On 12 September 2013, Eli Lilly (Lilly) filed a Notice of Arbitration that officially launched the arbitration of its claim against Canada (NAFTA Claim) under the North American Free Trade Agreement (NAFTA). The NAFTA Claim alleges that the invalidation by Canadian courts of the Lilly drug patents for STRATTERA® (atomoxetine) and ZYPREXA® (olanzepine) is inconsistent with the obligations owed to Lilly by Canada as an investor under NAFTA. Lilly is seeking an amount in damages of not less than Cdn $500 million. Specifically, Lilly claims that Canada has failed in its positive obligation under NAFTA to, (i) provide fair and equitable treatment and full protection and security for its investments (Article 1105(1)), and (ii) not to expropriate the investment of an investor except in narrow circumstances and on payment of compensation (Article 1110). Both the Lilly drug patents at issue were invalidated by Canadian courts for a lack of utility based on the “promise doctrine”, which provides that if any specific promise of utility is made in a patent, it is that specific promise which must be demonstrated or soundly predicted in order to satisfy the requirement for patent utility. Where no specific promise is made, the ordinary level of a “mere scintilla” of utility will apply (see, for example, Sanofi-Aventis v Apotex Inc, 2013 FCA 186 at para 49). Lilly contends that since the promise doctrine evolved after it invested in the Canadian drug patents, it was entitled to rely on its legitimate expectation that Canada’s domestic patent law would remain unchanged from the time of patent issuance. The “promise doctrine” is not provided for expressly in the Canadian Patent Act; instead, it is a judicial interpretation of patent utility requirements that has arisen in the Canadian federal courts. In denying leave to appeal in respect of both Lilly patents, the Supreme Court of Canada has declined to make an authoritative statement on the doctrine. For its part, the Canadian Government has not overruled the application of the doctrine with legislation, nor come to any agreement with Lilly during their negotiations held prior to the Notice of Arbitration being filed. As a result, this matter continues to progress towards an arbitration which may have to balance the sovereignty of Canada over its domestic patent law on the one hand, and the right of an investor to challenge judicial doctrines that affect its investments on the other. ETIPS® will continue to monitor this story. For prior ETIPS® articles covering the progress of Lilly’s NAFTA claim, click here and here. Summary by: John Lucas

E-TIPS® ISSUE

13 09 25

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