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Eli Lilly's $100-million NAFTA gambit: Big Pharma can ignore its patent promises

| March 4, 2013
Photo: sciondriver/Flickr

On November 7, multinational drug maker Eli Lilly (2012 profits: $4 billion) filed a notice of intent to submit a NAFTA investment claim challenging Canada's system for granting patents after being denied one for its ADHD drug Strattera. Ears perked up around the world. As Public Citizen explains in a recent primer on the case, "Eli Lilly's move marks the first attempt by a patent-holding pharmaceutical corporation to use U.S. 'trade' agreement investor privileges as a tool to push for greater monopoly patent protections, which increase the cost of medicines for consumers and governments."

The case is important given the high-profile controversy related to patents and other pharmaceutical monopoly rights in the Canada-EU free trade negotiations, which are coming to a conclusion, and because of how the Trans-Pacific Partnership could also extend patent protections to Big Pharma.

Eli Lilly's NAFTA challenge, the latest in a list of about eight current cases against Canada worth at least $2.5 billion, takes aim at Canada's "promise doctrine." Over the past decade, Canadian courts have started to require firms to prove that a patented drug is more than just useful under the definitions in the Patent Act, but that utility is tied to the promises a firm makes about how the drug works and how it is different than existing drugs.

Eli Lilly says in its notice of intent that, "This nonstatutory 'promise doctrine' is not applied in any other jurisdiction in the world," and that it "contravenes TRIPS Article 27(1) and NAFTA Article 1709(1) by imposing onerous and additional utility requirements that have had the effect of denying patent rights for inventions which meet the conditions precedent to patentability." (TRIPS is the WTO Agreement on Trade-Related Intellectual Property Rights.)

But as Public Citizen explains, that's not a bad thing. In fact, the promise doctrine makes Canada patent regime stronger in many ways than U.S. and European equivalents:

The corporation lambasts this patent policy framework as "discriminatory, arbitrary, unpredictable and remarkably subjective." It presumes to declare what Canada's policy should be -- that Canada must issue a patent and allow a drug firm to charge monopoly prices if a medicine has a 'mere scintilla' of utility.

The result of a NAFTA win for Eli Lilly, says the U.S. public and consumer advocacy organization, "could expose Canada to a slew of investor-state attacks from other drug companies that have had patents invalidated because their medicines have not met the promises they made to initially obtain patents." (Canadian courts recently invalidated Pfizer's patent for Viagra, though for different reasons related to a failure to disclose the exact molecule that lifted men's spirits, so to speak.)

'Minimum standards of treatment' and expropriation

As in most recent NAFTA and many international investor-state disputes, Eli Lilly is claiming that the Canadian courts' decision to invalidate its patent for Strattera violates minimum standards of treatment guaranteed in NAFTA's Chapter 11. Public Citizen explains that both Canada and the U.S. argue this definition should be limited to due process under the law, "But investor-state tribunals have generated increasingly inventive interpretations of the minimum standard, arguing that it also requires governments not to enact policies that could plausibly violate foreign investors' expectations."

Here the firm claims that despite having recourse to the courts as any other company would, the court's decision, and the Government of Canada's failure to overturn that decision by granting the patent, "contravenes Lilly's most basic and legitimate expectations of a stable business and legal environment." They say they could not have anticipated that the "promise doctrine" would interfere with their right to profit when they first made their investment in Canada, and that they were deprived of "full protection and security," as if we were in the middle of a civil war.

Eli Lilly also argues that Canada prematurely took away its exclusive patent rights for Strattera, which amounts to a direct expropriation -- as if their factory had been seized -- in contravention of NAFTA Article 1110. Alternatively, the firm argues, the court and government actions are an indirect expropriation of its right to profit in contravention of global treaties -- NAFTA and TRIPS -- that are legally binding on Canada.

But as Public Citizen comments:

NAFTA's Intellectual Property Chapter contains no general commitment to comply with other intellectual property agreements. Rather, in describing the standard that signatories are to meet–providing "adequate and effective protection and enforcement of intellectual property rights" -- NAFTA names four specific international agreements, the substantive provisions of which signatories are to give effect in their domestic law: conventions concerning phonograms, literary and artistic works, industrial property and plant varieties.

Moreover, WTO rules can only be enforced when one government formally challenges another government before a WTO tribunal. There is no right in the WTO for a corporation to directly challenge sovereign governments. Arguing that NAFTA requires countries to enforce international agreements and rules not even listed in NAFTA would vastly expand corporate rights to directly attack government policies -- and would do so under terms to which governments never agreed.

"Worryingly," continues the fact sheet, "the establishment of just such a backdoor means for private corporations to directly challenge governments for alleged TRIPS violations is one serious concern raised about the TPP's draft Investment Chapter, which expands considerably on NAFTA's rules."

Take action

Eli Lilly's notice of intent to file a NAFTA claim is only the first step. The next is filing the actual claim, and then Canada's counter-claim before it can go behind closed doors to an investment tribunal outside the country. The case, and many other current NAFTA investor lawsuits against Canada (ex. Lone Pine's challenge to Quebec's fracking moratorium, or the St. Mary's Cement case against an Ontario decision denying them the right to dig a quarry, among others) show just how badly we need a radical reform of these treaties to better balance corporate rights to profit with the public right to regulate and set policy.

On February 5, more than 70 Canadian, Quebec and European organizations issued a joint statement against including investor-state dispute settlement in the Canada-EU trade deal. There is news today that Canada and the EU are still wrestling with language in the investment treaty but that it threatens to be even more pro-investor than NAFTA. The Eli Lilly case and the number of multinational pharmaceutical companies based in Europe creates even more urgency to say no to excessive investor rights in the CETA and other Canadian trade negotiations.

To send a letter today to Prime Minister Harper asking him to pull investor-state dispute settlement out of CETA, click here. You'll be sent to a Registered Nurses' Association of Ontario action alert.

Photo: sciondriver/Flickr

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