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Eli Lilly files Notice of Arbitration in $500M NAFTA dispute against Canada

September 23, 2013

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.

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Andrea Berenbaum, B.Sc., Ph.D. (Inorg. Chem.), M.Sc.BMC, J.D., is an associate lawyer with Bereskin & Parr LLP's Biotechnology and Pharmaceutical Practice group.

Patricia Folkins, B.Sc., Ph.D. (Chem.), is a partner with Bereskin & Parr LLP and head of the firm’s Chemical practice group.

 

Information on this website is for information only. It is not, and should not be taken as, legal advice. You should not rely on, or take or not take any action, based upon this information. Professional legal advice should be promptly obtained. Bereskin & Parr LLP professionals will be pleased to advise you.

 
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