Canada Capitulates: Supreme Court Throws Away Government's Great Pharma Patent Victory

from the who-needs-the-law-when-you-can-bully? dept

Techdirt readers will probably recall a long-running saga involving corporate sovereignty, $500 million, the US pharma company Eli Lilly, and drug patents. In its claim against the Canadian government, made using NAFTA's Chapter 11, Eli Lilly insisted it should have been given some drug patents, despite Canada's courts finding that they had not met the requirements for patentability -- specifically that there was no evidence that the drugs in question provided the benefits in the patent. Eli Lilly said that Canada was being unreasonable in setting a slightly higher bar than other countries by demanding that a patented drug should actually do something useful. As Mike reported back in March, even the lawyers that made up the corporate sovereignty tribunal hearing this case agreed that Canada was within its rights to take this view. They not only dismissed the claim, but ordered Eli Lilly to pay Canada's legal fees.

This was a huge win for Canada in particular, and governments in general. At the time, it all felt a little too good to be true. And now seems it was: as infojustice.org reports, the Supreme Court of Canada has just overturned decades of precedent -- and implicitly the Eli Lilly ruling -- by making it easier for Big Pharma to gain patents on medicines that don't really work:

This reversal in AstraZeneca Canada Inc. v. Apotex, Inc. is particularly disconcerting because Canada had just won an investor-state arbitration award in the long awaited Eli Lilly v. Canada case upholding its more stringent promise/utility doctrine that had been used successfully to overturn two dozen secondary patents, particularly those claiming new uses of known medicines, where patent claimants failed to present evidence in support of the prediction of therapeutic benefit promised in their patent applications.

Thus Canada's Supreme Court has inexplicably thrown away the government's earlier victory, and undermined the country's more rigorous approach to granting pharma patents. Writing for infojustice.org, Brook K. Baker believes this stunning capitulation is a result of unremitting bullying from the US:

Canada had been under intense pressure from the US, which had placed Canada on its Special 301 Watch List for five years threatening that the promise/utility doctrine unreasonably harmed Big Pharma in the US and from the pharmaceutical industry itself which claimed that the doctrine violated global patentability criteria. President Trump's hardball campaign promise to rewrite or leave the North American Free Trade Agreement because of its failure to adequately protect US intellectual property interests may also have played a role. Likewise, President Trump's more recent assertions that US payers are unreasonably subsidizing biomedical research and development because other countries, like Canada, are paying lower prices for innovator medicines than insurers and other payers in the US may also have increased pressure on the Court.

It's really sad to see the Canadian court kowtowing like this, undermining its own independence and moral authority in the process. Weaker patents will lead to the Canadian taxpayer paying higher prices for less-effective drugs. Worst of all, the Big Pharma bullies, aided and abetted by a newly-aggressive US government indifferent to other countries' health problems, will be encouraged to push for even more patent protection all around the world. That will lead not just to higher prices, but to more suffering and avoidable deaths, as crucial medicines become unaffordable for poorer patients.

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Filed Under: canada, corporate sovereignty, isds, patents, trade agreements
Companies: apotex, astrazeneca, eli lilly

Just Because Eli Lilly's Corporate Sovereignty Claim Over Patents Failed Doesn't Mean The Threat Has Gone Away

from the don't-relax-yet dept

Back in March, Mike wrote about how Eli Lilly's demand for $500 million "compensation" from Canada for rejecting two of its patents was finally thrown out. This was a long-running story, and was widely-regarded as a crucial test. Had Eli Lilly won, people suggested, it would have opened the floodgates for many such corporate sovereignty claims. Some also claimed that Eli Lilly's defeat showed what is officially known as the "investor-state dispute settlement" (ISDS) system was actually working well, and needed neither abolishing nor tweaking. But an interesting analysis by Cynthia Ho, who is a professor at Loyola University Chicago School of Law, suggests that things might not be so clear cut. Here are the key points she makes in a column published by Intellectual Property Watch:

It is true that Eli Lilly ultimately failed to persuade the investment tribunal that Canada's invalidation of two patents, based on its interpretation of "useful," compromised guarantees under NAFTA's investment chapter. But, it should be noted, this failure was principally evidentiary in nature. That is, Eli Lilly failed to provide adequate evidence in support of its claims, all of which were premised on its assumption that there was a dramatic change in the law. The tribunal, however, never questioned whether IP rights that were invalidated consistent with domestic law could constitute a violation of international investment law. Even more importantly, the tribunal never questioned whether patent laws consistent with TRIPS could nonetheless be challenged as compromising investment agreements. In addition, although some have suggested that Eli Lilly could not win, the tribunal explicitly stated that the claim was not frivolous.

As Ho points out, there are a number of troubling aspects to the tribunal's decision, even if it went against Eli Lilly. The main one is that countries still have the threat hanging over them of corporate sovereignty cases being brought and won because of disputes over patents and copyright. That would represent a radical departure from traditional ISDS cases, which are typically over physical assets like mines and oil fields. Moreover, she suggests that even if a new law were fully consistent with the main Trade-Related Aspects of Intellectual Property Rights (TRIPS) treaty, it could still be challenged using a corporate sovereignty claim -- in effect, setting ISDS tribunals above global agreements like TRIPS:

the tribunal stated that a judicial decision could form the basis of an investment claim without any actual denial of justice. In addition, while the Eli Lilly tribunal stated that it is inappropriate for ISDS tribunals to serve as an "appellate tier" over domestic decisions, it would be premature to assume, as some have suggested, that this single decision obviates any such concern. Importantly, there is no precedent in investor-state disputes and, unlike the [World Trade Organization] system where panel decisions tend to be consistent and uniformity is promoted with a standing appellate body, there are often inconsistent investor-state rulings with no current mechanism to promote uniformity.

The rest of Ho's column explores these and other concerns, and is well-worth reading. It may be that her fears are overblown, and that Canada's success in defending its patent system will discourage others from bringing similar cases. But given the unpredictable nature of ISDS cases, and the fact that a new wave of speculative funding is available, it is quite likely that investors will be emboldened to try their luck in this area again, irrespective of the Eli Lilly defeat.

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Filed Under: canada, corporate sovereignty, isds, nafta, patents, trade agreements
Companies: eli lilly

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.

Filed Under: canada, corporate sovereignty, drugs, isds, nafta, patents, tpp, us
Companies: eli lilly

Pharma Officials Insist That There Is 'Zero Evidence' That Patents Harm Access To Medicine

from the just-because-you-don't-look,-doesn't-mean-it's-not-there dept

Yesterday afternoon, the twitter feed for "LillyPad," which is Eli Lilly's "policy" blog and Twitter feed, excitedly tweeted out a quote from Stefan Oschmann, an executive at pharmaceutical competitor Merck, who was just elected as the new head of the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) -- basically, the big pro-pharma lobbying group. The tweet is no longer there, because LillyPad deleted it, but here's a screenshot I took apparently seconds before it disappeared: As you can see, they're quoting Oschmann insisting that "there is zero evidence that intellectual property is a hindrance to access to medicines." Almost immediately, you can see that nearly all of the responses started pointing to... um... evidence of how patents are a hindrance to access to medicine. Here's an OxFam paper and a massive paper from Medicins San Frontieres (MSF) Access Campaign, which focuses specifically on improving access to life-saving medicines. Lots of other comments were just mocking the claim, with some asking if Lilly was going to post a correction.

Perhaps recognizing just how ridiculous the whole thing looked, Lilly went with option "pretend it never happened" and deleted the tweet. What might have been better and more productive would have been to come out and admit that the statement was bullshit and that there are legitimate concerns about how patents can hold back access to medicine. An intellectually honest organization might then try to kick off a discussion about the different issues and the tradeoffs, recognizing that patents clearly do harm access, but potentially could also create incentives that lead to new drug creation (this is the standard claim, anyway, though some are skeptical of that as well).

But it appears that Eli Lilly (and IFPMA) have no interest in being intellectually honest or having such a discussion. No, they've decided to stick to the ridiculous and bogus corporate line that patents are all butterflies and roses, and do no harm at all. What a wasted opportunity -- even if it helped show the true colors of the current leadership of the pharmaceutical industry.

And it's even more ridiculous that this all took place at an IFPMA event where "global health" was the key topic, and they talked about "inclusiveness" and "sustainability" along with transparency. But, in the end that's all clearly buzzwords and smoke screens, because when its new boss makes a stupid, clearly incorrect statement that shows what the industry is all about, the message gets hidden and there's no discussion or transparency at all. For shame.

As for Dr. Oschmann, seeing as he's a long-term Merck exec, he'd do well to remember the words of George Merck, from nearly a century ago:

We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.

It appears that sentiment has long since been beaten out of Merck.

Filed Under: access to medicine, patents, pharmaceuticals, stefan oschmann
Companies: eli lilly, ifpma, merck

Eli Lilly Enlists Congress In Fight Against Canada For Refusing Patent On Useless Drug

from the war-on-all-fronts dept

Eli Lilly bet its entire business model on patents years back, rather than on creating useful products that people want to buy. Lately it's been having trouble getting new patents, and is reacting extremely poorly to the fact that its last-gasp efforts to get new patents aren't working. As we've noted, a few years back, Canada rejected some patent applications for some Eli Lilly drug after the Canadian patent board "determined that the drug had failed to deliver the benefits the firm promised when obtaining the patent." In other words, after realizing that the drug is not useful, Canada rejected the patent.

And Eli Lilly flipped out.

Eli Lilly has sued Canada for $500 million claiming "lost profits." How is this possible, you ask? Well, it's those corporate sovereignty provisions that are finding their way into various trade agreements lately. They're usually called "investor state dispute settlement" (ISDS) provisions, because supporters know that such a phrase will bore most people to death and they won't realize what's happening. Eli Lilly is arguing that Canada's decision to check to see if a drug is actually useful somehow violates its international agreements. And thus that a sovereign decision by Canada not to patent drugs of questionable benefit is not just a violation of trade, but stomping on Eli Lilly's expected profits.

Lilly is now raising the stakes. Not only has it asked the USTR to put Canada back on the wacky "Special 301 list" of "naughty countries" that don't bow before American corporate demands, but it's convinced 32 members of Congress to out themselves as corporate shills for Eli Lilly by demanding that the USTR follow through on this request.

Eli Lilly seems to have no shame about this, happily admitting that it's behind this effort to have the US punish Canada for daring to judge whether or not a drug is useful. As he told the Wall Street Journal:

“We’ve been unsuccessful in bringing about change by other means,” said Lilly chief executive John Lechleiter. “It’s an issue right at our back door. And unfortunately, we’re afraid it can lead to other countries attempting to undermine intellectual property.”

No, not "undermine intellectual property." It's about actually making sure, before giving you a decades-long monopoly right, that your drug is actually useful. Of course, if the USTR actually follows through and puts Canada on the Special 301 list, it will just cement what a complete joke the Special 301 list really is. For years, the USTR -- at the behest of Hollywood -- put Canada on the Special 301 list. Each year Canadian officials would specifically state that they "don't recognize" the process of the Special 301 list as being legitimate (because it's not) and then proceed to do nothing. Eventually, though, with a new government in place, Canada did change its copyright laws, and was "downgraded" on the Special 301 list. Upgrading them back up to a "pirate" nation will just highlight why Canada (and every other country) should totally ignore the nearly entirely arbitrariness of the list.

Meanwhile, shame on those 32 members of Congress for supporting such a blatant attempt by a company to interfere in the sovereignty of Canada and its crazy idea that drugs should actually be useful to deserve patent protection.

Filed Under: canada, corporate sovereignty, isds, lobbying, patents
Companies: eli lilly

European Commission Admits It Plans To Put 'Corporate Christmas List' Of IP Demands Into TAFTA/TTIP

from the acta's-back dept

A few months ago, we quoted the EU trade commissioner Karel De Gucht, who is responsible for handling the TAFTA/TTIP negotiations on the European side, as saying:

"ACTA, one of the nails in my coffin. I'm not going to reopen that discussion. Really, I mean, I am not a masochist. I'm not planning to do that.

If the Commission advances new basic legislation, which I think she should, we will revisit the question, but I'm not going to do this by the back door".

Well, either that was just more misdirection, or he's not in control of his staff. Because we learn from a stunning report of a little-publicized meeting between corporate lobbyists and the EU's negotiator on intellectual monopolies, Pedro Velasco Martins, that putting many of the worst features of ACTA into TAFTA/TTIP is precisely what the European Commission has planned. Here's the background:

Taking place at the American Chamber of Commerce offices in Brussels, the purpose of the two hour exchange was to strategize between businesses and the Commission in order to make sure that the maximum level of new IP restrictions will be written into the treaty. Present at the meeting were representatives from a range of the very largest multinational corporations. Among these were TimeWarner, Microsoft, Ford, Eli Lilly, AbbVie (pharmaceutical, formerly Abbott) and the luxury conglomerate LMVH. The participant list also included representatives from Nike, Dow, Pfizer, GE, BSA and Disney - among others. Also present was Patrice Pellegrino from OHIM [Office for Harmonization in the Internal Market], the EU/Commission agency responsible for trade marks in the EU.

As you will notice, most of those companies are from the US. Nothing wrong that, of course, except when you consider the following:

Controversially, the supposedly neutral Commission negotiator and the OHIM representative not only defined themselves as allies with the businesses lobbyists. They went far beyond this and started to instruct the representatives in detail on how they should campaign to "educate" the public in order to maximise their outcome in terms of industry monopoly rights. In particular, concerns from elected representatives, such as the European Parliament -- as well as civil society criticisms about ever increasing intellectual property rights -- were to be kept out of the public debate.

Here's what the European Commission really wants to see in TAFTA/TTIP:

Commission negotiator Velasco Martins revealed the existence of a secret list of corporate demands for new intellectual property rights in the transatlantic treaty. Previously -- towards the public and the Parliament -- the Commission has created the impression that intellectual property rights will be downplayed. The only IP right mentioned has been geographical indications, a minor issue which few are concerned about. In reality, the Commission now revealed that they have received "quite a Christmas list of items" on IP from corporate lobbyists and that they are working to implement this list. The list has already been discussed with the US in several meetings, in person as well as online.

The Christmas list covers almost every major intellectual property right. On patents, industry had shown "quite an interest" especially on the procedures around the granting of new patents. On copyrights the industry wants to have the "same level of protection" in the US and EU; in reality this always means harmonization up which results in more restrictions for the general public. On plant variety rights the pharma sector has lobbied for "higher levels" of protection. On trademarks the corporate lobbyists had made classification-related requests to the Commission. Additionally there had been a lot of interest in trade secrets.

There's also stuff from our old friend ACTA -- stricter enforcement:

According to the negotiator, the most repeated request on the Christmas list was in "enforcement". Concerning this, companies had made requests to "improve and formalize" as well as for the authorities to "make statements". The Commission negotiator said that although joint 'enforcement statements' do not constitute "classical trade agreement language" -- a euphemism for things that do not belong in trade agreements -- the Commission still looks forward to "working in this area".

That seems to go against explicit promises made earlier by the European Commission:

Since the beginning of the TTIP negotiating process, it is very clear that the eventual agreement on intellectual property rights will not include elements that were controversial in the context of ACTA. For example, the ACTA provisions on IPR enforcement in the digital environment (ACTA articles 27.2 to 27.4) will not be part of the negotiations. Neither will ACTA's provisions on criminal sanctions.

The report of the meeting contains many other fascinating insights into the real thinking of the European Commission. For example, apparently there is some relief that people are focusing on the horrors of corporate sovereignty, since that has allowed work on the "corporate Christmas list" to proceed unnoticed. There was also a warning that it is probably only a matter of time before details get out:

"Lots of people are waiting for the first slip, the first leak"

In the wake of the good things that have already flowed from Edward Snowden's leaks, and the enhanced status of whistleblowers today, that seems increasingly likely to happen. Finally, there was a useful hint of how the European Commission is going to attempt to justify bringing back ACTA in TAFTA/TTIP:

A recurring theme was that the public needs to be re-educated to understand the value of industry monopoly rights.

According to Pellegrino, the key to doing this is a number of pro-IP reports that will or have been released by OHIM.

One recent report was highlighted. It claims that every fourth job in the EU only exists because of intellectual property regulations.

That would presumably be this report, which claims ridiculously that:

IPR-intensive industries contribute

26% of employment and
39% of GDP in the EU

Techdirt wrote about this back in October, where we pointed out that it obtains these unrealistically high figures by including a whole range of industries that use things like copyright and patents only in the most limited and tangential way. Expect to see more of these exaggerated claims, based on similarly shoddy methodologies, appearing in the next few months.

That OHIM is putting out such propaganda isn't perhaps too surprising -- it's just a form marketing for its activities. But what is shocking is that an OHIM representative, along with the most senior EU negotiator for intellectual monopolies, should be offering detailed advice to US companies on how to subvert the TAFTA/TTIP negotiations by trying to keep the dissenting views of Members of the European Parliament and EU civic groups out of the debate. That's a direct assault on fair and open discourse, and ultimately undermines European democracy at a time when many are calling into question the entire idea of the European Union.

At the very least, the European Commission should set up a formal inquiry into what happened at this meeting, to make sure such blatant favoritism is avoided in future. If it doesn't, we'll know definitively that not only is it happy to see corporates on both sides of the Atlantic given preferential treatment during TAFTA/TTIP, but that it really doesn't care who knows. Meanwhile, those who took to the streets of Europe to fight off ACTA last year may want to start getting their boots ready.

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Filed Under: acta, copyright, karel de gucht, patents, pedro velasco martins, tafta, trade agreements, treaty, ttip
Companies: abbvie, bsa, disney, dow, eli lilly, ford, ge, lvmh, microsoft, nike, pfizer, time warner, us chamber of commerce

Eli Lilly Officially Sues Canada For 'Lost Profits' Because Canada Rejected Eli Lilly's Patents

from the incredible dept

A few years ago, we noted that Eli Lilly was facing some hard times, in large part because it had focused its entire business model around getting patents, and many of those patents were expiring, and very few new ones were in the pipeline. Even so, it was still rather surprising earlier this year to see Eli Lilly claim that Canada owed it $100 million for undermining the company's "expected future profits" by rejecting an Eli Lilly patent. The Canadian court reasonably felt that it shouldn't give Eli Lilly a patent on something that wasn't determined to be useful. Normally, if a country doesn't give you a patent, you move on. However, Eli Lilly used a questionable part of NAFTA, the so-called investor-state dispute resolution mechanism, to argue that Canada was "expropriating its property," and thus demanded compensation -- starting at $100 million, which it then raised to $500 million.

A few weeks ago, Eli Lilly's CEO wrote an op-ed piece, claiming that by not granting his company a monopoly, Canada was "suffocating life-saving innovation." That's wrong. And it's obnoxious. For years we've covered how the pharmaceutical industry has actually used patents to hold back life-saving innovations by locking them up, blocking advances, jacking up the price to absolutely insane rates, and by using a variety of other questionable practices (including patenting historical folk medicines). But, more importantly, every country gets to determine what is and what is not patentable. For Eli Lilly to use trade policies to effectively try to negate Canada's patent validity standards is a blatant attack on Canadian sovereignty.

And now the official case has been filed and Eli Lilly is basically demanding that $500 million because Canada decided that an Eli Lilly drug wasn't worth a patent.

Keep this in mind as we discuss the Trans Pacific Partnership (TPP) agreement and the upcoming EU-US trade agreement TTIP/TAFTA, because companies are asking for similar dispute resolution mechanisms, and this could become a big, big deal. Remember how New Zealand recently has put in a law that should mostly ban software patents? Imagine if Microsoft and others suddenly started trying to sue that country for "lost profits" because it won't give them patents on their software.

Filed Under: canada, investor-state dispute resolution, nafta, patents, tafta, tpp, trade agreements, ttip
Companies: eli lilly

Eli Lilly Raises Stakes: Says Canada Now Owes It $500 Million For Not Granting A Patent It Wanted

from the too-much-is-never-enough dept

A few months ago we wrote about the extraordinary -- and worrying -- case of Eli Lilly suing Canada after the latter had refused to grant a pharma patent. Eli Lilly's contention was that by failing to grant its patent (even if it didn't meet the criteria for a patent in Canada), Canada had "expropriated" Eli Lilly's property -- and that it should be paid $100 million as "compensation".

But it seems that the company has had second thoughts. Not that its action was outrageous, and that it ought quietly to retract its suit in the hope that people might just forget about this display of presumption; instead, it has decided it was far too generous in asking for only $100 million, as this Globe and Mail story explains:

U.S. pharmaceutical giant Eli Lilly and Co. has escalated a challenge it launched last year against Canada's patent rules under the North American free-trade agreement, and is now demanding $500-million in compensation after the company lost its Canadian patents on two drugs.

Indianapolis-based Lilly has expanded the NAFTA case over the loss of its patent for Strattera, a drug used to treat attention deficit hyperactivity disorder, to also include Canada's invalidation of the company's patent for Zyprexa, which is used to treat schizophrenia.

This shows that the initial action was no one-off, and that if Eli Lilly's action succeeds, we can expect it and many other companies to avail themselves of this method of extracting money from the public purse, as provided for under NAFTA's investor-state dispute settlement (ISDS) clauses.

What's troubling is that similar ISDS schemes are being negotiated for both TPP and TAFTA/TTIP. That will give corporations even more opportunities to sue nations for supposed "expropriation", and to challenge perfectly legitimate local laws that dare to stand in the way of bigger profits.

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Filed Under: canada, investor state disputes, patents
Companies: eli lilly

Canada Denies Patent For Drug, So US Pharma Company Demands $100 Million As Compensation For 'Expropriation'

from the money-for-nothing dept

An increasingly problematic aspect of free trade agreements (FTAs) is the inclusion of investor-state provisions that essentially allow companies -- typically huge multinationals -- to challenge the policies of signatory governments directly. The initial impulse behind these was to offer some protection against the arbitrary expropriation of foreign investments by less-than-democratic governments. But now corporations have realised that they can use the investor-state dispute mechanism to challenge all kinds of legitimate but inconvenient decisions in any signatory nation. Here's a good example of how this provision is being invoked to contest a refusal by Canadian courts to grant a patent on a drug, as explained on the Public Citizen site:

Eli Lilly and Company has initiated formal proceedings under the North American Free Trade Agreement (NAFTA) to attack Canada's standards for granting drug patents, claiming that the denial of a medicine patent is an expropriation of its property rights granted by the agreement. The investor privileges provisions included in NAFTA and other U.S. "free trade" agreements (FTAs) empower private firms to directly challenge government policies before foreign tribunals comprised of three private-sector attorneys, claiming that the policies undermine their "expected future profits." 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 claim that denying a patent is somehow an "expropriation" of property is pretty extraordinary. Patents are intellectual monopolies that are granted by governments; Eli Lilly does not have such a monopoly in Canada unless the government there grants it, which it does by applying its well-established laws and rules. Here's the background to the current dispute:

Eli Lilly launched its NAFTA attack after Canadian courts invalidated Eli Lilly's monopoly patent rights for an attention deficit hyperactivity disorder (ADHD) drug, having determined that the drug had failed to deliver the benefits the firm promised when obtaining the patent. However, in its formal notice of intent to take Canada to a NAFTA investor tribunal, Eli Lilly makes clear that it is not only challenging the invalidation of its particular patent, but Canada's entire legal doctrine for determining a medicine's "utility" and, thus, a patent's validity. While pushing for a patent standard that would raise medicine prices, Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, is demanding $100 million from Canadian taxpayers as compensation for Canada's enforcement of its existing medicine patent standards.

Basically Eli Lilly failed to deliver its side of the bargain, since the drug doesn't work very well, so Canada refused to allow the company to retain a patent that was contingent on it being effective. What's worrying is that the drug company's present action is not just challenging that decision, but the whole approach that requires drugs to work well enough to deserve a patent -- not unreasonably.

The case will not be heard before any ordinary national or even international court, with all that this implies in terms of transparency and fairness, but by a very special kind of tribunal:

The tribunals are comprised of three private sector attorneys, unaccountable to any electorate, who rotate between serving as "judges" and bringing cases for corporations against governments. The tribunals operate behind closed doors, and there are no conflict of interest rules. The tribunalists are paid by the hour and governments are often ordered to pay for a share of tribunal costs even when cases are dismissed. There is no limit to the amount of money tribunals can order governments to pay corporations. There are very limited appeal rights.

The entire approach is clearly biased towards companies and against the national governments, so the following facts will come as no surprise:

Under U.S. FTAs and related deals, private investors have already pocketed over $3 billion in taxpayer money via investor-state cases, while more than $15 billion remains in pending claims.

However, bad as things are currently, they promise to get even worse if the TPP agreement is finalized in line with leaked versions:

Ironically, while Canada faces an investor-state challenge from Eli Lilly, the country has joined negotiations to establish the TPP, which would expand the investor-state system further. To date, Canada has paid more than $140 million to foreign investors after NAFTA investor-state attacks on energy, timber and toxics policies. Part of Eli Lilly's claim against Canada is that the invalidation of its patent constituted an expropriation of its "investment." NAFTA does not list patents in its definition of a protected "investment," although some analysts have long worried that the broad, vague NAFTA definition could be used to attack medicine patent policies. But in the TPP, the proposed Investment Chapter explicitly names "intellectual property rights" as a protected "investment."

That is, TPP aims to formalize precisely the argument that Eli Lilly is trying to make using some rather far-fetched legal logic, discussed at length in the Public Citizen post quoted above. Moreover, it seems highly likely that a similarly far-reaching investor-state section will be included in the new Transatlantic FTA (TAFTA), now being discussed more widely.

The central problem with these investor-state provisions is that they elevate companies to the level of entire countries. Secret, unaccountable and biased tribunals with unlimited powers then enable them to overturn democratic decisions and legislation passed to preserve things like public health or the environment, simply because they would reduce corporate profits. And yet few people are even aware that such investor-state provisions exist, despite their massive impact on the lives of millions. That's a hugely troubling combination for the future.

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Filed Under: canada, expropriation, investor-state provisions, nafta, patents, tafta, trade agreements, us
Companies: eli lilly

Eli Lilly's Reliance On Patents May Be Its Downfall

from the it's-a-crutch dept

Copycense points us to a NY Times piece about how pharmaceutical giant Eli Lilly is facing some tough times ahead. Why? Because the patents on the drugs that make up most of its revenue are all set to expire soon, and their pipeline of newly patented drugs is pretty far behind. Of course, what this highlights is the folly of relying on patents as your business model. The patents become a crutch, and you're unable to build a real business doing anything other than coming up with new patentable drugs. It takes the focus away from building a real business around making people healthy, to one that's focused on coming up with stuff we can sell that can be patented.

Filed Under: patents, pharmaceuticals
Companies: eli lilly