In a Significant Decision, ICSID Rejects Eli Lilly’s Claim that the Utility Standard under Canadian Patent Law has Undergone a Dramatic Shift

In a widely reported decision, the International Centre for the Settlement of Investment Disputes Tribunal (hereinafter “the ICSID”) last week dismissed Eli Lilly’s claims against Canada under the North Atlantic Free Trade Agreement (NAFTA) founded upon a purported change in the utility standard for establishing patentability under Canadian law.

In its 159-page judgment, the Tribunal squarely rejected the company’s claim that Canadian courts radically altered the interpretation of the utility standard claim for patenting between 2002 and 2008 that operated to its detriment in a manner impermissible under the NAFTA.

The verdict particularly stands out for the Tribunal’s decision to give domestic judicial fora a ‘play in the joints’ to interpret domestic patent law in a manner they deem fit and for making it clear that a claimant cannot invoke the provisions of a multilateral treaty for the invalidation of its patents consistent with well settled legal principles – an eventuality that the claimant should have foreseen.
The wide-ranging impact of the verdict is best evidenced by the fact that as many as 9 applications for leave to file amicus curiae submissions were filed before the Tribunal during the course of the proceedings.

Facts and arguments:

The case centres around two patents held by the claimant, Eli Lilly, over two drugs called Zyprexa and Strattera. While Zyprexa tablets are used to treat psychotic disorders, Strattera is used as an anti-depressant. The claimant obtained a patent for Zyprexa in Canada in 1998 and for Strattera in 2002.

The claimant filed a suit against Novopharm for patent infringement of the Zyprexa patent which resulted in the invalidation of the said patent. More specifically, the Canadian judge who adjudicated upon the infringement proceedings, vide judgment dated 10.11.2011, held that the Zyprexa patent did not sufficiently demonstrate the promise as to its utility and the patentee was not in a position to soundly predict the same while filing the patent application.
Similarly, Novapharm challenged the validity of the Strattera patent, and by judgment dated 14.9.2010, it was held that the said patent was invalid on account of the fact that the patent application did not appropriately disclose the basis upon which a prediction as to its utility was made.

While the claimant made a number of arguments in support of the proposition that the invalidation of its patents was attributable to a sea change in Canada’s patent law which is impermissible under the NAFTA, I will only focus on its arguments that are relevant to Canada’s patent law. The claimant advanced 3 main arguments on this count.

First, it argued that Canadian courts now adopt a ‘promise utility’ standard for ascertaining the utility of any invention in contradistinction to the earlier standard of ‘scintilla of utility’. More specifically, this doctrine comprises 3 elements which, viewed cumulatively, have significantly raised the threshold for meeting the utility requirement: (1) the patent application must contain a promise of its utility; (2) courts cannot look at post-filing material to see if the patent application sufficiently discloses utility; and (3) no material that is not referenced in the patent application can be considered for determining if the application makes a sound prediction as to its utility.

Second, in light of the Canadian Supreme Court’s 2002 verdict in the Azt patent case, the claimant argued, the evidentiary burden for establishing the promise of utility has significantly increased. In light of the fact that this case held that the scientific effectiveness or commercial use of a patented invention cannot be established on the basis of any material adduced after the filing of the patent application, and overruled a longstanding precedent on this subject, the claimant argued that this verdict resulted in a paradigmatic shift in Canadian patent law.

Third, by virtue of the Canadian court’s 2008 judgment in the so-called Raloxifene decision, the claimant argued, it is impermissible for Canadian courts to now consider any prefiling evidence not disclosed in the patent application for determining if the utility of a patent has been soundly predicted.

In response, the Canadian government argued that what the claimant describes as a drastic change in Canadian patent law is nothing more than a combination of 3 long-standing rules: (1) a claimant is always held to the promises made in a patent; (2) there is a long line of cases as per which postfiling evidence is inadmissible for establishing utility; and (3) ever since the Canadian Supreme Court’s 1979 Monsanto judgment it has been a well settled principle that prediction as to the utility of a patent can only be adduced on the basis of disclosures made in the application.

Decision of tribunal:

The Tribunal commenced its analysis by noting that the claimant had the burden of showing that the utility standard in Canadian patent law had undergone a dramatic transformation during the period between the grant of the Zyprexa and Strattera patents and their subsequent invalidation. It arrived at the conclusion that the claimant was unable to discharge this burden for 3 reasons.

First, the Tribunal took note of the Canadian Supreme Court’s 1981 judgment in the Consolboard case which contained language to the effect that a patent application must always contain a promise as to the utility of the patent. Noting that Canadian courts have repeatedly cited Consolboard for the utility standard, the Tribunal held that the claimant could not argue that the standard did not exist before the grant of the Zyprexa and Strattera patents. While the standard may not have been invoked by courts to invalidate patents until 2005 on a regular basis, the Tribunal acknowledged, this was no basis to conclude that the standard did not exist.

Second, insofar as the claimant’s argument about the embargo on the consideration of post-filing material for the ascertainment of utility is concerned, the Tribunal held that a bare perusal of the AZT decision indicates that the Supreme Court explained in its judgment how the ratio in that case was consistent with prior Canadian court rulings. Ergo, it could not be held that the judgment created new law or brought about a fundamental change in the application of the utility standard.

Third, insofar as the sound prediction doctrine is concerned, the Tribunal held that the doctrine has been developed through a number of judicial pronouncements over a long period of time, so it would be incorrect to state that the Raloxifene decision in 2008 fundamentally altered the application of the doctrine. Noting that the 1979 Monsanto judgment and the 2002 Azt judgments laid the groundwork for the disclosure requirement as to prediction of utility, the Tribunal rejected the claimant’s argument that the Raloxifene judgment was a bolt from the blue.

Ergo, the Tribunal arrived at the conclusion that Canadian patent law as to utility underwent evolutionary and incremental change during the period between 2002 and 2008, but there was no dramatic change in the law as courts merely applied the utility standard with greater frequency to invalidate patents. On this basis, it dismissed the claimant’s arguments.


Rahul Bajaj

Rahul Bajaj is a fourth year law student at the University of Nagpur. His interest in intellectual property law began taking a concrete shape when he pursued Professor William Fisher's online course on copyright law in the second year of law school. Since then, Rahul has worked on a diverse array of IP matters during his internships. He is particularly interested in studying the role of intellectual property law in facilitating access to education.

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