Canada Slams Lilly for ‘Scattershot’ Patent Filings in a Long-Running Dispute

Source: The Wall Street Journal

17 Feb 2015

In blunt language, the Canadian government has harshly criticized Eli Lilly in a closely watched patent dispute that is being heard by an international tribunal. At issue is the extent to which a government has the right to set its own patent laws and the recourse a drug maker has to challenge unfavorable court decisions.

As we have noted previously, the battle centers on different rulings a few years ago by Canadian courts that invalidated patents on a pair of Lilly drugs – the Zyprexa antipsychotic and the Strattera pill for attention deficit disorder. The decisions triggered the arrival of cheaper generics in Canada, leading to what Lilly claims were significant sales and job losses there.

Two years ago, Lilly filed for arbitration under the rules of the North American Free Trade Agreement and sought $500 million in damages in hopes of forcing Canada to alter its approach for administering patent rights. In technical terms, Lilly is pursuing what is called an investor-state dispute which, under international trade treaties, allows companies to initiate claims against foreign governments.

As Lilly sees it, the courts unfairly ruled its original patent applications should have offered more proof of effectiveness at the time of the initial filings. The drug maker attempted to obtain additional patents for other uses, but the courts ruled Lilly did not make its case. Lilly argues the courts relied on a government doctrine that produced “absurd” results and accuses Canada of expropriating its patents.

Canada filed an initial response last June, but last month came back with a blistering and lengthy counter attack that charges Lilly is “profoundly wrong” about the court rulings, which struck down the patents in 2009 and 2011. Moreover, the government argues the drug maker took a “scattershot” approach to filing patents in order to “monopolize whole areas of research.”

For instance, between 1992 and 2004, Lilly filed patent applications claiming a dozen new uses for Strattera, such as treating psoriasis, stuttering, incontinence, hot flashes, anxiety, learning disabilities, tic disorders, cognitive failure, oppositional defiant disorder, conduct disorder, pervasive development disorder, and ADHD, according to the government filing.

But “close inspection of the patent specifications for these filings revealed that roughly half of [the] applications contained no reference to experimental data. Moreover, of the seven patent applications actually referencing experimental data, three referenced only a single case study,” the Department of Foreign Affairs, Trade and Development argues in its response.

And between 1995 and 1998, Lilly filed 16 separate patents for using Zyprexa to treat excessive aggression, fungal dermatitis, bipolar disorder, sexual dysfunction, insomnia, anesthetic agent, nicotine withdrawal, tic disorder, anorexia, depression, autism and mental retardation, pain, migraines, dyskinesia, addictive substance withdrawal, and Alzheimer’s disease, according to the filing.

The government argues the patents were all filed during a period when Lilly’s “longstanding monopoly” for Zyprexa was about to expire. But roughly five of the 16 applications did not contain reference to relevant experimental data. And of the 11 that did, in nine of 11 cases, this was limited to “bare reference” to a clinical study in which the claimed use had been demonstrated, the filing states.

The government, which notes Lilly later abandoned most of the applications, argues the patent filings had “the effect of diminishing, rather than increasing innovation by discouraging competing research efforts.” The government argues that “Canadian law does not grant patents for almost-inventions, even if the applicant’s speculation at the time of filing is later confirmed.”

In a statement e-mailed to us, a Lilly spokesman writes the drug maker has reviewed the government response and “nothing in their filing changes our strongly held belief that Canada has improperly invalidated our patents under their NAFTA obligations and that Lilly is entitled to compensation for its losses.”

Lilly, by the way, has attempted to portray Canada as insufficiently unwilling to protect intellectual property rights in other venues. Last year, the U.S. Trade Representative did not add Canada to its “Priority Watch” list of countries that fail to enforce patent rights, despite a Lilly lobbying effort on Capitol Hill in Washington, D.C.

And as part of a prepared statement in response to the Canadian government filing, Lilly circulated a new report on intellectual property issued this month by the U.S. Chamber of Commerce. The report criticized Canada for “onerous patentability requirements” that “discriminate against pharmaceutical patents” and court rulings differ from “international standards” found in trade treaties.

For its part, Lilly maintains that the report describes Canada as being “among the outliers related to intellectual property protection,” although the report does not use that word to describe Canada, but does so for several other countries. In fact, the report notes that Canada’s ranking in terms of its overall intellectual property environment improved slightly from its previous report.

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