This is the story of something that happens all the time: Companies suing governments over invalidated/ rejected patents/ patent applications. However, this commonplace news snippet becomes not-so-commonplace because of the huge amount of money involved. Also because of the fact that this case has opened up a new way by which Multinational Companies can influence state policies.
Last year, Eli Lilly, a US Pharmaceutical company sued the government of Canada after two of its patents were invalidated by courts in Canada. If that sounds familiar that’s because you have read about Novartis v. Union of India & Others that was decided exactly two years ago, April 2013.
Now let’s take a look at the facts we have.
Sometime back, the supreme court of Canada invalidated two patents of Eli Lilly on the basis of a “promise doctrine” ie if a patentee “explicitly and unequivocally” promises a use or result for an invention, the patentee is responsible to keep that promise. For example, in this case, Eli Lilly had promised that its inventions, which were pharmaceutical drugs, were better than rest of the drugs in the market. But it was more of a guess, and the courts in Canada invalidated the patents in 2007 and then again in 2011.
According to Eli Lilly’s notice to Canada, this invalidation was simply “absurd”. Eli Lilly argues that that “The promise doctrine” was introduced way after the patent was granted in Canada, and its patents should not be invalidated using the promise doctrine.
Now if you know anything about patents, you would know that there is absolutely no point in arguing here. Patents are routinely invalidated when the law changes or in common law jurisdictions, when there is a new ruling. That’s part of the reason why a Bilsky Vs Kappos or an Alice vs CLS gains a lot of interest among patent lawyers.
The difference here is, not only has Eli Lilly sued Canada, it has demanded a hefty compensation of $500 million for lost potential profits. Now that is something that has been not heard of. To answer the question “How on earth could they do that!!”, allow me to introduce to a term that has been used time and again for several nefarious purposes: ISDS.
ISDS or The Investor State Dispute Settlement, are a group of about 3000 agreements that have been implemented as early as the end of the second world war. There were a lot of newly formed independent nations after the second world war, and they were all hungry for foreign investments. These agreements promised foreign investors a set of minimum guarantees and they felt safe to invest in companies. Now one of the guarantees that the ISDS provided was that a state shall provide compensation for “expropriation” of investments. If that is a word too big for you, it means that the state shall provide compensation for investments stolen by the state. If the investors can prove that in a court of law, oh wait, there is no court of law here- ISDS disputes are solved in a tribunal of private lawyers chosen by the government and the investors. So if the investors are able to prove that in a tribunal of private lawyers that the government is liable to compensate them, the government is liable to pay them out. There are no binding precedents, or appellate reviews.
Now all of the above facts about ISDS have been in existence for the past sixty five years. So what’s new? What’s new is that, companies have started treating Intellectual Property as investments to the extent that a simple invalidation of a patent is treated as expropriation. Likewise, inability to display a trademark is being counted as expropriation. To cite an example:
In 2011, the Australian Government banned use of trademarks on cigarette packets. Name of the company was to be written in a generic manner, and the cigarette packet was to be labelled with messages like “Smoking Kills” “Smoking causes blindness” etc. Immediately, Phillip Morris, the tobacco company known for Malboro, sued the Australian country for a hefty sum. The lawsuit failed, but that did not stop them from sending notices to poorer countries like Togo and Uruguay when these countries came up with similar laws.
But that again, was about trademarks. Eli Lilly is probably the first company to sue a nation for invalidation of patents. That too for $500 million. The basis for the suit is that patents are investments and invalidating them using a new law is expropriation of the “investment”. Seemingly, Eli Lilly assumes that an issued patent should never be invalidated and also that a nation cannot modify its laws without violating the “ISDS gurantees”. Eli Lilly’s case is further strengthened because of the TRIPs agreement of 1994, that guaranteed a minimum level of IP protection in all the signing nations.
Here are a list of allegations put forth by Eli Lilly:
- NAFTA and TRIPS agreements refer to mandatory obligation to grant patents to inventions that are “useful” and have “industrial applicability”. Eli Lilly alleges that Canada has failed to enforce its patents, both of which being useful with industrial applicability
- Eli Lilly states that Canada cannot compel patentees to include evidence of utility in their patents.
- Lilly objects that the “Promise” doctrine is being improperly applied only to pharmaceutical patents.
All the above objections can be objected to because both the TRIPs and the NAFTA have provisions to provide flexibility to countries to define key terms like “new” and “patentable”. But Eli Lilly claims that Canada’s definition of the word “new” is unacceptable.
So the bottom line is, that should Eli Lilly’s allegations and claims are to succeed, several international norms that help countries to have different standards of IP protection would be destroyed.
Eli Lilly’s allegations could spell trouble to the international IP environment, particularly jurisdictionally isolated patent provisions like Compulsory licensing, provisions to prevent Evergreening of drugs, etc. Further, the ruling would also cause countries to have lesser control over their IP policies.
So unlike the commonplace Pharmaceutical IP lawsuits, this particular Lawsuit should be of major concern. Caution must be held while signing anymore ISDS agreements. Moreover, new provisions like fast track legislation of ISDS cases should be fiercely opposed.
Leo Paul Johnson is a senior patent engineer at IP ASTRA