[Ip-health] FW: Eli Lilly's notice of investor-state case unveiled

Steven Knievel sknievel at citizen.org
Mon Dec 10 10:27:48 PST 2012

From: Ben Beachy 
Sent: Monday, December 10, 2012 1:21 PM
Subject: Eli Lilly's notice of investor-state case unveiled

Eli Lilly's notice of intent to launch a Ch. 11 investor-state attack on Canada just became public.  You can find it here: http://www.italaw.com/sites/default/files/case-documents/italaw1172.pdf.  
. The case concerns a patent for an ADD drug, not a schizophrenia drug (as Luke Eric Peterson initially projected). 
. Eli's claims include MST, expropriation, and national treatment.
. Eli Lilly wants $100 million (Canadian dollars) in compensation for damages.  

Here's Luke's article on the notice:

publication date: Dec 10, 2012

By Luke Eric Peterson

Fuller details of a threatened arbitration claim against the Government of Canada have come to light with the release by Canada of a Notice of Intent filed on November 7, 2012 by the U.S.-based drug company Eli Lilly.

The threatened claim under Chapter 11 of the North American Free Trade Agreement (NAFTA) was first revealed by IAReporter on December 3, 2012. In our original reporting, we noted that Lilly had not yet divulged the drug(s) at the center of the dispute, but that the company has suffered the recent invalidation of a patent for the blockbuster drug, Zyprexa.

The Notice confirms that the Zyprexa controversy could be fodder for NAFTA arbitration once all domestic remedies are exhausted, however in the interim Lilly has framed its initial Notice as centered on another drug, Strattera, a treatment used for Attention Deficit Disorder. The patent for that drug was invalidated by a Canadian Federal Court in 2010 - some five years prior to the patent's scheduled expiration - due to its perceived inutility.

Lilly says that it has suffered damages of at least 100 million Canadian Dollars as a result of the invalidation of its patent for Strattera. The law firm Gowlings LLP represents Lilly.

"Absurd" and "arbitrary" Judge-made law at core of dispute

At the core of Lilly's threatened claim is a concern that Canada's Federal Courts have developed a doctrine which is at odds with patent law in other jurisdictions, and which has had the effect of invalidating a surprising number of patents in recent years. Lilly complains that Canadian Courts are asking not merely that a given invention have some "scintilla" of usefulness, but also that patent-holders prove, with evidence, that the invention has lived up to the usefulness "promised" by the patent-holder at the time of seeking the patent.

On Lilly's analysis, this "judge-made" promise-doctrine is not only a divergence from Canadian judicial practice prior to 2005, and at odds with the less stringent tests used in the United State and Europe, but also inconsistent with Canada's obligations under several intellectual property conventions, including the World Trade Organization agreement on Trade-Related Intellectual Property (TRIPs).

Much energy directed at showing breach of non-NAFTA Chapter 11 obligations

While Lilly's notice devotes the bulk of its pages to a detailed description of Canada's international treaty obligations, much of this effort is directed to establishing that Canada is not complying with treaties for the protection of intellectual property. Only in the closing pages of its Notice does Lilly (briefly) turn to consider how its treatment in Canada can be construed as a breach of NAFTA Chapter 11's investment protections.

In this context, the company singles out three measures: judicial decisions invalidating Lilly's patent for Strattera; the failure of Canada to rectify the judicial over-reach by the Canadian Courts; and the further adoption by Canada of the judge-made law on patent utility, for instance in the context of intellectual property guidance drafted and published by Canada' Intellectual Property Office.

Invalidation is contrary to expectations, but investment details not proffered

Lilly contends that the sudden and arbitrary adoption by the Canadian Courts of a new, more stringent approach to patent invalidation is contrary to the company's expectations "at the time of its investment", and in breach of NAFTA Article 1105 which sets out a minimum standard of treatment owed to foreigners. Despite this reference to its expectations "at the time of its investment", Lilly's notice does not go into detailed particulars of its covered investment, including the timing of those investments and clarification as to whether the drug Strattera is produced in Canada or imported into that territory for sale by a Canadian subsidiary.

Invalidation of patent is also an expropriation

Apart from its claim for breach of NAFTA Article 1105, Lilly also contends that the 2010 invalidation of its Strattera patent, more than five years before its scheduled expiration, amounts to an expropriation. 

In contrast to Apotex v. USA case, Lilly eschews a denial of justice claim

Of particular interest, the recently-filed Notice does not appear to allege a "denial of justice" on the part of Canada's Courts, and instead appears to assume that judicial decisions needn't be viewed through the lens of that notoriously difficult-to-meet standard. In its newly-threatened claim against Canada, Lilly cites a controversial 2009 ICSID ruling that had held that judicial decisions can be characterized as expropriatory where they are inconsistent with the host state's international treaty obligations. 

In eschewing a claim for denial of justice, Lilly proposes a different legal course than the one taken by Canadian generic pharmaceutical company Apotex in the first of two NAFTA arbitrations brought by that company against the United States.*

Creative National Treatment claims postulated

Finally, Lilly also puts forward a brief allegation that Canada has denied the company National Treatment. This claim has several facets. 

First, Lilly appears to argue that the company faces more onerous patent standards in Canada than a Canadian investor might face in other jurisdictions, such as the United States and Europe. (This unusual form of extra-territorial comparison is not commonly seen in National Treatment claims under investment treaties.) 

Second, Lilly argues that domestic generic pharmaceutical companies - the drivers of many of the Canadian cases which have led to the invalidation of patents held by so-called "innovative" pharmaceutical companies - have received more favourable treatment because they are the beneficiaries of the measures such as the ones faced by Lilly in Canada. 

Elsewhere in the Notice, Lilly also adverts to another variation of its discrimination claim: the fact that pharmaceutical companies appear to be bearing the brunt of the "promise-doctrine", rather than patent-holders in other sectors of the economy.

More information about the Ip-health mailing list