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Secondary Use Patents Briefing (June 2014)

Litigation and Trade Policy Briefing (June 5, 2014)

On June 5, 2014, a panel of experts discussed the recent case that Eli Lilly brought against the Canadian government under NAFTA. Canadian courts recently invalidated Eli Lilly secondary use patents related to atomoxetine (Strattera) and olanzapine (Zyprexa) for failure to meet Canada’s utility requirements. Lilly failed to provide sufficient evidence to soundly predict the usefulness of their claimed inventions at the time of filing. After losing its cases in court, Lilly sued Canada for $500 million under North American Free Trade Agreement (NAFTA) Chapter 11’s investor-state dispute settlement (ISDS) provision. Lilly aims to transform Canada’s law. The ongoing arbitration has international implications for country sovereignty, access to medicines and innovation policy.

Panel 1 Videos | Panel 2 Videos | More Resources

Event Videos ? Panel 1

Panel #1 gives us an introduction to the case, Canada’s patent rules and Lilly’s claims, and discusses Lilly’s ability to enter into arbitration with the Canadian government.

Andrew Williams – Partner, McDonnell Boehnen Hulbert & Berghoff

“It was somewhat ironic that [Canada invalidated Lilly’s patents on utility] because Canada had approved these drugs for treatment in Canada that hundreds of thousands of Canadians were using this drug…”

Andrew walks us through how Lilly received its patents for Strattera and Zyprexa, and then the progression of the cases through the courts. He provides the background evidence that Lilly utilized to support its claims, including that the disclosure requirement came after Lilly filed its patents. He also describes Lilly’s arguments in its arbitration against Canada, pointing to the fact that Lilly already had a safe and successful product marketed to Canadians, and Canada had already approved its patents.

Burcu Kilic – Legal Counsel, Public Citizen’s Global Access to Medicine Program

“We promote the usage of flexibilities in the TRIPS agreement, and we are concerned about the chilling effect [of Lilly’s ISDS case] because this is a warning for other countries: don’t ever mess with our patents, or you will end up in an investor-state arbitration.”

Burcu sets the stage for the delicate balance between granting patents to inventors and providing access to medicines for the public. She paints the patent picture, stepping us through the patent bargain, and why Lilly did not fulfill their duty to the public to sufficiently disclose their predictions of usefulness of the invention to the public. She argues that Canada has the right to set its own standards for utility & disclosure” through the flexibilities provided in the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement and NAFTA. She also wrestles with Lilly’s pursuit of an ISDS case through NAFTA. As Burcu aptly describes, “Welcome to the jungle.”

Sean Flynn – Professor, American University Washington College of Law

“This action, [Lilly] says, is illegal under Article 17, and anything that is illegal under Article 17 is an expropriation. So there it is. You notice the footnote is on the first sentence not the second; they don’t have any support for that [second] argument.”

Sean provides a law school professor’s perspective on what NAFTA’s ISDS clause is about, and how Lilly is trying to apply it. He is quick to point out that the NAFTA Chapter 11 claim Lilly has brought actually encompasses Chapter 17, the IP chapter, even though an ISDS claim is supposed to be restricted solely to investment claims in Chapter 11. He posits that Lilly is doing some fancy footwork to broaden its claims, through claims of expropriation and loss of expectation of profit. He also shows that Lilly’s argument that NAFTA’s patent requirements should be read through the lens of U.S. law is wrongheaded.

Simon Lester – Trade Policy Analyst, Cato Institute

“The expansion of international intellectual property law in the way that is being done here, we can bring intellectual property into investment law, that’s a major policy shift, and in some loose sense, shouldn’t the people have a say in this, shouldn’t there be a public debate about the implications of this.”

Simon states that the ‘promise doctrine’ in front of the Canadian courts is not about the doctrine itself, but is actually a way for the Canadian courts to get involved in patent policy. He challenges the patent policy and asks why there is no differentiation between the game Twister and pharmaceutical patents when it comes to the period of exclusivity, 20 years. As he dives into ISDS, he states that it will start to get dangerous if we drag patent law into international investment law. He also states that by allowing ISDS to occur, we effectively have created a court of higher power above the Supreme Court.

Q&A

Question: What concerns do you have about the expansion of the ISDS system? What ramifications could this have on access to medicines or government definitions of utility?

Simon: These ISDS complaints can stop the government from doing something, but can also make them do something, and that is a concern. As libertarians, we can’t rely on ISDS to reign in government. This is at its core a way to take power from the national sphere and put it in the international sphere, and we have to think about the implications of doing this.

Sean: The bootstrapping in this complaint would not be necessary in the TPP, because the TPP makes it explicit that you can make lost profit claims without going to minimum standard of treatment. There is also the issue of pharmaceutical reimbursement, where pharma companies will put up roadblocks for the government to reduce the price of pharmaceuticals in government programs. There is a debate about whether this should be subject to bilateral investment treaties.

Question: What happens if a Mexican company invested large amounts of money and research into isolating genes, and now cannot patent their work in the U.S. after the Supreme Court’s decision in Myriad Genetics? Are they justified in taking the United States to ISDS, as an investor of intellectual property in the U.S.?

Burcu: Yes, I think you can. What goes around comes around, and we are highly concerned with the chilling effect of the Lilly case. Now, even though the Supreme Court has been taking the lead on patent policy and law, ISDS provides a new venue to challenge their decisions.

Event Videos ? Panel 2

Panel #2 provides a comparative view of the patent side of the case, discussing both whether the Canadian approach to utility is valid, and whether Lilly’s secondary use patents were valid in the first place.

Norman Siebrasse – Professor, University of New Brunswick

Norman dives into the new USPTO guidelines and provides commentary on how there is diversity between countries when it comes to secondary use and novelty requirements. Gunpowder, for example, would not be patentable under the new guidelines in the U.S. because it uses naturally occurring substances. He believes that the U.S. Supreme Court has taken the wrong approach with some of its cases when it considered whether certain types of inventions should be patented (e.g. Myriad Genetics). He reminds us that patent laws are national, but innovation occurs on an international scale, so it is important to look to other countries’ rules to determine what is optimal.

A video of Norman Siebrasse’s presentation is unavailable due to technical difficulties. You can find the slides from Norman’s presentation here.

Richard Gold – Professor, McGill University

“There is an implied premise (in fact I think it’s pretty expressed) that there is something called a promise doctrine in Canadian law, and in fact you will never find such a promise doctrine. No court has ever called this a promise doctrine. Promise is just another way to say, what is the utility that a patentee asserted?”

Richard gives us a different perspective on how patent law should be implemented. He finds no reason to have Canada change their current approach, as there is no international requirement or standard regarding how utility should be assessed in patent law. He states that very few cases have actually been decided using what became known as the “promise doctrine,” in contrast to Lilly’s claims. When it has been assessed, the court is looking at whether there is a logical, empirical basis for the prediction, even if there have been no clinical trials. He also states that Canada’s utility standard is actually a lower standard than the U.S. standard. Regardless, he reminds us that the Supreme Court of Canada has yet to hear a case on the “promise doctrine.”

John Covert – Partner, Sterne Kessler Goldstein & Fox

“Rush to filing – how long can we hold off until we file that patent application? How much time can we wait for the generation of additional data to put into our application to support the utility? There are situations where there is a rush to filing, and the application goes in, and there is a question about how much data is there.”

John provides a view from a patent prosecution standpoint, and speaks about the importance of the timing of filing a patent application. He gives insight into the differences between U.S. and international utility standards, and how whether you have a first or second generation product affects your timing of filing. There is the real possibility of filing too early, causing your patent to be invalidated later, while waiting too long invites others to file before you. He finds that the U.S. patent system is set up to reward innovation first, with actual proof of utility to come later, while in places like Japan, the idea must already be taken to completion.

Jonathan Stainsby – Partner, Aitken Klee

“When I deposed one of the inventors, he told me that prior to the filing, he couldn’t have told anyone with his hand on his heart it had any of the advantages, any of the side effect benefits, that Lilly asserted in the patent. And the basis of the data that Lilly had at the time of the filing, expert evidence at the trial said the predictive value of that data was nil. So Lilly didn’t know what the properties of the compound were, nor could they have predicted them. So if that’s not a speculative claim, I don’t know what is.”

Jonathan closes the talk with a strong assertion – the “promise doctrine” is a complete fiction fabricated by Lilly. The sound prediction test is what the court actually looked to for assessing utility. He rebuts Lilly’s fear of subjectivity in judge’s interpretations of patents by reminding us that this is what judges do all the time with contracts, treaties, and other documents. He states that the olanzapine patent was a selection patent, so they had to make statements that it had advantages beyond the original patent, and the predictive value of their evidence was nil. He indulges, “if that’s not a speculative claim, I don’t know what is.” Atomoxetine was similar. Canada’s sound prediction test, according to Jonathan, is actually in favor of patentees, since they just have to predict what their invention will do. But they have to tell the world the factual basis for their prediction, and Lilly did not do that.

Q&A

Question: The irony in the case is that this came from litigation in which the counterpart to Lilly is probably using the drug for the use that Lilly predicted. Lilly predicted it right, and they are being criticized for not having a reasonable basis for the prediction. Isn’t there a disconnect here?

Jonathan: In neither case was it necessary to say the drug didn’t work. Lilly just didn’t meet its side of the patent bargain with atomoxetine. They didn’t state the basis that they used for the prediction; they never referenced their 7-week, double-blind, crossover study that was ongoing at the time the patent was filed. With olanzapine, it was one of many, many compounds, and Lilly stated that it was better than the genus compound, but had no factual basis for the prediction, and their prediction was actually not true.

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