As mentioned on Friday, the NAFTA arbitration tribunal in the Eli Lilly ‘promise doctrine’ proceeding has issued a ruling. The public decision is now available confirming that the tribunal decided in favour of Canada on the merits. The decision addresses issues of jurisdiction, liability for judicial measures and Canada’s utility requirements for patents.

Eli Lilly and Company and Government of Canada, Case No. UNCT/14/2 final award (PDF).

The questions considered by the tribunal were (per [110]):

(i)  What is the scope of the Tribunal’s jurisdiction, if any? (Section VI)

(ii)  Is denial of justice the only basis of liability for judicial measures under NAFTA Chapter Eleven? (Section VII)

(iii)  Has there been a dramatic change in the utility requirement in Canadian patent law? (Section VIII)

(iv)  Is the utility requirement in Canadian patent law, as applied to the Zyprexa and Strattera Patents, arbitrary and/or discriminatory?67 (Section IX)

(v)  If (iii) and/or (iv) is answered in the affirmative, did the invalidations of the Zyprexa and Strattera Patents breach Respondent’s obligations under NAFTA Article 1110 and/or Article 1105?

Some select passages relating to the promise utility issues:

[308] Claimant bears the burden of establishing the facts on which it relies for this aspect of its claim. Therefore, the Tribunal will analyse in this section whether Claimant adduced sufficient evidence to prove its allegation that “[i]n the mid-2000s, after the patents for Zyprexa and Strattera had been examined and granted, but prior to their invalidation by the courts, Canada’s patent utility law underwent a dramatic transformation”.427 As discussed below, the Tribunal finds that Claimant has not met its burden in relation to this allegation.

…

[337] In sum, the Tribunal recognizes that the outcome in AZT was unexpected for some practitioners and even judges who had understood the language of the Court of Appeal in Ciba-Geigy to mean that utility could be demonstrated through post-filing evidence (most notably commercial success). Still, having considered all of the evidence, the Tribunal cannot conclude that the Supreme Court effected a dramatic change from previously well- established law when it clarified this rule in AZT.

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[349] Taking together all of the documents and testimony, the Tribunal cannot accept Claimant’s position that the Raloxifene Decision radically changed a well-settled rule of Canadian law. Instead, the Tribunal sees the progressive development of the doctrine of sound prediction over decades, specifically in relation to the required disclosure. When the Supreme Court first adopted the doctrine in Monsanto, it did not set a clear disclosure rule. Over the following years, during which there was little litigation over utility, the law was not significantly clarified. Then, the 2002 AZT decision set out the requirements for a sound prediction, identifying proper disclosure as one of those requirements. As proper disclosure was not at issue on the facts of AZT, it was not until the 2008 Raloxifene Decision that the requirement was applied by a court (although the Patent Office began applying it much earlier, including in relation to Claimant’s patents).481 Indeed, the doctrine may develop further. According to Professor Siebrasse, the details of the disclosure requirement for sound prediction are still being debated in the courts, with some judges opining that it should apply only to new use patents.482

[350] This process has of course involved some elements of change, but based on the record, that change is more incremental and evolutionary than dramatic.

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[386] Taken as a whole, the evidence before the Tribunal shows that Canada’s utility requirement underwent incremental and evolutionary changes between the time that the Zyprexa and Strattera Patents were granted and then invalidated, in particular during the six-year period that Claimant highlights (2002-2008). Over those years, there was an increase in the number of utility-based challenges of pharmaceutical patents, which appears to have increased the pace of the development of the law most relevant to that sector. The Tribunal also sees that each of the three rules that Claimant considers part of the promise utility doctrine has a reasonably solid foundation in prior authority, even if there is a question about the extent to which that prior authority was applied in practice.

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[459] Regarding the costs of legal representation and assistance, in the exercise of its discretion under Article 40(2), and considering that Respondent prevailed on the merits but not on jurisdiction, the Tribunal has concluded that it is appropriate for Claimant to bear its own costs and to reimburse Respondent for 75 percent of Respondent’s costs.

[460] Therefore, Claimant shall pay to Respondent the amount of CAD 4,448,625.32, representing 75 percent of the sum of (i) Respondent’s legal fees amounting to CAD 4,579,260.92 plus (ii) Respondent’s additional disbursements of CAD 1,352,239.50.