Eli Lilly NAFTA Chapter 11 Policy Forum

As mentioned before the holidays, we will be holding a policy forum at Cato on the Eli Lilly NAFTA Chapter 11 case, on January 16.  You can register to attend here: http://www.cato.org/events/patents-public-health-international-law-eli-lilly-nafta-chapter-11-case

Henning explained the case about a year ago, here.  In a nutshell, the case arises from a series of Canadian court rulings that have narrowed the scope of when pharmaceutical products may be patented. In particular, the courts set a higher standard for determining whether the product at issue is "useful" (one of the three elements required for granting a patent). Patent applicants must now "demonstrate" or "soundly predict" the effectiveness of a drug to establish its usefulness.  As a result of these rulings, demonstrating usefulness requires more, and costly, testing of pharmaceuticals prior to applying for a patent then was needed previously.

Based on this doctrine, two of Eli Lilly's drug patents -- for ADHD and schizophrenia drugs -- have been ruled invalid by Canadian courts in the last couple years.  These patents had been granted in the early to mid 1990s. They have now been taken away.

What this means for consumers of these drugs is that (Canadian) generics companies will start making the drugs.  (That's who challenged Eli Lilly's patents.)  So more of these drugs will be available at lower prices.  But of course, the inventing companies' profits are reduced, and they have less incentive going forward to create new drugs.

In response, Eli Lilly has sued under NAFTA Chapter 11, putting forward expropriation and "minimum standard of treatment" claims.  And it has asked for $500 million in compensation.

This all raises a number of questions for me:

- Are the Canadian court rulings completely outside of international norms for granting patents? And if so, does it matter if Canadian courts go their own way?

- What rationale did the Canadian courts offer? What were they trying to do: help the generics industry so as to promote public health, or help the domestic industry?

-  How should international law deal with this issue? We have the TRIPS agreement at the WTO, and NAFTA has its own IP rules. Is IP specific international law a better forum for this than the NAFTA investment rules?  The investment obligations at issue here are general ones:  fair and equitable treatment, and regulatory expropriation. Can they be made to fit with these very specific IP issues?

- More generally, should international courts review the decisions of domestic courts, on intellectual property issues or otherwise? Are there limits to this?

- How will this case eventually be resolved? Parliament? A new Canadian court ruling?

I don't have the answers to any of these questions, but I'm confident the three experts we have gathered for the panel will have interesting things to say about each of them!