1. SEPTEMBER 24, 2013
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DELL CHISM
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KEVIN BELL
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PattonBoggs.com Client Alert: Eli Lilly Files NAFTA Arbitration Claim Against Canada for Allegedly Discriminating Against Specific
Patented Technologies
1
INTELLECTUAL PROPERTY GROUP CLIENT ALERT
ELI LILLY FILES NAFTA ARBITRATION
CLAIM AGAINST CANADA FOR
ALLEGEDLY DISCRIMINATING AGAINST
SPECIFIC PATENTED TECHNOLOGIES
Eli Lilly, the U.S. pharmaceutical company, is accusing the Government of
Canada of violating its obligations to foreign investors under the North
American Free Trade Agreement (NAFTA) because its courts invalidated
patents on two of its drugs, Strattera (covering treatment for attention
deficit/hyperactivity disorder) and Zyprexa (covering treatment of schizophrenia
and bipolar disorder). The company filed its Notice of Arbitration with NAFTA
on September 12, seeking U.S.$500 million in compensation. A copy of the
Notice of Arbitration is available here.
Lilly demanded arbitration under NAFTA Chapter 11, which allows investors in
NAFTA countries to bring claims against the governments. Lilly alleged that in
invalidating the patents, Canadian courts applied rules that are in conflict with
Canada’s obligations under NAFTA. Lilly argues that Canada’s ability to
invalidate patents can only be grounded in facts that could have prevented
issuance of the patent during prosecution of the patent applications as required
under NAFTA. Lilly’s Notice of Arbitration also accuses Canada of
expropriation through the courts’ failures to abide by its obligations under
NAFTA and utilizing rules that are in direct conflict with Canada’s obligations
under NAFTA.
In recent years, the Canadian courts began utilizing the “promise doctrine,”
requiring that patents demonstrate or predict usefulness as of the filing date of
the patent applications. Canadian courts invoked that doctrine and found the
Strattera and Zyprexa patents invalid. Lilly asserts that the decisions demonstrate
Canada’s continuing disregard for and unpredictable implementation of
established international thresholds for patentability and validity. Specifically,
Lilly alleges that Canada’s federal courts violated the country’s obligations under

2. PattonBoggs.com Client Alert: Eli Lilly Files NAFTA Arbitration Claim Against Canada for Allegedly Discriminating Against Specific
Patented Technologies
2
NAFTA as well as the Trade-Related Aspects of Intellectual Property Agreement (TRIP) and the Patent Cooperation
Treaty (PCT). The pharmaceutical company argues that NAFTA obligates Canada to grant patents on applications
that are new and have an “inventive step” with industrial applicability regardless of the technological field, despite the
Canadian courts’ apparent discriminating treatment of pharmaceutical patent applications.
The parties can expect the arbitration proceeding to take approximately two years to reach resolution in front of a
three-person arbitration panel agreed on by the parties.
The Lilly case comes on the heels of an award in a Chapter 11 case brought by Apotex Inc., a Canadian
pharmaceuticals corporation, against the United States. The arbitration related to the treatment Apotex allegedly
received from courts and agencies in the course of its efforts to bring new generic drugs to market. On June 14, 2013,
the arbitration panel issued an Award on Jurisdiction and Admissibility, dismissing all of the claims and ordering
Apotex to pay the United States’ legal fees and arbitral expenses. The award in that case can be found here.