for Lilly did not immediately respond to requests for comment Wednesday. Canada does not comment on the pending arbitration.

Eli Lilly is represented by Richard G. Dearden, Anca M. Sattler and Wendy J. Wagner of Gowling WLG and Marney Cheek, John K. Veroneau, Alexander A. Berengaut, James M. Smith, Nikhil V. Gore and Lauren S. Willard of Covington & Burling LLP<http://www.law360.com/firms/covington-burling>.

Canada is represented by attorneys from its Department of Justice and Department of Foreign Affairs, Trade and Development, including Sylvie Tabet, Shane Spelliscy, Mark A. Luz, Adrian Johnston, Mariella Montplaisir, Michelle Hoffmann and Krista Zeman.

The case is Eli Lilly & Co. v. Canada, case number UNCT/14/2, at the International Centre for the Settlement of Investment Disputes.

--Additional reporting by Hannah Sheehan and Jack Newsham. Editing by Brian Baresch.

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