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

Last Updated: September 24 2013
Article by Andrea Berenbaum and Patricia Folkins

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.

Background

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.

Outlook

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 Mondaq.com.

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

Authors
Andrea Berenbaum
Patricia Folkins
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions