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Tribunal Decides in Favour of Canada in NAFTA Arbitration Suit

March 21, 2017

By Michael Fenwick 

The Government of Canada has prevailed in its NAFTA arbitration suit with Eli Lilly and Company [“Lilly”]. Lilly sued the government as a result of the invalidation, by Canadian courts, of the patents that protected Lilly’s drugs Strattera® and Zyprexa®. The patents were invalidated on the basis they lacked utility after application of the promise doctrine. The promise doctrine involves a review of the specification of a patent to determine whether the inventors have made a promise concerning the invention’s utility. If a court finds that the inventors made a promise, whether explicitly or implicitly, the patent will only have utility if that promise is fulfilled. As such, the promise doctrine can increase the threshold required for a finding of utility. Lilly’s patents covering their drugs were invalidated as a result of the application of the promise doctrine.

In the arbitration suit, Lilly argued that the application of the ‘promise doctrine’ constituted new and arbitrary law, and was discriminatory, in particular, against pharmaceutical companies and their patented products. Accordingly, Lilly argued that the Government of Canada had wrongfully expropriated Lilly’s intellectual property in contravention of its obligations under the NAFTA treaty. The Government of Canada objected to the suit on several grounds, including the argument that the invalidation of Lilly’s patents did not constitute a breach of the NAFTA provisions or any other international obligation.

Upon a review of the evidence, the Tribunal found that the application of the promise doctrine did not involve a fundamental or dramatic change in Canadian patent law. The Tribunal also found that the promise doctrine was neither arbitrary nor discriminatory, and that it does not violate any NAFTA provision or obligation owed by the Government of Canada under the treaty. 

While the Tribunal’s decision is not necessarily surprising, Lilly’s suit against the Government of Canada did garner a significant amount of press coverage, resulting in a spotlight on the promise doctrine. Lilly’s NAFTA arbitration suit is not the only significant case involving the promise doctrine which is currently ongoing. We eagerly await a decision from the Supreme Court of Canada in AstraZeneca Canada Inc. v. Apotex Inc., which also solely focused on the promise doctrine (see our article here). It’s unlikely the Supreme Court would be influenced by Lilly’s arbitration case and the associated press coverage. However, based on comments from the Chief Justice during the oral hearing in the AstraZeneca case, we are cautiously optimistic that the promise doctrine could be scaled back. Stay tuned – we expect the Supreme Court’s decision very soon.

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Michael Fenwick Michael Fenwick
B.Sc., M.Sc. (Org. Chem.), LL.B.
416.957.1665  email Michael Fenwick