Eli Lilly Loses Quixotic Quest To Get Canada To Pay $500 Million For Rejecting Its Bad Patents
from the corporate-sovereignty-saved dept
Over the last few years, we've written a ton about "corporate sovereignty" provisions in trade agreements. Technically, these tend to be called "Investor State Dispute Settlement" or ISDS provisions, but I really believe that a decent part of the reason they're called something so boring is to stop people from paying attention to just how nefarious these provisions truly are. One of the reasons we first started paying attention to these provisions -- as they were showing up in agreements under negotiation, such as the TPP and TTIP -- was following a story involving the pharmaceutical giant Eli Lilly demanding $100 million from Canada for rejecting two of its patents.
The issue was that Canada had rejected these two patents because the company couldn't prove that the patented drugs were actually useful. Eli Lilly claimed that Canada had no right to reject patents on that basis, arguing that it was a "dramatic" shift in how patents were reviewed, and thus it was "expropriating its property" and undermining the company's "expected future profits." Think about that for a second. By the time this case went to an actual tribunal, the amount that the company was demanding had ballooned from $100 million to $500 million. This battle has waged on for many years -- and for Eli Lilly, this was a huge deal. Management at the company basically bet the company on continuing to get new patents, and any hiccup -- even a rejection of patents for not being useful -- could be a disaster for the company. The company even pushed to get Canada slammed during diplomatic proceedings in the infamous Special 301 Report for the USTR for daring to reject its patents -- and the USTR complied.
Well, it looks like all of that may have been for nothing. That's because Eli Lilly has lost entirely, and not only won't it be getting the $500 million it wanted, but it also has to pay Canada's $5 million in legal fees. You can read the final award here or down below. Of course, some may argue that this shows that the ISDS corporate sovereignty provisions work out fine in the end, with tribunals getting things right (even if that's not actually true in many cases), but just the fact that the Canadian government had to go through this massive and expensive process for many years just for rejecting two bad patents should show why ISDS provisions are such a problem.
In the ruling, the tribunal even notes the Special 301 report that Eli Lilly worked so hard to have call out Canada's patenting practices, but more or less dismisses it, by noting that others, such as Mexico didn't complain similarly:
The Tribunal has paid particular attention to the 2014 and 2015 editions of the Special 301 Report of the USTR. In these documents, USTR notes that the United States “has serious concerns about the lack of clarity and the impact of the heightened utility requirements for patents that Canadian courts have applied recently”. This comment cannot be dismissed outright as a lobbying effort by Claimant, as suggested by Respondent. However, the Special 301 Report stands alone in the record as a complaint regarding Canada’s utility doctrine from any other State, including Mexico, in the decade since the promise utility doctrine was allegedly adopted. For the Tribunal, that silence speaks louder than the single, brief criticism contained in the USTR’s Special 301 Report.
In other words, sure, maybe it wasn't just because Eli Lilly heavily lobbied Congress and the USTR to attack Canada on this point, but the fact that no other country seems concerned with Canada's standards for denying patents, it certainly looks like this wasn't such a big deal.
Also in the ruling, there's a focus on "expectations." Remember, a big part of Eli Lilly's claims was how this impacted its "expected" profits. But here, the tribunal basically notes that just because Eli Lilly expected Canada to ignore its own law, it doesn't mean that it actually enforcing its own laws is some nefarious plot:
The record shows that at the time Claimant made its investments, it was aware that Canadian patent law required patented inventions to be useful. Eli Lilly executives testified that they understood the Canadian utility requirement to be a low threshold. In fact, it appears that the utility of Strattera and Zyprexa in Canada was taken for granted within the company. Claimant expected its patents would not be invalidated for lack of utility.
However, this perception cannot amount to a legitimate expectation. For the reasons stated above, the Tribunal has found that each of the three elements of the alleged promise utility doctrine had a foundation in Canadian law when Claimant’s patents were filed. At that time, although Claimant may not have been able to predict the precise trajectory of the law on utility, it should have, and could have, anticipated that the law would change over time as a function of judicial decision-making.
The idea behind ISDS was to encourage investment in developing nations, where there was a fear that a sketchy government might seize a factory or something. But that's not a problem between Canada and the US, and Eli Lilly should have been able to put on its big boy pants and recognize that maybe, just maybe, Canada can reject some of its patents, and the company doesn't need to throw an international hizzy fit. Next time, rather than betting the company on patents, perhaps the company will start thinking about business models that don't require a complete lottery ticket.
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Filed Under: canada, corporate sovereignty, drugs, isds, nafta, patents, tpp, us
Companies: eli lilly
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Re:
Zyprexa - Olanzapine was first made in the United Kingdom in 1982 by Eli Lilly. The drug became generic in 2011. Sales of Zyprexa in 2008 were $2.2B in the US, and $4.7B worldwide.[
So why would you need a patent on a drug that went generic 6 years ago?
Oh because you want to lock up another territory to protect the billions in income for a few more years?
It seems that these tactics were just trying to prop up profits, not for something new and useful but just trying to create another captive market where they can control the prices.
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Hell, no.
No. They're no better than the off-patent drugs they came from.
Next?
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But they thought they had.
If they didn't get their way, they would force the country to expend millions defending against imaginary losses.
They got these lopsided rulings, and bought support from a nation where they dominate the market putting profits above lives.
They inflate prices and look for ways to maintain control, reaping the profits they claim are for new development... yet they are spending millions trying to recycle control of old drugs.
Countries are not supposed to be beholden to the fevered dreams of wealth of corporations and the fact that there is even a framework for ISDS should shame leadership. Corporations can demand payment for imaginary losses, where is the framework for a country to demand compensation from a company that put profit over citizens lives and demanding hundreds a pill for something that cost .02 to make?
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Stubbornness?
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Re: Stubbornness?
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Apparently not, because their actions are completely devoid of any concern for patient wellbeing and appear to be driven solely by profit motives.
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No. They take a capitalist oath.
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Bravo Canada...
Right, wrong, or indifferent, Canada stood its ground.
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Of course, some may argue that this shows that the ISDS corporate sovereignty provisions work out fine in the end, with tribunals getting things right (even if that's not actually true in many cases), but just the fact that the Canadian government had to go through this massive and expensive process for many years just for rejecting two bad patents should show why ISDS provisions are such a problem.
Whether or not countries win the case isn't the main issue, the fact that they have to go to court at all is. If you know that you're in the right on something, but you also know that there's a really good chance that in the right or not you'll still be dragged to court and have to deal with that song and dance if you do it, you're less likely to engage in whatever the behavior is, whether that be speaking, passing a law or merely enforcing it.
When a country is faced with the threat of hundreds of millions or more on the line, where the 'judges' are anything but unbiased and the ruling can't be appealed then letting a company do whatever they want can start to seem the better option, even if it screws the public of that country over. As SLAPP suits demonstrate you don't need to go to court to beat the other party, often a threat to do so is more than enough.
Doing a little research on the site regarding threats I found this article where the first half covers the threats and how effective they can be as listed in the source article, with the later being more problems caused by corporate sovereignty, and in the process ran across this little gem:
And ISDS has put Romania in a no-win situation because it tried to follow European Union laws. During its struggling, newly post-communist days, the government had enacted a set of generous tax incentives. When it was trying to join the EU, it was instructed to end those incentives, which the European authorities regarded as “illegal state aid.” After the government did just that, the owners of a food manufacturing business — Romanian-born twin brothers who became Swedish citizens — filed an ISDS claim in 2005.
The European Commission told the tribunal that the tax incentives violated EU law. Unmoved by that fact, the tribunal awarded those brothers about $250 million. And when the European Commission ordered Romania not to pay, the brothers moved to seize Romania’s overseas assets. In a statement, the brothers’ company, European Food SA, said the tribunal’s award was justified because Romania owed the company damages for removing the incentives.
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https://www.techdirt.com/articles/20170309/07133936877/canada-says-it-wont-attend-special-301-hearin g-because-ustr-prefers-industry-allegations-to-facts-data.shtml
Canada considers the Special 301 process and the Report to be invalid and analytically flawed because the process relies primarily on US. industry allegations rather than empirical evidence and objective analysis.
Good for Canada.
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The Trump administration has declared that it'll be opening NAFTA renegotiations within weeks.
It's not hard to imagine that Eli Lilly will be showing up at the table with some demands.
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Why hang a sword over your head if you don't have to?
Corporate sovereignty clauses should be seen by any government that's been paying attention as a poison pill. Doesn't matter how good the rest of it is, if it includes a corporate sovereignty clause it should be rejected.
Companies are staffed by adults, they don't need a clause to 'protect' them from the mean old governments passing mean old laws, common sense should be plenty.
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Shot at and missed...
Just because Eli Lilly missed on this shot, it doesn't mean that there's nothing wrong with ISDS corporate sovereignty provisions. I expect the pharma industry will continue taking shots even if a few occasionally miss the bull's eye.
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