[Ip-health] Pharmalot: A $500 Million Brawl: Lilly, Canada And Invalidated Patents

Steven Knievel sknievel at citizen.org
Tue Sep 17 07:31:22 PDT 2013


A $500 Million Brawl: Lilly, Canada And Invalidated Patents

Posted Fri, 09/13/2013 - 11:08am by Ed Silverman

In the latest twist in the brawl between Eli Lilly and the Canadian government over invalidated patents, the drugmaker has filed for arbitration and is seeking nearly $500 million in damages as part of an effort to force Canada to alter the way patent rights are administered. The case was filed yesterday under the rules of the North American Free Trade Agreement.

The drugmaker is pursuing what is known as an investor-state dispute which, under provisions of international trade treaties, allows companies to initiate disputes against foreign governments. In this case, Lilly maintains that court decisions violated Canadian obligations under NAFTA, the Trade-Related Aspects of Intellectual Property Agreement and the Patent Cooperation Treaty. Lilly (LLY), by the way, previously sought $100 million in compensation when first challenged Canada.

As reported previously, Lilly argues that Canada failed to uphold international obligations and allowed generic rivals to challenge its patents on two of its drugs without providing sufficient evidence of utility, or usefulness. An example would be clinical data, and Lilly (LLY) accused Canada of expropriation, failing to meet minimum standards of treatment and discriminatory treatment (here is the Lilly claim).

"Patent decisions in Canada over the last decade not only fly in the face of long-established international standards, but they're subjective and completely unpredictable," says Lilly general patent counsel Doug Norman in a statement. "The standard seems to be that there is no standard. The notice of arbitration is the next natural step in Lilly's continuing efforts to address financial losses from improper invalidation."

The patents in question, by the way, pertain to the Strattera attention-deficit disorder pill and the Zyprexa antipsychotic treatment. These were invalidated by Canadian courts in 2010 and 2011, respectively, after Canada implement its 'promise doctrine' for determine intellectual property rights. Lilly contends the doctrine has produced 'absurd results' and violates standards found in NAFTA.

But consumer advocates maintain that the investor-state system essentially elevates companies to the same level of sovereign governments, and this empowers them to circumvent domestic laws and courts, and directly challenge public interest policies before United Nations and World Bank tribunals. These tribunals are comprised of three lawyers.

"It's an eye opener that a domestic court decision can be second-guessed by a foreign tribunal," Lori Wallach, who heads the Public Citizen Global Trade Watch, tells Politico.  And she considers the use of the NAFTA dispute resolution process particularly "invasive" because this subjects the Canadian patent system to the preferences of a single company.

And Public Citizen warns that using a private NAFTA tribunal for arbitration might be expanded under the Trans-Pacific Partnership. "Eli Lilly's alarming NAFTA case against Canada's entire legal doctrine for determining patent validity reveals how multinational pharmaceutical corporations can use the broad foreign investor privileges in these so-called trade pacts as a backdoor way to undercut a government's prerogative to set its own patent standards, a prerogative that is essential for ensuring access to affordable medicines," says Ben Beachy, research director at Public Citizen Global Trade Watch.

"Thanks to these pacts' sweeping investor privileges, Eli Lilly is empowered to ask an unaccountable, extrajudicial tribunal of three individuals to second-guess the patent decisions of Canada's domestic courts and order $500 million in taxpayer compensation. If the Trans-Pacific Partnership, which would expand NAFTA's extraordinary investor privileges even further, would actually get enacted, we could see more pharmaceutical corporations follow Eli Lilly's lead in using the pact to intimidate governments that dare to enact policies to prevent patent evergreening and ensure access to affordable medicines"

"Eli Lilly's brazen usage of NAFTA's sweeping foreign investor privileges to undermine domestic court decisions is not likely to make members of Congress any more interested in revoking their own influence over the TPP by granting the Obama administration's controversial request for the extraordinary Fast Track authority required to railroad the NAFTA-mimicking pact through Congress" (here is a Public Citizen position statement).

One expert says Lilly is entering "untested legal waters," according to Politico, because NAFTA cases have normally been geared toward administrative or legislative government actions, not court decisions. "I would call it an aggressive claims because it goes pretty far in its reach," Lawrence Herman, a former senior Canadian trade official, tells Politico. "

As noted previously, among the issues raised by Lilly is expropriation. The drugmaker believes that the language in trade deals bars governments from not only takeovers of actual physical property, but also intangible property - such as patents - because such a move would diminish the potential for real profits.


Steven Knievel
Program Associate | Global Trade Watch
Public Citizen | Protecting Health, Safety and Democracy
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