Abstract: Despite the deep irony of free trade agreements being subverted to codify and extend anti-competitive monopoly rights and despite the equally deep irony of foreign investors having greater enforcement rights than local investors, the joining of enhanced intellectual property rights (IPRs) and protections and strengthened investor rights is creating a wild-west opportunity for unbounded corporate power. Two current contestations show the dangers of this expanded power in sharp relief.
Yesterday, the Cato Institute hosted a panel on the Investor-State dispute brought by Eli Lilly against Canada under Chapter 11 of the North American Free Trade Agreement. The panel featured Mark Schultz from the Southern Illinois University School of Law, Burcu Kilic from Public Citizen, and Christopher Sands from the Hudson Institute. The trade dispute surrounds a Canadian court case in which Eli Lilly’s patent for Strattera was found to be invalid because it did not met the Canadian utility standards. The company alleges that the utility standards applied by the court – which require the patent applicant to demonstrate ‘promised utility’ at the time of filing – amount to an “unlawful expropriation of Claimant’s investments.”
Investor-state dispute resolution is a growing concern for governments like Canada that should want to preserve policy space for regulating business activity. From licenses for fracking, mining, and timber cutting, to health and safety regulations, to labor policy, and to intellectual property rules, countries are finding their regulatory rules and decisions attached by investors whose expectations of future profits are affected by even-handed regulations or by appellate court decisions.
After losing two patent cases before the appellate courts of a Western democracy, should a disgruntled foreign multinational pharmaceutical company be free take that country to private arbitration claiming that its expectations of monopoly profits had been thwarted by the courts’ decisions? Should governments continue to negotiate trade agreements where expansive Intellectual Property-related investor rights and investor- state dispute settlement (ISDS) are enshrined into hard law?
On 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.
[Posted by Henning Grosse Ruse-Khan on the International Economic Law and Policy Blog (CC BY-NC 2.5)] Last week, Luke Peterson reported that the U.S. based pharma corporation Eli Lilly has put Canada on notice of its intent to submit a claim to arbitration under NAFTA Chapter 11 following the invalidation of some of its patents by Canadian courts (http://www.iareporter.com/articles/20121203_2). The Notice of 7 November 2012 is now available on Andrew Newcombe’s website (http://italaw.com/cases/1625). It reveals an interesting new interface between international IP and investment law.
Excerpt from a Fact Sheet from Public Citizen’s Global Trade Watch.
Click here for the full Fact Sheet
Eli Lilly and Company has initiated formal proceedings under the North American Free Trade Agreement (NAFTA) to attack Canada’s standards for granting drug patents, claiming that the denial of a medicine patent is an expropriation of its property rights granted by the agreement.
Yesterday, Mexico was invited to enter the TPP negotiations. According to the USTR press release: “The Administration will shortly notify Congress of its intent to include Mexico in the TPP negotiations. The notification will trigger a 90-day consultation period with Congress on U.S. negotiating objectives with respect to Mexico. USTR also will publish a notice in the Federal Register seeking public comments.”
Today, Canadian Prime Minister Harper announced that Canada will join the TPP negotiations as well, (see Reuters story). Harper said that “Opening new markets and creating new business opportunities leads to jobs, growth and long-term prosperity for all Canadians.”
Another round of TPP negotiations on intellectual property is underway this week in Chile, and two additional countries are looking to get in on the action: Mexico and Canada. However, both countries may have trouble getting their citizenry to agree to the IP provisions if they remain in their current form. To determine how much each country would have to change its laws to comply with TPP requirements, PIJIP asked me to compare the TPP’s leaked IP chapter with the existing law in each country, as well as the countries’ obligations under NAFTA.
Unsurprisingly, the TPP provides far more stringent limitations than NAFTA, and would require major legal changes by both countries.