lillyOn September 12, Eli Lilly formally submitted a Notice of Arbitration against Canada under the rules of the North American Free Trade Agreement (NAFTA). The filing is here.

Eli Lilly alleges that Canada violated its NAFTA intellectual property obligations when its courts found the patents for two of its drugs to be invalid. The drug patents in question – covering Lilly’s products Strattera and Zyprexa – had been successfully challenged by generic firms in 2009 and 2010, which argued that the patents failed to meet Canadian usefulness standards.

The Notice of Arbitration states that:

“Canada is required to grant patents for inventions that “are new, result from an inventive step and are capable of industrial application.” (Id. NAFTA Article 1709(1)). Further, such “patents shall be available and patent rights enjoyable without discrimination as to field of technology” and Canada may only revoke a patent on grounds that would have justified a refusal to grant the patent in the first instance. (Id. Article 1709(7) & (8)). Canada has failed to abide by these obligations, and that failure, along with other conduct, has resulted in the unlawful expropriation of Claimant’s investments under NAFTA Article 1110 and a violation of the minimum standard of treatment mandated by NAFTA Article 1105.”

Eli Lilly seeks the following relief:

“(i) damages for the full measure of direct losses and consequential damages sustained as a consequence of Canada’s breach of its obligations under NAFTA Chapter 11, estimated in an amount not less than CDN $500 million plus any payments Lilly or its enterprise is required to make arising from the improvident loss of its Zyprexa and Strattera patents or its inability to enforce its Zyprexa and Strattera patents;
(ii) the full costs associated with these proceedings, including all professional fees and disbursements, as well as the fees of the arbitral tribunal;
(iii) pre-award and post-award interest;
(iv) payment of a sum of compensation equal to any tax consequences of the award, in order to maintain the award’s integrity; and
(v) such further relief as the arbitral tribunal may deem just and appropriate.”

Eli Lilly’s chief patent counsel, Doug Norman, is quoted in Politico saying that the Canadian Parliament needs to change its law to prevent similar court rulings: “The Parliament could have stepped in and fixed Canada’s patent statutes. To date they have looked the other way.”

However, public interest groups are alarmed that Eli Lilly has used the investor-state Dispute settlement mechanism in this way.  In a briefing paper on the dispute released last March, Public Citizen warned that “Eli Lilly’s NAFTA investor-state challenge marks the first attempt by a patent-holding pharmaceutical corporation to use the extraordinary investor privileges provided by U.S. “trade” agreements as a tool to push for greater monopoly patent protections, which increase the cost of medicines for consumers and governments.”

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