Canada: Eli Lilly Files Notice Of Arbitration In $500M NAFTA Dispute Against Canada

In the past 10 years, there has been a significant increase in the number of Canadian pharmaceutical patents, which have been invalidated by the courts on the basis that they fail to provide proper support for their "promised" utility. Subsequent to the Supreme Court of Canada (SCC) denying it leave to appeal from decisions invalidating its patents protecting the drugs Strattera and Zyprexa on this ground, Eli Lilly has taken the novel approach of filing a Notice of Arbitration against the Government of Canada under the North American Free Trade Agreement (NAFTA) Chapter 11.


It is well established in Canadian law that for an invention to be patentable, it must not only be new and non-obvious, it must also have utility. The utility of a claimed invention is established by proving that, at the filing date of the patent application, the utility was either demonstrated or could be soundly predicted. The SCC established a three-part test for sound prediction in Apotex Inc v. Wellcome Foundation Ltd, 2002 SCC 77 ("AZT") as follows: (1) there must be a factual basis; (2) the inventor must have an articulable and sound line of reasoning from which the desired result can be inferred from the factual basis; and (3) there must be proper disclosure. Subsequent to the SCC decision in AZT, the courts have increasingly reverted to what is known as the "promise of the patent" doctrine in their utility analysis. Under this doctrine, the courts first construe the utility that the patent promises to deliver and then requires that the patent holder prove that it had either demonstrated or soundly predicted that utility at the time of filing.

Eli Lilly's StratteraTM is a drug containing the active ingredient atomoxetine used for the treatment of Attention-Deficit/Hyperactivity Disorder (ADHD). This medical use was covered by claims of Eli Lilly's Canadian Patent No. 2,209,735 (the '735 Patent) which was found invalid by the Federal Court in an impeachment action brought by the generic drug company Novopharm (now Teva Canada Limited). A key factor in the court's decision was the finding that the inventors claimed in the '735 Patent a new use for atomoxetine to effectively treat humans with ADHD and what is implicit in this promise is that atomoxetine will work in the longer term. The Federal Court concluded that a seven-week long clinical trial on 22 adult patients, referred to as the MGH Study, "was too small in size and too short in duration to provide anything more than interesting but inconclusive data" and therefore did not constitute a demonstration of utility. While holding that "[i]n some cases an initial study of this sort might provide a basis for a sound prediction of utility" the Federal Court ultimately found that the '735 Patent did not meet the disclosure requirements for sound prediction as the patent did not set out a reference to the findings of the MGH Study. The Federal Court of Appeal (FCA) upheld the decision of the Federal Court, and the SCC denied leave to hear a further appeal. Had the '735 Patent not been found invalid, it would not have expired until January 4, 2016.

ZyprexaTM is an antipsychotic containing the active ingredient olanzapine used for the treatment of schizophrenia and other psychotic disorders. Such uses were covered by the claims in Eli Lilly's Canadian Patent No. 2,041,113 (the '113 Patent) which was found invalid by the courts after a series of decisions stemming from an infringement action brought by Eli Lilly against Novopharm. Eventually, after a denial of leave to appeal to the SCC from the FCA decision remitting the utility and sufficiency grounds of alleged invalidity back to the Federal Court for determination, this case ended up back in the Federal Court, which found that the '113 Patent was invalid because the patent's promise had not been demonstrated and could not have been soundly predicted as of the filing date of the patent. Key, in this decision, was the determination that the promise of the '113 Patent is that olanzapine treats schizophrenia patients in the clinic in a markedly superior fashion with a better side-effects profile than other known antipsychotics and that this promise expresses a substantial advantage for olanzapine over the compounds of Eli Lilly's earlier genus patent, Canadian Patent No. 1,075,687 ( click here for further details). The FCA dismissed an appeal without reasons and the SCC denied leave to hear a further appeal in this case ( click here for further details). Had the '113 Patent not been found invalid, it would have expired on April 24, 2011.

The Notice of Arbitration

Eli Lilly filed a Notice of Intent to Submit a Claim to Arbitration under NAFTA Chapter 11, seeking damages in an amount of not less than CDN $100 million regarding its patent for Strattera. This was later withdrawn and replaced by a Second Notice of Intent seeking damages in an amount of not less than CDN $500 million regarding its patents for both Strattera and Zyprexa. On September 12, 2013 Eli Lilly filed its Notice of Arbitration.

In the Notice of Arbitration, Eli Lilly asserts that the promise doctrine, upon which its Strattera and Zyprexa patents were invalidated, contravenes Canada's obligations under NAFTA and the Patent Cooperation Treaty (PCT), including by:

  1. providing inadequate and ineffective protection and enforcement of patent rights;
  2. imposing onerous and additional patentability requirements that have the effect of denying patent protections to inventions that are new, non-obvious and capable of industrial application and therefore meet all of the required conditions precedent to patentability under NAFTA;
  3. discriminating against pharmaceutical patents, contrary to the requirement that patents be made available in all fields of technology under NAFTA;
  4. revoking patent rights on grounds that would not have justified a refusal to grant the patent in the first instance;
  5. imposing form and content requirements relating to international patent applications that are different from or additional to those provided in the PCT and Regulations; and
  6. denying to the patent holder the right to insist before national courts that the requirements provided for by the PCT and Regulations be applied to the applicant's international patent application.

Eli Lilly alleges that the "promise doctrine" created by the judiciary "is inconsistent with the utility standard embodied in NAFTA Chapter 17, is significantly out of step with the law of utility in Canada's NAFTA partners, and is a dramatic departure from the standard in Canada when the Zyprexa and Strattera patents were filed and granted". Eli Lilly further asserts that Canada has breached its obligations under NAFTA Chapter 11, namely Article 1110 (Expropriation) and Article 1105 (Minimum Standard of Treatment) and seeks relief, including damages, in an amount of not less than CDN $500 million.


As reported here, the recent decision from the FCA in Sanofi-Aventis v Apotex Inc, may suggest that the Canadian courts are becoming less motivated to read an explicit promise into a patent based on inferences. However, the promise of the patent remains a controversial aspect of the utility analysis in Canada which, to date, the SCC has not granted leave to hear as part of an appeal. The outcome of Eli Lilly's NAFTA suit will be of interest to patentees who have exhausted all avenues of domestic appeal in Canada.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Patricia Folkins
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.