INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
IN AN ARBITRATION UNDER CHAPTER ELEVEN OF THE NAFTA
AND THE UNCITRAL ARBITRATION RULES, 1976
between
ELI LILLY AND COMPANY
Claimant
and
GOVERNMENT OF CANADA
Respondent
Case No. UNCT/14/2
FINAL AWARD
Members of the Tribunal
Professor Albert Jan VAN DEN BERG (President)
Sir Daniel BETHLEHEM QC
Mr. Gary BORN
Secretary of the Tribunal
Ms. Lindsay GASTRELL
Date of dispatch to the Parties: 16 March 2017
REPRESENTATION OF THE PARTIES
Representing Eli Lilly and Company: Representing the Government of Canada:
Richard G. Dearden
Wendy J. Wagner
Anca M. Sattler
GOWLING LAFLEUR HENDERSON LLP
160 Elgin Street, Suite 2600
Ottawa, Ontario, K1P 1C3
Canada
and
Marney L. Cheek
John K. Veroneau
Alexander A. Berengaut
James M. Smith
Nikhil V. Gore
Lauren S. Willard
COVINGTON & BURLING LLP
One City Center, 850 Tenth St., NW
Washington, DC 20001
United States of America
Sylvie Tabet
Shane Spelliscy
Mark A. Luz
Adrian Johnston
Mariella Montplaisir
Michelle Hoffmann
Krista Zeman
TRADE LAW BUREAU
Departments of Justice and of
Foreign Affairs, Trade and
Development
125 Sussex Drive
Ottawa, Ontario, K1A OG2
Canada
i
TABLE OF CONTENTS
LIST OF DEFINED TERMS......................................................................................................... vi
INTRODUCTION ................................................................................................................. 1
Parties ........................................................................................................................... 1
Overview ........................................................................................................................ 1
PROCEDURE........................................................................................................................ 3
BACKGROUND TO THE DISPUTE................................................................................. 18
Canadian Patent Law.................................................................................................... 18
Zyprexa Patent (Olanzapine)........................................................................................ 20
Strattera Patent (Atomoxetine)..................................................................................... 23
REQUESTS FOR RELIEF.................................................................................................. 25
Relief Sought by Claimant ........................................................................................... 25
Relief Sought by Respondent....................................................................................... 26
INTRODUCTION TO THE TRIBUNAL’S ANALYSIS................................................... 26
The Jurisdiction of the Tribunal and Questions of Applicable Law ............................ 26
Burden of Proof............................................................................................................ 29
Roadmap to the Tribunal’s Analysis............................................................................ 29
JURISDICTION .................................................................................................................. 30
Applicable Law ............................................................................................................ 30
The Parties’ Positions................................................................................................... 30
Respondent’s Position........................................................................................... 31
a. Timeliness of Respondent’s Jurisdictional Objection................................... 31
b. Claimant’s Compliance with NAFTA Articles 1116(2) and 1117(2)........... 33
Claimant’s Position............................................................................................... 37
a. Timeliness of Respondent’s Jurisdictional Objection................................... 37
b. Claimant’s Compliance with NAFTA Articles 1116(2) and 1117(2)........... 39
NAFTA Party Article 1128 Submissions..................................................................... 41
Mexico .................................................................................................................. 41
United States......................................................................................................... 42
The Parties’ Observations on the NAFTA Party Article 1128 Submissions ............... 42
Claimant’s Observations....................................................................................... 42
Respondent’s Observations................................................................................... 44
ii
The Tribunal’s Analysis ............................................................................................... 45
Timeliness of Respondent’s Jurisdictional Objection........................................... 45
Claimant’s Compliance with NAFTA Articles 1116(2) and 1117(2) .................. 45
LIABILITY FOR JUDICIAL MEASURES UNDER NAFTA CHAPTER ELEVEN....... 49
The Parties’ Positions................................................................................................... 49
Claimant’s Position............................................................................................... 49
a. NAFTA Article 1110..................................................................................... 51
b. NAFTA Article 1105..................................................................................... 52
Respondent’s Position........................................................................................... 53
a. NAFTA Article 1110..................................................................................... 54
b. NAFTA Article 1105..................................................................................... 56
NAFTA Party Article 1128 Submissions..................................................................... 58
Mexico .................................................................................................................. 58
United States......................................................................................................... 59
The Parties’ Observations on the NAFTA Party Article 1128 Submissions ............... 61
Claimant’s Observations....................................................................................... 61
Respondent’s Observations................................................................................... 63
The Tribunal’s Analysis ............................................................................................... 63
THE ALLEGED DRAMATIC CHANGE IN THE UTILITY REQUIREMENT UNDER
CANADIAN LAW ....................................................................................................................... 66
The Parties’ Positions................................................................................................... 66
Claimant’s Position............................................................................................... 66
a. The Traditional Utility Test........................................................................... 67
b. Creation of the Promise Utility Doctrine ...................................................... 69
c. Promise Standard........................................................................................... 69
d. Post-Filing Evidence ..................................................................................... 72
e. Disclosure for Sound Prediction.................................................................... 73
f. MOPOP Amendments and CIPO Practice .................................................... 74
g. Statistical Evidence ....................................................................................... 76
h. Comparison with Other Jurisdictions............................................................ 77
i. Legitimate Expectations................................................................................ 78
Respondent’s Position........................................................................................... 81
a. Promise Standard........................................................................................... 82
iii
b. Post-Filing Evidence ..................................................................................... 84
c. Disclosure for Sound Prediction.................................................................... 86
d. MOPOP Amendments and CIPO Practice .................................................... 88
e. Statistical Evidence ....................................................................................... 89
f. Comparison With Other Jurisdictions........................................................... 90
g. Legitimate Expectations................................................................................ 91
The Tribunal’s Analysis ............................................................................................... 94
Preliminary Observations...................................................................................... 94
The Utility Requirement in Canadian Jurisprudence............................................ 95
a. The Promise Standard ................................................................................... 95
b. Post-Filing Evidence ................................................................................... 100
c. Disclosure for Sound Prediction.................................................................. 104
MOPOP Amendments and CIPO Practice.......................................................... 109
Statistical Evidence............................................................................................. 113
Comparison with Other Jurisdictions.................................................................. 117
Legitimate Expectations...................................................................................... 118
Conclusion .......................................................................................................... 119
THE ALLEGED ARBITRARY AND DISCRIMINATORY NATURE OF THE UTILITY
REQUIREMENT UNDER CANADIAN LAW......................................................................... 120
The Parties’ Positions................................................................................................. 120
Claimant’s Position............................................................................................. 120
a. Arbitrariness ................................................................................................ 120
b. Discrimination............................................................................................. 123
Respondent’s Position......................................................................................... 125
a. Arbitrariness ................................................................................................ 125
b. Discrimination............................................................................................. 127
The Tribunal’s Analysis ............................................................................................. 129
Preliminary Observations.................................................................................... 129
Arbitrariness........................................................................................................ 130
Discrimination..................................................................................................... 134
Conclusion .......................................................................................................... 137
COSTS............................................................................................................................... 138
Applicable Law .......................................................................................................... 138
iv
Claimant’s Submission on Costs................................................................................ 138
Respondent’s Submission on Costs............................................................................ 140
The Tribunal’s Decision on Costs.............................................................................. 142
CONCLUSIONS................................................................................................................ 144
Jurisdiction ................................................................................................................. 144
Merits ....................................................................................................................... 145
Costs ....................................................................................................................... 147
AWARD ............................................................................................................................ 148
v
LIST OF DEFINED TERMS
‘113 Patent Canadian Patent No. 2,041,113, relating to the drug Zyprexa
(active ingredient olanzapine), filed in Canada on 24 April 1991
‘687 Patent Canadian Patent No. 1,075,687, filed in Canada in 1975
‘735 Patent Canadian Patent No. 2,209,735, relating to the drug Strattera
(active ingredient atomoxetine), filed in Canada on 4 January
1996
ADHD Attention-deficit/hyperactivity disorder
C-CS Claimant’s Submission on Costs, filed on 22 August 2016
C-PHM Claimant’s Post-Hearing Memorial, filed on 25 July 2016
C-RPHM Claimant’s Reply Post-Hearing Memorial, filed on 8 August
2016
Canada Government of Canada, Respondent
CIPO Canadian Intellectual Property Office
Counter-Memorial Respondent’s Counter-Memorial, filed on 27 January 2016
Claimant Eli Lilly and Company
FTC NAFTA Free Trade Commission
FTC Note NAFTA Free Trade Commission’s Notes of Interpretation of
Certain Chapter Eleven Provisions dated 31 July 2001
Health Canada Canada’s health regulatory agency
vi
Hearing Hearing for these proceedings held from 30 May to 9 June 2016
at the World Bank offices in Washington D.C., United States of
America
ICSID International Centre for Settlement of Investment Disputes
IP Intellectual Property
Lilly Eli Lilly and Company, Claimant
Lilly Canada Eli Lilly Canada Inc.
Memorial Claimant’s Memorial, filed on 29 September 2014
Mexico United Mexican States
MGH Massachusetts General Hospital
MOPOP Manual of Patent Office Practice
NAFTA North American Free Trade Agreement between Canada,
Mexico, and the United States of America as entered into force
on 1 January 1994
NAFTA Parties Canada, Mexico and the United States
NoA Notice of Arbitration, filed by Claimant on 12 September 2013
NOC Notice of Compliance, issued by the Canadian Minister of
Health
Novopharm Canadian drug manufacturer Novopharm Limited (now Teva
Canada Limited)
PCT Patent Cooperation Treaty as entered into force on 24 January
1978
vii
Parties Claimant and Respondent collectively
Party Claimant or Respondent individually
Patent Act Canadian Patent Act as entered into force in 1985
PM(NOC) Canada’s Patented Medicines (Notice of Compliance)
Regulations, SOR/93-133
PO 1 Procedural Order No. 1, issued by the Tribunal on 26 May 2014
PO 2 Procedural Order No. 2, issued by the Tribunal on 6 April 2015
PO 3 Procedural Order No. 3, issued by the Tribunal on 15 January
2016
PO 4 Procedural Order No. 4, issued by the Tribunal on 23 February
2016
R-CS Respondent’s Submission on Costs, filed on 22 August 2016
R-PHM Respondent’s Post-Hearing Memorial, filed on 25 July 2016
R-RPHM Respondent’s Reply Post-Hearing Memorial, filed on 8 August
2016
Raloxifene Decision Canadian Federal Court decision dated 5 February 2008,
relating to the Raloxifene Patent
Raloxifene Patent Canadian patent relating to a drug with the active ingredient
raloxifene
Rejoinder Memorial Respondent’s Rejoinder Memorial, filed on 8 December 2015
Reply Memorial Claimant’s Reply Memorial, filed on 11 September 2015
Respondent The Government of Canada
viii
SoC Claimant’s NoA, designated as its Statement of Claim by letter
dated 14 May 2014
SoD Respondent’s Statement of Defence, filed on 30 June 2014
Strattera Decision Canadian Federal Court decision dated 14 September 2010,
finding the Strattera Patent to be invalid for lack of utility
Strattera Patent The ‘735 Patent
SPLT Substantive Patent Law Treaty
Transcript Transcript of the Hearing
TRIPS The Agreement on Trade-Related Aspects of Intellectual
Property Rights administered by the World Trade Organization
and effective as of 1 January 1995
UNCITRAL Rules The United Nations Commission on International Trade Law’s
Arbitration Rules as adopted by General Assembly Resolution
31/98 on 15 December 1976
United States United States of America
USTR United States Trade Representative
VCLT Vienna Convention on the Law of Treaties
WIPO World Intellectual Property Organization
Zyprexa Decision Canadian Federal Court decision dated 10 November 2011,
finding the Zyprexa Patent to be invalid for lack of utility
Zyprexa Patent The ‘113 Patent
ix
INTRODUCTION
Parties
1. The claimant in this arbitration is Eli Lilly and Company (“Claimant” or “Lilly”), a
pharmaceutical company incorporated in the United States of America (“United States”)
under the laws of the State of Indiana, with its principal place of business located at Lilly
Corporate Center, Indianapolis, Indiana, 46205. Claimant brings its claims on its own
behalf and on behalf of its indirectly owned subsidiary, Eli Lilly Canada Inc., a Canadian
enterprise with its principal place of business located at 3650 Danforth Avenue, Toronto,
Ontario, M1N 2E8 (“Lilly Canada”).
2. Claimant is represented in this arbitration by its representatives listed on page i above.
3. The respondent in this arbitration is the Government of Canada (“Respondent” or
“Canada”). Respondent is represented in this arbitration by its representatives listed on
page i above.
Overview
4. Claimant has submitted the present dispute to international arbitration pursuant to Chapter
Eleven of the North American Free Trade Agreement, which entered into force on 1
January 1994 (“NAFTA”), and the United Nations Commission on International Trade
Law’s Arbitration Rules as adopted by General Assembly Resolution 31/98 on 15
December 1976 (“UNCITRAL Rules”). By agreement of the Parties, the International
Centre for Settlement of Investment Disputes (“ICSID”) serves as the administering
authority for this proceeding.
5. In this arbitration, Claimant asserts claims arising from the invalidation of its Canadian
patents protecting the drugs marketed in Canada as Strattera and Zyprexa. The Canadian
courts invalidated these two patents in 2010 and 2011, respectively, on the ground that they
did not meet the requirement under Canadian patent law that an invention be “useful”.
According to Claimant, the basis for the Canadian courts’ decisions was their adoption in
the mid-2000s of the “promise utility doctrine”, which Claimant considers to be radically
1
new, arbitrary and discriminatory against pharmaceutical companies and products.
Claimant argues that the promise utility doctrine is inconsistent with Respondent’s
obligations related to patent protection under NAFTA Chapter 17. Further, Claimant
contends that the retroactive application of the doctrine to Claimant’s patents has resulted
in (i) the unlawful expropriation of Claimant’s investments under NAFTA Article 1110,
and (ii) a breach of Respondent’s obligation to provide the minimum standard of treatment
under NAFTA Article 1105. Claimant submits that Respondent’s jurisdictional objection
should be dismissed as untimely, and that in any event, it lacks merit; it asserts that this
Tribunal has jurisdiction ratione temporis over Claimant’s claims.
6. Respondent’s position is that the Tribunal should dismiss all of Claimant’s claims for the
following four separate reasons: (i) the sole legal basis on which a national court decision
could result in a breach of NAFTA Chapter Eleven is a denial of justice, which Claimant
has not alleged; (ii) the Tribunal lacks jurisdiction ratione temporis because Claimant’s
claim is time-barred under NAFTA Articles 1116(2) and 1117(2); (iii) there has been no
dramatic change in Canadian courts’ interpretation of the requirement under the Canadian
patent law that an invention be “useful”; and (iv) the invalidation of Claimant’s patents
does not constitute a breach of NAFTA Chapter Eleven or any other international
obligation. In this regard, Respondent argues that consideration of Canada’s compliance
with NAFTA Chapter 17 or other international obligations outside of Chapter Eleven is
beyond the mandate of this Tribunal.
7. The Parties’ specific requests for relief are set forth in Section IV below, and a fuller
summary of their positions is contained in Sections VI.B,VI.B(2) VII.A, VIII.A, and IX.A
below. In its analysis, the Tribunal has considered not only the positions of the Parties as
summarized in this Award but the numerous detailed arguments made in the Parties’
written and oral pleadings as well. To the extent that these arguments are not referred to
expressly, they should be deemed to be subsumed into the Tribunal’s analysis.
8. The Tribunal has also received and considered written submissions from the United States
and the United Mexican States (“Mexico”) under NAFTA Article 1128 and from the amici
curiae identified in Section II below.
2
PROCEDURE
9. On 7 November 2012, Claimant delivered a Notice of Intent to Submit a Claim to
Arbitration to Respondent in respect of its patent for Strattera. Subsequently, on 13 June
2013, Claimant delivered a second Notice of Intent to Submit a Claim to Arbitration to
Respondent, which contained claims identical to those raised in the first Notice of Intent,
but added the Zyprexa patent to the complaint. Claimant later withdrew the first Notice of
Arbitration.
10. Claimant commenced this arbitration by its Notice of Arbitration dated 12 September 2013
(“NoA”), submitted pursuant to Article 3 of the UNCITRAL Arbitration Rules, and
Articles 1116, 1117, and 1120 of the NAFTA.
11. As envisaged in NAFTA Article 1123, the Parties agreed that the Tribunal would comprise
three arbitrators, one arbitrator appointed by each of the disputing parties and the third,
presiding arbitrator appointed by agreement of the disputing parties.
12. Claimant appointed Mr. Gary Born, a national of the United States, as arbitrator, and Mr.
Born accepted the appointment by letter of 18 November 2013. Together with his
acceptance, Mr. Born provided the Parties with a declaration of his independence and
impartiality and a disclosure statement.1
13. Respondent then appointed Sir Daniel Bethlehem, a national of the United Kingdom based
in London, as arbitrator, and Sir Daniel accepted the appointment on 17 December 2013.
Together with his acceptance, Sir Daniel provided the Parties with a declaration of his
independence and impartiality and a disclosure statement.2
14. On 4 March 2014, Claimant requested that the Secretary-General of ICSID appoint the
third, presiding arbitrator pursuant to NAFTA Article 1128. Claimant informed the
1
By letters of 9 June 2015, 10 and 22 July 2015, 7 September 2015, 22 April 2016, 27 June 2016, 4 October 2016 and
14 March 2017 Mr. Gary Born provided the Parties with supplemental disclosure statements. No Party raised any
objections or queries regarding these statements.
2
By letter of 3 February 2017, Sir Daniel Bethlehem provided the Parties with a supplemental disclosure statement.
No Party raised any objections or queries regarding this statement.
3
Secretary-General of an agreement of the Parties that this appointment be made through a
strike-and-rank list of seven candidates. The Secretary-General accepted Claimant’s
request by letter of 6 March 2014.
15. On 18 March 2014, in accordance with the Parties’ agreed procedure, the SecretaryGeneral
provided the Parties with a list of seven candidates. Each party submitted its
ranking of candidates on 1 April 2014.
16. By letter of 2 April 2014, the Secretary-General informed the Parties that the overall most
preferred candidate was Professor Albert Jan van den Berg, a national of the Netherlands
based in Brussels, and that he was therefore appointed as President of the Tribunal. The
Tribunal was deemed to have been constituted on that date in accordance with the
UNCITRAL Arbitration Rules and NAFTA Chapter Eleven.
17. In consultation with the Tribunal, the Parties agreed that ICSID would serve as
administering authority for the arbitration. By Claimant’s letter of 10 April 2014 to the
Secretary-General of ICSID, the Parties requested that ICSID provide full administrative
services. On the same day, the Secretary-General confirmed that ICSID would provide
such services and informed the Parties that Ms. Lindsay Gastrell, ICSID Counsel, would
serve as Secretary to the Tribunal.
18. In response to a request from the Tribunal, the Parties filed a joint submission on procedural
issues and confidentiality (including a jointly proposed Procedural Order No. 1, jointly
proposed Confidentiality Order, and a proposed Procedural Calendar from each Party) on
14 April 2014. As there were a number of issues upon which the Parties could not reach
agreement, the Tribunal invited each Party to submit its observations on the outstanding
issues. On 2 May 2014, Claimant filed its Observations on Outstanding Issues for the First
Procedural Hearing, and Respondent filed its Submission on Procedural Issues.
19. The Tribunal held a procedural hearing with the Parties on 10 May 2014, with the President
of the Tribunal and the Parties attending in person at the World Bank Headquarters in
Washington, D.C., and the co-arbitrators participating by videoconference from the World
Bank office in London.
4
20. The following individuals attended procedural hearing:
TRIBUNAL
Professor Albert Jan van den Berg President
Mr. Gary Born Arbitrator (participating via VC, World Bank London)
Sir Daniel Bethlehem QC Arbitrator (participating via VC, World Bank London)
ICSID SECRETARIAT
Ms. Lindsay Elizabeth Gastrell Secretary of the Tribunal
CLAIMANT
Counsel:
Ms. Marney Cheek Covington & Burling LLP
Mr. John Veroneau Covington & Burling LLP
Mr. James (Jay) Smith Covington & Burling LLP
Mr. Nikhil Gore Covington & Burling LLP
Ms. Celia Choy Covington & Burling LLP
Ms. Karina Watts (Paralegal) Covington & Burling LLP
Ms. Whitney Knowlton (Paralegal) Covington & Burling LLP
Ms. Wendy Wagner Gowling Lafleur Henderson LLP
Parties:
Mr. Arvie Anderson Eli Lilly and Company
RESPONDENT
Counsel:
Mr. Christophe Bondy Trade Law Bureau, Government of Canada
Ms. Yasmin Shaker Trade Law Bureau, Government of Canada
Mr. Maxime Dea Trade Law Bureau, Government of Canada
Mr. Adrian Johnston Trade Law Bureau, Government of Canada
Parties:
Mr. Lucas McCall
Department of Foreign Affairs, Trade and
Development Canada
Ms. Sara Amini Industry Canada
Mr. Gregoire Major Industry Canada Legal Services
21. At the procedural hearing, the Tribunal heard the Parties’ oral argument on procedural
issues, including the issue of the legal seat of the arbitration. Following deliberations on
this issue during a break in the hearing, the Tribunal informed the Parties of its decision
that the legal seat of this arbitration shall be Washington, D.C.
22. Following the procedural hearing, on 14 May 2014, the Tribunal provided the Parties with
a draft Procedural Order No. 1 and a draft Confidentiality Order, reflecting the Tribunal’s
5
decisions on issues addressed by the Parties during the hearing, and invited any final
comments from the Parties.
23. By letter of the same date, Claimant designated the NoA as its Statement of Claim (“SoC”),
as had been discussed during the first procedural hearing.
24. On 26 May 2014, the Tribunal issued Procedural Order No. 1 (“PO 1”) embodying the
agreements of the Parties and the decisions of the Tribunal on procedural matters. Section
5.1 of PO 1 recorded the Tribunal’s decision that the seat of arbitration would be
Washington, D.C. Section 9.1 provided that the proceeding would be bifurcated into two
phases, a merits phase and, if necessary, a quantum phase. Annex B of PO 1 set out a
timetable for the merits phase of the proceeding.
25. With respect to the hearing, PO 1 set forth the agreement of the Tribunal and the Parties
that the hearing would be open to the public, except when necessary to protect confidential
information. At Claimant’s request, PO 1 further stated that:
The hearing shall be made accessible to the public in real time via
closed-circuit television broadcast to a World Bank room other than
the room in which the hearing is held, subject to a time delay and
any other arrangements needed to safeguard confidential
information.
26. Also on 26 May 2014, the Tribunal issued the Confidentiality Order, which both Parties
signed on the same date.
27. As contemplated in Annex B of PO 1, on 30 June 2014, Respondent submitted its Statement
of Defence (“SoD”), together with Exhibits R-001 to R-035 and Authorities RL-001 to RL-
009.
28. On 29 September 2014, Claimant submitted its Memorial (“Memorial”), with Exhibits C-
001 to C-307 and Authorities CL-001 to CL-122, and the following four witness statements
and seven expert reports:
• First Witness Statement of Mr. Robert A. Armitage dated 27 September 2014
(“Armitage First Statement”);
6
• Witness Statement of Ms. Anne Nobles dated 25 September 2014 (“Nobles
Statement”);
• Witness Statement of Mr. Robert Postlethwait dated 25 September 2014
(“Postlethwait Statement”);
• Witness Statement of Mr. Peter G. Stringer dated 25 September 2014 (“Stringer
Statement”);
• First Expert Report of Prof. Jay Erstling dated 27 September 2014 (“Erstling First
Report”);
• First Expert Report of Ms. Gilda González Carmona dated 26 September 2014
(“González First Report”), in English and Spanish originals;
• First Expert Report of Mr. Steven G. Kunin dated 26 September 2014 (“Kunin First
Report”);
• First Expert Report of Prof. Robert P. Merges dated 29 September 2014 (“Merges First
Report”);
• First Expert Report of Mr. Fabián Ramón Salazar dated 26 September 2014 (“Salazar
First Report”), in Spanish with English translation;
• First Expert Report of Prof. Norman V. Siebrasse dated 29 September 2014
(“Siebrasse First Report”); and
• First Expert Report of Mr. Murray Wilson dated 25 September 2014 (“Wilson First
Report”).
29. On 27 January 2015, Respondent submitted its Counter-Memorial (“CounterMemorial”),
accompanied by Exhibits R-036 to R-356 and Authorities RL-010 to RL-
078, and the following three witness statements and five expert reports:
• Witness Statement of Ms. Kimby Barton dated 26 January 2015 (“Barton
Statement”);
• First Witness Statement of Dr. Marcel Brisebois dated 26 January 2015 (“Brisebois
First Statement”);
• First Witness Statement of Dr. Michael Gillen dated 26 January 2015 (“Gillen First
Statement”);
• First Expert Report of Mr. Ronald E. Dimock dated 26 January 2015 (“Dimock First
Report”);
7
• First Expert Report of Dr. Daniel J. Gervais dated 23 January 2015 (“Gervais First
Report”);
• First Expert Report of Mr. Timothy R. Holbrook dated 26 January 2015 (“Holbrook
First Report”);
• First Expert Report of Ms. Hedwig “Heidi” Lindner dated 26 January 2015 (“Lindner
First Report”), in Spanish with English translation; and
• First Expert Report of Mr. T. David Reed dated 26 January 2015 (“Reed First
Report”).
30. As contemplated in PO 1, the Parties then exchanged requests for the production of
documents. On 25 March 2015, the Parties submitted their outstanding document requests
for resolution by the Tribunal. Claimant submitted its completed Redfern Schedule,
observations and Authorities CL-123 to CL-145; Respondent submitted its completed
Redfern Schedule, observations and Authorities RL-079 to RL-087.
31. On 6 April 2015, the Tribunal issued its decisions with respect to the outstanding requests
in Procedural Order No. 2, including Annexes A and B (“PO 2”), indicating which
documents the Parties were ordered to produce.
32. On 25 June 2015, Respondent informed the Tribunal and ICSID that Mr. Christophe
Douaire de Bondy would no longer be representing Respondent in this matter and that all
future case correspondence should be directed to Mr. Shane Spelliscy and Mr. Mark Luz
of the Trade Law Bureau.
33. On 11 September 2015, Claimant submitted its Reply Memorial (“Reply”), accompanied
by Exhibits C-308 to C-514 and Authorities CL-146 to CL-166 and the following witness
statement and ten expert reports:
- Second Witness Statement of Mr. Robert A. Armitage dated 11 September 2015
(“Armitage Second Statement”);
- Second Expert Report of Prof. Jay Erstling dated 10 September 2015 (“Erstling
Second Report”);
- Second Expert Report of Ms. Gilda González Carmona dated 10 September 2015
(“González Second Report”), in English and Spanish originals;
8
- Second Expert Report of Mr. Steven G. Kunin dated 9 September 2015 (“Kunin
Second Report”);
- Expert Report of Prof. Bruce Levin dated 7 September 2015 (“Levin Report”);
- Second Expert Report of Prof. Robert P. Merges dated 10 September 2015 (“Merges
Second Report”);
- Expert Report of Mr. Andrew J. Reddon dated 11 September 2015 (“Reddon
Report”);
- Second Expert Report of Mr. Fabián Ramón Salazar dated 10 September 2015
(“Salazar Second Report”), in Spanish with English translation;
- Second Expert Report of Prof. Norman V. Siebrasse dated 10 September 2015
(“Siebrasse Second Report”);
- Expert Report of Mr. Philip Thomas dated 7 September 2015 (“Thomas Report”); and
- Second Expert Report of Mr. Murray Wilson dated 9 September 2015 (“Wilson
Second Report”).
34. By letter of 29 October 2015, ICSID notified Mexico and the United States of the deadline
for written submissions by the non-disputing NAFTA Parties pursuant to NAFTA Article
1128. In addition, an announcement was posted on the ICSID website stating the deadline
and instructions for submitting an application for leave to file a non-disputing party
(amicus) submission.
35. On 8 December 2015, Respondent submitted its Rejoinder Memorial (“Rejoinder”),
together with Exhibits R-357 to R-473, amended Exhibits R-243, R-333 and R-345,
Authorities RL-088 to RL-118, and the following two witness statements and five expert
reports:
- Second Witness Statement of Dr. Marcel Brisebois dated 7 December 2015 (“Brisebois
Second Statement”);
- Second Witness Statement of Dr. Michael Gillen dated 7 December 2015 (“Gillen
Second Statement”);
- Second Expert Report of Mr. Ronald E. Dimock dated 4 December 2015 (“Dimock
Second Report”);
- Second Expert Report of Dr. Daniel Gervais dated 7 December 2015 (“Gervais Second
Report”)
9
- Second Expert Report of Mr. Timothy R. Holbrook dated 5 December 2015
(“Holbrook Second Report”);
- Second Expert Report of Ms. Hedwig “Heidi” A. Lindner dated 7 December 2015
(“Lindner Second Report”), in Spanish with English translation; and
- Second Expert Report of Mr. T. David Reed dated 7 December 2015 (“Reed Second
Report”).
36. In a letter to Respondent dated 17 December 2015, copied to the Tribunal, Claimant
requested that Respondent unilaterally withdraw its objection to jurisdiction ratione
temporis raised for the first time in the Rejoinder. In response, by letter dated 18 December
2015, Respondent declined to withdraw its jurisdictional objection. On 21 December 2015,
Claimant informed Respondent that it would seek relief from the Tribunal for noncompliance
with Article 21(3) of the UNCITRAL Arbitration Rules and Section 10.2 of
PO 1 immediately following the holidays.
37. By letter of 5 January 2016 to the Tribunal, Claimant set forth observations on the timing
of Respondent’s objection to jurisdiction ratione temporis and sought leave to respond in
writing to the objection.
38. By letter of 8 January 2016, Respondent stated that it did not object to Claimant submitting
a response to its jurisdictional arguments, provided Respondent would be allowed to
respond in writing to Claimant’s submission. Respondent also proposed that if the Tribunal
were to grant Claimant’s request for additional written submissions, the deadline for the
NAFTA Article 1128 submissions and applications for leave to file amicus submissions
should be postponed.
39. On the same date, Claimant informed the Tribunal that it agreed with an extension of the
deadline of the NAFTA Article 1128 submissions but objected to altering the amicus filing
deadline. Additionally, Claimant proposed to shorten the period for the Parties to respond
to the NAFTA Article 1128 submissions.
40. Also on 8 January 2016, Mexico and the United States submitted letters to the Tribunal
proposing an extension to the filing deadline for the non-disputing NAFTA Party
submissions under NAFTA Article 1128.
10
41. Following a further exchange of comments by the Parties in relation to the procedural
calendar (Respondent’s letter of 12 January 2016 and Claimant’s letter of 13 January
2016), the Tribunal issued Procedural Order No. 3 dated 15 January 2016 (“PO 3”). In PO
3, the Tribunal ordered that: (i) Claimant would be allowed to respond to Respondent’s
objection to jurisdiction ratione temporis raised in the Rejoinder; (ii) further submissions
from Respondent on its jurisdictional objection were not necessary; and (iii) the deadlines
for Article 1128 submissions and applications for leave to file amicus submissions would
be extended. PO 3 contained a revised procedural calendar reflecting these decisions.
42. ICSID informed Mexico and the United States of the extended deadline for the nondisputing
NAFTA Party submissions under NAFTA Article 1128 and posted an
announcement on its website regarding the new deadline for applications for leave to file
amicus submissions.
43. On 22 January 2016, Claimant submitted its Opposition to Respondent’s Jurisdictional
Objection (“Opposition on Jurisdiction”), together with Exhibit C-515 and Authorities
CL-167 to CL-177.
44. Nine applications for leave to file an amicus curiae submission were submitted on 12
February 2016. The applicants were: (i) a group of academics from the United States, the
United Kingdom, Switzerland, South Africa and Nepal; (ii) the Canadian Chamber of
Commerce; (iii) the Canadian Generic Pharmaceutical Association; (iv) the SamuelsonGlushko
Canadian Internet Policy and Public Interest Clinic and the Centre for Intellectual
Property Policy; (v) Dr. Henning Grosse Ruse-Khan, Dr. Kathleen Liddell and Dr. Michael
Waibel of the University of Cambridge; (vi) Innovative Medicines Canada and
BIOTECanada; (vii) seven intellectual property law professors from universities in the
United States; (viii) the National Association of Manufacturers; and (ix) Pharmaceutical
Research and Manufacturers of America, Mexican Association of the Research Based
Pharmaceutical Industry, and Biotechnology Innovation Organization.
45. In accordance with the revised procedural calendar, on 19 February 2016, each Party
submitted comments on the applications for leave to file amicus submissions. Claimant
11
attached to its comments Authorities CL-178 to CL-179, and Respondent attached to its
letter an Annex A.
46. On 23 February 2016, the Tribunal issued Procedural Order No. 4 (“PO 4”) concerning the
applications for leave to file amicus submissions. The Tribunal granted six of the
applications, accepting into the record the submissions of the following amici:
a. Dr. Burcu Kilic, Professor Brook K. Baker, Professor Cynthia Ho and Mr. Yaniv
Heled: In summary, the position of these intellectual property law experts is that
NAFTA does not impose a uniform standard of patentability criteria, and that
Respondent has acted well within its rights under NAFTA to set its own utility
requirement. They also contend that Claimant’s initiation of this arbitration is an
abusive attempt to influence the Canadian Parliament to change the law on utility.
b. Canadian Chamber of Commerce: In summary, this submission states that deviation
from international norms on utility and sound prediction will negatively affect
Canada’s economy, and that the Canadian courts’ interpretation of promise utility can
be linked to declining investments in the Canadian pharmaceutical sector.
c. Canadian Generic Pharmaceutical Association (“CGPA”): In summary, CGPA urges
the Tribunal to dispose of this arbitration without commenting upon any substantive
principles of Canadian patent law, which it argues could upset longstanding Canadian
jurisprudence. According to CGPA, the “promise doctrine” as described by Claimant
does not exist, and is a only construct to support its arguments in this proceeding.
d. Samuelson-Glushko Canadian Canadian Internet Policy & Public Interest Clinic and
Centre for Intellectual Property Policy: In summary, this submission raises several
points in objection to Claimant’s case, including: (i) a patent is not an unconditional
property right, as it is always subject to a risk of litigation and invalidation by the court;
(ii) there are no formal or informal international standards of utility, including under
NAFTA; and (iii) Claimant’s arguments confuse the aims of trade law with those of
intellectual property law.
12
e. Gregory Dolin (University of Baltimore School of Law), Christopher Holman
(University of Missouri-Kansas City School of Law), Jay Kesan (University of Illinois
School of Law), Erika Lietzan (University of Missouri-Colombia School of Law), Adam
Mossoff (George Mason University School of Law), Kristen Osenga (University of
Richmond School of Law), and Mark Schultz (Southern Illinois University School of
Law): In summary, these intellectual property law professors challenge many aspects
of Respondent’s law on utility, which in their view departs from NAFTA Article
1709(1). They argue that Respondent’s approach runs counter to global norms and the
long historical trend toward increasing harmonisation of the utility standard in a liberal
direction.
f. National Association of Manufacturers: In summary, this manufacturing association
based in the United States submits that Respondent’s promise utility doctrine is
inconsistent with established international norms for patent protection and in violation
of NAFTA Chapter Eleven. In its view, Respondent has injected uncertainty into the
system and put at risk manufacturers’ ability to file a single global patent application
under the Patent Cooperation Treaty (the “PCT”).
47. On 18 March 2016, Mexico and the United States filed written submissions pursuant to
NAFTA Article 1128 (“Mexico Article 1128 Submission” and “United States Article
1128 Submission”). These submissions are discussed where applicable in the sections
below.
48. On 8 April 2016, the Parties provided the Tribunal with a jointly proposed draft Procedural
Order No. 5 concerning the procedural rules for the hearing on jurisdiction and merits.
After considering the Parties’ proposed draft order, on 12 April 2016, the Tribunal provided
the Parties with a draft agenda for the pre-hearing procedural teleconference. At the same
time, the Tribunal sought the Parties’ views on certain outstanding procedural items
relating to the hearing. Once the Tribunal received and considered the Parties’ comments,
it provided the Parties with an updated draft Procedural Order No. 5.
13
49. On 22 April 2016, the Parties filed the following submissions:
a. Respondent’s Observations on Issues Raised in 1128 Submissions of Mexico and the
United States (“Respondent’s Observations on 1128 Submissions”);
b. Respondent’s Observations on Issues Raised in Amicus Submissions (“Respondent’s
Observations on Amicus Submissions”); and
c. Claimant’s Comments on NAFTA Article 1128 Submissions and Non-Disputing Party
(Amicus) Submissions (“Claimant’s Observations on 1128 and Amicus
Submissions”).
50. On 27 April 2016, the President of the Tribunal held a pre-hearing teleconference with the
Parties. Following the teleconference, on 29 April 2016, the Tribunal issued Procedural
Order No. 5 (“PO 5”), reflecting the Parties’ agreements and the Tribunal’s decisions on
the procedural rules to govern the hearing.
51. Also on 29 April 2016, each Party notified the other Party and the Tribunal of the witnesses
and experts it intended to call during the hearing.
52. As contemplated in PO 5, on 6 May 2016, the Tribunal issued to the Parties a list of
questions to be addressed during their opening statements.
53. The same day, a news alert was posted on the ICSID website announcing that the hearing
would be open to the public and providing instructions for accessing the public viewing
room.
54. By letter of 25 May 2016, Respondent requested “that the Tribunal clarify for the Parties
that the documents referenced by the non-disputing parties in their amicus curiae
submissions are, in fact, considered part of the record in this arbitration”. Claimant
responded the following day, opposing “Canada’s attempt to introduce hundreds of new
exhibits into the record five days before the beginning of the hearing”. The Tribunal
addressed this issue in Procedural Order No. 6 (“PO 6”), issued on 27 May 2016. In PO 6,
the Tribunal decided, inter alia, that either Party would be permitted to rely on documents
14
referenced in the amicus curiae submissions that were not already part of the record, as
long as that Party notified the other Party and the Tribunal at least 24 hours in advance.
55. The hearing on jurisdiction and merits was held at the World Bank Headquarters in
Washington, D.C. from 30 May to 8 June 2016 (excluding Sunday, 5 June and Tuesday, 7
June 2016) (the “Hearing”).3
In accordance with PO 1, the Hearing was broadcast to a
public viewing room at the World Bank Headquarters.
56. The following individuals were present at the Hearing:
TRIBUNAL
Professor Albert Jan van den Berg President
Mr. Gary Born Arbitrator
Sir Daniel Bethlehem QC Arbitrator
ICSID SECRETARIAT
Ms. Lindsay Gastrell Secretary of the Tribunal
CLAIMANT
Counsel:
Ms. Marney L. Cheek Covington & Burling LLP
Mr. Alexander A. Berengaut Covington & Burling LLP
Mr. James M. Smith Covington & Burling LLP
Mr. Michael A. Chajon Covington & Burling LLP
Mr. John K. Veroneau Covington & Burling LLP
Ms. Gina M. Vetere Covington & Burling LLP
Ms. Natalie M. Derzko Covington & Burling LLP
Mr. Nikhil V. Gore Covington & Burling LLP
Ms. Lauren S. Willard Covington & Burling LLP
Mr. Alexander B. Aronson Covington & Burling LLP
Ms. Tina M. Thomas Covington & Burling LLP
Ms. Elizabeth Fouhey Covington & Burling LLP
Ms. Idun Klakegg Covington & Burling LLP
Mr. Richard G. Dearden Gowling WLG
Ms. Wendy J. Wagner Gowling WLG
Mr. Alejandro Luna Fandino Olivares
Parties:
Mr. Arvie J. Anderson Eli Lilly and Company
Mr. Steven P. Caltrider Eli Lilly and Company
Ms. Arleen Palmberg Eli Lilly and Company
3
PO 5 provided that the Hearing would take place from 30 May to 9 June 2016, excluding only Sunday, 5 June 2016.
During the course of the hearing, the Parties conferred and agreed to a modified schedule, pursuant to which the
Hearing would be adjourned on 4, 7 and 9 June 2016. Later, the Parties informed the Tribunal that in order to complete
their presentations, they would need the Hearing to proceed on 4 June 2016.
15
Witnesses:
Mr. Robert A. Armitage Retired, formerly with Lilly
Ms. Anne Nobles Retired, formerly with Lilly
Mr. Robert Postlethwait Retired, formerly with Lilly
Mr. Peter George Stringer Independent consultant, formerly with Lilly
Experts:
Professor Jay Erstling William Mitchell College of Law
Professor Gilda Gonzalez Carmona
Universidad Nacional Autonoma de México,
formerly with Instituto Mexicano de la Propiedad
Industrial
Mr. Stephen G. Kunin Oblon, Spivak, McClelland, Maier & Neustadt, LLP
Professor Bruce Levin Columbia University
Professor Robert P. Merges UC Berkeley School of Law
Mr. Andrew J. Reddon McCarthy Tétrault LLP
Mr. Fabian Ramon Salazar
Independent consultant, formerly with Instituto
Mexicano de la Propiedad Industrial
Professor Norman V. Siebrasse University of New Brunswick
Mr. Philip Thomas
Retired, formerly with World Intellectual Property
Organization
Mr. Murray Wilson Retired, formerly with the Canadian Patent Office
RESPONDENT
Counsel:
Ms. Sylvie Tabet Trade Law Bureau, Government of Canada
Mr. Shane Spelliscy Trade Law Bureau, Government of Canada
Mr. Adrian Johnston Trade Law Bureau, Government of Canada
Ms. Krista Zeman Trade Law Bureau, Government of Canada
Mr. Mark Luz Trade Law Bureau, Government of Canada
Ms. Mariella Montplaisir Trade Law Bureau, Government of Canada
Ms. Shawna Lesaux Trade Law Bureau, Government of Canada
Mr. Marc-Andre Leveille Trade Law Bureau, Government of Canada
Parties:
Ms. Michelle Hoffman Investment Trade Policy, Government of Canada
Mr. Denis Martel Industry Canada, Government of Canada
Mr. Sanjay Venugopal Industry Canada, Government of Canada
Mr. Brad Jenkins Industry Canada, Government of Canada
Witnesses:
Mr. Marcel Brisebois Industry Canada, Government of Canada
Dr. Michael Gillen Retired, Government of Canada
Experts:
Professor Tim Holbrook Emory University
Mr. Ron Dimock
(assisted by Mr. Ryan Evans)
Dimock Stratton LLP
Professor Heidi Lindner
(assisted by Mr. Manuel Morante)
Arochi & Lindner
Mr. Dave Reed Retired
Professor Daniel Gervais Vanderbilt University Law School
16
57. Ms. Diana Burden and Ms. Laurie Hendrex provided court reporting services, and Mr.
Daniel Giglio, Mr. Charles Roberts and Mr. Luis Arango provided simultaneous SpanishEnglish
interpretation for the Parties’ experts on Mexican law.
58. In addition to the attendees listed above, representatives from Mexico and the United States
attended the Hearing in the hearing room.
59. On the final day of the Hearing (Day 8), the United States (through its representative Ms.
Lisa Grosh) sought leave to make an oral submission to present further views in connection
with its NAFTA Article 1128 written submission of 18 March 2016. At the Tribunal’s
invitation, the Parties’ made oral observations on the issue, by which Claimant asked the
Tribunal to deny the United States’ request, and Respondent sought to have it granted. The
Tribunal took a short recess to deliberate and then ordered that the United States would not
be permitted to make an oral submission during the Hearing because it had not provided
the required advance notice under NAFTA Article 1128. Instead, the Tribunal invited the
United States to submit a written note setting forth its views by midday. By email of later
that day, the Supplemental Submission of the United States was provided to the Parties and
the Tribunal. The Parties were then given an opportunity to make oral observations on the
United States’ position.
60. At the close of the Hearing, the Tribunal and the Parties discussed a number of postHearing
procedural steps. The Tribunal then confirmed the agreed post-Hearing schedule
by letter on 9 June 2016.
61. In accordance with that schedule (as revised by the Parties’ agreement), on 25 July 2016,
each Party submitted its Post-Hearing Memorial (“C-PHM” and “R-PHM”). On 8 August
2016, each Party submitted its Reply Post-Hearing Memorial (“C-RPHM” and “R-
RPHM”).
62. On 22 August 2016, Claimant submitted its submission on costs, together with Authorities
CL-200 to CL-206 (“C-CS”), and Respondent submitted its submission on costs, together
with Authorities RL-160 to RL-173 (“R-CS”).
17
BACKGROUND TO THE DISPUTE
Canadian Patent Law
63. The patent system in Canada is rooted in the Canadian Patent Act (the “Patent Act”).4
As
explained by the Supreme Court of Canada, an “inventor gets his patent according to the
terms of the Patent Act, no more and no less”.5
64. Under the Patent Act, the day-to-day administration of the patent system is carried out by
the Patent Office, which is part of the Canadian Intellectual Property Office (“CIPO”). The
Commissioner of Patents has ultimate responsibility for granting and issuing patents, and
patent examiners work on his or her behalf to review each patent application for compliance
with the Patent Act and the Patent Rules.6
Decisions of patent examiners may be appealed
to the Commissioner, although the review is in fact conducted by the Patent Appeal Board,
a body within the Patent Office, and then approved by the Commissioner.7
65. Both Parties have referred to the patent system as a bargain between society and the
inventor. On one side, the invention must be new, useful and non-obvious, and the inventor
must adequately describe it to the public.8
In exchange, the inventor is given certain
exclusive rights to the invention for a prescribed period.
66. Accordingly, the Patent Act defines “invention” as “any new and useful art, process,
machine, manufacture or composition of matter, or any new and useful improvement”, and
sets forth requirements pertaining to disclosure.9
One of these requirements—that an
invention be useful—is at the heart of this dispute. Section VIII below elaborates the
Parties’ positions on the utility requirement in the Patent Act and its application by
Canadian courts.
4
Siebrasse First Report ¶3 (“Patent rights in Canada are wholly a creature of statute”); Dimock Report ¶13 (“There is
no common law right to a patent. The patent system is entirely rooted in legislation.”).
5
R-143, Canada (Commissioner of Patents) v. Farbwerke Hoechst Aktien-Gesellschaft Vormals Meister Lucius &
Bruning, [1964] SCR 49, p. 57.
6
C-050/R-001, Patent Act, R.S.C. 1985, c. P-4, §4(2).
7
Dimock First Report §I.C.
8
See Dimock First Report §I.B; Siebrasse First Report §II.
9
C-050/R-001, Patent Act, RSC, 1985, c. P-4, §2.
18
67. Here, the Tribunal simply notes that, under Canadian judicial authority, utility may be
either demonstrated or “soundly predicted”. The doctrine of sound prediction was adopted
by the Supreme Court of Canada in Monsanto Co. v. Canada (Commissioner of Patents).10
Sound prediction has particular applicability to patents for pharmaceuticals, as it allows an
inventor to predict that untested chemical compounds would behave in the same way to
other structurally similar compounds. The doctrine of sound prediction may permit those
untested compounds to be patented.11
68. Since 1987, the Patent Act has allowed inventors to patent pharmaceutical compounds,
provided that the patentability requirements identified above are satisfied.12
Initially,
however, Canada maintained a compulsory licensing system under which generic
pharmaceutical manufacturers could license and produce patented pharmaceutical products
before the expiry of the patent.13
Generic manufacturers that paid a statutory fee of four or
five per cent to the patentee were permitted to bring the generic to market.14
69. In 1993, Canada eliminated the compulsory licensing regime, partly in recognition of its
international obligations under the Agreement on Trade-Related Aspects of Intellectual
Property Rights (“TRIPS”) and NAFTA.15
It was replaced with a set of regulations entitled
Patented Medicines (Notice of Compliance Regulations) (“PM(NOC)”), which are
uniquely applicable to the pharmaceutical sector.16
PM(NOC) requires any pharmaceutical
market entrant, such as a generic manufacturer, to obtain a Notice of Compliance (“NOC”)
10
C-061/R-023, Monsanto Co. v. Canada (Commissioner of Patents), [1979] 2 SCR (“Monsanto”) at 1113-14 (finding
that an inventor who had tested three related compounds to inhibit the vulcanization of rubber could soundly predict
the utility of the remaining compounds in the same genus without testing each one).
11
See Memorial ¶51, citing C-61/R-023, Monsanto at 1113-14. Siebrasse First Report ¶28; see also C-201, BurtonParsons
Chemicals, Inc v Hewlett-Packard (Canada) Ltd, [1976] 1 SCR 555, at 565.
12
Siebrasse First Report ¶35. (“For many years, Canada, like many other countries, did not permit patents that claimed
a medicine or food. In 1987, however, section 41 of the Patent Act, which prohibited such claims, was repealed. Until
then, a pharmaceutical compound could only be claimed in connection with the process by which it was made”).
13
C-323, Patent Act, S.C. 1923, c. 23, §17.
14
CL-079, WTO Report, “Canada – Patent Protection of Pharmaceutical Products”, ¶4.6. Respondent’s expert Mr.
Dimock agreed that the compulsory licensing system “hardly considered” the interest of patentees. Dimock Report
¶39. See C-321, Comm’n on Pharm. Servs., Canadian Pharm. Ass’n, Pharmacy in a New Age: Report of the
Commission on Pharmaceutical Services 25 (1971) (recognizing that the Canadian patent law regime effectively
denies market exclusivity to pharmaceuticals); C-322, Celotex Corp. v. Donnacona Paper Co., (1939) 2 C.P.R. 26, at
41 (Ex. Ct.) (recognizing the pharmaceutical patent regime as impractical and oppressive).
15
Dimock First Report ¶40.
16
Dimock First Report ¶41.
19
from the Minister of Health.17
However, before any NOC is issued, the patent-holder has
an opportunity to bring an application in the Federal Court to prohibit the Minister from
issuing an NOC.18
70. Patent law cases can also come before the Federal Court in other ways, such as on appeal
from a decision of the Patent Commissioner.19
In addition, under the Patent Act, “any
interested person” may challenge a patent in invalidation proceedings before the Federal
Court.20
Zyprexa Patent (Olanzapine)
71. In 1975, Lilly Industries Limited U.K. filed for a Canadian patent covering 15 trillion
compounds, including olanzapine, which was one of the “most preferred compounds”.21
In
1980, this patent was issued with Canadian Patent No. 1,075,687 (the “‘687 Patent”).22
72. According to Claimant, Zyprexa was first synthesized in 1982 in the United Kingdom.23
73. On 24 April 1991, Eli Lilly and Company Limited U.K. filed Canadian Patent Application
No. 2,041,113 in relation to olanzapine, as a selection from the genus of the ‘687 Patent
(the “Zyprexa Patent” or “‘113 Patent”).24
The patent application mentions the invention
as a novel organic compound, to be used as a pharmaceutical in the context of the “category
known as antipsychotics for treating serious mental conditions such as schizophrenia and
schizophreniform illnesses”.25
17
Dimock First Report ¶¶43, 154.
18
Dimock First Report ¶¶43, 154. In such a suit, the generic manufacturer may allege that the patent is invalid on any
ground, including utility.
19
See, e.g., R-250, President and Fellows of Harvard College v. Canada (Commissioner of Patents), [2000] 4 FC
528, ¶14.
20
C-050/R-001, Patent Act, RSC, 1985, c. P-4, §60(1). (“A patent or any claim in a patent may be declared invalid or
void by the Federal Court at the instance of the Attorney General of Canada or at the instance of any interested
person”.)
21
C-145/R-033, Eli Lilly Canada Inc. v. Novopharm Ltd., 2009 FC 1018, ¶23.
22
R-292, Patent Specification CA 1,075,687.
23
Memorial ¶84; citing Postlethwait Statement ¶13.
24
C-126, Canadian Patent Application No. 2,041,113 (published 24 April 1991).
25
C-126, Canadian Patent Application No. 2,041,113 (published 24 April 1991), p. 1.
20
74. On 13 October 1995, Lilly Canada requested examination of the Zyprexa Patent by the
Canadian Intellectual Property Office (“CIPO”).26
75. On 28 October 1996, Health Canada issued an NOC with the relevant requirements of the
Food and Drug Regulations in relation to “Zyprexa Tablets”, in which the active ingredient
was olanzapine.27
Zyprexa was approved for the treatment of the symptoms of psychotic
disorders.28
76. Claimant states that it launched Zyprexa in Canada in 1996.29
77. Following the patent examination process, on 17 March 1998, CIPO gave notice that the
Zyprexa Patent application would be accepted.30
78. On 14 July 1998, the Zyprexa Patent was issued.31
According to Claimant, it obtained
patents for olanzapine in 81 jurisdictions, including Mexico and the United States.32
79. On 6 June 2007, Canadian drug manufacturer Novopharm Limited (“Novopharm”, now
Teva Canada Limited) obtained regulatory approval from Health Canada to market a
generic version of Zyprexa.33
Lilly Canada had attempted to obtain an order prohibiting
the Minister of Health from issuing that NOC to Novopharm, but its action was dismissed
by the Federal Court on 5 June 2007.34
Lilly Canada’s appeal in relation to the NOC was
dismissed as moot, given that the NOC had already been issued.35
26
C-131, Request for Examination (Canadian Patent Application 2,041,113) (Zyprexa/Olanzapine).
27
C-133, Notice of Compliance DIN(s) 02229250, 02229269, 02229277, 02229285 (28 October 1996).
28
C-137, Centerwatch, Zyprexa.
29
Memorial ¶92.
30
C-065, Notice of Allowance re Canadian Patent Application No. 2,041,113 (Zyprexa/Olanzapine) (5 September
1997).
31
C-132, Canadian Patent No. 2,041,113 (14 July 1998).
32
Memorial ¶85; citing Armitage First Statement ¶11; C-096, Mexican Zyprexa file wrapper; C-426, File History for
Mexican Patent No. 173791 (Zyprexa/olanzapine) (Partial Translation for C-096); C-128, U.S. Patent Application No.
07/890,348 (22 May 1992).
33
C-151, Health Canada, Notice of Compliance Database, Search Results for “Olanzapine”.
34
C-144/R-032, Eli Lilly Canada Inc. v. Novopharm Ltd., 2007 FC 596.
35
C-512/R-208, Eli Lilly Canada Inc. v. Novopharm Ltd., 2007 FCA 359.
21
80. Lilly Canada filed suit against Novopharm for patent infringement. On 5 October 2009,
the Federal Court dismissed the action. In the same judgment, Justice James W. O’Reilly
invalidated the Zyprexa Patent on the basis that it “is not a valid selection patent”, holding
that it “does not describe an invention over and above what was disclosed in the ‘687
patent”.36
The judgment held further that:
One does not have to discredit a product or those who make it in
order to invalidate its patent. I am satisfied that olanzapine is a useful
drug for the treatment of schizophrenia. However, Lilly had a patent
for it that lasted from 1980 to 1997. It sought a separate and
supplementary patent for it, no doubt, to try to recuperate some of
its corporate investment in its neuroleptic programme. . . . But as the
sun began to set on the ’687 patent, it became important to try to
extend the patent protection for olanzapine. The ’113 patent was
clearly drafted with a view of justifying a fresh patent. But the
evidence just was not there, yet. Accordingly, I must conclude that
the ’113 is not a valid selection patent. The claims set out above are
invalid. Novopharm is entitled to relief under s. 8 of the Patented
Medicines (Notice of Compliance) Regulations, to be determined in
a separate proceeding, and to its costs.37
81. Lilly Canada appealed this judgment. The appeal was allowed, and the Federal Court of
Appeal set aside the Federal Court’s decision on 21 July 2010. The Federal Court of Appeal
found that Justice O’Reilly had erroneously treated the conditions for a valid selection
patent as “an independent basis upon which to attack the validity of a patent”.38
The Federal
Court of Appeal remanded the issues of “utility” and “sufficiency of disclosure” to the
Federal Court for re-determination.39
82. Justice O’Reilly reconsidered the case on the basis of the directions of the Federal Court
of Appeal. By judgment dated 10 November 2011 (the “Zyprexa Decision”), he found the
Zyprexa Patent to be invalid for lack of utility, noting that:
Novopharm has established that the patent’s promise had not been
demonstrated and could not have been soundly predicted on the
36
C-145/R-033, Eli Lilly Canada Inc. v. Novopharm Ltd., 2009 FC 1018, ¶139.
37
Id., ¶154.
38
C-046/R-015, Eli Lilly Canada Inc. v. Novopharm Ltd., 2010 FCA 197, ¶4.
39
Id., ¶124.
22
basis of the evidence available to the inventors in 1991.
Accordingly, I must conclude that the ‘113 is not a valid selection
patent. The claims set out above are invalid. Lilly’s action for patent
infringement is dismissed, with costs.40
83. Lilly Canada appealed the Zyprexa Decision to the Federal Court of Appeal. On 10
September 2012, the appeal was dismissed.41
84. On 16 May 2013, the Supreme Court of Canada refused leave to appeal the decision of the
Federal Court of Appeal of 10 September 2012.42
Strattera Patent (Atomoxetine)
85. In 1979, Claimant obtained a Canadian patent for a genus group of compounds including
atomoxetine (Canadian Patent No. 1,051,034). The patent specification mentions
compounds “useful as psychotropic agents, particularly as anti-depressants”.43
86. In 1985, Claimant filed for a second patent relating only to atomoxetine, stating that “[t]he
compound of this invention is used as an antidepressant in the method of this invention,
which comprises administering to a human suffering from depression an effective
antidepressant dose of the compound”.44
87. According to Claimant, it approached doctors at the Massachusetts General Hospital
(“MGH”) in the United States, with a proposal for a joint human clinical trial to test the
efficacy of atomoxetine in treating attention-deficit/hyperactivity disorder (“ADHD”). The
trial was carried out from January to April 1995, and a report was subsequently published
in the American Journal of Psychiatry.45
88. On 4 January 1996, Claimant filed a “new use” patent application for atomoxetine under
the PCT, requesting entry into the Canadian national phase on 7 July 1997 (the “Strattera
40
C-146/R-016, Eli Lilly Canada Inc. v. Novopharm Ltd., 2011 FC 1288, ¶273.
41
C-147/R-035 Eli Lilly Canada Inc. v. Novopharm Ltd., 2012 FCA 232.
42
R-002, Eli Lilly Canada Inc., et al. v. Novopharm Limited, 2013 CanLII 26762 (SCC).
43
R-247, Patent Specification CA 1,051,034, p. 1.
44
R-269, Patent Specification CA 1,181,430, p. 20.
45
Memorial ¶119; citing C-152, Thomas Spencer, et al, Effectiveness and Tolerability of Tomoxetine in Adults with
Attention Deficit Hyperactivity Disorder, 155 Am. J. Psychiatry 693 (May 1998).
23
Patent” or “‘735 Patent”).46
The patent claims the use of atomoxetine for a “method of
treatment of the psychiatric disorder known as attention-deficit/hyperactivity disorder”.47
89. On 27 February 2001, Claimant requested examination of the Strattera Patent by CIPO.48
On 21 January 2002, it requested expedited examination on the basis that “[t]he invention
described and claimed in the present application has become of great commercial
importance to the Applicant”.49
90. On 21 March 2002, CIPO gave notice that the Strattera Patent would be accepted.50
91. On 1 October 2002, the Strattera Patent was issued.51
According to Claimant, it also
obtained patents for atomoxetine in dozens of other jurisdictions.52
92. On 24 December 2004, Health Canada issued an NOC with respect to Strattera and it was
launched on the market thereafter.53
93. Novopharm challenged the validity of the Strattera Patent in the Federal Court. On 14
September 2010, Justice R.L. Barnes issued a judgment finding the Strattera Patent to be
“invalid on the basis of inutility” (the “Strattera Decision”).54
Justice Barnes held that:
to the extent that the ‘735 Patent is based on a sound prediction from
the MGH Study that atomoxetine is useful in the treatment of
ADHD, the patent fails for want of disclosure before some reference
to those findings was required to be set out in the patent.55
46
C-154, Canadian Patent Application No. 2,209,735 (published 18 July 1996).
47
Id., p. 1. See also R-026, Patent Specification CA 2,209,735.
48
C-066, Request for Examination re Canadian Patent Application No. 2,209,735 (Strattera/Atomoxetine).
49
C-157, Request to Advance Examination (Canadian Patent Application 2,209,735) (Strattera).
50
C-069, Notice of Allowance re Canadian Patent Application No. 2,209,735 (Strattera/Atomoxetine) (21 March
2002).
51
C-067, Canadian Patent No. 2,209,735 (Strattera) (1 December 2002).
52
Memorial ¶124; citing Armitage First Statement ¶19 and Appendix B.
53
C-159, Notice of Compliance DIN(s) 02262800, 02262819, 02262827, 02262835, 02262843.
54
C-160/R-027, Novopharm Ltd. v. Eli Lilly & Co., 2010 FC 915, ¶122.
55
Id., ¶120.
24
94. Claimant appealed the Strattera Decision. On 5 July 2011, the Federal Court of Appeal
dismissed the appeal.56
On 8 December 2011, Claimant was denied leave to appeal to the
Supreme Court of Canada.57
REQUESTS FOR RELIEF
Relief Sought by Claimant
95. In the SoC, Claimant requests the following relief:
(i) damages for the full measure of direct losses and consequential
damages sustained as a consequence of Respondent’s breach
of its obligations under NAFTA Chapter 11, estimated in an
amount not less than CDN $500 million plus any payments
Lilly or its enterprise is required to make arising from the
improvident loss of its Zyprexa and Strattera Patents or its
inability to enforce its Zyprexa and Strattera Patents;
(ii) the full costs associated with these proceedings, including all
professional fees and disbursements, as well as the fees of the
arbitral tribunal;
(iii) pre-award and post-award interest;
(iv) payment of a sum of compensation equal to any tax
consequences of the award, in order to maintain the award’s
integrity; and
(v) such further relief as the arbitral tribunal may deem just and
appropriate.58
96. Claimant confirms this request for relief in the Memorial and the Reply and its PostHearing
Memorial.59
97. In the Opposition on Jurisdiction, Claimant requests that the Tribunal:
(i) reject Canada’s jurisdictional objection as untimely under
UNCITRAL Article 21(3) or, in the alternative, reject Canada’s
56
C-163/R-028, Eli Lilly & Co. v. Teva Canada Ltd., 2011 FCA 220.
57
R-003, Eli Lilly and Company v. Teva Canada Limited, 2011 CanLII 79177 (SCC).
58
SoC ¶85.
59
Memorial ¶295; Reply ¶371; C-PHM ¶323.
25
objection on the merits; and, in either case, (ii) award Lilly all costs
(including attorney’s fees) incurred in connection with Canada’s
belated jurisdictional objection.60
Relief Sought by Respondent
98. In the SoD, Respondent requests the Tribunal to issue an Award:
• dismissing Claimant’s claim in its entirety;
• awarding Respondent its costs, with applicable interest,
pursuant to Article 1135(1) of the NAFTA and Article 40 of
the UNCITRAL Rules; and
• granting any other relief that may seem just.61
99. Respondent confirms this request in the Counter-Memorial, the Rejoinder and its PostHearing
Memorial.62
INTRODUCTION TO THE TRIBUNAL’S ANALYSIS
The Jurisdiction of the Tribunal and Questions of Applicable Law
100. The jurisdiction of the Tribunal is rooted in Section B of Chapter Eleven of NAFTA. In
this regard, insofar as may be material for purposes of these proceedings,63
NAFTA Article
1116(1) provides that a Party may submit to arbitration under Section B of Chapter Eleven
a claim that another Party has breached an obligation under Section A of Chapter Eleven.
This provision is echoed in Article 1117(1) in respect of claims on behalf an enterprise.
101. It follows from these provisions that the Tribunal’s jurisdiction is limited, in the
circumstances of this case, to claims of a breach of obligations under Section A of NAFTA
60
Opposition on Jurisdiction ¶50.
61
SoD ¶120.
62
Counter-Memorial ¶421; Rejoinder ¶283; R-PHM ¶273.
63
The Tribunal notes for completeness the reference in NAFTA Articles 1116(1) and 1117(1) to claims under NAFTA
Articles 1503(2) and 1502(3)(a) falling within the jurisdiction of a tribunal established under Section B of NAFTA
Chapter Eleven.
26
Chapter Eleven. A NAFTA Chapter Eleven tribunal is not a tribunal of general jurisdiction
with competence to adjudicate claims of a breach of other provisions of NAFTA.
102. Without prejudice to this appreciation, the Tribunal notes, as will be evident from the
discussion that follows on the question of applicable law, that the proper limitation of the
Tribunal’s jurisdiction to alleged breaches of Section A of NAFTA Chapter Eleven does
not require the Tribunal to ignore other provisions of the NAFTA, other agreements
between the NAFTA Parties, or other relevant and applicable rules of international law, for
purposes of assessing the claims before it.
103. As regards applicable law, NAFTA Article 1131(1), under the heading “Governing Law”,
provides: “A Tribunal established under this Section shall decide the issues in dispute in
accordance with this Agreement and applicable rules of international law”. This reflects,
for purposes of proceedings under NAFTA Chapter Eleven, the requirement in NAFTA
Article 102(2), addressing the objectives of the NAFTA, that “The Parties shall interpret
and apply the provisions of this Agreement in the light of its objectives set out in paragraph
1 and in accordance with applicable rules of international law”. Having regard also to the
terms of Article 33(1) of the UNCITRAL Rules,64
the Tribunal accordingly observes that
the applicable law for purposes of these proceedings is the NAFTA and applicable rules of
international law.
104. The Tribunal notes also the terms of NAFTA Article 1112(1) and Article 103(2), which
provide further clarity on the relevant applicable law in the event of any inconsistency,
first, between NAFTA Chapter Eleven and other chapters of the NAFTA, and, second,
between the NAFTA and other agreements. Thus, Article 1112(1) provides: “In the event
of any inconsistency between this Chapter and another Chapter, the other Chapter shall
prevail to the extent of the inconsistency”. Article 103(2) provides: “In the event of any
inconsistency between this Agreement and such other agreements [to which the Parties to
64
Article 33(1) of the UNCITRAL Arbitration Rules 1976 provides: “The arbitral tribunal shall apply the law
designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the
arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable”.
27
the NAFTA are party], this Agreement shall prevail to the extent of the inconsistency,
except as otherwise provided in this Agreement”.
105. The Tribunal notes, additionally, the terms of NAFTA Article 1131(2), which provides:
“An interpretation by the [NAFTA Free Trade] Commission of a provision of this
Agreement shall be binding on a Tribunal established under this Section”. In this regard,
the Tribunal notes that the Commission adopted interpretations of, inter alia, NAFTA
Article 1105(1), on 31 July 2001 (“FTC Note”).65
106. As will be evident from the FTC Note interpretation of Article 1105(1), a tribunal seised
of a dispute concerning, inter alia, the interpretation and application of this provision is
required to have regard at the very least to customary international law to determine the
content, under customary international law, of the minimum standard of treatment
requirement for purposes, inter alia, of interpreting and applying the concepts of “fair and
equitable treatment” and “full protection and security”. It follows, and in the Tribunal’s
view this accords with a plain reading of both NAFTA Article 1131(1) and Article 102(2),
that the phrase “applicable rules of international law” addresses not simply, for example,
rules of interpretation of treaties, such as those reflected in Articles 31 and 32 of the Vienna
Convention on the Law of Treaties (“VCLT”), but also any other applicable rules of
international law that may be relevant to the case before it. This would include, for
example, relevant and applicable rules on State responsibility, such as go to questions of
attribution of conduct, as well as other relevant and applicable rules of international law
that inform the interpretation and application of the provisions, inter alia, of Section A of
NAFTA Chapter Eleven that are in issue in the proceedings. It will be a matter for each
tribunal constituted under Section B of NAFTA Chapter Eleven to evaluate, with the
65
Under the heading “Minimum Standard of Treatment in Accordance with International Law”, the Commission
adopted the following interpretations: “1. Article 1105(1) prescribes the customary international law minimum
standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of
another Party. 2. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require
treatment in addition to or beyond that which us required by the customary international law minimum standard of
treatment of aliens. 3. A determination that there has been a breach of another provision of the NAFTA, or of a
separate international agreement, does not establish that there has been a breach of Article 1105(1)”.
28
assistance of submissions of the parties on the matter, the precise scope of the phrase
“applicable rules of international law” in the circumstances of the case of which it is seised.
107. As regards the interpretation of the NAFTA, the Tribunal will proceed by reference to the
commonly accepted customary international law rules of interpretation of treaties reflected
in Articles 31 and 32 of the VCLT.
Burden of Proof
108. The Tribunal shall be guided by Article 24(1) of the UNCITRAL Arbitration Rules, which
provides that “[e]ach party shall have the burden of proving the facts relied on to support
his claim or defence”.
109. The Tribunal shall apply the well-established principle that the party alleging a violation
of international law giving rise to international responsibility has the burden of proving it.
If that party adduces evidence that prima facie supports its allegation, the burden of proof
may shift to the other party when the circumstances so justify.
Roadmap to the Tribunal’s Analysis
110. During the Hearing, each Party proposed a decision tree setting forth what it considered to
be the issues to be addressed by the Tribunal, and the order in which those issues should
be addressed.66
The Parties agree on the fundamental issues to be decided, although they
disagree on the order of the analysis. Having considered the decision tree of each side, the
Tribunal will approach the issues in the following order:
(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)
66
Respondent’s Opening Statement, slide 7; Claimant’s Closing Presentation, slide 140; R-PHB ¶5.
29
(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?
JURISDICTION
Applicable Law
111. Article 21(3) of the UNCITRAL Rules states that “A plea that the arbitral tribunal does not
have jurisdiction shall be raised not later than in the statement of defence …”.
112. NAFTA Article 1116(2) provides:
An investor may not make a claim if more than three years have
elapsed from the date on which the investor first acquired, or should
have first acquired, knowledge of the alleged breach and knowledge
that the investor has incurred loss or damage.
113. NAFTA Article 1117(2) provides:
An investor may not make a claim on behalf of an enterprise … if
more than three years have elapsed from the date on which the
enterprise first acquired, or should have first acquired, knowledge
of the alleged breach and knowledge that the enterprise has incurred
loss or damage.
The Parties’ Positions
114. In the Rejoinder, Respondent raised for the first time an objection to the Tribunal’s
jurisdiction ratione temporis. Respondent’s position is that Claimant recast its claim in the
Reply in a way that brought it outside of the three-year limitation period set forth in
NAFTA Articles 1116(2) and 1117(2). In response, Claimant argues that this jurisdictional
objection should be rejected as untimely and, in any event, fails as a matter of law.
67
Although not listed as a fundamental issue on the Parties’ decision trees, the Tribunal finds it appropriate to address
Claimant’s allegations of arbitrariness and discrimination in a separate section, as explained further below at ¶389.
30
Respondent’s Position
a. Timeliness of Respondent’s Jurisdictional Objection
115. Respondent contends that its jurisdictional objection is timely because (i) it was raised as
early as possible; (ii) Claimant was not prejudiced by the timing of this objection; and (iii)
an objection to jurisdiction pursuant to NAFTA Articles 1116(2) and 1117(2) cannot be
waived.68
116. According to Respondent, Article 21(3) of the UNCITRAL Rules applies only to the extent
that a respondent knew or should have known of the jurisdictional objection at the filing of
the statement of defence.69
When a claimant is permitted to make additional written
submissions after the statement of claim and reorients its claim therein, Article 21(3)
cannot be used to bar a jurisdictional objection arising from the new version of the claim.70
117. Respondent argues that in this case, prior to the Reply, Claimant’s claims were seemingly
based on the invalidation of the Zyprexa and Strattera Patents, and Respondent therefore
did not raise an objection under NAFTA Articles 1116(2) and 1117(2). Then, when
Claimant began to reorient its claim during the document production phase, Respondent
immediately objected.71
According to Respondent, it became clear only in the Reply that
the measure Claimant was challenging was the promise utility doctrine itself, creating the
basis for Respondent’s jurisdictional objection. Respondent asserts that it made this
objection to the Tribunal as soon as possible—in its next written submission, the Rejoinder.
118. In any event, according to Respondent, even if the Tribunal were to find that Respondent
should have brought the objection sooner, Article 21(3) cannot be interpreted to bar its
68
R-PHB §III.A.
69
R-PHB ¶78.
70
R-PHB ¶79. Respondent points out that under Article 22 of the UNCITRAL Rules, a claimant does not have a
presumptive right to make another written submission following the statement of claim.
71
R-PHB ¶81, citing Procedural Order No. 2, Annex B, in which Respondent stated: “In order to establish jurisdiction
in this matter, Claimant stated the measures to be the invalidation of two of its patents by the Federal Court. Having
asked the Tribunal to assert jurisdiction on the basis of these two specific measures, Claimant cannot now recast the
measure as ‘Canada’s development of a new utility doctrine’. This goes beyond the Tribunal’s jurisdiction, extending
to an undefined time period and cases involving unspecified patents that did not form any part of Claimant’s
investment.”
31
objection in the present circumstances, because Claimant suffered no prejudice from the
timing of the objection. Respondent argues that the purpose of Article 21(3) “is to prevent
surprise and prejudice to a claimant at the hearing”.72
This is not a concern in this case, as
Respondent raised its jurisdictional objection six months before the Hearing, and Claimant
had the opportunity to respond in writing.73
119. Finally, Respondent argues that the Tribunal must address its jurisdictional objection in
any event, because an objection made pursuant to NAFTA Articles 1116(2) and 1117(2)
cannot be waived by a disputing party.74
These provisions set a temporal limit on a
tribunal’s jurisdiction that forms part of the NAFTA Parties’ consent to arbitration.
According to Respondent:
variation of the terms of a State Party’s consent to arbitration in the
context of any particular dispute is not possible, unless allowed for
in the treaty, because it would amount to an amendment of the terms
of the underlying treaty itself. Therefore, in a treaty-based investorState
arbitration, in order to ascertain the limits of its jurisdiction,
the Tribunal must look not to the conduct or agreement of the
particular disputing parties before it, but rather to the terms of the
treaty by which it is governed and the agreement of the States that
are Parties to it. 75
120. Respondent’s view is that the UNCITRAL Rules do not change this required approach;
they cannot expand the jurisdiction of a Chapter Eleven tribunal.76
To support its position,
Respondent points to the following provisions: Article 1(2) of the UNCITRAL Rules,77
NAFTA Article 1120(2)78
and NAFTA Article 1122(1).79
72
R-PHB ¶82.
73
R-PHB ¶¶82-83.
74
R-PHB ¶¶84-88.
75
R-PHB ¶86.
76
R-PHB ¶88.
77
Article 1(2) of the UNCITRAL Rules states: “These Rules shall govern the arbitration except that where any of
these Rules is in conflict with a provision of the law applicable to the arbitration from which the parties cannot
derogate, that provision shall prevail”.
78
NAFTA Article 1120(2) states that the “applicable arbitration rules shall govern the arbitration except to the extent
modified by this Section.”
79
NAFTA Article 1122(1) states “Each Party consents to the submission of a claim to arbitration in accordance with
the procedures set out in this Agreement” (emphasis added by Respondent).
32
b. Claimant’s Compliance with NAFTA Articles 1116(2) and 1117(2)
121. Respondent submits that the Tribunal lacks jurisdiction ratione temporis because Claimant
failed to satisfy the temporal limit on Respondent’s consent to arbitrate found in NAFTA
Articles 1116(2) and 1117(2). According to Respondent, Claimant’s claim is
fundamentally a challenge to the promise utility doctrine. On Claimant’s own case, this
doctrine crystalized when it was applied to Claimant’s patent for raloxifene (the
“Raloxifene Patent”) by the Federal Court on 5 February 2008 (the “Raloxifene
Decision”).80
Although Claimant suffered a loss as a result of the Raloxifene Decision, it
chose not to submit its claim within three years of the alleged measures and loss.
122. Respondent interprets the three-year limitation period set out in NAFTA Articles 1116(2)
and 1117(2) as a strict precondition to its consent to arbitration, such that a tribunal lacks
jurisdiction ratione temporis over claims falling outside that time period.81
It notes that a
number of NAFTA Chapter Eleven tribunals have declined jurisdiction on this basis.82
123. For Respondent, the inclusion of the word “first” in Articles 1116(2) and 1117(2) is critical
“because it identifies the precise moment at which the three-year time limitation begins to
run”: the instant when the investor or enterprise acquired knowledge of the alleged breach
and a loss, as opposed to the middle or the end of such a breach.83
Thus, the time-bar clock
does not stop or restart even if a measure is alleged to have a continuing effect or to have
been applied many times after original adoption.84
80
In the Raloxifene case, Claimant applied to the Federal Court for an order barring the Minister of Health from
allowing the generic pharmaceutical company Apotex to market a generic version of Raloxifene before the expiration
of Claimant’s patent for the drug. The court held against Claimant on the ground that Claimant had failed to
demonstrate or soundly predict utility as of the filing date of its Raloxifene Patent. C-115/R-200, Eli Lilly Canada
Inc. v. Apotex Inc. et al, 2008 FC 142. The Federal Court of Appeal affirmed the trial court’s decision on March 25,
2009. C-119/R-354, Eli Lilly Canada Inc. v. Apotex Inc., 2009 FCA 97. Claimant sought leave to appeal the decision
to the Supreme Court of Canada but the Supreme Court denied on October 22, 2009. R-447, Eli Lilly Canada Inc. v.
Apotex Inc., [2009] SCCA No. 219.
81
Rejoinder ¶¶66-71.
82
Rejoinder ¶¶70-71, citing, inter alia, RL-090, Grand River Enterprises Six Nations, Ltd., et al. v. United States of
America, UNCITRAL, Decision on Objections to Jurisdiction, 20 July 2006 (“Grand River v. United States, Dec. on
Juris.”), ¶38; RL-016, Apotex Holdings Inc., Apotex Inc. v. United States of America, ICSID Case No.ARB(AF)/12/1,
Award, 25 August 2014 (“Apotex v. United States”), ¶¶314-335.
83
Rejoinder ¶72. See R-PHB ¶93.
84
Rejoinder ¶72.
33
124. Respondent submits that all three NAFTA Parties have repeatedly expressed their view
that this is the proper interpretation of Articles 1116(2) and 1117(2).85
According to
Respondent, such a clear, consistent position constitutes “a ‘subsequent agreement between
the parties regarding the interpretation of the treaty’ and/or ‘subsequent practice’ which
‘shall be taken into account’ when interpreting NAFTA” under the VCLT.86
125. Similarly, Respondent asserts that tribunals interpreting Articles 1116(2) and 1117(2) have
found that the limitation period is not subject to suspension or extension on account of
subsequent actions of the respondent State.87
Only the tribunal in UPS v. Canada held
differently, deciding that a continuing breach tolls the limitations period. According to
Respondent, the UPS approach, which has been rejected by the NAFTA Parties and
endorsed by no other tribunal, fails to give meaning to the word “first” and is therefore
contrary to the principle of effet utile.88
126. Applying this interpretation to the present case, Respondent asserts that Claimant failed to
submit its claim within the prescribed three-year period. According to Respondent,
Claimant’s claim as stated in the Reply is actually a challenge to the judiciary’s alleged
adoption of the promise utility doctrine, not to the invalidation of the Zyprexa and Strattera
Patents. On Claimant’s own case, this doctrine was developed through Canadian federal
court decisions issued between 2002 and 2008.89
127. Respondent considers one of those court decisions, the Raloxifene Decision, particularly
significant because it concerned Claimant’s own patent, and “[a]ll three aspects of
Canadian patent law that Claimant now challenges in this arbitration as a violation of
85
Rejoinder ¶¶73-75. Respondent cites, for example, RL-091, Merrill & Ring Forestry L.P. v. Canada, UNCITRAL,
1128 Submission of the United States, 14 July 2008 (“Merrill & Ring v. Canada”), ¶5 (“An investor first acquires
knowledge of an alleged breach and loss at a particular moment in time: under Article 1116(2), that knowledge is
acquired on a particular ‘date’. Such knowledge cannot first be acquired on multiple dates, nor can such knowledge
first be acquired on a recurring basis”.).
86
Rejoinder ¶75, quoting RL-072, VCLT Art. 31(3).
87
Rejoinder ¶77, citing CL-109/RL-058, Marvin Feldman Karpa v. United Mexican States, ICSID Case No.
ARB(AF)/99/1, Award, 16 December 2002 (“Marvin Feldman v. Mexico”), ¶63; RL-090, Grand River v. United
States, ¶¶29, 81.
88
Rejoinder ¶79, citing RL-091, Merrill & Ring v. Canada. See RL-103, United Parcel Service v. Government of
Canada, UNCITRAL, Award on the Merits, 24 May 2007.
89
Rejoinder ¶¶87-90.
34
Canada’s obligations under Chapter Eleven were applied to Claimant” in that case.90
Further, according to Respondent, Claimant suffered a loss as a result of the Raloxifene
Decision on 30 March 2009, when the Minister of Health issued an NOC to the generic
pharmaceutical company Apotex, which allowed Apotex to market a generic raloxifene
product.91
128. Therefore, Respondent submits that “Claimant first acquired knowledge of all relevant
aspects of what it calls Canada’s ‘promise utility doctrine’ and a loss as a result of that
doctrine” when the Supreme Court denied Claimant’s application for leave to appeal the
Raloxifene Decision on 22 October 2009.92
Accordingly, the three-year limitation period
started to run no later than that date.93
129. According to Respondent, by waiting nearly four years after that critical date to submit its
claim to arbitration, Claimant has run afoul of NAFTA Articles 1116(2) and 1117(2).94
In
Respondent’s view, the only claim on which Claimant could rely would be a denial of
justice in the specific court proceedings concerning the Zyprexa and Strattera Patents, but
Claimant has conceded that there was no such denial of justice.95
130. Respondent considers it irrelevant that the Raloxifene Decision was rendered in a
PM(NOC) proceeding that did not result in an invalidation of the Raloxifene Patent (unlike
the proceedings concerning the Zyprexa and Strattera Patents). According to Respondent,
the important fact is that Claimant undeniably suffered a loss as a result of the Raloxifene
Decision, which was based on the same judicial doctrine that Claimant now challenges.96
90
Rejoinder ¶94; see id. ¶¶95-103 and R-PHM ¶95.
91
Rejoinder ¶¶104-108; R-PHM ¶95; R-473, Health Canada, Drugs and Health Products, Notice of Compliance
Information, “Apo-Raloxifene”.
92
Rejoinder ¶110; R-447, Eli Lilly Canada Inc. v. Apotex Inc., [2009] SCCA No. 219.
93
Id.
94
Id.
95
Rejoinder ¶111, citing Reply ¶17.
96
Rejoinder ¶107.
35
131. Respondent also finds it insignificant that the Raloxifene Decision does not relate to the
Zyprexa or Strattera Patents, which are at issue in this case. In this regard, Respondent
argues:
Claimant cannot have first acquired knowledge of the alleged
NAFTA breach in the raloxifene proceedings with respect solely to
its raloxifene patent, and then again first acquired knowledge of the
alleged breach years later with respect to its atomoxetine and
olanzapine patents. The fact that the impugned “promise utility
doctrine” continued to affect Claimant’s other investments is
irrelevant for the purpose of the limitations period imposed by
NAFTA.97
132. Citing the award in Grand River v. United States, Respondent argues that finding
jurisdiction in this case “would allow Claimant to base its claim on the most recent
transgression, even if it had knowledge of earlier breaches and injuries”.98
It would also
erase the temporal limitation with respect to judicial doctrines, as court decisions are
always limited to a specific dispute.99
133. In its Post-Hearing Memorial, Respondent argues in the alternative that Claimant’s claim
would be barred by NAFTA Articles 1116(2) and 1117(2) even if the Tribunal were to
consider the promise utility doctrine solely with respect to the Zyprexa and Strattera
Patents.100
According to Respondent, “given the lack of data supporting those patents when
they were filed, Claimant knew of at least some loss of value after the decision in
raloxifene”.101
97
Rejoinder ¶109; R-PHM ¶102.
98
R-PHM ¶101, quoting RL-090, Grand River v. United States, Dec. on Juris., ¶81.
99
R-PHM ¶101.
100
R-PHM ¶¶103-105.
101
R-PHM ¶105. Respondent argues that Claimant employed many Canadian patent attorneys, who would have
understood the consequences of the promise utility doctrine on the Zyprexa and Strattera Patents. Id., citing Armitage,
Tr. 344:14-19 (“If there had been material developments in the Canadian law on utility, there would have been any
number of communications back and forth between Lilly’s in-house patent attorneys and its Canadian patent agents”).
36
Claimant’s Position
a. Timeliness of Respondent’s Jurisdictional Objection
134. Claimant submits that Respondent’s jurisdictional objection is untimely and therefore
should not be considered.102
Under Article 21(3) of the UNCITRAL Rules, any objection
to the Tribunal’s jurisdiction must be raised no later than in the statement of defence.
According to Claimant, Respondent has violated this provision by failing to raise its
objection to the Tribunal’s jurisdiction ratione temporis until the filing of the Rejoinder.
Prior to that submission, Respondent had expressly declined to object to the Tribunal’s
jurisdiction on several occasions: during the First Procedural Hearing, in the Statement of
Defence and in the Counter-Memorial.103
135. Claimant further argues that the timing of Respondent’s objection is prejudicial, as
highlighted by Respondent’s attempt to deny Claimant an opportunity to respond.104
In
addition, it is not responsive to the Reply and thereby conflicts with Section 10.2 of
Procedural Order No. 1105
governing the scope of written submissions.106
Moreover, in
Claimant’s view, the late objection has increased costs and compromised the efficiency of
this proceeding.107
136. According to Claimant, tribunals have consistently found untimely jurisdictional
objections to be procedurally improper and declined to entertain them on that basis, even
where a party had attempted to reserve its right to raise an objection later than the statement
of defence.108
102
Opposition on Jurisdiction §I.
103
Opposition on Jurisdiction ¶8, citing Recording of First Procedural Hearing, 3:13-3:15, SoD ¶83, and CounterMemorial
¶209 (stating that “Canada is not seeking dismissal of the claim on the basis of lack of jurisdiction”).
104
Opposition on Jurisdiction ¶9, citing Letter of Mr. Shane Spelliscy to Ms. Marney Cheek of 18 December 2015, p.
2.
105
PO 1 §10.2 (“The Disputing Parties may include with their Reply and Rejoinder submissions only evidence
responding to or rebutting matters raised by the other Disputing Party’s immediately preceding written submission or
documents produced by that other Disputing Party with, or in the period following, that submission”).
106
Opposition on Jurisdiction ¶12.
107
Opposition on Jurisdiction ¶9.
108
Opposition on Jurisdiction ¶¶10-11, citing CL-174, Bureau Veritas, Inspection, Valuation, Assessment and
Control, BIVAC B.V. v. Republic of Paraguay, ICSID Case No. ARB/07/9, Decision on Jurisdiction, 29 May 2009,
37
137. Claimant submits that Respondent’s justification for delay—that Claimant “recast” its case
in the Reply—is untenable and directly contradicted by the record.109
According to
Claimant, it has consistently argued that the measures at issue are the invalidations of the
Zyprexa and Strattera Patents, not the promise utility doctrine itself or any action taken in
respect of its Raloxifene Patent.110
Claimant argues that it discussed the content and
operation of the promise utility doctrine in the factual background section of the Reply
only to provide the factual context for its case and to respond to arguments advanced in
Respondent’s Counter-Memorial.111
138. According to Claimant, Respondent’s interpretation of UNCITRAL Rule 21(3) is flawed.
In particular, Respondent provides no valid reason why this Rule should not be enforced
in complex cases with multiple rounds of briefing.112
139. Claimant also rejects Respondent’s position that UNCITRAL Rule 21(3) is pre-empted by
NAFTA. Claimant considers this argument “nonsensical” because NAFTA itself specifies
that Chapter Eleven proceedings may be governed by the UNCITRAL Rules.113
Although
NAFTA can modify the UNCITRAL Rules,114
“there is nothing in Articles 1116 and 1117
that indicates an intent to modify Rule 21(3). Instead, without any conflict between them,
Rule 21(3) and Articles 1116 and 1117 operate together in a coherent fashion”.115
Indeed,
in set-aside proceedings concerning the award in S.D. Myers v. Canada, the Canadian
Federal Court recognized that a NAFTA Party can waive a jurisdictional objection by
failing to timely raise it.116
¶52; CL-175, Canfor Corporation v. United States of America, UNCITRAL, Decision on the Place of Arbitration,
Filing of a Statement of Defence and Bifurcation of the Proceedings, 23 January 2004, ¶48.
109
Opposition on Jurisdiction §I.B.
110
Opposition on Jurisdiction ¶¶25-27.
111
Opposition on Jurisdiction ¶28.
112
C-PHM ¶¶34-35.
113
C-PHM ¶37, citing NAFTA Art. 1120(1).
114
See NAFTA Article 1126(1).
115
C-PHB ¶37.
116
C-PHB ¶38, citing C-001, Attorney Gen. of Can. v. S.D. Myers, Inc., 2004 FC 38, ¶¶46-53. The court found that
Canada had failed to object to the Tribunal’s jurisdiction during the arbitration; therefore, its jurisdictional objection
in the set-aside proceeding was untimely under UNCITRAL Rule 21(3).
38
b. Claimant’s Compliance with NAFTA Articles 1116(2) and 1117(2)
140. Claimant submits that it filed the NoA squarely within the three-year limitation period set
forth in NAFTA Articles 1116(2) and 1117(2), and that Respondent has failed to meet its
burden of showing otherwise.117
In this regard, Claimant stresses that its case concerns just
two of its patents: the Zyprexa and Strattera Patents. Therefore, the facts relevant to
Articles 1116(2) and 1117(2) are that: (i) the Supreme Court rejected Claimant’s
application to appeal the invalidation of the Strattera Patent on 8 December 2011; (ii) the
Supreme Court rejected its application relating to the Zyprexa Patent on 16 May 2013; and
(iii) Claimant filed its NoA on 12 September 2013, within three years after the dates of
these final judgments.118
Thus, Claimant concludes that its claims are timely.
141. According to Claimant, Respondent’s jurisdictional objection mistakenly focuses on the
treatment of Claimant’s Raloxifene Patent, which is not being challenged in this
arbitration.119
This approach is contrary to the principle that a claimant’s case is defined
by its own submissions.120
Further, Respondent fails to show how the treatment of this
patent can trigger the limitations clock for claims concerning two other investments, which
are legally and factually distinct.121
For Claimant, it is unclear how it could have acquired
“knowledge [of] loss or damage” to the Zyprexa and Strattera Patents in 2009, before the
courts had issued any decision invalidating them.122
142. Claimant argues that Respondent has not cited a single case that supports its position.123
Rather, it contends, NAFTA tribunals have consistently held that acts occurring more than
three years before a claimant’s claim “may provide necessary and vital context for the
117
Opposition on Jurisdiction §II.
118
Opposition on Jurisdiction ¶36.
119
Opposition on Jurisdiction ¶37.
120
Opposition on Jurisdiction ¶38, citing CL-116/RL-006, Glamis Gold, Ltd. v. United States, UNCITRAL, Award,
8 June 2009 (“Glamis Gold v. United States”), ¶349 (“The basis of the claim is to be determined with reference to the
submissions of [the] [c]laimant”).
121
Opposition on Jurisdiction §I(b).
122
Opposition on Jurisdiction ¶35.
123
Opposition on Jurisdiction §II(b); C-PHM ¶40.
39
evaluation of host state actions that take place within the limitation period”.124
For
example, in Bilcon v. Canada, the tribunal stated:
While Article 1116(2) bars breaches in respect of events that took
place more than three years before the claim was made, events prior
to the three-year bar … are by no means irrelevant. They can provide
necessary background or context for determining whether breaches
occurred during the time-eligible period.125
143. Thus, Claimant argues, its references to earlier Canadian court decisions are appropriate
and do not have the effect of shortening the limitation period. They instead serve only as a
factual predicate to the challenged measures and the development of the promise utility
doctrine.126
144. According to Claimant, NAFTA tribunals have not taken issue with references to acts
outside of the limitation period, even if those prior acts could themselves have been the
basis of a NAFTA claim.127
In this regard, Claimant cites Apotex and Bilcon, cases in which
the tribunal was asked to consider a series of interrelated but distinct government acts.128
In both cases the tribunal found certain of the claimant’s claims to be time-barred, but
found no time-bar difficulty for later, related acts that took place within the limitation
period.129
145. Claimant also considers Respondent’s reliance on past submissions by NAFTA Parties
regarding Article 1128 unavailing. While these submissions may support the proposition
that an allegation of a continuing breach does not stop the time-bar clock, that point is
124
Opposition on Jurisdiction ¶35; C-PHM ¶39.
125
CL-166, William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of
Delaware Inc. v. Government of Canada, UNCITRAL, PCA Case No. 2009-04, Award on Jurisdiction and Liability,
17 March 2015 (“Bilcon v. Canada”), ¶282. See also CL-116/RL-006, Glamis Gold. v. United States, ¶¶348-350.
126
Opposition on Jurisdiction ¶¶41-44.
127
Opposition on Jurisdiction ¶¶44-46.
128
CL-176/RL-119, Apotex Inc. v. Government of the United States of America, UNCITRAL, Award, 14 August
2013, ¶¶330-333; CL-166, Bilcon v. Canada,, ¶¶266, 740.
129
Ibid.
40
irrelevant because Claimant has neither alleged a continuing breach nor advanced any
claim for its Raloxifene Patent.130
146. Finally, Claimant submits as a factual matter that, given the unpredictable and inconsistent
application of the promise utility doctrine, Claimant had no way of predicting a loss in
connection with the Zyprexa and Strattera Patents as a consequence of the prior
invalidation of the Raloxifene Patent.131
NAFTA Party Article 1128 Submissions
Mexico
147. In its NAFTA Article 1128 Submission, Mexico also offers its views on the interpretation
of NAFTA Articles 1116(2) and 1117(2).
148. Mexico agrees with Respondent’s submissions in paragraphs 66 to 80 of the Rejoinder,
which fall under the headings: “Articles 1116(2) and 1117(2) Establish a Strict Three-Year
Time Limit to Submit a Claim to Arbitration” and “The Time Limit in NAFTA Articles
1116(2) and 1117(2) Begins to Run from the First Date a Claimant Acquires Knowledge
of the Alleged Breach and a Loss”.132
149. Mexico states that the jurisdiction ratione temporis of a tribunal established under NAFTA
Chapter Eleven depends on a claimant’s compliance with Articles 1116(2) and 1117(2).133
150. In addition, according to Mexico, Tribunals have recognized that noncompliance with
Article 1116(2) or 1117(2) is a “clear and rigid limitation defense—not subject to any
suspension, prolongation or other qualification”.134
Thus, “neither a continuing course of
conduct nor the occurrence of subsequent acts or omissions can renew or interrupt the
three-year limitation period once it has commenced to run”.135
130
Opposition on Jurisdiction ¶47.
131
C-PHM ¶42.
132
Mexico Article 1128 Submission ¶4.
133
Mexico Article 1128 Submission ¶5.
134
Mexico Article 1128 Submission ¶6, quoting RL-090, Grand River v. United States, Dec. on Juris., ¶29.
135
Mexico Article 1128 Submission ¶7.
41
United States
151. In its NAFTA Article 1128 Submission, the United States offers two main observations on
the interpretation of NAFTA Articles 1116(2) and 1117(2).
152. First, the United States observes that these provisions apply to claims by an “investor of a
Party”, which is defined in Article 1139 as a national or an enterprise of a NAFTA Party
“that seeks to make, is making or has made an investment”. According to the United States,
the limitation period “must therefore relate to the particular investment for which the
investor seeks a remedy for the breach and loss” and begins to run “when the investor first
acquires knowledge of the alleged breach and loss in connection with that particular
investment”.136
153. Second, the United States submits that knowledge of an alleged breach and loss is “first
acquired” on a particular date, not on multiple dates or on a recurring basis. Therefore,
once an investor “first acquires” the relevant knowledge, the limitation period begins to
run and cannot be renewed by subsequent acts of the State Party arising from a continuing
course of conduct.137
The Parties’ Observations on the NAFTA Party Article 1128 Submissions
Claimant’s Observations
154. In its observations on the NAFTA Party Article 1128 Submissions, Claimant first discusses
generally the role and nature of Article 1128 submissions, before turning to the specific
comments offered by the United States and Mexico.138
Specifically, Claimant challenges
Respondent’s argument that the Tribunal should afford such submissions special weight in
interpreting NAFTA. According to Claimant, the only entity granted authority to issue
136
United States Article 1128 Submission ¶3.
137
United States Article 1128 Submission ¶4, citing RL-090, Grand River v. United States, Dec. on Juris., ¶29.
138
Claimant’s Observations on 1128 and Amicus Submissions §I.A.
42
interpretations of NAFTA is the NAFTA Free Trade Commission; Article 1128
submissions have no such status.139
155. Further, Claimant submits that “Article 1128 submissions are inextricably linked to
NAFTA Parties’ litigation positions when they act as respondents”.140
Thus, the arguments
presented in those submissions are not entitled to special deference, but rather must be
“afforded weight solely in proportion to their persuasive merit”.141
156. While maintaining that Respondent’s jurisdictional objection is not properly before the
Tribunal, Claimant nevertheless offers a number of observations regarding the specific
Article 1128 submissions relating to that objection.142
According to Claimant, the United
States’ interpretation of the limitation period in NAFTA Articles 1116 and 1117 confirms
that Respondent’s objection has no merit.143
In particular, Claimant cites the United States’
statement that the “time limitations period in Articles 1116(2) and 1117(2) must … relate
to the particular investment for which the investor seeks a remedy for the breach and
loss”.144
In Claimant’s view, “Canada’s proposed dates for the commencement of the
139
Claimant’s Observations on 1128 and Amicus Submissions ¶3, citing NAFTA Article 2001.
140
Claimant’s Observations on 1128 and Amicus Submissions ¶4, citing CL-181, Céline Lévesque, “Inconsistency
Inherent in International Investment Awards and the Role of State Interpretations: The Example of the Mexican
Sweetener Trio of Cases under NAFTA”, in Yearbook on International Investment Law & Policy 2013-2014 (Oxford
2015), p. 371 (“FTC interpretations rise to the highest levels of government in the three NAFTA Parties, while
submissions made in the course of arbitrations do not. One is closer to the political realm than the other. The point is
not so much about the authority of parties’ counsel to make submissions but rather goes to the permanence and
consistency of the interpretations they contain”.); Clyde C. Pearce & Jack Coe, Jr., “Arbitration Under NAFTA
Chapter Eleven: Some Pragmatic Reflections upon the First Case Filed Against Mexico”, 23 Hastings Int’l & Comp.
L. Rev. 311 (2000), p. 338.
141
Claimant’s Observations on 1128 and Amicus Submissions ¶5, citing CL-184, Gas Natural SDG S.A. v. Argentine
Republic, ICSID Case No. ARB/03/10, Decision of the Tribunal on Preliminary Questions on Jurisdiction, 17 June
2005, ¶47 and fn 12 (“We do not believe, however, that an argument made by a party in the context of an arbitration
reflects practice establishing agreement between the parties to a treaty within the meaning of Article 31(3)(b) of the
Vienna Convention on the Law of Treaties”.); CL-185, Telefónica S.A. v. Argentine Republic, ICSID Case No.
ARB/03/20, Decision of the Tribunal on Objections to Jurisdiction, 25 May 2006, ¶¶112-113; CL-180, Kendra
Magraw, “Investor-State Disputes and the Rise of Recourse to State Party Pleadings As Subsequent Agreements or
Subsequent Practice under the Vienna Convention on the Law of Treaties”, 1 ICSID Review 142 (2015), p. 166.
142
Claimant’s Observations on 1128 and Amicus Submissions ¶8.
143
Claimant’s Observations on 1128 and Amicus Submissions ¶¶9-10.
144
Claimant’s Observations on 1128 and Amicus Submissions ¶9, quoting United States Article 1128 Submission ¶3
(emphasis added by Claimant).
43
limitations period simply do not relate to ‘the particular investment[s]’ at issue in this
arbitration—the Zyprexa and Strattera patents”.145
157. In addition, Claimant raises no objection to the United States’ submission that “a
continuing course of conduct … does not renew the limitations period”, but argues that this
principle is irrelevant in the present case. According to Claimant, its claim relates to the
invalidation of its Zyprexa and Strattera Patents, which occurred within the three-year
limitation period, and its references to earlier Federal Court decisions are appropriate to
provide factual context for this claim.146
Respondent’s Observations
158. Like Claimant, Respondent makes observations concerning Article 1128 submissions
generally before addressing the specific submissions of the United States and Mexico.147
In particular, Respondent asserts that the submissions of the NAFTA Parties in this and
other proceedings reflect a common interpretation of NAFTA Articles 1105, 1110, 1116
and 1117.148
In accordance with VCLT Article 31(3), the Tribunal must give “considerable
weight” to this agreement of the NAFTA Parties.149
159. Referring to the specific submissions of the United States and Mexico on Articles 1116
and 1117, Respondent argues that the NAFTA Parties have a shared understanding of the
NAFTA limitation period. For Respondent, three points of agreement are particularly
relevant: (i) the limitation period is “not subject to any suspension, prolongation, or other
qualification”;150
(ii) it begins to run when the investor first acquires knowledge of the
145
Claimant’s Observations on 1128 and Amicus Submissions ¶9.
146
Claimant’s Observations on 1128 Submissions ¶10, citing Opposition on Jurisdiction ¶¶41-42, 47.
147
Respondent’s Observations on 1128 Submissions §§II and IV.
148
Respondent’s Observations on 1128 Submissions ¶5.
149
Respondent’s Observations on 1128 Submissions ¶4, citing CL-066, VCLT Article 31(3) (“There shall be taken
into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation
of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which
establishes the agreement of the parties regarding its interpretation”.).
150
Respondent’s Observations on 1128 Submissions ¶7, citing, inter alia, Mexico Article 1128 Submission ¶6 (stating
that NAFTA tribunals “have recognized that there is a ‘clear and rigid limitation defense – not subject to any
suspension, prolongation or other qualification’”.); United States Article 1128 Submission ¶2 (“The claims litigation
period has been described as ‘clear and rigid’ and not subject to any ‘suspension’, ‘prolongation’ or ‘other
qualification’.).
44
breach and loss, which can occur only at a single point in time;151
and (iii) a continuing
course of conduct cannot stop or renew the time-bar clock.152
For Respondent, the result
of applying this common interpretation to the present case is that “Claimant’s recast
challenge to the ‘promise utility doctrine’ per se is time-barred”.153
The Tribunal’s Analysis
Timeliness of Respondent’s Jurisdictional Objection
160. The Parties disagree as to whether Respondent’s jurisdictional objection should be barred
as untimely under Article 21(3) of the UNCITRAL Rules. The Tribunal need not decide
this issue, as Respondent’s objection must be dismissed in any event for the reasons set
forth below.
Claimant’s Compliance with NAFTA Articles 1116(2) and 1117(2)
161. The three-year limitation period set forth in NAFTA Articles 1116(2) and 1117(2) begins
to run on “the date on which the investor first acquired, or should have first acquired,
knowledge of the alleged breach and knowledge that the investor has incurred loss or
damage”. As a consequence, the merits of Respondent’s objection to the Tribunal’s
jurisdiction ratione temporis turn on the identity of the “alleged breach”.
162. Respondent has endeavored to show that the basis of Claimant’s claim is the alleged
promise utility doctrine, adopted by the Canadian judiciary in decisions issued from 2002
to 2008.
163. However, as Claimant is the Party asserting the Tribunal’s jurisdiction to decide its
substantive claim, the “alleged breach” must, in the first instance, be identified by reference
151
Respondent’s Observations on 1128 Submissions ¶8, citing, inter alia, Mexico Article 1128 Submission ¶4 (“once
the investor first acquires knowledge of the alleged breach and that it has suffered damage, the limitation period for
filing a claim commences and will end at the three-year mark regardless of whether the impugned measure continues
thereafter”); United States Article 1128 Submission ¶4 (“An investor or enterprise first acquires knowledge of an
alleged breach and loss at a particular moment in time … Such knowledge cannot first be acquired at multiple points
in time or on a recurring basis”.).
152
Respondent’s Observations on 1128 Submissions ¶9, citing United States Article 1128 Submission ¶4; Mexico
Article 1128 Submission ¶7.
153
Respondent’s Observations on 1128 Submissions ¶10.
45
to Claimant’s submissions.154
Claimant has repeatedly asserted that the measure at issue is
the Canadian courts’ invalidation of the Zyprexa and Strattera Patents by application of the
promise utility doctrine; Claimant denies that it is challenging the promise doctrine in the
abstract or the doctrine’s application to the Raloxifene Patent.
164. The Tribunal has carefully examined Claimant’s written and oral submissions to evaluate
whether Claimant’s characterization of its claim for the purpose of jurisdiction is supported
by its position on the merits. In light of Respondent’s argument that Claimant “recast” its
claim in the Reply, the Tribunal has paid particular attention to this pleading. An overall
reading of the Reply confirms that Claimant’s challenge is aimed solely at the invalidation
of the Zyprexa and Strattera Patents.155
Indeed, this is clear even if one focuses specifically
on the paragraphs of the Reply cited by Respondent for its portrayal of the claim.156
Claimant does not allege that the promise utility doctrine itself in the abstract is a violation
of NAFTA Chapter Eleven.
165. Therefore, Respondent’s attempt to re-characterize Claimant’s case cannot be accepted.
The Tribunal finds that the “alleged breach” for purposes of NAFTA Articles 1116(2) and
1117(2) is the invalidation by the Canadian judiciary of the Zyprexa and Strattera Patents
through application of the promise utility doctrine.
166. This finding of the Tribunal about the nature of the case has repercussions both for
Respondent’s jurisdictional objection and for the Tribunal’s ability to have regard to
developments that occurred more than three years before this arbitration was initiated.
154
CL-116/RL-006, Glamis Gold v. United States, ¶349.
155
See, e.g., Reply ¶3 (asserting that the promise utility doctrine violates NAFTA Chapter 17 and then alleging that
“[w]hen Canada applied this doctrine to revoke Lilly’s Zyprexa and Strattera patents, it effected an uncompensated
expropriation in violation of Article 1110 of NAFTA and a violation of Canada’s obligation to afford ‘fair and
equitable treatment’ to Lilly’s investments under Article 1105 of NAFTA”); Reply §IV (“Canada’s Revocation of the
Zyprexa and Strattera Patents Constituted a Wrongful Expropriation Under Article 1110”); Reply §V (“Canada’s
Conduct in Revoking the Zyprexa and Strattera Patents Failed to Meet the Standard of Fair and Equitable Treatment
Guaranteed in NAFTA Article 1105(1)”); Reply ¶371 (confirming its request for relief set forth in the SoC, which
includes damages “arising from the improvident loss of its Zyprexa and Strattera Patents or its inability to enforce its
Zyprexa and Strattera Patents”).
156
Rejoinder ¶87, citing, Reply ¶¶70, 173, 211; see also Reply ¶¶88-90, citing, Reply ¶¶48, 72, 73, 92-93, 104.
46
167. With respect to jurisdiction, the critical question is obviously: when did Claimant first
acquire knowledge, or constructive knowledge, of the alleged breach and the ensuing loss?
Given the Tribunal’s finding on the identity of the alleged breach, the Tribunal sees no way
in which Claimant could have acquired the requisite knowledge before the court
invalidated the Zyprexa and Strattera Patents. An investor cannot be obliged or deemed to
know of a breach before it occurs. Further, any loss suffered by Claimant before the date
of the alleged breach with respect to a different investment (the Raloxifene Patent) is
irrelevant to the application of NAFTA Articles 1116(2) and 1117(2) to the investments at
issue in this arbitration (the Zyprexa and Strattera Patents).
168. In its Post-Hearing Memorial, Respondent appears to offer an alternative argument, that,
after the Raloxifene Decision, Claimant knew that the Zyprexa and Strattera Patents
themselves had suffered “at least some loss of value”.157
Aside from the fact that
Respondent does not fully explain the loss that it purports here to identify, its argument
fails as a consequence of the Tribunal’s finding of the content of Claimant’s claim. Quite
simply, Claimant did not suffer, and could not have suffered, the loss of which it complains
here (i.e., invalidation of the Zyprexa and Strattera Patents) before those patents were
invalidated.
169. This remains true even assuming that the Raloxifene Decision increased the risk that the
Zyprexa and Strattera Patents would one day be invalidated. Articles 1116(2) and 1117(2)
do not require investors to bring claims for possible future breaches on the basis of potential
(and therefore necessarily hypothetical) losses to their investments or the increased risks
of such losses. Thus, the Tribunal declines to impute knowledge of a future breach and loss
to Claimant.
170. For these reasons, the Tribunal finds the relevant dates for the commencement of the
limitation period to be 8 December 2011 and 16 May 2013, when the Supreme Court denied
Claimant leave to appeal the invalidation of the Strattera Patent and the Zyprexa Patent,
respectively.158
Claimant submitted its NoA on 12 September 2013, within the three-year
157
R-PHM ¶105.
158
R-003, Eli Lilly and Company v. Teva Canada Limited, 2011 CanLII 79177 (S.C.C.); R-003, Eli Lilly Canada Inc.,
et al. v. Novopharm Limited, 2013 CanLII 26762 (S.C.C.). The original Federal Court decisions invalidating the
47
limitation period set forth in NAFTA Articles 1116(2) and 1117(2).159
Therefore,
Respondent’s objection to the Tribunal’s jurisdiction ratione temporis is denied.
171. A remaining issue concerns the Tribunal’s treatment of those events that did occur more
than three years before this arbitration was initiated. Although the alleged promise utility
doctrine is not the substantive basis of Claimant’s claim, it plays a prominent role in
Claimant’s submissions. Indeed, one critical element of Claimant’s case is establishing that
judicial decisions issued from 2002 to 2008 effected a dramatic change in the Canadian
utility requirement.
172. In this context, many previous NAFTA tribunals that have found it appropriate to consider
earlier events that provide the factual background to a timely claim. As stated by the
tribunal in Glamis Gold v. United States, a claimant is permitted to cite “factual predicates”
occurring outside the limitation period, even though they are not necessarily the legal basis
for its claim.160
The tribunal in Grand River v. United States reached the same conclusion,
drawing on past decisions:
The Mondev and Feldman tribunals both considered the merits of
claims regarding events occurring during the three-year limitations
period, even though they were linked to, and required consideration
of, events prior to the limitations period or to NAFTA’s entry into
force. In Mondev, the Tribunal considered (and rejected) the
Claimant’s claim that it had suffered a denial of justice in connection
with state court proceedings occurring after NAFTA entered into
force, although the dispute underlying the litigation arose years
before. In Feldman, the Tribunal awarded damages in respect of
discrimination occurring during the three-year limitations period,
Strattera and Zyprexa Patents on the ground of inutility were issued on 14 September 2010 and 10 November 2011,
both within the three-year limitations period. C-160/R-027, Novopharm Ltd. v. Eli Lilly & Co., 2010 FC 915; C-
146/R-016, Eli Lilly Canada Inc. v. Novopharm Ltd., 2011 F.C. 1288.
159
The Tribunal notes the submissions of Respondent, Mexico and the United States stating that the limitation period
under Articles 1116(2) and 1117(2) is not subject to suspension, prolongation or other qualification, and that in
particular, a continuing course of State conduct cannot stop or renew the time-bar clock. In the present case, Claimant
has not advanced a theory of continued breach or otherwise advocated the suspension or extension of the limitation
period. Nor does the Tribunal adopt any such approach in reaching its decision. This case is simpler: the alleged breach
for each investment—the invalidation of the patent—occurred at a single point in time within the three-year period.
160
CL-116/RL-006, Glamis Gold v. United States, ¶348.
48
but its analysis of this and other claims again required consideration
of earlier events. 161
173. The Tribunal also adopts this well accepted approach. The following analysis of the merits
of Claimant’s claim will be informed where appropriate by reference to earlier relevant
events, including the Canadian judiciary’s interpretation of the utility requirement over
time. NAFTA Articles 1116(2) and 1117(2) in no way limit or preclude such consideration.
LIABILITY FOR JUDICIAL MEASURES UNDER NAFTA CHAPTER ELEVEN
The Parties’ Positions
Claimant’s Position
174. Claimant rejects Respondent’s position that under international law, the only possible
theory of liability for judicial measures is a denial of justice.
175. In this regard, Claimant highlights Respondent’s acknowledgment that “a State is
responsible in international law for the conduct of its organs, including the judiciary”.162
As stated in Article 4 of the ILC Draft Articles on State Responsibility: “[t]he conduct of
any State organ shall be considered an act of that State under international law, whether
the organ exercises legislative, executive, judicial or any other functions”.163
176. Further, Claimant argues that NAFTA Chapter Eleven does not distinguish among
executive, legislative, or judicial actions.164
To the contrary, under NAFTA Article 201, a
“measure” includes “any law, regulation, procedure, requirement or practice”, and
161
RL-090, Grand River v. United States, Dec. on Juris., ¶86. See CL-007/RL-004, Mondev International Ltd. v.
United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002 (“Mondev v. United States”), ¶70
(“events or conduct prior to the entry into force of an obligation for the respondent State may be relevant in determining
whether the State has subsequently committed a breach of the obligation. But it must still be possible to point to
conduct of the State after that date which is itself a breach”); CL-109/RL-058, Marvin Feldman v. Mexico.
162
Reply ¶242, quoting Counter-Memorial ¶230 and fn 416.
163
CL-057, Responsibility of States for Internationally Wrongful Acts, Article 4(1).
164
Reply ¶239.
49
tribunals have found the terms “procedure” and “requirement” to be sufficiently broad to
encompass judicial actions involving private parties.165
177. In Claimant’s view, Respondent has failed to explain why the creation of a new legal rule
by courts should be treated differently from the creation of the same legal rule by another
branch of government.166
The result of Respondent’s position would be to exempt all
judge-made law from the requirements of international law.167
178. In addition, Claimant considers Respondent’s approach to be inconsistent with the
principle that a State’s internal political system cannot alter its obligations under customary
international law. To the extent that judges serve a greater law-making function in common
law jurisdictions, those countries would be advantaged over others by a heightened
standard for judicial measures.168
179. According to Claimant, when a national court violates a procedural norm of international
law, the State may be liable for a denial of justice, but when a court violates a substantive
rule of international law, it is “a freestanding basis of liability”.169
Professor Jan Paulsson
states in his treatise on denial of justice: “[a] national court’s breach of other [nonprocedural]
rules of international law, or of treaties, is not a denial of justice, but a direct
violation of the relevant obligation imputable to the state like any acts or omissions by its
agents”.170
165
Reply ¶¶239 and 325; citing CL-061/RL-002, Robert Azinian et al. v. United Mexican States, ICSID Case No.
ARB(AF)/97/2, Award, 1 November 1999 (“Azinian v. Mexico”),, ¶98; CL-008, The Loewen Group, Inc. & Raymond
L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Decision on Hearing on Respondent’s
Objection to Competence and Jurisdiction, 5 January 2001, ¶60 (“We reject therefore the Respondent’s objection that
the Mississippi Court judgments are not ‘measures adopted or maintained by a Party’ because they resolved a dispute
between private parties”).
166
C-PHM ¶199.
167
Reply ¶331; see also Reply §§II-III.
168
Claimant gives the example of the Mexican Patent Act, which is principally interpreted by an administrative agency
rather than its courts. In that case, Respondent’s approach would allow a Canadian investor to challenge an arbitrary
interpretation of the Mexican Patent Act by the administrative agency but not to challenge a patent revocation by a
Canadian court. Reply ¶332 and fn 671, citing CL-158, The Oxford Handbook of International Investment Law, p.
555 (2008); CL-159, John Henry Merryman and Rogelio Pérez-Perdomo, The Civil Law Tradition (2007), p. 37;
González First Report ¶15.
169
Reply ¶244.
170
Reply ¶244, quoting CL-147, Jan Paulsson, Denial of Justice in International Law (2010), p. 98.
50
180. Claimant also cites the tribunal in Azinian v. Mexico, which quoted former ICJ President
Eduardo Jiménez de Aréchaga’s statement that:
The responsibility of the State for acts of judicial authorities may
result from three different types of judicial decision. The first is a
decision of a municipal court clearly incompatible with a rule of
international law. The second is what is known traditionally as a
‘denial of justice.’ The third occurs when, in certain exceptional and
well-defined circumstances, a State is responsible for a judicial
decision contrary to municipal law.171
a. NAFTA Article 1110
181. In the context of its expropriation claim, Claimant argues that “tribunals have concluded
that judicial measures qualify as indirect expropriations when they result in a substantial
deprivation and violate a rule of international law”.172
For example, in Saipem v.
Bangladesh, the tribunal found the annulment of a commercial arbitration award by the
Bangladeshi courts to be an indirect expropriation under the Italy-Bangladesh BIT. In its
analysis, the tribunal looked at two factors: (i) the impact of the court’s action, finding a
“substantial deprivation”; and (ii) whether that action was unlawful under international
law, finding that it violated, inter alia, Bangladesh’s obligations under the New York
Convention.173
Claimant cites in particular the Saipem tribunal’s statement that:
While the Tribunal concurs with the parties that expropriation by the
courts presupposes that the courts’ intervention was illegal, this does
not mean that expropriation by a court necessarily presupposes a
denial of justice.174
182. Claimant argues that other tribunals have similarly recognized that when judicial measures
violate an international obligation, they may constitute an expropriation, even in the
absence of a denial of justice. These include the tribunals in: (i) ATA v. Jordan, which
171
Memorial ¶178, quoting CL-061/RL-002, Azinian v. Mexico, ¶98 (quoting Eduardo Jiménez de Aréchaga,
International Law in the past Third of a Century, Recueil des cours (1978) 159-1) (emphasis added in Azinian).
172
Memorial ¶180; see Reply ¶246.
173
Memorial ¶180, citing CL-062/RL-064, Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No.
ARB/05/7, Award, 30 June 2009(“Saipem v. Bangladesh”), ¶133.
174
Memorial ¶182, quoting CL-062/RL-064, Saipem v. Bangladesh, ¶181. Claimant dismisses Respondent’s view
that Saipem was a “results oriented decision”; even if true, this would not undermine the fact that the tribunal’s “logic
is well-grounded in international law and relevant to the case at hand”. Reply ¶247.
51
found an expropriation based on a Jordanian court’s retroactive application of a law;175
(ii)
Rumeli Telkom v. Kazakhstan, which held that a judicial decision constituted an unlawful
expropriation even though there was no evidence of a violation of due process;176
and (iii)
Oil Field of Texas v. Iran, stating that “[i]t is well established in international law that the
decision of a court in fact depriving an owner of the use and benefit of his property may
amount to an expropriation of such property that is attributable to the state of that court”.177
b. NAFTA Article 1105
183. In the context of its claim under NAFTA Article 1105, Claimant argues that multiple
arbitral awards have confirmed that denial of justice is not the only protection against
judicial action offered by the minimum standard of treatment. In particular, Claimant relies
upon:
a. Liman Caspian Oil v. Kazakhstan, in which the tribunal observed that denial of justice
is just one example of the standard of fair and equitable treatment, and that the standards
of fair and equitable treatment and denial of justice “are not synonymous” with respect
to acts of courts;178
b. White Industries v. India, in which the tribunal analysed the acts of India’s courts under
three distinct aspects (denial of justice, protection of legitimate expectations and
transparency);179
and
175
C-PHM ¶186, citing CL-063/RL-068,
ATA Construction, Industrial and Trading Company v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/2,
Award, 18 May 2010, ¶¶125-128.
176
Reply ¶249; C-PHM ¶186, citing Rumeli Telekom A.S., Telsim Mobil Telekomikasyon Hizmetleri A.S. v. Republic
of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 July 2008, ¶¶705-706.
177
C-PHM ¶186, quoting CL-059, Oil Field of Texas, Inc. v. Iran, 12 Iran-U.S. C.T.R. 308, 318 (1986),¶42.
178
Reply ¶327; quoting RL-027, Liman Caspian Oil BV and NCL Dutch Investment BV v. Republic of Kazakhstan,
ICSID Case No. ARB/07/14, Award, 22 June 2010 (“Liman v. Kazakhstan”), ¶268.
179
Reply ¶327; citing CL-157, White Industries Australia Ltd. v. Republic of India, UNCITRAL, Award, 30
November 2011, (“White Industries v. India”) ¶10.1.1.
52
c. Frontier Petroleum v. Czech Republic, in which the tribunal considered whether a court
decision was arbitrary or discriminatory, in addition to examining procedural propriety
and due process.180
184. Claimant also points to Mondev v. United States. Although the tribunal in that case found
no violation of Article 1105, it considered whether the court decision at issue was based on
a retroactive application of new law, suggesting that if this could be shown, the claimant
would not have been confined to arguing a denial of justice.181
185. According to Claimant, Respondent cannot identify a single arbitral decision supporting
its position that a denial of justice is the only basis of liability for court decisions.182
Waste
Management v. Mexico, Azinian v. Mexico and Loewen v. United States cannot help
Respondent, because in the specific circumstances of each of those cases, denial of justice
was the only relevant theory of liability before the tribunal.183
Respondent’s Position
186. As its primary defence, Respondent asserts that “Claimant has failed to state a claim under
Articles 1116(1) and 1117(1) for a breach of Articles 1110 and 1105 because it admits that
there has been no denial of justice”.184
Respondent accepts that a State is responsible under
international law for the conduct of all of its organs, including the judiciary, but contends
that different State functions attract different types of liability. According to Respondent,
the only substantive obligation under NAFTA Chapter Eleven with respect to judicial
measures is to ensure that the investments of an investor from another NAFTA Party are
180
Reply ¶327; citing RL-067, Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Award, 12
November 2010 (“Frontier Petroleum v. Czech Republic”), ¶¶284, 525.
181
C-PHM ¶190, citing CL-007/RL-004,
Mondev v. United States, ¶¶133-134
182
Reply ¶¶250-252.
183
Reply ¶¶250-252 and 328; citing RL-013,
The Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3,
Award, 26 June 2003 (“Loewen v. United States”), ¶¶44, 141; CL-007/RL-004, Mondev v. United States, ¶134; CL-
061/RL-002, Azinian v. Mexico, ¶¶100-102 (noting that the claimants “raised no complaints against the Mexican
courts” and did “not allege a denial of justice”); RL-013, Loewen v. United States, ¶¶39, 141.
184
R-PHM §II.
53
not denied justice.185
As Claimant has not claimed a denial of justice, the Tribunal need
make no further inquiries.186
187. Respondent denies that this rule advantages common law jurisdictions over civil law
jurisdictions, where the role of the courts is more limited. According to Respondent, the
adjudicative function in both systems is protected by the same rule of denial of justice.187
a. NAFTA Article 1110
188. Focusing specifically on Claimant’s claim under Article 1110, Respondent argues that
denial of justice is the only basis on which a domestic court judgment on the validity of a
property right could constitute an expropriation.188
189. To support this position, Respondent cities the tribunal’s statement in Loewen v. United
States that: “[i]n the circumstances of this case, a claim alleging an appropriation in
violation of Article 1110 can succeed only if Loewen establishes a denial of justice under
Article 1105”.189
Similarly, Respondent points to Azinian v. Mexico, which involved a
contract found to be invalid by the Mexican court. The tribunal determined that in the
absence of a denial of justice, the domestic court’s ruling must stand.190
190. Respondent rejects Claimant’s main submission that domestic court decisions can be
expropriatory if they violate a rule of international law. According to Respondent, if
Claimant’s position is accepted, “NAFTA Chapter Eleven tribunals will be transformed
both into tribunals with plenary jurisdiction over all international treaties and supranational
courts of appeal in domestic property law issues”.191
185
R-PHM ¶19. See Counter-Memorial ¶¶230-245, 318-325 and 331-343; Rejoinder ¶¶213-222, 236-237 and 244-
255; Respondent’s Observations on 1128 Submissions, ¶¶12-14, 19-21 and 30-33.
186
Reply ¶¶17, 334, fn 433; Rejoinder ¶255; R-PHM ¶20.
187
Rejoinder ¶255, fn 489.
188
Counter-Memorial ¶¶318-325; Rejoinder ¶¶120-123.
189
Counter-Memorial ¶320, quoting RL-013, Loewen v. United States , ¶141.
190
Counter-Memorial ¶321, citing CL-061/RL-002, Azinian v. Mexico, ¶103. According to Respondent, this principle
has also been applied by tribunals in more recent cases under bilateral investment treaties. Counter-Memorial ¶¶323-
325 (discussing RL-063, Frank Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, 8 April
2013 (“Arif v. Moldova”), ¶¶415-416; RL-027, Liman v. Kazakhstan, ¶431).
191
Counter-Memorial ¶334; see Rejoinder ¶216.
54
191. According to Respondent, Claimant’s approach confuses distinct international law
obligations. The international law on expropriation requires first establishing the existence
of a property right under domestic law, and an investor “cannot circumvent an adverse
determination of its rights at domestic law simply by pointing to an alleged inconsistency
with some other, independent international obligation owed between States”.192
192. In Respondent’s view, Claimant bases its proposed rule on a mischaracterisation of past
arbitral decisions, beginning with the speech of Judge Aréchaga that was quoted by the
Azinian tribunal. Respondent contends that this speech concerned State responsibility
generally, not the international rules governing expropriation or the possibility of judicial
expropriation. It stands for nothing more than the proposition that States are responsible
for the acts of their courts.193
Thus, the Azinian tribunal, after quoting Judge Aréchaga on
that point, proceeded to hold that there was no expropriation because the claimant had not
proven a denial of justice.194
193. Respondent also denies that Saipem v. Bangladesh supports Claimant’s position, arguing
that (i) “the asserted right at issue in Saipem was an international arbitral award, not a right
purely derived from domestic law”; and (ii) the tribunal based its holding of expropriation
on its finding that the Bangladeshi courts’ conduct was so irregular that it amounted to
abuse of right.195
Respondent points to commentary suggesting that Saipem was in fact
about judicial conduct amounting to a denial of justice, but the tribunal was prevented from
reaching that outcome.196
194. In addition, Respondent opposes Claimant’s reliance on Professor Paulsson’s statement
that when “national courts disregard or misapply international law, they are subject to
international censure like any other organ of a state”.197
According to Respondent, given
192
Counter-Memorial ¶332.
193
Counter-Memorial ¶335.
194
Counter-Memorial ¶335, citing CL-061/RL-002, Azinian v. Mexico, ¶98.
195
Counter-Memorial ¶336, citing CL-062/RL-064, Saipem v. Bangladesh, ¶¶159-160, 167.
196
Counter-Memorial ¶338, citing, inter alia, R-339, Mavluda Sattorova, “Denial of Justice Disguised? Investment
Arbitration and the Protection of Foreign Investors form Judicial Misconduct”, ICLQ 2012, p. 12. In Saipem, the
tribunal’s jurisdiction did not extend to denial-of-justice claims, as the claimant had not exhausted all local remedies.
197
Rejoinder ¶¶121-122, citing Reply ¶245.
55
that the first step of the expropriation analysis—identifying the property right—is purely a
question of domestic law, the most apt quotation from Professor Paulsson, which Claimant
also cites, is: “[t]o the extent that national courts disregard or misapply national law, their
errors do not generate international responsibility unless [there is] technical or procedural
denial of justice”.198
195. Respondent argues that Claimant cannot point to any (i) examples of a judicial
expropriation in the absence of a denial of justice; (ii) instances where a judicial
determination that a property right was invalid under domestic law was found to be an
expropriation under international law; or (iii) evidence of state practice.199
b. NAFTA Article 1105
196. In the context of NAFTA Article 1105, Respondent points to the FTC Note, which makes
clear that the only source of obligations in Article 1105 is the customary international law
minimum standard of treatment of aliens. Respondent argues that denial of justice is the
only rule of customary international law applicable to State organs exercising an
adjudicative function.200
Thus, Claimant has not stated a claim under Article 1105.
197. Respondent points to the statement of the tribunal in Waste Management II that to establish
a breach of Article 1105, the conduct must have either been “arbitrary, grossly unfair,
unjust or idiosyncratic” or “involve[d] a lack of due process leading to an outcome which
offends judicial propriety—as might be the case with a manifest failure of natural justice
in judicial proceedings…”.201
According to Respondent, this requirement is confirmed by
198
Rejoinder ¶122, quoting CL-147, Jan Paulsson, Denial of Justice in International Law (2010), p. 5 (emphasis added
by Respondent).
199
Rejoinder ¶¶125, 214.
200
Counter-Memorial ¶231; Rejoinder ¶245; citing CL-061/RL-002, Azinian v, Mexico, ¶¶102-103; CL-007/RL-004,
Mondev v. United States, ¶126; RL-024, The Loewen Group, Inc. & Raymond L. Loewen v. United States of America,
ICSID Case No. ARB(AF)/98/3, Response of United States of America to the November 9, 2001 Submissions of the
Governments of Canada and Mexico Pursuant to NAFTA Article 1128, 7 December 2001, pp. 6-7; RL-023, The
Loewen Group, Inc. & Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Second
Submission of the United Mexican States, 9 November 2001, pp. 5-6.
201
Counter-Memorial ¶224; quoting CL-065/RL-014,
Waste Management, Inc. v. United Mexican States), ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004 (“Waste
Management II”), ¶98; also citing RL-076, S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award,
13 November 2000, ¶263; CL-007/RL-004, Mondev v. United States, ¶127; RL-005, ADF Group Inc. v. United States
56
the decisions in Glamis Gold v. United States, Cargill v. Mexico, Mobil and Murphy v.
Canada, and International Thunderbird v. Mexico.202
198. According to Respondent, the Mondev v. United States tribunal recognized that domestic
courts are to be afforded substantial deference, and that NAFTA tribunals cannot “secondguess
the reasoned decisions of the highest courts of a State”.203
Respondent relies upon
the finding of the Mondev tribunal that even if a domestic court were to elaborate a new
interpretation of the law, as Claimant alleges in this case, this is not unexpected in a
common law jurisdiction. In the absence of a denial of justice, there would be no violation
of Article 1105.204
199. To the extent that Claimant argues that the minimum standard of treatment prohibits
conduct other than a denial of justice, Respondent argues that Claimant bears the burden
of establishing the existence of such rules and has failed to do so.205
In its view, arbitral
decisions can elucidate but not create state practice and opinio juris. Thus, reliance on such
decisions does not help Claimant meet its evidentiary burden.206
200. In any event, Respondent argues that the arbitral decisions cited by Claimant do not support
its position. First, the tribunal in Liman Caspian v. Kazakhstan found that the Energy
Charter Treaty’s fair and equitable treatment provision provides protection beyond the
of America, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003, ¶184; RL-013, Loewen v. United States, ¶¶132-
134.
202
Counter-Memorial ¶¶225-226; quoting CL-102/RL-015,
Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, 18 September 2009 (“Cargill
v. Mexico”), ¶296; also citing CL-116/RL-006, Glamis Gold v. United States, ¶627; CL-112/RL-007, Mobil
Investments Canada Inc. and Murphy Oil Corporation v. Canada, ICSID Case No. ARB(AF)/07/4, Decision on
Liability and on Principles of Quantum, 22 May 2012 (“Mobil v. Canada”), ¶¶138-153; RL-016, Apotex v. United
States, ¶9.47.
203
Rejoinder ¶¶246-247; quoting CL-007/RL-004, Mondev v. United States, ¶126; also citing CL-061/RL-002,
Azinian v. Mexico, ¶99; RL-013, Loewen v. United States, ¶51; RL-063, Arif v. Moldova, ¶¶398, 416, 440-441; R-
327, Rudolf Dolzer and Christoph Schreuer, Principles of International Law (2008), pp.165-166; RL-025, The
Loewen Group, Inc. & Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Opinion of
Christopher Greenwood, 26 March 2001, ¶64.
204
Counter-Memorial ¶238; citing CL-007/RL-004, Mondev v. United States, ¶126.
205
Rejoinder ¶256.
206
Rejoinder ¶¶248, 259; citing Reply ¶¶326-327. Respondent’s position is that the autonomous fair and equitable
treatment provisions in other treaties do not form a rule of customary international law, and are not relevant for
determining the content of Article 1105(1).
57
minimum standard of treatment in international law. Thus, the tribunal’s conclusion that
this higher standard was not synonymous with denial of justice is unsurprising.207
Similarly, Respondent contends that in White Industries v. India, the relevant fair and
equitable treatment provision was autonomous from the minimum standard of treatment.208
Third, in Frontier Petroleum Services v. Czech Republic, the tribunal essentially found that
there had been no denial of justice.209
Furthermore, Respondent highlights that no breach
of the fair and equitable treatment standard was found in these three cases, demonstrating
the high threshold for court actions to constitute a breach.210
NAFTA Party Article 1128 Submissions
Mexico
201. Mexico agrees with the statement by the United States in the context of other NAFTA
proceedings that customary international law has crystallized a minimum standard of
treatment in only a few areas, one of which is fair and equitable treatment.211
In the
particular case of judicial acts of a State, Mexico’s view is that there are
fundamental distinctions that international law has made and
continues to make between acts of the judiciary and the acts of other
organs of the State. International tribunals defer to the acts of
municipal courts not only because the courts are recognized as being
expert in matters of a State’s domestic law, but also because of the
judiciary’s role in the organisation of the State.212
202. On that basis, Mexico agrees with Respondent that with respect to judicial acts, denial of
justice is the only rule of customary international law clearly identified and established so
far as part of the minimum standard of treatment of aliens.
207
Rejoinder ¶249; citing Reply ¶327; RL-027, Liman v. Kazakhstan, ¶¶263, 268.
208
Rejoinder ¶250; citing Reply ¶327; CL-157, White Industries v. India, ¶¶4.3.1, 10.2.3, 10.3.9, 10.3.16, 10.3.19,
10.3.21.
209
Rejoinder ¶251; citing Reply ¶327; RL-067, Frontier Petroleum v. Czech Republic, ¶529.
210
Rejoinder ¶252.
211
Mexico Article 1128 Submission ¶12; quoting Mesa Power LLC v. Government of Canada, PCA Case No. 2012-
17, Second Article 1128 Submission of the United States, 12 June 2015 (“Mesa v. Canada”), ¶12.
212
Mexico Article 1128 Submission ¶13; quoting The Loewen Group, Inc. & Raymond Loewen v. United States of
America, ICSID Case No. ARB(AF)/98/3, Second Article 1128 Submission of the United Mexican States, p. 5.
58
203. If a claimant asserts a breach of Article 1105 based on a different rule, it has the burden of
establishing the existence of that rule based on State practice and opinio juris. Mexico does
not consider decisions of international tribunals, particularly those which interpret
autonomous standalone fair and equitable treatment, to constitute State practice.213
United States
204. According to the United States, under international law, the actions of domestic courts are
accorded a greater presumption of regularity than legislative or administrative acts are.
Foreign nationals have no cause for complaint at international law about a domestic system
of law if it conforms to a “reasonable standard of civilized justice” and is fairly
administered.214
Thus, unless there is a denial of justice, international tribunals will defer
to domestic courts interpreting matters of domestic law.215
205. The United States provides examples of instances where a denial of justice may exist.216
In its view, there is a high threshold required for judicial measures to rise to the level of a
denial of justice in customary international law.
213
Mexico Article 1128 Submission ¶14; citing Counter-Memorial ¶¶231-245, 271; CL-102/RL-015, Cargill v.
Mexico, ¶273; Mesa v. Canada, ¶14; Mercer International Inc. v. Government of Canada, ICSID Case No.
ARB(AF)/12/3, Submission of Mexico pursuant to Article 1128 of NAFTA, 8 May 2015, ¶18.
214
United States Article 1128 Submission ¶20; quoting Edwin Borchard, The Diplomatic Protection of Citizens
Abroad or the Law of International Claims (1925), p. 198.
215
United States Article 1128 Submission ¶22; citing Barcelona Traction, Light and Power Co., Ltd. (Belgium v. Spain),
ICJ, Separate Opinion of Judge Tanaka, 5 February 1970, p. 154; R-323, Zachary Douglas, International
Responsibility for Domestic Adjudication: Denial of Justice Deconstructed, International and Comparative Law
Quarterly, September 2014, pp. 10-11(); The Loewen Group, Inc. & Raymond Loewen v. United States of America,
ICSID Case No. ARB(AF)/98/3, Response of the United States of America to the Submissions of Claimants
Concerning Matters of Jurisdiction and Competence, 7 July 2000, p. 8; Edwin Borchard, The Diplomatic Protection
of Citizens Abroad or the Law of International Claims (1925), pp. 195-196; Alwyn V. Freeman, International
Responsibility of States for Denial of Justice (1938), p. 33; CL-061/RL-002, Azinian v. Mexico, ¶99; Mohammad
Ammar Al Bahloul v. Republic of Tajikstan, SCC Case No. V(064/2008), Partial Award on Jurisdiction and Liability,
2 September 2009, ¶237.
216
United States Article 1128 Submission ¶21. The United States gives the following examples of circumstances that
might amount to a denial of justice: an obstruction of access to courts, failure to provide guarantees which are generally
considered indispensable to the proper administration of justice, a manifestly unjust judgment, corruption in judicial
proceedings, and executive or legislative interference with the judicial process. Id. ¶28.
59
206. With respect to NAFTA Article 1110, the United States submits that a State’s obligation
forms part of the minimum standard of treatment under customary international law.217
Accordingly, “decisions of domestic courts acting in the role of neutral and independent
arbiters of the legal rights of litigants do not give rise to a claim for expropriation under
Article 1110(1)”.218
For the United States, the “dearth” of international precedents
examining whether judicial acts may be expropriatory is not surprising.219
207. Further, the United States observes that the concept of “judicial takings” is not recognized
in U.S. law.220
According to the United States, there is one exception: a judicial measure
may constitute an expropriation absent a denial of justice where the “judiciary is not
separate from other organs of the State [which] direct or otherwise interfere with a domestic
court decision so as to cause an effective expropriation”.221
208. With respect to NAFTA Article 1105, the United States’ position is that judicial measures
may form the basis of claim only if (i) they are final, and (ii) a denial of justice is proven.
Otherwise, Chapter Eleven tribunals would become supranational appellate courts on the
application of substantive domestic law.222
217
United States Article 1128 Submission ¶28.
218
United States Article 1128 Submission ¶29.
219
United States Article 1128 Submission ¶29, citing, inter alia, Parvan P. Parvanov & Mark Kantor, “Comparing
U.S. Law and Recent U.S. Investment Agreements: Much more similar than you might expect”, in Yearbook on
International Investment Law & Policy 2010-2011, p. 801 (Sauvant, ed. 2012) (“Judicial improprieties may in theory
form the basis for a claim under international law for expropriation. However, it is far more common for an investor
to pursue that claim under the customary international law principle of ‘denial of justice,’ which is often considered
part of the international minimum standard of treatment … Given the dearth of precedents, our analysis of judicial
expropriations under international law could end right here”).
220
United States Article 1128 Submission ¶29, discussing RL-046, Stop the Beach Renourishment, Inc. v. Florida
Department of Environmental Protection, 560 U.S. 702 (2010) (“Stop the Beach v. Florida”).
221
United States Article 1128 Submission ¶30.
222
United States Article 1128 Submission ¶24; citing R-322, Christopher Greenwood, “State Responsibility for the
Decisions of National Courts” in Issues of State Responsibility before International Judicial Institutions 61 (2004), p.
64; R-323, Zachary Douglas, International Responsibility for Domestic Adjudication: Denial of Justice
Deconstructed, International and Comparative Law Quarterly, September 2014, p. 33; see also United States Article
1128 Submission ¶22.
60
The Parties’ Observations on the NAFTA Party Article 1128 Submissions
Claimant’s Observations
209. Claimant argues that the United States’ position ignores the rule that the “conduct of any
State organ shall be considered an act of that State under international law”.223
In this way,
the United States’ approach would create an unworkable distinction among the functions
of government branches, and such a distinction “may provide common law jurisdictions
with an advantage over jurisdictions where judge-made law is less prevalent”.224
International tribunals cannot favor some forms of State organization over others.225
210. Regarding the United States’ view that investment tribunals will defer to domestic courts
interpreting domestic law, Claimant does not consider this proposition to be implicated in
this arbitration. Claimant emphasizes that it alleges that Respondent’s conduct is at odds
with its international commitments, not that the courts have misapplied Canadian law.226
Claimant submits that the United States has recognized in other contexts that a State’s
judiciary may violate substantive international norms to the same extent that any other
branch of government may.227
211. Claimant specifically challenges the United States’ submission that a denial of justice is
required for judicial acts to result in an expropriation under Article 1110.228
Claimant
argues that the United States has offered no authority to support this view, and that it has
223
Claimant’s Observations on 1128 and Amicus Submissions ¶23, quoting CL-188, Draft Articles on State
Responsibility, Article 4 (emphasis added by Claimant).
224
Claimant’s Observations on 1128 and Amicus Submissions ¶23.
225
Claimant notes the exception proposed by the United States: a judicial measure may constitute an expropriation
without a denial of justice where the “judiciary is not separate from other organs of the State”. According to Claimant,
“[t]his proposed exception is subjective, and simply compounds the risk that states will be subject to different rules
based on their different constitutional frameworks and internal political arrangements”. Claimant’s Observations on
1128 and Amicus Submissions ¶24.
226
Claimant Comments on Article 1128 Submissions and Amicus Submissions ¶19; citing United States Article 1128
Submission ¶¶22, 24; Reply ¶334.
227
Claimant Comments on Article 1128 Submissions and Amicus Submissions ¶20; citing CL-196, Request for
Consultations by the United States, ‘China-Measures Affecting the Protection and Enforcement of Intellectual
Property Rights’; CL-197, First Submission of the United States, ‘China-Measures Affecting the Protection and
Enforcement of Intellectual Property Rights’, ¶¶23-24; R-404, Panel Report, ‘China-Measures Affecting the
Protection and Enforcement of Intellectual Property Rights’.
228
Claimant’s Observations on 1128 and Amicus Submissions ¶21, citing Unites States Article 1128 Submission ¶¶28-
29.
61
ignored the decisions presented by Claimant, in which tribunals have found “judicial
measures to be expropriatory based on violations of substantive norms of international
law”.229
Thus, there is no “dearth” of such precedents as the United States suggests.230
212. Claimant points to the U.S. Supreme Court decision in Stop the Beach Renourishment v.
Florida Department of Environmental Protection to counter the United States’ assertion
that the concept of “judicial takings” is not recognized in US law.231
According to
Claimant, a plurality of the Court found that judicial measures can constitute takings under
the Fifth Amendment.232
213. With regard to Article 1105, Claimant disagrees that judicial measures may form the basis
of a claim only if denial of justice is proven.233
According to Claimant, tribunals and
scholars have repeatedly recognized that a national judiciary may contravene substantive
norms protected under Article 1105, and not only procedural standards under international
law.234
Claimant sees the United States’ submission on this point as lacking authoritative
support. In this regard, Claimant rejects the United States’ reliance upon the article of
Professor Zachary Douglas, which in its view is not supported by authority.235
229
Claimant’s Observations on 1128 and Amicus Submissions ¶21, citing Reply ¶¶243-253.
230
Claimant’s Observations on 1128 and Amicus Submissions fn 51, citing Unites States Article 1128 Submission
¶29.
231
Claimant’s Observations on 1128 and Amicus Submissions ¶22, citing RL-046, Stop the Beach v. Florida.
232
Claimant’s Observations on 1128 and Amicus Submissions ¶22, citing RL-046, Stop the Beach v. Florida, at 714
(“There is no textual justification for saying that the existence or the scope of a State’s power to expropriate private
property without just compensation varies according to the branch of government effecting the expropriation. Nor
does common sense recommend such a principle. It would be absurd to allow a State to do by judicial decree what the
Takings Clause forbids it to do by legislative fiat”). Claimant notes that, “while the U.S. Department of Justice has
taken the position in domestic litigation that the plurality opinion in Stop the Beach should not be followed, its position
has been rejected by the Federal appeals court that hears all patent appeals”.
233
Claimant Comments on Article 1128 Submissions and Amicus Submissions ¶18; citing United States Article 1128
Submission ¶24.
234
Claimant Comments on Article 1128 Submissions and Amicus Submissions ¶17; citing Reply ¶325-334.
235
Claimant Comments on Article 1128 Submissions and Amicus Submissions ¶18; citing United States Article 1128
Submission ¶¶21, 23-24; Reply ¶¶ 327 fns 657, 330.
62
Respondent’s Observations
214. Respondent cites the United States’ statement that “as a matter of customary international
law, international tribunals will defer to domestic courts interpreting matters of domestic
law unless there is a denial of justice”.236
215. According to Respondent, “[a]ll three NAFTA Parties agree that where a neutral and
independent domestic court determines legal rights, there can be no expropriation under
Article 1110”.237
In this regard, Respondent highlights the United States’ observations that
the concept of judicial takings is not recognized under U.S. law, and that in the international
context, there is a “dearth” of precedents.238
216. With respect to Article 1105, Respondent points out that the NAFTA Parties’ agree that
denial of justice is the only basis on which judicial measures can breach the minimum
standard of treatment.239
217. For Respondent, this agreed interpretation of Articles 1110 and 1105 is fatal to Claimant’s
claim, as there is no allegation that the Federal Courts that invalidated the Zyprexa and
Strattera Patents were not acting as neutral and independent arbiters.240
The Tribunal’s Analysis
218. The issue of a respondent State’s liability, in proceedings such as this, for the decisions and
actions of its courts is much disputed. The debate about whether such liability is restricted
to conduct that amounts to a denial of justice turns on how denial of justice is defined.
There was considerable discussion of this issue in the Hearing, including whether there is
a distinction to be drawn between a substantive denial of justice and the requirements of
procedural due process, and whether the concept of denial of justice encompasses notions
236
Respondent’s Observations on 1128 Submissions ¶29, citing United States Article 1128 Submission ¶22.
237
Respondent’s Observations on 1128 Submissions ¶30, citing inter alia United States Article 1128 Submission ¶29;
Mexico Article 1128 Submission ¶19.
238
Respondent’s Observations on 1128 Submissions ¶29, citing United States Article 1128 Submission ¶29.
239
Respondent Comments on Article 1128 Submissions ¶¶19-20; quoting Counter-Memorial ¶14; Mexico Article
1128 Submission ¶14; United States Article 1128 Submission ¶24.
240
Respondent’s Observations on 1128 Submissions ¶33.
63
of egregious irrationality or manifest unreasonableness. At bottom, Respondent’s position
appears to be that, as long as it is possible to say that a court acted on a reasoned and
rational basis, no question of liability could arise, whether, for present purposes, under
either NAFTA Article 1105 or Article 1110.
219. This acknowledges the possibility that a decision of a court, or other judicial conduct, that
falls so far below accepted minimum standards—in the words of counsel for Respondent,
that “had a result that was so surprising that propriety and competence had to be
questioned”—might engage the liability of the respondent State. The Tribunal agrees with
this acknowledgment by Respondent. The question that follows is whether conduct that
does not constitute a denial of justice may nonetheless be capable of qualifying as a
violation of NAFTA Articles 1105 or 1110.
220. For the reasons and conclusions set out in the section that follows on the utility requirement
under Canadian law, the Tribunal does not need to reach a decision on the Parties’
submissions on these issues, and judicial economy dictates that it should not do so. Having
regard to the Parties’ submissions, the Tribunal accordingly limits itself to the following
brief observations on these points.
221. First, the judiciary is an organ of the State. Judicial acts will therefore in principle be
attributable to the State by reference to uncontroversial principles of attribution under the
law of State responsibility. As a matter of broad proposition, therefore, it is possible to
contemplate circumstances in which a judicial act (or omission) may engage questions of
expropriation under NAFTA Article 1110, such as, perhaps, in circumstances in which a
judicial decision crystallizes a taking alleged to be contrary to NAFTA Article 1110. This
said, the Tribunal emphasizes the point made below in respect of NAFTA Article 1105(1)
that a NAFTA Chapter Eleven tribunal is not an appellate tier in respect of the decisions
of national judiciaries.
222. Second, as regards NAFTA Article 1105(1), the Tribunal accepts in principle the analysis
and conclusions of the NAFTA Chapter Eleven tribunal in Glamis Gold on the content of
the customary international law minimum standard of treatment addressed in NAFTA
Article 1105(1) and, in particular, its conclusion as follows:
64
The Tribunal therefore holds that a violation of the customary
international law minimum standard of treatment, as codified in
Article 1105 of the NAFTA, requires an act that is sufficiently
egregious and shocking—a gross denial of justice, manifest
arbitrariness, blatant unfairness, a complete lack of due process,
evident discrimination, or a manifest lack of reasons—so as to fall
below accepted international standards and constitute a breach of
Article 1105. Such a breach may be exhibited by a “gross denial of
justice or manifest arbitrariness falling below acceptable
international standards;” or the creation by the State of objective
expectations in order to induce investment and the subsequent
repudiation of those expectations. The Tribunal emphasizes that,
although bad faith may often be present in such a determination and
its presence certainly will be determinative of a violation, a finding
of bad faith is not a requirement for a breach of Article 1105(1).241
223. Third, adopting this analysis, it is evident that there are distinctions to be made between
conduct that may amount to a denial (or gross denial) of justice and other conduct that may
also be sufficiently egregious and shocking, such as manifest arbitrariness or blatant
unfairness. It is also apparent, in the Tribunal’s view, that concepts of manifest arbitrariness
and blatant unfairness are capable, as a matter of hypothesis, of attaching to the conduct or
decisions of courts. It follows, in the Tribunal’s view, that a claimed breach of the
customary international law minimum standard of treatment requirement of NAFTA
Article 1105(1) may be properly a basis for a claim under NAFTA Article 1105
notwithstanding that it is not cast in denial of justice terms. As noted above, the conduct
of the judiciary will in principle be attributable to the State by reference to uncontroversial
principles of State responsibility. As a matter of principle, therefore, having regard to the
content of the customary international law minimum standard of treatment, the Tribunal is
unwilling to shut the door to the possibility that judicial conduct characterized other than
as a denial of justice may engage a respondent’s obligations under NAFTA Article 1105,
within the standard articulated in the award in Glamis. The Tribunal considers that this
assessment is consistent with the approach, inter alia, of the NAFTA Chapter Eleven
tribunal in Mondev, with which it is content to agree.
241
CL-116/RL-006, Glamis Gold v. United States, ¶627 (footnotes omitted).
65
224. Fourth, this said, as has also already been noted, the Tribunal emphasizes that a NAFTA
Chapter Eleven tribunal is not an appellate tier in respect of the decisions of the national
judiciary. It is not the task of a NAFTA Chapter Eleven tribunal to review the findings of
national courts and considerable deference is to be accorded to the conduct and decisions
of such courts. It will accordingly only be in very exceptional circumstances, in which
there is clear evidence of egregious and shocking conduct, that it will be appropriate for a
NAFTA Chapter Eleven tribunal to assess such conduct against the obligations of the
respondent State under NAFTA Article 1105(1).
225. Fifth, the Tribunal notes that NAFTA Article 1110(1)(c) includes the requirement that, to
be concordant with NAFTA Article 1110(1), the nationalization or expropriation of an
investment must be “in accordance with due process of law and Article 1105(1)”. As
regards decisions of the national judiciary, the interplay between obligations under NAFTA
Articles 1105(1) and 1110 will be a matter for careful assessment in any given case, subject
to the controlling appreciation that a NAFTA Chapter Eleven tribunal is not an appellate
tier with a mandate to review the decisions of the national judiciary
226. Sixth, as will emerge from the discussion and conclusion in the section that follows, the
Tribunal has concluded that the factual predicate, in this case, that would be necessary to
sustain Claimant’s case of a breach of Article 1105(1) and/or Article 1110 has not been
established. Regardless of the debate about the denial of justice limits of liability of a
respondent State, therefore, the Tribunal concludes that Claimant’s case does not meet the
threshold requirement to proceed under this head.
THE ALLEGED DRAMATIC CHANGE IN THE UTILITY REQUIREMENT
UNDER CANADIAN LAW
The Parties’ Positions
Claimant’s Position
227. Claimant argues that the promise utility doctrine is a radical departure from Canada’s
traditional utility standard and the utility standards applied by Canada’s NAFTA partners,
66
the United States and Mexico.242
It claims that for decades Canada applied the traditional
utility test for which a “mere scintilla” of utility sufficed, and under that test,
pharmaceutical patents were never found to lack utility until the advent of the promise
utility doctrine in the mid-2000s.243
a. The Traditional Utility Test
228. According to Claimant, in the mid-1990s when NAFTA entered into force and when the
Zyprexa and Strattera patents were granted, the utility requirement enshrined in the Patent
Act had “a well-established meaning that was applied by the Federal Courts, the Patent
Office, and inventors”.244
It was a “mere scintilla” test, under which “very little” or a “slight
amount” of utility satisfied the low threshold of utility required.245
Patents that were held
to lack utility under this standard were wholly inoperable.246
Claimant’s expert Professor
Siebrasse points to two classic examples of inoperable inventions: a “death ray” and a
“perpetual motion machine”.247
In other words, so long as an invention was capable of
being put to a specific use, even if that use had no commercial value, then it was “useful”
under the Patent Act.248
229. As evidence of the low threshold for utility, Claimant asserts that from 1980 to 2004 there
were only 28 utility challenges in Canadian trial courts.249
Four of the challenges related
to pharmaceutical patents, all of which eventually were found to be useful under the Patent
Act.250
Claimant contends that this “point bears emphasis: for a quarter of a century – from
242
Memorial ¶36.
243
Memorial ¶¶56, 222.
244
Memorial ¶45.
245
Siebrasse First Report ¶20 (citing C-207, Prentice v. Dominion Rubber Co., [1928] Ex CR 196, at 199 (Ex Ct); C-
208, Asten-Hill Ltd v. Ayers Ltd., [1939] 2 DLR 234, at 246 (Ex Ct)).
246
Siebrasse First Report ¶¶ 20-21; see also Wilson First Report ¶27.
247
Siebrasse First Report ¶23 (citing C-210, X v. Commissioner of Patents, [1981], 59 C.P.R. 7 (F.C.A.) (death ray); C-
211, Otta v. Canada (Patent Commissioner), [1979] 51 C.P.R. 2d 134 (P.A.B.) aff’d 51 C.P.R. 2d 139 (F.C.A.)
(perpetual motion machine).
248
See, e.g., C-042, Wandscheer et al. v. Sicard Ltd., [1948] S.C.R. 1, at 4; Siebrasse First Report ¶79.
248
C-305; Chronological List of Canadian Utility Decisions from 1980 to Present.
249
C-305; Chronological List of Canadian Utility Decisions from 1980 to Present.
250
Memorial ¶46.
67
1980 to 2004 – not a single pharmaceutical patent was found to lack utility in any Canadian
court”.251
230. Claimant also points to the Manual of Patent Office Practice (“MOPOP”), which it
characterizes as “guidelines relied upon by patent examiners as a practical summary of
applicable patent law in Canada”.252
According to Claimant, Section 12 of the 1990
MOPOP restated the application of the “mere scintilla” to pharmaceutical patents.253
231. Claimant’s expert, Mr. Wilson, explained that patent examiner practice under the
traditional utility test was in keeping with MOPOP guidance and the “mere scintilla” test:
Unless the examiner had reason to doubt that the invention worked,
the inquiry [into utility] ended there . . . . [I]t was neither required
nor typical for applicants to provide much, if any, data derived from
real world use, whether through clinical data of pharmaceuticals, or
through road testing of machines.254
232. According to Claimant, if a utility challenge arose during this era, then “testing or other
evidence that had been generated after the date of the patent application” could be used to
show utility.255
Such evidence took two forms, according to Claimant’s expert. First,
commercial success of a patent “was considered good evidence of utility on the view that
a useless invention could not be commercially successful”.256
Second, evidence of postfiling
testing could prove utility on the assumption that “if a process works today, it must
also have worked yesterday. The fact that it was not tested yesterday does not mean it did
not work yesterday”.257
233. According to Claimant, the traditional utility test requiring a “mere scintilla” of utility was
consistent with the requirement in NAFTA Chapter 17 that patents be made available for,
251
Id.
252
Memorial ¶47.
253
C-54, MOPOP §§ 12.02, 12.03 (January 1990).
254
Wilson First Report ¶30.
255
Memorial ¶52.
256
Siebrasse First Report ¶30 nn.40, 41 (collecting cases).
257
Siebrasse First Report ¶34; see also Memorial ¶53, citing C-044/R-190, Ciba-Geigy AG v. Canada (Commissioner
of Patents), [1982] 65 C.P.R. 2d 73 (F.C.A.) (“Ciba-Geigy”), at 78.
68
inter alia, inventions that are “capable of industrial application”.258
It was also consistent
with a low threshold for utility required in the United States and Mexico.259
b. Creation of the Promise Utility Doctrine
234. Claimant argues that a decade later, in the mid-2000s, after the patents for Zyprexa and
Strattera were granted but before they were invalidated by the courts, Canada’s utility
requirement “underwent a dramatic transformation” as the promise utility doctrine
emerged.260
235. Claimant submits that the promise utility standard imposes three elements that drastically
depart from the traditional utility test. In practice, the three elements operate as an
integrated, single, heightened utility requirement.261
First, patent examiners and judges
seek to identify a “promise” in the patent disclosure, and this promise becomes the
measuring stick for utility. Second, evidence submitted with the patent application to show
fulfilment of any promise in the patent description is subject to heightened scrutiny, and
post-filing evidence such as commercial use may not be relied upon. Third, pre-filing
evidence may not be considered to support a sound prediction unless that pre-filing
evidence was referenced in the patent application itself.262
c. Promise Standard
236. Claimant asserts that, since 2005, “the Canadian courts have identified or inferred
additional promises of utility from the disclosure that go beyond the utility of the claimed
invention, imposing an elevated requirement for utility”.263
Thus, identifying the patent’s
“promise” is “inherently arbitrary and unpredictable”, and a promise may be found even if
258
CL-044, NAFTA Art. 1709.1.
259
Memorial §V(C); Reply §II(C).
260
Memorial ¶56; Reply ¶¶70-71.
261
C-PHM ¶74.
262
Memorial ¶57; Reply ¶70.
263
C-PHM ¶84; see also Testimony of Siebrasse Tr. 520:10-15 (stating that Canadian courts are imposing an
“elevated” utility standard). Testimony of Reddon Tr. 827:9-16 (“Courts now derive, and sometimes using
considerable lengths and expert evidence imply, promises into the disclosure of patents,… but it’s now done without
reference to the utility of the claimed invention.”).
69
not intended as such.264
Claimant cites the statement of the Federal Court of Appeal in
Sanofi-Aventis that “[a]n inventor whose invention is described in a patent which would
otherwise be valid can nonetheless promise more for his invention than required by the Act
so as to render his patent invalid”.265
237. Claimant’s expert, Professor Siebrasse, opines that the “standard against which utility is
assessed now has two branches. The first branch corresponds to the long standing
requirement of a mere scintilla of utility, while the second branch sets an elevated standard
according to the ‘promise of the patent’”.266
Essentially, according to Claimant, a patentee
can now invalidate its own patent—one which would have easily satisfied the mere scintilla
test—if it inadvertently over-promised what the invention could do.
238. Claimant disagrees with Respondent’s contention that the promise utility doctrine has been
long “recognized as an integral part of Canadian law”.267
In particular, it argues that
Consolboard, a Supreme Court case from 1981, which Respondent claims is the seminal
decision on the utility standard, actually has nothing to do with the promise utility doctrine
at all. In Consolboard, the Supreme Court of Canada, quoting with approval Halsbury’s
Laws of England, a comprehensive narrative statement of English law, stated that an
invention lacks utility if “the invention will not work, either in the sense that it will not
operate at all or, more broadly, that it will not do what the specification promises to do”.268
According to Claimant, the use of the word “promise” in Consolboard is not akin to its
meaning within the promise utility doctrine; it is simply “shorthand for the invention’s
intended use”.269
Thus, the holding of Consolboard actually reaffirms the low bar for utility
and the “mere scintilla test”.270
In any event, Professor Siebrasse opines that Canadian
264
Memorial ¶61.
265
C-047, Sanofi-Aventis v. Apotex, Inc., 2013 FCA 186, at ¶54.
266
Siebrasse First Report ¶41.
267
Reply ¶35, quoting Counter-Memorial ¶93.
268
C-118/R-011, Consolboard Inc. v. MacMillan Bloedel (Sask) Ltd., [1981] 1 S.C.R. 504 (“Consolboard”), at 525.
268
Reply ¶79.
269
Reply ¶79.
270
Siebrasse First Report ¶73, citing C-118/R-011, Consolboard, at 525.
70
courts never cited or relied upon Consolboard as supporting any elevated utility standard
or the promise utility doctrine until 2005.271
239. Claimant argues that there is no other pre-2005 authority for the promise utility doctrine.
In particular, none of the cases presented in Mr. Dimock’s “Selected History” supports
Respondent’s position.272
According to Claimant: (i) in several of these cases, including
the Consolboard trial decision and New Process Screw, the court found the claimed
invention was inoperable;273
(ii) in other cases, the inventions at issue were held to have
utility because they worked—the “mere scintilla test”;274
(iii) in two other cases, the court
rejected the argument that utility could be assessed by reference to the patent’s disclosure;
and (iv) two other cases did not involve utility findings at all.275
240. Claimant also refutes the legal commentaries on which Respondent relies for pre-2005
evidence of the promise utility doctrine,276
as none of the underlying Canadian cases cited
in these writings supports the proposition that promises of utility can be found in the
disclosure.277
271
Reply ¶83; Siebrasse First Report ¶73 (collecting cases citing Consolboard for precedent for other issues, not for
utility); Testimony of Siebrasse, Tr. 522:8-15, 526:3-527:7.
272
C-PHM ¶92, citing Dimock Presentation, slide 15 (“Promise of Utility: Selected History of Case Law and Legal
Commentary”)); see also Claimant’s Closing Statement, slide 56.
273
Reply ¶85; R-162, New Process Screw Corp. v. PL Robertson Mfg. Co. Ltd., [1961] 39 C.P.R. 31 (Ex. Ct.), at 32.
C-PHM ¶94 (citing C-042, Wandscheer et al. v. Sicard Ltd., [1948] S.C.R. 1; R-195, Hoescht Pharmaceuticals of
Canada Limited et al. v. Gilbert & Company et al., [1964], Fox Pat. 28 (Ex. Ct.); R-360, Feherguard Products Ltd.
v. Rocky’s of BC Leisure Ltd., [1994], 53 P.C.R. 3d)417 (F.C.T.D.); R-376, TRW Inc. v. Walbar of Canada Inc.,
[1991], 39 C.P.R. 3d.) 176 (F.C.A.)); see also Claimant’s Closing Statement, slide 58 (summarizing Siebrasse’s expert
testimony on these cases).
274
C-PHM ¶94, citing R-008, Rodi & Weinenberger Aktiengesellschaft v. Metalliflex Ltd., [1959], 32 C.P.R. 102
(Q.A.C.); R-375, Corning Glass Works v. Canada Wire & Cable Ltd., [1984], 81 C.P.R. 2d 39 (F.C.T.D.); R-401,
Wellcome Foundation Ltd v. Apotex Inc., [1995] F.C.J. No. 226, 60 C.P.R. 3d 135 (F.C.A.); C-230, Almecon Industries
Ltd. v. Anchortek Ltd., [2001], 17 C.P.R. 4th 74 (F.C.T.D.); R-187, Goldfarb v. W.L. Gore & Associates Inc., [2001],
11 C.P.R. 4th 1290; R-168, Amfac Foods, Inc. v. Irving Pulp & Paper, Ltd., [1986], 12 C.P.R. 3d 193 (F.C.A.). See
also Claimant’s Closing Statement, slide 57 (summarizing Siebrasse’s expert testimony on these cases).
275
C-PHM ¶97, citing C-118/R-011, Consolboard; R-173, American Cyanamid Company v. Ethicon Limited, [1979]
R.P.C. 215; see also Claimant’s Closing Statement, slide 57 (summarizing Siebrasse’s expert testimony on
Consolboard).
276
See Dimock Presentation, slide 15.
277
C-PHM ¶98.
71
d. Post-Filing Evidence
241. Claimant asserts that a second major change in Canadian patent law raised the evidentiary
burden on patentees to prove any “promises” of utility. Claimant’s position is that this
change occurred in 2002, when the Canadian Supreme Court ruled in AZT that evidence of
utility such as scientific effectiveness and commercial use is inadmissible if it was
generated after the filing date of the patent.278
According to Claimant, AZT reversed a
contrary Federal Court of Appeal ruling below and overturned the prior ruling of the
Federal Court of Appeal in Ciba-Geigy.279
In Ciba-Geigy, the court held:
if indeed what is in the patent specification was mere speculation or
prediction, the speculation or prediction having turned out to be true,
ought to be considered to have been well founded at the time it was
made.280
242. Claimant rejects Respondent’s position that the ban on post-filing evidence predates
AZT.281
Claimant contends that there is “voluminous case law allowing post-filing
evidence of utility” prior to that case.282
Respondent’s argument that these cases relate to
operability is misplaced, given that operability is the core of the utility requirement.283
243. Claimant argues that Respondent cannot point to a single utility case before AZT excluding
post-filing evidence.284
Respondent’s reliance on inventorship disputes is unavailing
278
See C-213/R-004, Apotex Inc. v. Wellcome Foundation Ltd., 2002 SCC 77, at ¶46, 80-85. According to Claimant,
this new requirement is especially problematic for pharmaceutical patents. Memorial ¶66; Reply ¶94; Siebrasse First
Report ¶59
279
C-PHM ¶104. See C-044/R-190, Ciba-Geigy, at 77.
280
C-PHM ¶107, quoting C-044/R-190, Ciba-Geigy, at 77.
281
See R-PHM ¶142.
282
C-PHM ¶106; Reply ¶98, citing C-220, McPhar Engineering Co. of Canada v. Sharpe Instruments Ltd., [1960] 35
C.P.R. 105, at 147-48; C-228, Cochlear Corp. v. Cosem Neurostim Ltée, [1995] 64 C.P.R. 3d 10, at 16, 35; Siebrasse
Second Report ¶ 58, fn. 90 (discussing Hoechst Pharmaceuticals of Canada Ltd. v. Gilbert & Co., [1965] Ex. C.R.
710, at 714).
283
C-PHM ¶106, citing Testimony of Siebrasse, Tr. 518:9-12 (noting that under Canada’s traditional utility test, only
“inoperable inventions failed.
284
Reply ¶99.
72
because as such disputes do not require any proof of utility; they concern who filed for a
patent first.285
244. Claimant also points to testimony from the Hearing to show the novelty of AZT. Professor
Siebrasse testified that, prior to AZT, no commercially successful product was ever held to
lack utility.286
Indeed, Respondent’s expert, Mr. Dimock, could not identify a single such
case.287
Nor could Mr. Dimock cite any case before 2002 in which a court expressly
disallowed a patentee to rely on post-filing evidence to prove utility.288
e. Disclosure for Sound Prediction
245. Claimant submits that another heightened evidentiary burden was imposed beginning with
the 2008 Raloxifene Decision. This was the first time a Canadian court declined to consider
pre-filing evidence of soundly predicted utility that was not disclosed in the patent.289
Now,
when utility is based on a sound prediction, the patent must contain the factual basis for
that prediction, including the evidence and line of reasoning that supports the prediction.
246. Again, Claimant rejects Respondent’s argument that this is a long standing rule in Canadian
law. According to Claimant, Respondent primarily relies on Monsanto, a 1979 decision of
the Supreme Court of Canada, which does not support its position.290
Rather, “Monsanto
reversed a decision of the CIPO Patent Appeal Board that effectively required disclosure
of the factual basis for sound prediction”.291
Further, the court held that the burden is on
the patent office to disprove utility, not on the applicant to prove it.292
Indeed, at the
Hearing, Respondent’s expert, Mr. Dimock, conceded that Monsanto did not expressly
285
Respondent’s Closing Statement, Tr. 2264:23-2266:11; C-PHM ¶108 (citing Testimony of Dimock, Tr. at 1136:16-
1137:22).
286
Testimony of Siebrasse, Tr. 519:24-520:3.
287
Testimony of Dimock, Tr.1169:25-1170:6.
288
Testimony of Dimock, Tr. 1170:10-23.
289
C-PHM ¶113; see also C-115/R-200, Raloxifene.
290
See C-061/R-023, Monsanto.
291
Reply ¶109.
292
Siebrasse Second Report ¶69.
73
require disclosure of the factual basis for sound prediction.293
Claimant accepts
Respondent’s point that Monsanto draws upon a 1969 English decision, Olin Mathieson.294
However, in Claimant’s view, Olin Mathieson actually stands for the proposition that that
evidence supporting sound prediction does not need to be in the patent.295
247. Claimant also accepts that the court in the Raloxifene Decision applied language from AZT
regarding disclosure, but according to Claimant, the “AZT ruling itself expressly declined
to decide what would be considered ‘proper disclosure’ where utility is based on a sound
prediction”.296
248. Claimant asserts that the testimony of Respondent’s witness and expert at the hearing
demonstrates the novelty of the rule. For example, Dr. Gillen explained that it was only
after the Raloxifene Decision that Patent Office examiners were instructed to require the
factual basis and line of reasoning for sound prediction to be in the patent itself.297
Mr.
Dimock conceded that: (i) there were no cases between the 2002 AZT decision and the
Raloxifene Decision that imposed an additional disclosure requirement for sound
prediction;298
(ii) during that same period, the Federal Court of Appeal considered evidence
from outside the patent in a sound prediction case;299
and (iii) the scope of this evidentiary
rule is still in dispute.300
f. MOPOP Amendments and CIPO Practice
249. Claimant submits that MOPOP amendments in 2009 and 2010 incorporated all three
elements of the promise utility doctrine and demonstrate the sea-change in the law on
utility.301
For example, Chapter 12 of MOPOP was revised in 2009 to include for the first
293
Dimock Testimony, Tr. 1086:6-10 (“Agree or disagree. Monsanto made no finding that the factual basis had to be
disclosed? MR. DIMOCK: It didn’t make that explicit finding. Yes, it did not.”).
294
See C-461, Olin Mathieson Chemical Corp. v Biorex Laboratories Ltd., [1970] R.P.C. 157 (Ch D).
295
Siebrasse Second Report ¶ 67.
296
C-PHM ¶115, citing oSiebrasse Testimony, Tr. 683:21-684:3.
297
Gillen Testimony, Tr. 992:12-25.
298
Dimock Testimony, Tr. 1112:21-1113:3.
299
Id. at 1127:9-1129:17.
300
Id. at 1117:14-20.
301
C-PHM §II.A.
74
time a utility requirement that an inventor had to meet every “promise” made in the patent
application.302
250. In addition, the 2010 MOPOP included the requirement that the factual basis for a sound
prediction be disclosed in the description.303
It also included a new section entitled “Office
Actions on Utility,” which would have been useless before 2005 when rejections on the
ground of utility were rare.304
251. Claimant submits that “MOPOP is a reliable restatement of Canadian patent law”,
reflecting the Canadian Patent Office’s interpretation of the Patent Act.305
It follows that
the 1990s MOPOPs represented the Canadian utility requirement when the Zyprexa and
Strattera patents were issued, and that the 2009 and 2010 MOPOPs show the dramatic
change that occurred thereafter.306
According to Claimant, neither of these points is
rebutted by Respondent’s characterization of MOPOP as a “high-level summary”.307
252. For Claimant, there is no question that the MOPOP amendments were based on changes in
Canadian law. The new MOPOP sections on utility and sound prediction contain citations
to new cases, including AZT and the Raloxifene Decision, as acknowledged by Dr.
Gillen.308
Claimant asserts that MOPOP did not cite the “promise” language in
Consolboard until the 2000s.309
253. Claimant further argues that the “dramatic changes to the MOPOP were accompanied by
parallel changes in Patent Office practice”.310
According to Claimant, utility objections
were raised for the first time in Office Actions in the mid-2000s.311
Indeed, Respondent’s
302
C-59, MOPOP §12.08.01 (December 2009).
303
C-60, MOPOP §9.04.01 (December 2010).
304
C-59, MOPOP §12.09 (December 2009); Reply ¶125.
305
Reply ¶¶143-146; C-PHM ¶51.
306
C-PHM ¶52.
307
C-PHM ¶53, quoting Respondent’s Opening Statement, Tr. 193:20-194:8.
308
Gillen Testimony, Tr. 935:20-936:4, 963:7-970:8.
309
C-PHM ¶54.
310
C-PHM ¶59.
311
Reply ¶¶140-142.
75
experts were unable to identify any example of a patent application rejected on the basis of
the promise utility doctrine prior to the 2000s.
254. Finally, Claimant asserts that the reactions of several CIPO examiners, who expressed
concerns and confusion about how to implement the new MOPOP sections on utility, serve
as contemporaneous evidence of the dramatic change in the law on utility.312
g. Statistical Evidence
255. Claimant also puts forth statistical evidence on the number of patents that were invalidated
by Canadian courts for inutility, arguing that this data reflects the dramatic change in the
law. Claimant asserts that since 2005, there has been a “sudden and unprecedented spike”
in patent invalidations by courts for lack of utility, and that this change is exclusively in
the pharmaceutical sector.313
Claimant updated its statistical evidence at the Hearing to
show that:
In the early period utility was rarely challenged in that sector and
never successfully but, since 2005, given the change in Canada’s
test, utility challenges have spiked and 28 cases (41 percent) have
been successful.314
256. Claimant argues that Respondent has given no plausible alternate explanation for the spike
in invalidations based on inutility. In particular, Claimant challenges Respondent’s position
that the spike is somehow due to the end of compulsory licensing and the introduction of
the PM(NOC) regulations in 1993.315
Not only did those changes take place more than 10
years before the spike in 2005, but the increased volume of litigation does not account for
the increase in the rate of invalidations.316
Further, according to Claimant, Respondent’s
312
C-PHM ¶¶61-68. Claimant relies on examiner comments on early drafts of the 2009 and 2010 MOPOPs, emails
and an internal CIPO study. See e.g. C-357, “Chapter 17 Working draft (July 2007) comments from C9,” Comments
of Daniel Begin and Marsha Black [Canada Doc. No. 1065, at 066681], C-361, “MOPOP Chapter 12 feedback C14 part
2,” Comments of Nancy Trus (Examiner) (17 March 2008) [Canada Doc. No. 921, at 065459] ; C-491, Let’s Talk
About Literal Assertions, Canada Doc. No. 39.
313
Claimant’s Opening Statement, Tr. 95:8-23; C-PHM ¶121.
314
Claimant’s Opening Statement, Tr. 95:12-16.
315
Respondent’s Closing Statement, Tr. 2249:22-24.
316
C-PHM ¶124.
76
attempt to rely on case-specific factors (such as experience of the fact finder and the
evidence presented) fails to explain the overall increase in invalidations.317
257. Finally, Claimant does not accept that changing the cut-off date between pre- and post-
2005 invalidations (from 1 January to 2 September 2005), as Respondent suggests, would
diminish the evidence of a dramatic change; the jump in invalidations would still be
significant, from 2 to 26 (rather than 0 to 28).318
Claimant accepts that the rate of
invalidities in the pre-2005 category would increase but argues that this is due to the small
data set.319
h. Comparison with Other Jurisdictions
258. Claimant argues that the dramatic change in Canadian law is also evident from the “recent
divergence” between the utility requirement in Canada and in the other NAFTA Parties.320
According to Claimant, the utility requirement remains a low bar in both the United States
and Mexico.321
This difference in law is reflected in “a stark divergence in outcomes”;
while invalidations based on utility have become frequent in Canada, utility “is a non-issue
in the rest of North America”.322
In this regard, Claimant’s expert, Professor Merges, cited
a survey of 239 cases in the United States over several years in which only one patent was
found invalid for lack utility.323
Claimant also points to the testimony of Respondent’s
expert on Mexican law, Ms. Lindner, confirming that no Mexican patent has ever been
invalidated for lack of “industrial application” (the utility standard in Mexico).324
317
Id.
318
C-PHM ¶126. Claimant denies that it is appropriate to move both of those cases to the pre-2005 period, as one of
them involved the application of the new utility requirement. Id., citing C C-354, Merck & Co., Inc. et al v. Apotex
Inc. et al., [2005] F.C. 755, at 73-74.
319
C-PHM ¶126. Claimant’s statistical expert Professor Levin warns that it is inappropriate to draw conclusions from
the pre-2005 period due to the small number of cases. Testimony of Bruce Levin, Tr. at 1277:2-12.
320
C-PHM ¶137. See Memorial §V.
321
C-PHM §II.E.1, citing, e.g., testimony of Canada’s expert Professor Holbrook, Tr. 1475:4-12 (“[Y]ou, Professor
Merges and Mr. Kunin notably agree . . . [t]hat the utility requirement is a low bar in the United States . . . .
PROFESSOR HOLBROOK: That’s correct”).
322
C-PHM ¶144.
323
Testimony of Robert Merges, Tr. 1299:2-6.
324
Testimony of Hedwig Lindner, Tr. 1970:17-21.
77
259. According to Claimant, in comparing the utility requirement across the NAFTA
jurisdictions, it is inappropriate to consider other, distinct patentability requirements (e.g.,
enablement), as Respondent attempts to do. In any event, even comparing patent law as a
whole across NAFTA jurisdictions, Canada remains an “outlier”, as demonstrated by the
difference in invalidations.325
For Claimant, this explains why the Office of the U.S. Trade
Representative (“USTR”), in its “Special 301” report, has expressed “serious concerns”
regarding Canada’s heightened patent utility standards since 2013.326
260. Claimant also points to negotiating documents of the World Intellectual Property
Organization (“WIPO”) to show a broader global consensus on the meaning of utility.
Claimant states that this evidence “confirms that Canada’s promise utility doctrine
constitutes a new and radical departure from the traditional patent law concept of utility,
as reflected in the laws of many countries”.327
i. Legitimate Expectations
261. Claimant submits that it had “legitimate expectations that its Zyprexa and Strattera patents
would not be invalidated on the basis of a radically new utility requirement.”328
According
to Claimant, this expectation was reasonably grounded in (i) Canadian patent law, (ii)
Respondent’s grant of the Strattera and Zyprexa Patents, and (iii) Respondent’s
international commitments under NAFTA and the PCT.329
262. Claimant argues that multiple NAFTA Chapter Eleven tribunals have held the that NAFTA
Article 1105 protects expectations that are reasonable in light of the respondent’s conduct,
including its established legal and regulatory framework.330
325
C-PHM ¶¶154-155.
326
Reply ¶52, C-PHM ¶155. See C-331, Office of the United States Trade Representative, Special 301 Report (2014),
pp. 49-50.
327
C-PHM ¶158.
328
Claimant’s Closing Statement, Tr. 2135:12-15; see Reply ¶349. Claimant has developed this argument primarily
in the context of its submissions on the alleged breach of NAFTA Article 1105. However, as explained below, the
Tribunal finds it appropriate to consider Claimant’s factual allegations here. See §VIII.B(6) below.
329
Memorial §VII.B.3; Reply §V.B.2; C-PHM §IV.C.2.(a).
330
Reply ¶356; C-PHM ¶278. Claimant cites, inter alia, CL-107, Grand River Enterprises Six Nations, Ltd., et al. v.
United States of America, UNCITRAL, Award, 12 January 2011, ¶140 and CL-166, Bilcon v. Canada, ¶572.
78
263. In this regard, Claimant alleges that it reasonably relied upon the traditional utility
requirement in Canadian patent law throughout the process of developing Zyprexa and
Strattera, and continued to do so as it brought the drugs to market.331
For support, Claimant
offers the testimony of Eli Lilly’s former General Counsel, Mr. Armitage, and the
executives who oversaw the launch of the two products.332
These witnesses testify that
confidence in the ability to secure patent protection was critical to the decision to proceed
with launch of the drugs in Canada.333
264. Claimant further submits that its legitimate expectations were also based on Respondent’s
specific commitments to Claimant with respect to the patent protection of Strattera and
Zyprexa.334
First, Respondent’s traditional utility requirement was a specific commitment
to Claimant because patentability standards are technical regulations aimed at, and relied
upon, by a discrete identifiable group.335
Second, Respondent made a commitment to
Claimant in the form of the grant of the Zyprexa and Strattera Patents themselves.336
According to Claimant, the patents specifically assured Claimant that it would have
exclusive rights to make, use, and sell its invention until the expiry of the patents. Thus, in
Claimant’s view, the patents were more than mere representations; they were bundles of
legally enforceable rights.337
265. According to Claimant, it relied upon the Strattera and Zyprexa Patents when making
significant investment decisions in relation to the drugs, such as investing in regulatory
approvals and marketing.338
In this context, Claimant cites the testimony of Mr.
331
Memorial ¶¶275-278.
332
Armitage First and Second Statements; Postlethwait Statement; Nobles Statement; Stringer Statement.
333
See, e.g., Postlethwait Statement ¶29 (“we were very focused on patent protection, and our patent attorneys had
not flagged any issues with our Canadian patent application. The fact that no issues were raised gave us confidence
that we would receive a patent, which in turn was a key consideration in our decision to proceed with the Canadian
launch”).
334
As a legal matter, Claimant rejects Respondent’s position that legitimate expectations must be based on a State’s
specific commitments to an investor, but as a factual matter, Claimant states that Respondent did in fact make such
commitments.
335
Memorial ¶284.
336
Memorial ¶285; Reply ¶360; C-PHM ¶281.
337
Memorial ¶286.
338
Memorial ¶287; Reply ¶360; Nobles Statement ¶23; Postlethwait Statement ¶30.
79
Postlethwait and Ms. Nobles, who state that patent protection was critical to the market
success of both products.339
266. In response to Respondent’s argument that patents are subject to judicial invalidation and
therefore cannot be the basis of legitimate expectations, Claimant contends that the normal
risk of invalidation is different from the unacceptable risk that a patent will be tested against
a new patentability requirement that could not have been foreseen at the time the patent
was granted.340
267. Claimant also relies on Respondent’s international obligations. According to Claimant, its
“legitimate expectations were reinforced by NAFTA Chapter 17, under which Canada was
obligated not to develop and retroactively apply a doctrine like the promise utility
doctrine”.341
Specifically with regard to the Strattera Patent, Claimant asserts that it had a
legitimate expectation that its application, which was valid under the PCT, would be
sufficient to meet Canadian requirements. For Claimant, this follows from the fact that the
PCT (i) does not require evidence of the utility of an invention to be disclosed, and (ii)
prohibits member countries from imposing additional or different form and content
requirements.342
268. Claimant contends that its expectations of patent protection were objectively reasonable.
In this regard, Claimant rejects Respondent’s argument that Claimant’s expectations were
insufficiently informed.343
According to Claimant, it has a network of qualified patent
agents and attorneys to advise management and ensure compliance with Canadian patent
law.344
For Claimant, the reason that none of these experts gave specific advice on the
339
Nobles Statement ¶23; Postlethwait Statement ¶30.
340
Reply ¶361; citing Counter-Memorial ¶294.
341
C-PHM ¶280; see Memorial ¶279; Reply ¶330.
342
Memorial ¶280-283; Reply ¶355; citing Erstling First Report ¶¶16, 24-28, 33-34; C-186, An Act to Amend the
Patent Act and To Provide for Certain Matters in Relation Thereto, Ch. 41; C-187, ‘Regulations for Carrying Into
Effect the Terms of the Patent Cooperation Treaty Done at Washington on June 19, 1970 and accompanying
Regulatory Impact Analysis Statement; CL-073/R-037, PCT, Article 27(1); C-188, Regulations Under the Patent
Cooperation Treaty, Rule 5.1(a)(vi); C-050/R-001, Patent Act, RSC, 1985, c. P-4, §38.2(2).
343
C-PHM ¶286.
344
C-PHM ¶286, citing inter alia Testimony of Robert Armitage, Tr. 343:18-344:1 (“Lilly maintained a network of
patent agents whose responsibility it was to provide advice on matters of patent law and practice to keep Lilly abreast
of those developments. That global network included patent agents in each of the countries in which Lilly sought
80
utility requirement in relation to the filing of the Strattera and Zyprexa Patents is precisely
because the traditional utility test was well understood to be a low bar, and analysis was
not required.345
Thus, Claimant contends that its expectations were reasonably rooted in
Canadian patent law as it existed at the time of its investments, before the law underwent
a dramatic change.
269. Claimant’s position is that the dramatic change in the Canadian utility requirement was
outside the “acceptable margin of change” that investors must anticipate.346
Therefore, in
its view, the invalidation of the Strattera and Zyprexa Patents through application of the
promise utility doctrine violated its legitimate expectations. In this regard, Claimant draws
“a distinction between measured change in the law or clarification of previously unsettled
law, on the one hand, and the adoption of a completely new doctrine in a well-settled area,
on the other”.347
According to Claimant, it could not reasonably have expected that
Canadian courts would create and then retroactively apply a new utility requirement.348
Furthermore, for Claimant, “it is not just the extent of the change that is striking. It is also
the inconsistency between Canada’s new promise utility doctrine and relevant international
treaties and practices.”349
Respondent’s Position
270. Respondent rejects Claimant’s allegation of a recent sea-change in the Canadian law on
utility. According to Respondent, the term “useful” is not defined in the Patent Act, and its
meaning has therefore necessarily evolved through jurisprudence. Respondent argues that
patents around the world, and in the case of Canada included highly competent Canadian patent agents located in
Canada who routinely provided that kind of advice to Lilly”).
345
C-PHM ¶289, citing inter alia Testimony of Robert Armitage, Tr. 344:18-25 (stating that he would have been
“shocked if there were evidence that advice on Canadian utility law had been given during that time frame, since it
was so well understood that the threshold for meeting the Canadian utility requirement for pharmaceutical inventions
was so low”).
346
Memorial ¶279; C-PHM ¶279, quoting CL-050, Rudolf Dolzer and Christoph Schreuer, Principles of International
Investment Law (2012), p. 148.
347
C-PHM ¶279. See C-PHM ¶282 (“there is a categorical difference between a challenge based on the law as it stood
at the time of grant and a challenge based on entirely new law”).
348
Memorial ¶279; Reply ¶364.
349
C-PHM ¶280. See Memorial ¶279, citing C-184, North American Free Trade Agreement Implementation Act, S.C.
1993, c. 44 and C-039, Honorable John Manley, Canadian Minister of Industry, Speaking Notes for Address to the
Standing Committee on Industry, Review of Bill C-91, 17 February 1997; see also Reply ¶364.
81
what Claimant presents as a unitary “promise utility doctrine” is in reality three distinct
long-standing patent law rules, discussed below.
a. Promise Standard
271. According to Respondent, the first long-standing rule is that a patentee will be held to any
promises contained in the patent. Utility has long been a bifurcated standard.350
272. Respondent observes that Claimant has narrowed its allegation regarding the promise
standard, such that the “dramatic change that it now alleges occurred in 2005 is not holding
patentees to promises of utility per se, but holding them to promises found in the disclosure
portion of the patent”.351
Respondent finds this to be a confusing aspect of Claimant’s case,
as Claimant continues to rely on cases where the promise was found in the language of the
claims (rather than the disclosure) as examples of the promise utility doctrine.352
273. In any event, Respondent argues that even Claimant’s narrowed allegation is incorrect.
Indeed, Respondent points out that Claimant itself acknowledged that the promise standard
was an established principle of patent law in submissions to the Supreme Court.353
Claimant’s expert, Professor Siebrasse, in his academic writing, also recognized the place
of the promise doctrine in earlier Canadian law.354
350
Counter-Memorial ¶92, quoting R-050, E. Richard Gold and Michael Shortt, “The Promise of the Patent in Canada
and Around the World”, 30:1 Canadian Intellectual Property Review 35, 54 June 2014 (“First, where the patent
document itself makes no promise of utility, a ‘mere scintilla of utility’ will suffice; this requirement has normally
been interpreted as requiring that the invention produce some minimally useful result. Second, where the inventor
makes a promise, the patent will have utility only if it fulfils that promise, regardless of whether it possesses a scintilla
of utility”).
351
R-PHM ¶113. See Tr. 911:4-19 (“MR. REDDON: In my report, and I think I’m very clear, it’s not so much suddenly
we’re going to take promises. It’s we’re going to stop looking in the claims for promises and start pulling them out of
the disclosure … it really arose when we changed from the claims to the disclosure …”); Tr. 555:19-24 (“MR.
JOHNSTON: As we’ve been discussing, on your view for a case to be an example of the promise utility doctrine, the
promise must be derived from the disclosure, not from the claims. PROFESSOR SIEBRASSE: That’s right. That’s
correct.”).
352
R-PHM ¶114.
353
R-PHM ¶115, citing R-034, Novopharm Limited v. Eli Lilly and Company, Supreme Court of Canada Case No.
33870, Memorandum of Argument of the Respondent, Application for Leave to Appeal, 26 October 2010, ¶2.
354
See, e.g., C-206, Norman V. Siebrasse, Must the Factual Basis for Sound Prediction Be Disclosed in the Patent?
(2012)28 Can IP Rev 39, p. 11, fn. 30 (“[The promise standard] has a long, but sporadic, history in Anglo-Canadian
patent law … but it has recently become a much more important feature of Canadian patent law…”).
82
274. Respondent points to what it considers “extensive historical evidence demonstrating the
existence of the promise standard in Canadian law long before Claimant filed its patents or
NAFTA entered into force”.355
275. Respondent relies in particular on the 1981 Supreme Court decision in Consolboard, which
holds that that “not useful” means an invention “will not do what the specification promises
that it will do”.356
Contrary to Claimant’s position, Respondent argues that there are
numerous pre-2005 cases that cite Consolboard for the promise standard.357
276. For example, Respondent points to the Federal Court of Appeal in the 1995 Wellcome
Foundation Ltd. v. Apotex decision, which stated that “[s]ince the utility of a patent must
ultimately be judged against its promise, the exercise requires that the specification be
carefully construed to determine exactly what the promise is”.358
Indeed, Professor
Siebrasse characterized the holding in Wellcome as the “clearest support for the promise of
the patent doctrine”.359
The Canadian government also referred to the bifurcated test in
submissions to WIPO in 2001 and 2003.360
355
R-PHM ¶117; see Counter-Memorial ¶¶88-107; Rejoinder ¶¶152-156; Dimock First Report ¶¶53-91; Dimock
Second Report ¶10, Annex B.
356
C-118/R-011, Consolboard, at ¶¶36-37.
357
R-PHM ¶121 n.27 (citing R-187, Goldfarb v. W.L. Gore & Associates Inc., [2001] 11 C.P.R. 4th 129, para. 109;
R-360, Feherguard Products Ltd. v. Rocky's of B.C. Leisure Ltd., [1994] 53 P.C.R. 3d 417 (F.C.T.D.), para. 23; C-
230, Almecon Industries Ltd. v. Anchortek Ltd., [2001] 17 C.P.R. 4th 74 (F.C.T.D.), ¶¶45-46).
358
R-401, Wellcome Foundation Ltd v. Apotex Inc., [1995] F.C.J. No. 226, 60 C.P.R. 3d 135 (F.C.A.), p. 154. As
confirmed by Professor Siebrasse, “specification” in this context refers to the disclosure portion of the patent. Tr.
621:14-17.
359
C-205, Norman V. Siebrasse, The False Doctrine of False Promise, (2013) 29 Can IP Rev 3, p. 22, fn. 91; see also
Testimony of Siebrasse, Tr. 621:18-22 (“MR. JOHNSTON: Just to be clear, is this the case we discussed earlier that
you described as the clearest support for the promise of the patent doctrine? PROFESSOR SIEBRASSE: Yes”).
360
R-407, WIPO, The Practical Application Of Industrial Applicability/Utility Requirements Under National And
Regional Laws, April 2001, ¶13 (“An invention lacks utility if it is not operable or it will not do what the specification
promised it will do (‘false promise’)); R-230, WIPO, Industrial Applicability” and “Utility” Requirements:
Commonalities and Difference, document SCP/9/5, 17 March 2003, ¶41 (“A finding that the alleged invention is not
useful may be expressed in a way that the invention will not work, either in the sense that it will not operate at all or,
more broadly, that it will not do what the specification promised it would do (‘false promise’).
83
277. Respondent also cites other commentary, including a 1960 article by leading Canadian
patent lawyer Mr. Donald Hill and the 1969 treatise of Dr. Harold G. Fox, both of which
refer to promises in the specification.361
278. Finally, according to Respondent, Claimant overlooks that patentees have always been held
to promises under other doctrines such as overbreadth. Respondent states that the “doctrine
of overbreadth has for decades held patentees to promises of utility by prohibiting claims
that are broader than the invention made or disclosed”.362
b. Post-Filing Evidence
279. Respondent also rejects Claimant’s assertion that the 2002 Canadian Supreme Court
decision in AZT changed the law by disallowing post-filing evidence of utility. Respondent
argues that Claimant’s characterization of AZT is inaccurate for four main reasons.
280. First, according to Respondent, the principle that utility must be established before filing
is enshrined in the Patent Act and early cases. Claimant’s “file now, pay later approach”
has no basis in Canadian jurisprudence; post-filing evidence was never permissible to
prove utility in Canadian law.363
For Respondent, this is confirmed by the Supreme Court’s
adoption of the doctrine of sound prediction in 1979 in Monsanto.364
The sound prediction
doctrine would be unnecessary if a patent could be granted based on speculations of utility
that would only be confirmed with post hoc testing.365
281. Second, Respondent argues that nothing in Justice Binnie’s decision in AZT suggests the
Supreme Court was changing or making new law. Instead, the Court interpreted various
provisions of the Patent Act and concluded that it required that utility be proven at the time
of the patent application. It also interpreted jurisprudence such as the 1930 Supreme Court
decision in Rice v. Cristiani and the 1979 case Procter & Gamble, in which the Supreme
361
R-160, Donald Hill, “Claim Inutility” (1960), 35 CPR 185, 188; R-163, Harold G. Fox, Canadian Patent Law and
Practice, 4th
ed. (1969), pp. 152-153.
362
R-PHM ¶131.
363
Counter-Memorial ¶120.
364
Dimock First Report ¶¶98-101, 103.
365
R-PHM ¶139.
84
Court stated, “Knowing a new process without knowing its utility is not in my view
knowledge of an ‘invention’”.366
282. Respondent disagrees with Claimant’s position that cases prior to AZT allowed post-filing
evidence to prove utility. In particular, Respondent argues that Claimant misreads CibaGeigy.
According to Respondent, the Federal Court of Appeal in Ciba-Geigy determined
that there was enough pre-filing evidence to soundly predict utility.367
Respondent argues
that the other cases cited by Claimant as allowing post-filing evidence are off point, as
those cases allowed post-filing evidence to prove obviousness and operability, elements of
patent law that are separate from utility.368
283. Third, Respondent asserts that the legal community did not regard AZT as a dramatic
change in the law.369
Respondent offers as an example commentary by a leading Canadian
intellectual property law firm that published a contemporaneous comment on AZT stating
that it “reaffirmed a long-standing position” on post-filing evidence and “confirmed” the
disallowance of post-filing evidence.370
Respondent argues that Claimant has offered no
evidence to the contrary. Claimant misreads the two cases which it interprets as confirming
the AZT changed the law.371
Further, Claimant’s expert, Mr. Reddon, offered no
documentary evidence to support his claim that other practitioners regarded AZT as a
change in the law.372
284. Fourth, Respondent argues that there is no other heightened evidentiary standard for utility
as a result of AZT. Here, Respondent addresses Claimant’s allegation that pharmaceutical
companies would now be required to conduct and finalize human clinical trials in order to
366
C-213/R-004, AZT (quoting Procter & Gamble Co. v. Bristol-Myers Canada Ltd., [1979] 42 C.P.R. 2d 33).
367
R-190, see Ceiba-Geigy AG v. Canada (Commissioner of Patents), (1982), 65 CPR (2d) 73 (FCA).
368
See Counter-Memorial ¶115.
369
R-PHM ¶¶144-146.
370
R-191, Supreme Court of Canada Reaffirms the Doctrine of Sound Prediction in Canadian Law, IP Perspectives
Intellectual Property & Technology Newsletter, Smart & Biggar/Fetherstnhaugh, February 2003, pp 2-3.
371
R-PHM ¶146 (citing C-532, Bristol-Myers Squibb Company v. Apotex Inc., [2010] F.C. 1304, at ¶¶ 30-31; C-209,
Aventis Pharma Inc. v. Apotex Inc., [2005] F.C. 1283, at ¶157).
372
Testimony of Reddon, Tr. 912:12-18.
85
prove or soundly predict the utility of a drug for human use.373
Respondent points to AZT
itself, in which in vitro tests were sufficient to prove or soundly predict utility.374
Respondent also suggests that Claimant’s perception of a heightened evidentiary standard
may be the result of a strengthened adversarial process in which litigants rigorously seek
to validate or invalidate a patent.375
c. Disclosure for Sound Prediction
285. According to Respondent, Claimant is also wrong to assert that the requirement to disclose
the factual basis and reasoning for a sound prediction of utility in the patent is new.
Respondent offers three main reasons to reject Claimant’s position.
286. First, Respondent argues that the need to disclose the basis for a sound prediction in the
patent has been recognized in Canadian law since the 1979 Monsanto decision, the seminal
case on sound prediction in Canada.376
In Monsanto, the Supreme Court allowed a claim
for a group of compounds whose utility was soundly predicted, based only on three
examples disclosed in the patent and affidavit evidence of the common general
knowledge.377
Both types of evidence are still used today.378
Thus, Monsanto established
the need to substantiate the basis for a sound prediction at the time of filing.
287. In addition, Respondent argues that Patent Office practice in the 1990s confirms that the
disclosure requirement for the basis of a sound prediction existed long before the
Raloxifene Decision. According to Dr. Gillen, in that era “the examiner would determine
whether or not the prediction appeared to be sound based on the type of research disclosed
373
Memorial ¶66; Reply ¶94. Claimant alleges for example that in vitro testing would not be sufficient under the
alleged heightened standard to prove utility.
374
R-PHM ¶149 (citing C-213/R-004, AZT).
375
R-PHM ¶150.
376
R-PHM ¶153.
377
C-061/R-023, Monsanto. According to Respondent, Professor Siebrasse concedes this point. See, e.g., Testimony
of Siebrasse, Tr. 699:24-700:4.
378
R-PHM ¶153.
86
in the application, the results obtained, and the explanation provided in the specification as
to how those results could predict the utility of a subject compound”.379
288. Second, Respondent argues that AZT affirmed Monsanto and the need to disclose the basis
for a sound prediction. In AZT, the Supreme Court explained that “the sound prediction is
to some extent the quid pro quo the applicant offers in exchange for the patent
monopoly”.380
It follows that a patentee must substantiate the basis for a sound prediction
before obtaining the patent, as did the patentee in AZT.381
Respondent asserts that
practitioners, including Claimant’s law firm Gowlings, interpreted AZT as requiring
disclosure of the basis for a sound prediction.382
Indeed, the Federal Court in the Strattera
Decision specifically cites AZT for the disclosure rule.383
289. For Respondent, Claimant cannot claim that it did not know of the requirement to disclose
the basis for a sound prediction in the patent. Before the Raloxifene Decision, Claimant
had received CIPO Office Actions that called for disclosure of the basis for a sound
prediction and cited AZT for the requirement.384
379
Gillen First Statement ¶44.
380
R-PHM ¶¶155-158.
381
C-213/R-004, AZT, ¶¶3, 70, 75 (The trial judge found that “the inventors possessed and disclosed in the patent
both the factual data on which to base a prediction, and a line of reasoning … to enable them to make a sound prediction
at the time they applied for the patent”).
382
R-PHM ¶¶157, citing R-191, Supreme Court of Canada Reaffirms the Doctrine of Sound Prediction in Canadian
Law, IP Perspectives Intellectual Property & Technology Newsletter, Smart & Biggar/Fetherstnhaugh, February 2003,
pp 2-3); R-494, Gowling Lafleur Henderson LLP, Pharmacapsules @ Gowlings, 4 May 2009, p. 5 (“The Court [in
the Raloxifene Decision] reiterated the test articulated by the Supreme Court in AZT namely that when an invention
had not yet been reduced to practice, the disclosure must give both the underlying facts and the sound line of reasoning
to justify the prediction.”)
383
C-160/R-027, Novopharm Ltd. v. Eli Lilly & Co., 2010 FC 915, ¶117.
384
Gillen Second Statement ¶¶ 26-27, citing R-382, CIPO Office Action dated 23 October 2003, Application No.
CA2304567 (“Claims 1 to 20 do not comply with Section 84 of the Patent Rules. The description fails to provide a
sound line of reasoning for the utility claimed.”); R-383, CIPO Office Action dated 7 October 2004, Application No.
CA2248873 (“Claim 6 does not comply with section 2 of the Patent Act. The description fails to provide a sound line
of reasoning for the utility of olanzapine for treating inflammation.”).
87
290. Third, Respondent argues that there is no precedent in Canadian law that would have
supported finding a sound prediction in relation to the Strattera Patent, which disclosed no
information at all to evidence of sound prediction.385
d. MOPOP Amendments and CIPO Practice
291. According to Respondent, MOPOP is neither an authoritative statement of the law nor a
comprehensive summary of Canadian patent law or Patent Office practice. Respondent
quotes the Foreword to eleven versions of MOPOP from 1989 to 2014, which states that it
“is to be considered solely as a guide, and should not be quoted as an authority. Authority
must be found in the Patent Act, the Patent Rules, and in decisions of the Courts interpreting
them”.386
Further, Respondent argues that conclusions about the state of the law cannot be
drawn from MOPOP because revisions come about slowly and are incomplete.387
As an
illustration, Respondent highlights that the 1990 MOPOP does not include the doctrine of
sound prediction, which was adopted in Canadian law in 1979.
292. In any event, Respondent rejects Claimant’s argument that MOPOP and Patent Office
practice reflect the creation of the promise utility doctrine in the mid-2000s. In particular,
Respondent notes that the 1990 MOPOP did not exclude the promise standard, and it
reflected a longstanding requirement to establish utility before filing.388
293. Further, according to Respondent’s witness Dr. Gillen, “The only situation in which an
examiner would accept evidence of utility after filing was one in which the examiner had
doubts about the credibility of an allegedly demonstrated (not predicted) utility. However,
385
See C-160/R-027, Novopharm Ltd. v. Eli Lilly and Co., [2010] F.C. 915, at ¶36 (“…the [Strattera] Patent offers no
information about the nature or sources of the evidence relied upon by the inventors to support the promise of
atomoxetine’s utility to treat ADHD by demonstration or by sound prediction”).
386
R-025, MOPOP, Foreward (August 1989, January 1990, March 1998, September 2004, February 2005, April 2006,
January 2009, December 2009, November 2013, December 2013 and May 2014).
387
Gillen First Statement ¶20 (“An inherent weakness of the MOPOP … is that it cannot be relied upon to be
completely up to date.”).
388
R-PHM ¶140; R-309, 1990 MOPOP §18.20.02 (“An invention, such as that related to a new substance, may not
be said to be invented until such date as the utility for it is known”).
88
even then the evidence would be required to have pre-dated the filing of the application in
question”.389
e. Statistical Evidence
294. Respondent characterizes Claimant’s statistical evidence as “anecdotal” and detached from
Claimant’s own theory of the case. Claimant’s statistics are not keyed to the events in 2002,
2005, and 2008 that Claimant claims to have caused a dramatic change in the law on
utility.390
The date selected by Claimant for the introduction of the promise utility doctrine
(1 January 2005) is nine months before Claimant alleges the promise standard was adopted,
and correcting the date materially changes Claimant’s results.391
295. While Respondent acknowledges that there has been an uptick in pharmaceutical patent
litigation on the issue of utility, it insists that the increase is due to “developments in the
patent regime that strengthened intellectual property protection for pharmaceuticals”.392
Respondent points specifically to the introduction of PM(NOC) proceedings in 1993,
which allowed pharmaceutical patent holders to pre-emptively block generic
manufacturers from entering the market.393
296. Respondent’s witness, Dr. Brisebois, identifies a number of methodological errors in
Claimant’s statistics. For example, he argues that Claimant’s expert, Professor Levin,
inappropriately includes in his 2005-2014 data set pharmaceutical cases in which the patent
was successfully challenged on other grounds, in addition to utility.394
Also, Claimant
includes PM(NOC) proceedings that do not result in true “invalidations”. Correcting for
these flaws shows that only three, not 23, pharmaceutical patents were invalidated for a
lack of utility alone during this period.395
In addition, Claimant counts all utility-based
389
Gillen First Statement ¶41.
390
R-PHM ¶162.
391
R-PHM ¶164.
392
Counter-Memorial ¶138 (emphasis in original).
393
Counter-Memorial ¶¶138-141.
394
Brisebois First Statement ¶37.
395
Counter-Memorial ¶¶144-148.
89
invalidations as examples of the promise utility doctrine, whether or not the promise
standard was actually applied in the case.396
f. Comparison With Other Jurisdictions
297. Like Claimant, Respondent has submitted extensive evidence relating to the patent law
regimes in the United States and Mexico. According to Respondent, the other NAFTA
Parties’ laws on utility are not in discord with Canada’s bifurcated standard.397
Of
particular relevance in the current context, Respondent argues that U.S. and Mexican patent
law has evolved since NAFTA. For example, the U.S. enablement and written description
doctrines are similar to Canada’s law on utility,398
and the enablement requirement has
become more rigorous since the passage of NAFTA.399
Similarly, Respondent contends
that Mexico’s industrial applicability requirement requires a rigorous showing of claimed
utility as of the filing date.400
In any event, Respondent finds any differences in patent law
regimes across jurisdictions irrelevant, as it contends that international patent law is not
harmonized by NAFTA or otherwise.401
298. Respondent further argues that no other State or international organization voiced any
concern over Canada’s law on utility prior to this arbitration, confirming that there has been
no dramatic change in the law.402
Respondent challenges the reliability of the 2014 and
2015 editions of the USTR Special 301 Report cited by Claimant, in which the United
States expresses “serious concerns” over Canada’s utility requirement.403
According to
Respondent, “the Special 301 Report is based not on empirical evidence and analysis, but
on industry allegations made to USTR, including representations made by the Claimant
396
R-PHM ¶165.
397
See, e.g., Counter-Memorial §II(G)-(H).
398
Counter-Memorial ¶¶171-172; Holbrook First Report ¶¶21-33.. According to Respondent, These doctrines,
particularly as applied to pharmaceutical compounds, require that claims of utility be substantiated with credible test
results in the patent description as of the filing date.
399
Holbrook First Report ¶67.
400
Counter-Memorial ¶¶176-177 (citing Lindner First Report ¶¶12, 42-44).
401
Counter-Memorial § II(I-J).
402
R-PHM §IV.F.
403
R-PHM ¶173. See C-331, Office of the United States Trade Representative, Special 301 Report (2014); C-332,
Office of the United States Trade Representative, Special 301 Report (2015).
90
and its industry associations”.404
In addition, these reports were not issued
contemporaneously with the changes in the law that Claimant alleges, but rather at the time
of the commencement of this arbitration. Thus, Respondent supposes that the reports were
the result of Claimant’s own lobbying efforts to bolster its claims in this arbitration.405
299. Respondent confirms that it knows of no other complaint or comment received by Canada
in the PCT, WIPO, or WTO context relating to its utility requirement during the relevant
period.406
g. Legitimate Expectations
300. In response to Claimant’s submissions regarding its alleged legitimate expectations,
Respondent argues that a mere failure to fulfil an investor’s expectations does not breach
the minimum standard of treatment in NAFTA Article 1105(1), although it may be relevant
to the analysis of whether a measure was sufficiently egregious to breach customary
international law.407
301. In any event, even if Claimant’s legal arguments were accepted, Respondent submits that
Claimant has failed to establish its alleged legitimate expectations. For Respondent, a
legitimate expectation must: (i) be objective, not subjective;408
(ii) involve a specific
assurance or promise by the State to induce the investment, which was relied upon by the
investor;409
(iii) exist at the time the investor decided to make the investment;410
and (iv)
404
R-PHM ¶173.
405
Id.
406
R-PHM ¶174.
407
Counter-Memorial ¶¶276, 283; citing CL-065/RL-014, Waste Management II, ¶98; CL-104/RL-003, International
Thunderbird Gaming Corporation v. United Mexican States, UNCITRAL/NAFTA, Award, 26 January 2006, ¶¶147,
194; CL-116/RL-006, Glamis Gold v. United States, ¶¶620, 627.
408
Counter-Memorial ¶282; citing CL-112/RL-007, Mobil v. Canada, ¶152; CL-116/RL-006, Glamis Gold v. United
States, ¶627.
409
Counter-Memorial ¶282; citing CL-112/RL-007, Mobil v. Canada, ¶152; CL-116/RL-006, Glamis Gold v. United
States, ¶620; CL-065/RL-014, Waste Management II, ¶98; RL-008, EDF (Services) Limited v. Romania, ICSID Case
No. ARB/05/13, Award, 8 October 2009, ¶217.
410
Counter- Memorial ¶282, citing RL-054, Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Islamic Republic of
Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009, ¶¶190-191; CL-094/RL-048, Duke Energy
Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No. ARB/04/19, Award, 18 August 2008
(“Duke Energy v. Ecuador”), ¶340.
91
be reasonable in the circumstances, including the political, socioeconomic, cultural and
historical conditions prevailing in the host State.411
302. According to Respondent, Claimant’s alleged expectations do not satisfy these criteria. In
particular, Respondent contends that it made no specific assurances to Claimant regarding
the Strattera and Zyprexa Patents. Respondent argues that Claimant cannot rely on the grant
of the patents as a basis for its alleged legitimate expectations because patents issued by
the Patent Office are only presumptively valid, subject to challenge and to final
determination by the judiciary.412
In this regard, Respondent cites Claimant’s annual public
filings, which state that “there is no assurance that … patents we have been granted would
be found valid if challenged”.413
303. Moreover, Respondent argues that Claimant’s alleged expectations were not reasonable. In
Respondent’s view, the record shows that the decision-makers within the company were
not sufficiently informed about Canadian patent law.414
Claimant’s employees testified that
they did not know of any reason why their patents would be invalidated for lack of
utility.415
Yet, according to Respondent, “the record is full of Canadian patent law
publications … warning about including promises in your patent, and of disclosing a
sufficient basis for a sound prediction long before Claimant filed its patent applications”.416
More generally, Respondent argues that when Claimant filed the Strattera and Zyprexa
Patents, it knew, or should have known, that its patents could be invalidated if they did not
satisfy the applicable patentability requirements, and that the legal meaning of patentability
requirements is constantly being clarified and elaborated through court decisions.417
411
Counter-Memorial ¶282, citing CL-094/RL-048, Duke Energy v. Ecuador, ¶340.
412
Counter-Memorial ¶294; R-PHM ¶268.
413
R-303, Eli Lilly Annual Report, Fiscal Year 1999, p. 4.
414
R-PHM ¶269.
415
Stringer Statement ¶25; Armitage First Statement ¶¶8, 12, 16; Noble Statement ¶23; Postlethwait Statement ¶¶22,
29. Respondent points out that none of Claimant’s witnesses testified in support of the patents before the Federal
Court. Counter-Memorial ¶293.
416
R-PHM ¶269, citing R-163, Harold G. Fox, Canadian Patent Law and Practice, 4th
ed. (1969), p. 153; R-164,
William L. Hayhurst, Q.C., Disclosure Drafting, [1971], 28 P.T.I.C. Bull 7th 64, at 78; R-199, William L. Hayhurst,
Q.C., “The Art of Claiming and Reading a Claim”, in Gordon F. Henderson, Patent Law of Canada (1994), p. 217.
417
Counter-Memorial ¶298, citing Dimock First Report ¶¶147-152.
92
304. Respondent dismisses Claimant’s specific argument that its expectations relating to the
Strattera Patent were grounded on the PCT. Respondent contends that Claimant could not
have expected that mere compliance with the PCT’s form and contents requirements would
meet Canada’s substantive disclosure requirements.418
For Respondent, this is obvious
because (i) the PCT is a strictly procedural treaty that says nothing about the substantive
conditions of patentability, (ii) Claimant did not make an appropriate attempt to comply
with country-specific validity requirements,419
and (iii) Respondent’s actions were
consistent with the PCT’s form and contents requirements, as evidenced by the lack of
evidence of any complaints being lodged by its treaty partners.420
305. According to Respondent, the only legitimate expectation Claimant could have had was to
receive a fair hearing from the Federal Court in the event of a challenge to its patents.421
Respondent contends that Claimant did in fact receive one; the application of the rules to
Claimant’s patents revealed that they were latently defective at the time of filing.422
306. Respondent rejects Claimant’s position that its legitimate expectations were violated as a
result of a dramatic change in the law. As summarized above, Respondent denies that the
law dramatically changed after the Strattera and Zyprexa Patents were granted. In its
response to Claimant’s position on legitimate expectations, Respondent further argues that:
[e]ven if such a change had occurred, it is trite to say that the
common law evolves over time. Any sophisticated investor expects
developments in the law, particularly in the area of patent law. It
simply cannot be that every time a court overrules a precedent, it
violates customary international law.423
418
Counter-Memorial ¶297, citing Reed First Report ¶¶33, 44-45; Gillen First Statement ¶56; CL-073/R-037, PCT,
Article 3; R-042, WIPO PCT Applicant’s Guide, ¶¶5.094-5.095.
419
Counter-Memorial ¶297; citing CL-073/R-037, PCT, Article 27(5) (“Nothing in this Treaty and the Regulations is
intended to be construed as prescribing anything that would limit the freedom of each Contracting State to prescribe
such substantive conditions of patentability as it desires…”).
420
C-PHM ¶272, citing Tr. 1601:13-17 (“MR. SPELLISCY: So the answer is no, none of Canada’s Treaty partners
under the PCT have brought a dispute complaining that Canada is violating the PCT, correct? PROFESSOR
ERSTLING: That is correct”).
421
Counter-Memorial ¶299.
422
Counter-Memorial ¶292.
423
R-PHM ¶267.
93
The Tribunal’s Analysis
307. The Canadian courts’ interpretation of the utility requirement under Canadian patent law,
and in particular their adoption of the promise utility doctrine in the mid-2000s, allegedly
departing dramatically from prior Canadian patent law, is the factual premise for
Claimant’s case.424
The Parties agree that a fundamental question before this Tribunal is
whether there was a “dramatic” change in the utility requirement in Canada.425
Claimant
has confirmed that it must succeed on this issue to prevail in this arbitration.426
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.
Preliminary Observations
309. Claimant has asserted that the promise utility doctrine is a unitary doctrine that crystalized
with the 2008 Raloxifene Decision, contending that this transformed the utility requirement
in Canadian law. As a preliminary observation, the Tribunal considers that it is difficult for
Claimant to establish that there has been a dramatic change in Canada’s patent utility law
where the relevant Canadian judicial decisions were handed down over a period of more
than six years, encompassing a range of cases from first instance to appellate tier.
Nevertheless, the Tribunal will examine more closely the evidence put forward by
Claimant with regard to each of the three alleged elements of the promise utility doctrine
and the doctrine as a whole.
424
See §VI.E(2) above.
425
Claimant’s Closing Statement, slide 140, “The Tribunal’s Decision Tree” (“2. Whether there has been a dramatic
change in the utility requirement in Canada”); R-PHM ¶5.
426
Claimant’s Closing Statement, slide 140, “The Tribunal’s Decision Tree” (“2. Whether there has been a dramatic
change in the utility requirement in Canada”); Tr. 2144:6-9 (“SIR DANIEL BETHLEHEM: You have to succeed on
each one. MS. CHEEK: Yes, the Claimant would need to succeed on each of these”).
427
Memorial ¶56.
94
310. In undertaking this analysis, the Tribunal is mindful of the role of the judiciary in common
law jurisdictions. Claimant’s position in this proceeding rests on an implicit premise that
common law decisions must follow in a reasonably foreseeable and predictable channel,
without significant or material changes. Yet evolution of the law through court decisions
is natural, and departures from precedent are to be expected.428
311. Finally, the Tribunal observes that the present case is one in which the facts are the law.
Thus, this analysis necessarily touches upon aspects of Canadian patent law previously
unfamiliar to the Members of the Tribunal. The Tribunal has been greatly assisted by the
Parties’ submissions and the testimony of their experts and witnesses, and thereby reaches
its conclusions with confidence.
The Utility Requirement in Canadian Jurisprudence
312. The Patent Act defines an invention as follows:
“invention” means any new and useful art, process, machine,
manufacture or composition of matter, or any new and useful
improvement in any art, process, machine, manufacture or
composition of matter429
313. As summarized above, Claimant alleges that Canadian courts dramatically changed the
application of this provision through a series of cases adopting the promise utility doctrine.
To recall, the doctrine comprises three elements: (i) the identification of a “promise” in the
patent disclosure, against which utility is measured; (ii) the prohibition on the use of postfiling
evidence to prove utility; and (iii) the requirement that pre-filing evidence to support
a sound prediction of utility must be included in the patent.
a. The Promise Standard
314. The Tribunal understands Claimant’s specific allegation regarding the promise standard to
be that courts now look beyond the claims in the patent to the disclosure in order to construe
428
See CL-007/RL-004, Mondev v. United States (finding that even if one were to accept the claimant’s argument
that the Massachusetts Supreme Judicial Court had made new law, “its decision would have fallen within the limits
of common law adjudication”).
429
C-050/R-001, Patent Act, RSC 1985, c P-4, §2.
95
the “promise” against which utility is assessed.430
Claimant asserts that this practice was
adopted by the Canadian judiciary in the mid-2000s without any basis in prior
jurisprudence.431
315. The Tribunal further understands that Claimant is not arguing that the promise standard
replaced the traditional “mere-scintilla” test, but rather that the two tests co-exist today.432
This is one point on which the Parties agree.
316. In determining whether Claimant has established that the promise standard is new law, the
Tribunal must begin by considering the much discussed 1981 Canadian Supreme Court
decision in Consolboard, in which Justice Dickson wrote:
There is a helpful discussion in Halsbury’s Laws of England, (3rd
ed.), vol. 29, at p.59, on the meaning of “not useful” in patent law.
It means “that the invention will not work, either in the sense that it
will not operate at all or, more broadly, that it will not do what the
specification promises that it will do … the practical usefulness of
the invention does not matter, nor does commercial utility, unless
the specification promises commercial utility” … Canadian law is
to the same effect. 433
430
See, e.g., C-PHM §II.C.a. (“Finding Elevated ‘Promises’ Beyond the Claimed Invention’s Use Is New”); id. ¶89
(“It is common ground that under Canada’s traditional test, the invention as claimed must work and be operable, such
that specific assertions of utility in the claims (which is part of the specification) must be fulfilled”).
431
Reply ¶73; Siebrasse Second Report ¶72. In light of Claimant’s assertion that this was a dramatic change in the
law, it is striking that nowhere in its Memorial or Reply does Claimant identify the name or date of the first court
decisions adopting this standard. One has to look to a footnote in Professor Siebrasse’s expert report to find the
citations to two trial court decisions in 2005 and a 2008 Court of Appeal decision, which he identifies as the first cases
applying the promise standard. Siebrasse First Report fn. 98. (“The original Federal Court cases were Bristol-Myers
Squibb Co v. Apotex Inc, 2005 FC 1348 [C-520], Pfizer Canada Inc v Apotex Inc, 2005 FC 1205 (C-250) and Aventis
Pharma Inc v Apotex Inc, 2005 FC 1283 (C-209)”). The first Court of Appeal decision affirming the promise of the
patent analysis was Atorvastatin 2008 FCA 108, supra note 51 [C-235]”). During the Hearing, a typographical error
in this footnote was corrected. The reference to C-190 was replaced with C-520. Tr. 1194:3-1195:20. The Tribunal
notes that it also misidentified C-235 as C-234.
432
See, e.g., Memorial ¶57; Siebrasse First Report ¶41 (“The standard against which utility is assessed now has two
branches. The first branch corresponds to the long standing requirement of a mere scintilla of utility, while the second
branch sets an elevated standard according to the “promise of the patent”); Claimant’s Opening Statement, Tr. 21:4-
12.
433
C-118/R-011, Consolboard, at ¶¶36-37.
96
317. The Tribunal notes that “specification” in this context refers to both the claims and the
disclosure of the patent.434
Thus, the utility test articulated by Justice Dickson, at least in
its language, is strikingly similar to Claimant’s presentation of the co-existing “mere
scintilla” and promise standards.
318. Claimant has argued that Consolboard was never cited for the promise standard before
2005. The record contradicts this position. Respondent has submitted a number of pre-2005
cases that rely on Consolboard for the proposition that “not useful” means “the invention
will not work, either in the sense that it will not operate at all or, more broadly, that it will
not do what the specification promises that it will do”.435
Like Consolboard, these
decisions do not appear to have applied the promise standard (in the sense of looking to the
patent disclosure for a promise of utility), but the citations cannot be ignored as indications
of similar analysis and policy considerations to that of the promise doctrine.
319. For the Tribunal, it is also relevant that Canadian courts have cited Consolboard for the
promise standard after 2005, a fact which Claimant does not contest. Notably, when the
promise standard was applied to Claimant’s patents, the courts relied on Consolboard. The
Strattera Decision includes a section titled “Utility – Legal Principles” in which the
“promise” language of Consolboard is quoted, followed by citations to authorities from
the 1960s.436
The 2010 Court of Appeals decision in the Zyprexa Patent litigation also cited
Consolboard, together with a 2008 Court of Appeals case.437
434
See Tr. 621:14-17, where Professor Siebrasse confirms that “specification” as used by the court includes the
disclosure portion of the patent.
435
R-187, Goldfarb v. W.L. Gore & Associates Inc. (2001), 11 CPR (4th) 129 ¶109 (emphasis added) (“The Supreme
Court of Canada in [Consolboard], discussed this concept. Dickson J., as he then was, explored, at page 525, the
meaning of ‘not useful’ in patent law. He said, quoting from Halsbury’s Laws of England, (3rd ed.), vol. 29, at page
59: It means ‘that the invention will not work, either in the sense that it will not operate at all or, more broadly, that it
will not do what the specification promises that it will do’”); R-360, Feherguard Products Ltd. v. Rocky's of B.C.
Leisure Ltd. (1994), 53 PCR (3d) 417 (FCTD), ¶23 (citing Consolboard for the proposition that “In patent law, a
patent is “not useful” if the invention will not work, either in the sense that it will not operate at all or, more broadly,
that it will not do what the specification promises that it will do”); C-230, Almecon Industries Ltd. v. Anchortek Ltd.
(2001), 17 CPR(4th) 74 (FCTD), ¶46.
436
C-160/R-027, Novopharm Ltd. v. Eli Lilly & Co., 2010 FC 915, ¶91.
437
C-046/R-015, Eli Lilly Canada Inc. v. Novopharm Ltd., 2010 FCA 197, ¶74-76. In the Zyprexa Decision, the
Federal Court recalled this part of the Court of Appeals decision. C-146/R-016, Eli Lilly Canada Inc. v. Novopharm
Ltd., 2011 FC 1288, ¶84.
97
320. As highlighted by Respondent, when Novopharm sought leave to appeal the 2010 Court of
Appeals decision in the Zyprexa case, Claimant opposed it. In its submission to the
Supreme Court, Claimant did not seek revision of the utility standard set out by the Court
of Appeals. Rather, it stated that the court had done “nothing more than follow established
principles of patent law and the jurisprudence of this Court”.438
321. Faced with all of this evidence, the Tribunal is not persuaded to dismiss Consolboard as
an authority on the basis of Claimant’s nuanced argument that the case does not in fact
stand for the promise standard, or Mr. Reddon’s view that practitioners thought the
Supreme Court was talking about promises in the claims.439
Fundamentally, the Tribunal
sees no basis for questioning the Canadian judiciary’s interpretation of its own Supreme
Court precedent.
322. In addition, the Tribunal has taken note of other pre-2005 Canadian authorities for the
promise standard in the record. Most notably, the Federal Court of Appeal in 1995 in
Wellcome reasoned:
Since the utility of a patent must ultimately be judged against its
promise, the exercise requires that the specification be carefully
construed to determine exactly what that promise is. The question is
then to decide whether the number of possible results, with or
without other evidence, leads to the inference that the process lacks
utility.440
438
R-034, Novopharm Limited v. Eli Lilly and Company, Supreme Court of Canada Case No. 33870, Memorandum
of Argument of the Respondent, Application for Leave to Appeal, 26 October 2010, ¶2 (emphasis added) (“While
Novopharm suggests that the Federal Court of Appeal has changed established law, a review of the Reasons for
Judgment of the Federal Court of Appeal shows that it did nothing more than follow established principles of patent
law and the jurisprudence of this Court. It certainly did not lower the threshold for the validity of patents in Canada
as alleged by Novopharm”). The Tribunal acknowledges that Novopharm was not arguing that the Court of Appeal
had changed law by adopting the promise standard, and that Claimant’s statement was therefore not specifically aimed
at that rule.
439
Testimony of Reddon, Tr. at 910:16-20 (“As a practitioner you have to contend with the words after the ‘or’ and
be ready to deal with them if it ever is applied, and what practitioners thought was that you needed to show some
promise in the claims”).
440
Wellcome Foundation Ltd v. Apotex Inc., [1995] F.C.J. No. 226, 60 C.P.R. 3d 135 (F.C.A.), at 154.
98
323. Before this arbitration, Claimant’s expert, Professor Siebrasse, opined that the holding in
Wellcome was the “clearest support for the promise of the patent doctrine”.441
The Tribunal
also finds Professor Siebrasse’s explanation of the jurisprudence in this article helpful:
The promise of the patent doctrine played no significant role in
Canadian patent law until 2005. There were only two cases of which
I am aware that considered a heightened utility requirement based
on the promise of the specification [Wellcome and Corning Glass
Works],442
and one more which arguably did so [Mobile].443
In all
three cases the promise was modestly construed and the claimed
invention was held to be useful. A fourth case implicitly rejected the
doctrine [Unilever].444
A few more cases used “promise” language
in discussing the utility of the patent, but only in the uncontroversial
senses as a synonym for utility,445
or as referring to the claim as
construed.446
324. This reading of the case law offers a realistic summary of the record before the Tribunal.
While the promise standard may not have played a significant role in the Canadian
jurisprudence before 2005, and courts looked to the disclosure for the promise in relatively
few cases, the rule was clearly “out there”, to be ignored at a patentee’s peril.447
Furthermore, the rule has a strong foundation in the language of Consolboard, which
Canadian courts still cite for the promise standard today, as already discussed.
441
C-205, Norman Siebrasse, The False Doctrine of False Promise, (2013) 29 Can IP Rev 3, p. 22, fn. 91.
442
R-375, Corning Glass Works v. Canada Wire & Cable Ltd. (1984), 81 CPR (2d) 39 (FCTD), p. 18 (finding the
patent useful and stating that “neither in the disclosures nor in the claims” does the patent “promise any particular
result”).
443
C-347, Mobil Oil Corp. v. Hercules Canada Inc., (1994), 57 C.P.R. (3d) 488 (FC), p. 23.
444
R-172, Unilever PLC. v. Procter & Gamble Inc., (1995) 61 C.P.R. (3d) 499 (FCA).
445
R-162, New Process Screw Corp. v. PL Robertson Mfg. Co. Ltd., (1961) 39 C.P.R. 31; R-360, Feherguard Products
Ltd. v. Rocky’s of BC Leisure Ltd. (1994), 53 PCR (3d) 417 (FCTD); R-376, TRW Inc. v. Walbar of Canada Inc.
(1991), 39 CPR (3d) 176 (FCA). Professor Siebrasse states that in TRW “the Court of Appeal used language which
strongly suggests the application of the promise of the patent doctrine, but on my reading, the case really turns on
claim construction and traditional inoperability”.
446
C-205, Norman Siebrasse, The False Doctrine of False Promise, (2013) 29 Can IP Rev 3, p. 22 (internal citations
to cases maintained but adjusted to cite the record).
447
As Claimant points out, there were very few utility cases before 2005. See Section VIII.B(4) below. While many
cases appear to have applied the “mere scintilla” standard, this alone does not support Claimant’s position, given its
acknowledgement that this lower standard still exists in parallel with the promise standard.
99
325. Therefore, Claimant’s argument that the promise standard constitutes a dramatic change in
the law fails.
b. Post-Filing Evidence
326. In respect of the second element of the promise utility doctrine, Claimant alleges that in
the 2002 AZT decision, the Supreme Court changed prior law and imposed a new ban on
post-filing evidence to prove utility. The Tribunal notes the Parties’ agreement that, under
the Patent Act, the date on which utility is assessed is the date of the patent application.448
The question is whether AZT changed prior law that allowed patentees to offer post-filing
evidence to show the claimed invention possessed utility.
327. In examining Claimant’s allegation, the Tribunal begins by reviewing the AZT decision. In
doing so, the Tribunal recalls that the sole purpose of this analysis is to assess the factual
basis of Claimant’s case, not to judge the Supreme Court’s ruling against any legal
standard, in NAFTA or elsewhere.
328. In AZT, the Supreme Court reversed a Federal Court of Appeal decision admitting postfiling
evidence of utility. The most relevant portions of Justice Binnie’s judgment,
delivering the Judgment of the Court, are reproduced here:
Nor, in my view, is it enough for a patent owner to be able to buttress
speculation with post-patent proof, and thereby to turn dross into
gold. Utility is an essential part of the definition of an “invention”
(Patent Act, s. 2). A policy of patent first and litigate later unfairly
puts the onus of proof on the attackers to prove invalidity, without
the patent owner’s ever being put in a position to establish validity.
Unless the inventor is in a position to establish utility as of the time
the patent is applied for, on the basis of either demonstration or
sound prediction, the Commissioner “by law” is required to refuse
the patent (Patent Act, s. 40). […]
The Patent Act defines an “invention” as, amongst other criteria,
“new and useful” (s. 2). If it is not useful, it is not an invention within
the meaning of the Act. […]
448
See Reply ¶98.
100
The question was whether AZT did the job against HIV that was
claimed; in other words, whether on February 6, 1985, there was any
invention at all within the meaning of s. 2 of the Patent Act.
Canadian case law dealing with inventorship has to be read keeping
the particular factual context in mind. In Christiani v. Rice, [1930]
S.C.R. 443, this Court held, per Rinfret J. (as he then was), at p. 454:
… for the purpose of section 7 [now s. 27], “it is not enough for a
man to say that an idea floated through his brain; he must at least
have reduced it to a definite and practical shape before he can be
said to have invented a process”. [Emphasis added.]449
329. Justice Binnie recognized that the Court of Appeal’s reasoning in its 1981 Ciba-Geigy
decision offered some support for the argument that post-filing evidence could be used to
support a finding of utility.450
In that case, the Court of Appeal stated that:
if indeed what is in the patent specification was mere speculation or
prediction, the speculation or prediction having turned out to be true,
ought to be considered to have been well founded at the time it was
made. Even at the time it was made it is not improbable that it would
have been considered well founded.451
330. Considering this language, Justice Binnie explains that (i) reading Ciba-Geigy as endorsing
post-filing validation of “bare speculation” would be inconsistent with the 1979 Monsanto
decision, and (ii) on the facts of Ciba-Geigy, the Court of Appeal had determined that it
was probable that the invention’s utility would have been considered well-founded at the
time of filing (suggesting that the language was obiter dicta).452
He then reasoned that:
In the broader context of the Patent Act, as well, there is good reason
to reject the proposition that bare speculation, even if it afterwards
turns out to be correct, is sufficient. … Accordingly, to the extent
Ciba-Geigy stands for a contrary position, I do not think it should be
followed.453
449
C-213/R-004, AZT, ¶¶46 et seq. (interpreting the Patent Act).
450
C-213/R-004, AZT, ¶84.
451
C-044/R-190, Ciba-Geigy, at 77. The Court of Appeals cited the Monsanto decision for this proposition.
452
C-213/R-004, AZT, ¶84 (“on the facts of Ciba-Geigy itself, Thurlow C.J. says, as quoted above, that ‘[e]ven at the
time it was made it is not improbable [i.e., it is probable] that it [the invention] would have been considered well
founded [i.e., a sound prediction]’”).
453
C-213/R-004, AZT, ¶84-85.
101
331. A number of observations are in order. First, contrary to Claimant’s arguments, the fact
that the Supreme Court’s AZT decision reversed the lower court decision on appeal is not
evidence of a change in the law; reversal serves various critical functions in a tiered judicial
system. Second, the AZT decision is expressly and satisfactorily based on the Patent Act,
jurisprudence and policy considerations. Third, although the contrast between the language
of Ciba-Geigy and AZT is apparent, Justice Binnie is able to read Ciba-Geigy in a way that
is not entirely inconsistent with the court’s ruling in AZT.454
Claimant would have the
Tribunal dismiss the court’s analysis of Ciba-Geigy in AZT on the basis that it is
“unpersuasive”.455
That is not the Tribunal’s role. Rather, its role is to determine whether
there was a dramatic change in Canadian patent law in this respect, a conclusion which it
is unable to reach on the record before it.
332. In light of these observations, the Tribunal finds that the AZT decision, on its face and as it
relates to Monsanto and Ciba-Geigy, cannot be considered a “complete and surprising
reversal from prior law”, as alleged by Claimant.456
For completeness, the Tribunal will
also look beyond the decision to consider the entire record on this issue.
333. Professor Siebrasse has presented several court decisions handed down before AZT in
which courts allowed post-filing evidence of utility.457
Respondent’s expert Mr. Dimock
has asserted, inter alia, that these cases relate not to utility but to “operability”, which is
relevant because post-filing evidence of operability is still admissible today.458
In response,
Professor Siebrasse has argued that (i) operability and utility are indistinguishable, and (ii)
Mr. Dimock misreads the cases. The Tribunal found both of these experts credible and
competent, and considers that each has made a reasoned case. The only appropriate
454
C-213/R-004, AZT, ¶84.
455
Reply fn. 170 (“Canada suggests that Claimant ‘over-reads’ Ciba-Geigy, but its arguments rest on the Supreme
Court’s entirely understandable, yet unpersuasive, attempts to distinguish Ciba-Geigy in the AZT decision itself.”).
456
C-PHM, Answer to Tribunal Question 29.
457
Siebrasse First Report ¶30; Siebrasse Second Report ¶¶56-59, citing inter alia C-218, Reliable Plastics Ltd. v.
Louis Marx & Co., [1958] 29 C.P.R. 113, at 126; C-221, CH Boehringer Sohn v. Bell-Craig Ltd., [1962] Ex. C.R.
201, at 245; C-228, Cochlear Corp. v. Cosem Neurostim Ltée, [1995] 64 C.P.R. 3d 10, at 35 (F.C.T.D.); C-301,
Hoechst Pharmaceuticals of Canada Ltd. v. Gilbert & Co., [1965] 1 Ex. C.R. 710, at 714, 28 Fox Pat. C. 120, 50
C.P.R. 26, aff’d [1966] S.C.R. 189, at 191, 50 C.P.R. 26.
458
Dimock First Report ¶105; Dimock Second Report ¶105. In this regard, the Tribunal notes that Claimant has not
specifically contested Respondent’s assertion that post-filing evidence is still today admitted to demonstrate
operability. See Reply fn. 168.
102
conclusion, then, in the Tribunal’s view, is that reasonable minds may differ in the
interpretation of the cases.459
334. Similarly, the record shows that after AZT was handed down, there was divergence among
Canadian judges and practitioners regarding the case’s relationship with prior law. For
example, as Claimant points out, in 2002, Apotex sought to amend its pleadings in a
Federal Court case on the basis that AZT had changed the law, and the trial judge expressly
accepted that position.460
On review, however, the Federal Court of Appeal took no view
on whether there had been a change.461
335. From the practitioner perspective, Mr. Reddon explained that AZT was a surprising,
dramatic change.462
On the other hand, a 2003 article in the newsletter of the patent law
firm Smart & Biggar referred to the relevant portion of AZT as a confirmation of an existing
principle:
After-the-fact-Validation
The Court confirmed that bare speculation, even if it afterwards
turns out to be correct, will not amount to sound prediction. It
rejected the suggestion, arising from earlier Canadian Federal Court
of Appeal decisions, that mere speculation which later turned out to
be true would be considered a sound prediction.463
336. Taking a broader perspective, the Tribunal accepts Claimant’s point that before AZT, no
commercially successful products were found to lack utility, whereas now this is not
459
As recognized by both experts, the courts in these decisions generally do not distinguish between pre- and postfiling
evidence, so this has to be determined based on the facts of the case.
460
C-532, Bristol-Myers Squibb Company v. Apotex Inc., 2010 FC 1304, ¶31 (“While I agree that it would have been
preferable if Apotex had formally withdrawn its statement in light of the change of law, I find that the amendments
made by Apotex to paragraph 21 in July of 2004 sufficiently demonstrated that lack of sound prediction with respect
to nefazodone and nefazodone hydrochloride was a live issue. The amendment to paragraph 21 paralleled the change
of law with respect to sound prediction: it alleged that even if one of the compounds of the ‘436 Patent had eventually
been shown to have the utility promised, there was a lack of sound prediction at the time of filing.”)
461
C-545, Apotex Inc. v. Bristol-Myers Squibb Company, 2011 FCA 34 , ¶23 (“Today, Apotex tells us that the decision
of the Supreme Court in Apotex Inc. v. Wellcome Foundation Ltd, 2002 SCC 77, [2002] 4 S.C.R. 153 changed the law
and, therefore, necessitated the 2004 amendments to its pleadings. If that was the case, it could have addressed
Wellcome with specific and well-particularized amendments, but did not do so.”).
462
See, e.g., Tr. 874:22-875:8
463
R-191, “Supreme Court of Canada Reaffirms the Doctrine of Sound Prediction in Canadian Patent Law”, IP
Perspectives Intellectual property & Technology Newsletter, Smart & Biggar /Fetherstonhaugh, February 2003, p. 3.
103
uncommon.464
This is a notable fact, but Claimant has not established this to be the result
of changed law.465
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 wellestablished
law when it clarified this rule in AZT.
c. Disclosure for Sound Prediction
338. The Tribunal now turns to Claimant’s allegation that the judiciary changed the law in the
2008 Raloxifene Decision by requiring the basis of sound prediction to be disclosed in the
patent.
339. As discussed above, the Raloxifene Decision concerned one of Claimant’s own Canadian
patents. In this litigation, Claimant appealed the trial court decision, arguing that the court
erred in holding that the Raloxifene Patent lacked adequate disclosure. In its decision
dismissing this appeal, the Court of Appeal stated:
The importance of the disclosure obligation in applying for a patent
has been emphasized by the Supreme Court of Canada on a number
of occasions in recent years (Pioneer Hi Bred Ltd. v. Canada
(Commissioner of Patents), [1989] 1 S.C.R. 1623 at paragraph 23;
Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142 at
paragraph 46; Free World Trust v. Électro Santé Inc. 2000 SCC 66,
[2000] 2 S.C.R. 1024 at paragraph 13; Apotex Inc. v. Wellcome
Foundation Ltd., 2002 SCC 77, [2002] 4 S.C.R. 153 at paragraph 37
(commonly referred to as AZT and hereinafter referred to as such)).
The decision of the Supreme Court in AZT is particularly significant
to the disposition of this appeal. According to AZT, the requirements
464
Courts cite AZT as the authority for disallowing evidence of commercial success. See C-209, Aventis Pharma Inc
v. Apotex Inc, 2005 FC 1283, ¶157 (“There is no question that the ‘206 patent turned out to be a very useful invention.
However, this sort of ‘after the fact validation’ was specifically rejected by the Supreme Court of Canada in
Wellcome”). Such citations do not suggest one way or the other whether AZT was a departure from prior law.
465
See subsection VIII.B(4) below, discussing Claimant’s quantitative data on litigation outcomes.
104
of sound prediction are three-fold: there must be a factual basis for
the prediction; the inventor must have at the date of the patent
application an articulable and sound line of reasoning from which
the derived result can be inferred from the factual basis; and third,
there must be proper disclosure (AZT, supra, at paragraph 70). As
was said in that case (para. 70): “the sound prediction is to some
extent the quid pro quo the applicant offers in exchange for the
patent monopoly”. In sound prediction cases there is a heightened
obligation to disclose the underlying facts and the line of reasoning
for inventions that comprise the prediction. […]
The appellant argues that in requiring the complete disclosure of the
factual basis underlying the sound prediction (i.e. requiring data to
substantiate the invention), the Federal Court Judge has changed the
disclosure requirements as set out in subsection 27(3) of the Patent
Act, R.S.C. 1985, c. P-4. I respectfully disagree. In AZT, the
Supreme Court, with obvious reference to subsection 34(1) of the
Patent Act (the predecessor to subsection 27(3)), held that where the
claimed invention had not yet actually been reduced to practice, the
patent must provide a disclosure such that a person skilled in the art,
given that disclosure, could have as the inventors did, soundly
predicted that the invention would work once reduced to practice.
Significantly, in AZT, the Court went on to state that the disclosure
requirements had been met given that both the underlying facts (the
test data) and the sound line of reasoning (the chain terminator
effect) were in fact disclosed (AZT, para. 70).466
340. The Tribunal finds this analysis highly instructive. It shows that Claimant raised the “new
requirement” argument in the Raloxifene proceeding, and the Court of Appeal rejected it
on the basis of Supreme Court precedent. This evidence weighs heavily against Claimant’s
position. Again, however, as part of its factual analysis, the Tribunal has carefully reviewed
the full record on this issue to assess whether Claimant is able to rebut this evidence.
341. The Parties and their experts have debated at length the implication of the Supreme Court’s
1979 Monsanto decision. On one side, Respondent asserts that Monsanto “emphasized that
a sound prediction must not go beyond the consideration provided by the disclosure”.467
On the other, Claimant finds nothing in the case to imply that the factual basis of sound
466
C-119/R-354, Eli Lilly Canada Inc. v. Apotex Inc., 2009 FCA 97, ¶¶13-14, 18. Professor Siebrasse notes that
Justice Hughes, the trial judge who authored the Raloxifene Decision, “was a patent practitioner with decades of
experience before being appointed to the bench”. Siebrasse Second Report ¶76.
467
Counter-Memorial ¶131.
105
prediction must be disclosed. During the Hearing, it became clear to the Tribunal that (i)
Monsanto does not expressly hold one way or the other on this issue;468
(ii) the court in
Monsanto did not admit any undisclosed evidence of sound prediction that would not be
admitted in Canadian courts today;469
and (iii) Monsanto draws upon a 1969 English
decision, Olin Mathieson, in which the court did admit evidence from outside the patent.470
Therefore, Monsanto does not offer a specific answer to the question of disclosure for
sound prediction.
342. There is some evidence that after Monsanto the Patent Office understood that applicants
should disclose the basis of a sound prediction. Dr. Gillen highlights a 1995
Commissioner’s Decision which concluded that the patent at issue did not contain anything
in its disclosure upon which to base a sound prediction.471
The Tribunal finds the language
of this decision instructive but notes that the refusal to grant the patent was based on a
provision of the Patent Act that does not concern utility (disclosure).
343. The Parties have also discussed AZT extensively in this context. The Tribunal has before it
numerous sources indicating that AZT was understood to set out the disclosure requirement
for sound prediction. As Claimant’s counsel stated at the Hearing, “the AZT decision
basically stated an additional disclosure rule, or what might have looked like an additional
disclosure rule, but didn’t actually apply it in that case because it wasn’t at issue”.472
Professor Siebrasse also conceded that the language of AZT could be interpreted to support
the disclosure rule.473
468
See, e.g., Tr. 1083:2-17.
469
Tr. 699: 24-700:4 (“MR. JOHNSTON: But in Monsanto the court did not admit any evidence that would not still
be admissible under Canadian law to justify a sound prediction. PROFESSOR SIEBRASSE: Well, yes, that’s right.”).
470
C-461, Olin Mathieson Chemical Corp. v Biorex Laboratories Ltd., [1970] R.P.C. 157 (Ch D); Tr. 1098:13-18
(“We have reference [in Olin Mathieson], sir, without a doubt to post-filing evidence and evidence that’s not in the
disclosure, correct? MR. DIMOCK: Yes, I’ve agreed with you on that.”).
471
R-381, Commissioner’s Decision 1206, relating to Application No. 529,362, 11 December 1995, p. 10. The
decision cites Monsanto and Olin Mathieson in relation to sound prediction.
472
Claimant’s Opening Statement, Tr. 49:1-5. See also Tr. 68:15-20 (“MS. WAGNER:...the disregarding of postfiling
evidence, does absolutely date to AZT 2002. It's the extra disclosure requirement that’s uncertain because the
court alluded to it but then never applied it, and then it wasn't until 2008 that it actually was applied.”)
473
Tr. 684:11-685:2 (“PROFESSOR SIEBRASSE: It made some statements that certainly could be interpreted as
supporting this disclosure … those words are amenable to that interpretation, although they’re amenable to other
interpretations as well.”).
106
344. Notably, the judges in both the Raloxifene Decision, discussed above, and the Strattera
Decision, traced the disclosure rule to AZT. The Strattera Decision states:
In a case involving a claimed sound prediction of utility, it is …
beyond debate that an additional disclosure obligation arises.
According to Justice Binnie in AZT, above, this obligation is met by
disclosing in the patent both the factual data on which the prediction
is based and the line of reasoning followed to enable the prediction
to be made.474
345. In fact, Claimant was aware of this interpretation of AZT many years earlier. In 2003,
Claimant received an Office Action regarding one of its patent applications for the use of
atomoxetine (active ingredient of Strattera), stating that:
The description fails to provide a sound line of reasoning for the
utility claimed. The factual support described does not lead to the
conclusion that the subject matter of these claims would have the
predicted utility. ([citing AZT])475
346. One year later, Claimant received a similar notice with respect to one of its applications for
a use of olanzapine (active ingredient of Zyprexa).476
347. Canadian patent law firms also noted that the disclosure requirement was set forth in
AZT.477
Indeed, after the Raloxifene Decision was handed down, Claimant’s law firm,
Gowlings, wrote that the Supreme Court had “reiterated the test articulated by the Supreme
Court in AZT”.478
474
C-160/R-027, Novopharm Ltd. v. Eli Lilly & Co., [2010] F.C. 915, at ¶117 (emphasis in original).
475
R-443, CIPO Office Action, Application No. 2,304,657, 23 October 2003. An Office Action is a formal letter from
a patent examiner at CIPO.
476
R-444, CIPO Office Action, Application No. 2,248,873, 7 October 2004.
477
R-191, “Supreme Court of Canada Reaffirms the Doctrine of Sound Prediction in Canadian Patent Law,” IP
Perspectives Intellectual property & Technology Newsletter, Smart & Biggar /Fetherstonhaugh, February 2003, pp.
2-3 (“The Court identified a three-component requirement of the doctrine: 1. There must be a factual basis for the
prediction; 2. The inventor must have at the date of the patent application an articulable and “sound” line of reasoning
from which the desired result can be inferred from the factual basis; and 3. There must be proper disclosure of the
foregoing.”).
478
R-494, Gowling Lafleur Henderson LLP, Pharmacapsules @ Gowlings, May 4, 2009, p. 5 (“The Court reiterated
the test articulated by the Supreme Court in AZT namely that when an invention had not yet been reduced to practice,
the disclosure must give both the underlying facts and the sound line of reasoning to justify the prediction”).
107
348. On the other hand, another law firm considered the Raloxifene Decision to be a “watershed
decision that is particularly relevant to the filing of patent applications henceforth”.479
Moreover, Claimant has presented cases decided in the period between AZT and the
Raloxifene Decision, in which the courts appear to have relied on evidence not disclosed
in the patent to assess whether utility could be soundly predicted.480
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.
***
479
C-485, McCarthy Tétrault Case Alert (Eli Lilly v. Apotex Inc.) (17 September 2009) (“The Court of Appeal held
that when a patent is based on sound prediction, the disclosure must include the underlying factual basis for the
prediction and the sound line of reasoning that grounded the inventors’ prediction”) (emphasis in original).
480
Siebrasse Second Report ¶71, citing C-215, Pfizer Canada Inc v. Apotex Inc, 2007 FCA 209; C-209, Aventis
Pharma. Inc. v. Apotex Inc., 2005 FC 1283, aff’d 2006 FCA 64. See Tr. 1127:9-1129:17 (Mr. Dimock reasoning that
if the patentee was “trying to rely on the priority date, then that would be added matter, and you'd have some debate
as to whether or not you could rely on the priority date. So my inference from what you’ve told me is that [the rat
studies] were likely not in the Canadian patent as filed”).
481
See ¶¶345-346 above.
482
Siebrasse Second Report ¶77.
108
351. The Tribunal concludes that the facts surrounding each of the three elements of the alleged
promise utility doctrine do not demonstrate a dramatic transformation of the utility
requirement in Canadian law. In this regard, the Tribunal is cognizant of Claimant’s
position that these three elements are part of a unitary, cohesive doctrine and must be
considered together. Therefore, in the following sections, the Tribunal examines the
evidence Claimant has produced in relation to the promise utility doctrine as a whole.
MOPOP Amendments and CIPO Practice
352. Claimant submits that all three elements of the promise utility doctrine were included in
MOPOP for the first time in the 2009 and 2010 versions, which stand in stark contrast to
the 1990 MOPOP that was in place at the time the Zyprexa and Strattera patents were
granted, and which reflected the traditional “mere scintilla” test.
353. The Tribunal will first address the authoritative weight of MOPOP, which has been a matter
of contention in this case. The introductory language of MOPOP speaks to this point:
The manual has been prepared by the Patent Office to instruct patent
examiners in Office policy relating to the examination of
applications for patents. […] This manual is to be considered solely
as a guide, and should not be quoted as an authority. Authority must
be found in the Patent Act, the Patent Rules, and in decisions of the
Courts interpreting them.483
354. The Tribunal notes this caveat and yet also agrees with Claimant that MOPOP could be a
reliable statement of Canadian patent law even if it lacks the force of law. Indeed, it is
common ground that MOPOP is relied upon by Canadian patent examiners in reviewing
applications, as stated in the text above.
355. The question of whether MOPOP is in fact reliable in the present context, as evidence of a
change in the law, turns on whether it is reasonably comprehensive and current. In this
regard, the Tribunal tends to agree with Respondent that MOPOP provides high level
internal guidance but cannot be considered a complete summation of Canadian patent
483
C-054, Canadian Intellectual Property Office – Patent Office, Manual of Patent Office Practice (January 1990),
Foreword.
109
law.484
Further, it would be unreasonable to expect MOPOP to reflect all relevant
jurisprudence at any specific point in time, as understood by anyone tasked with keeping a
legal treatise up to date.
356. Notably, Chapter 12 of the 1990 MOPOP, covering subject matter and utility, was
relatively sparse at just five pages (English and French), compared to the 38-page Chapter
12 in the 2009 MOPOP (English only). Claimant’s expert Mr. Wilson tried to explain that
this was because “utility was so basic” in the 1990s.485
But that is not the whole story. Mr.
Wilson had to accept that the 1990 MOPOP included no reference to Monsanto, the 1979
Supreme Court decision that established the principle of sound prediction of utility.486
Indeed, there is no mention of “sound prediction” at all.487
Yet it is undisputed that
Monsanto was a seminal utility case, and that patent examiners were accepting sound
predictions of utility in 1990.488
MOPOP’s evolution over time has not necessarily always
precisely tracked the case law or determined Patent Office practice.489
357. Therefore, the Tribunal finds MOPOP to be relevant as a general guide to Canadian patent
law but proceeds with caution in drawing any conclusion from specific amendments.
358. Claimant cites, inter alia, the following sections of the 1990 MOPOP as a statement of the
traditional “mere scintilla” test:
12.02.01 An invention must be useful:
Section 2 of the Act requires utility as an essential feature of
invention. If an invention is totally useless, the purposes and objects
484
Gillen First Statement ¶24 (“I am unaware of any examiner, patent applicant, or patent agent who would consider
the MOPOP to be a complete and authoritative guide on Patent Office practice or patent law in Canada at any given
point in time.”); Tr. 791:5-8 (“MR. WILSON: [MOPOP] doesn’t provide instructions on how to examine each specific
application, no, but it gives principles on how to examine all applications.”).
485
Tr. 794:10-19 (“MR. WILSON: Utility was so basic, it didn’t need pages to describe it. Utility was “not totally
useless”. You can describe it in three or four words, not five pages.”).
486
Tr. 794:14-24. See R-023, Monsanto Co. v. Canada, [1979] 2 S.C.R. 1108 (SCC), ¶¶24-25.
487
Tr. 794:14-24. See C-061/R-023, Monsanto, ¶¶24-25.
488
See, e.g., Tr. 793:18-22 (“MS. ZEMAN: But you agree that examiners were accepting sound predictions of utility
in 1990, right? MR. WILSON: I'm pretty sure they were, yes.”).
489
More generally, it is reasonable to accept that the Patent Office may expand and clarify MOPOP even when there
has been no change in the law, as suggested by the modernization of MOPOP between 1990 and 2009. See Gillen
Second Statement ¶31 (discussing the addition to Chapter 9 (Description) in 2010 that discusses in detail the person
of ordinary skill in the art (POSITA), although the POSITA analysis did not change in the 1990s or 2000s).
110
of the grant [of a patent] would fail and such grant would
consequently be void on the grounds of false suggestion, failure of
consideration and having tendency to hinder progress.
12.02.02 Utility must be disclosed:
An application for patent must not only describe the invention, but
also its operation or use (Section 34(1)). The operation or use of the
invention must, of course, show the purpose for which the invention
was intended. An invention may have several uses, but it must
always have at least one.
The claims must be drafted to an invention having the utility
disclosed. If the claims cover only things that have utility other than
that disclosed or if they included inoperable and therefore useless
embodiments, they are bad.490
359. Claimant then points to the following portion of the 2009 MOPOP:
12.08.01 Operability
Where, however, the inventors promise that their invention will
provide particular advantages (e.g. will do something better or more
efficiently or will be useful for a previously unrecognized purpose)
it is this utility that the invention must in fact have.491
360. Claimant is correct that the promise standard set forth in the 2009 MOPOP does not appear
in the 1990 MOPOP, and this new language appears to have signalled a change in practice
to at least some patent examiners.492
Indeed, Claimant’s expert Mr. Wilson explains that
the first Commissioner’s Decision dealing with the issue of promised utility was issued in
2010.493
490
Memorial ¶47 quoting C-054, MOPOP §§ 12.02, 12.03 (January 1990) (emphasis added by Claimant).
491
Counter-Memorial ¶124, quoting C-059, MOPOP §12.08.01 (December 2009). The section continues: “Although
an invention need only have one use in order to be patentable, where several uses are promised the applicant must be
in a position to establish each of them. For example, if a composition is promised to be useful as a drug, the applicant
must be in a position to show that it is useful in the therapy of at least once disease. If, however, it is promised to be
useful as a drug for treaty many diseases, the applicant must be in a position to establish its utility . . . in treating each
of the diseases”.
492
As summarized above, Claimant has submitted emails and comments of patent examiners stating that application
of this provision would be a change in examination practice. See, e.g., C-358, Comments on MOPOP Chapter 12
Compiled from Section C5 Biotech,” Comments of Linda Brewer, (17 March 2008) [Canada Doc. No. 910, at 065407]
(commenting that Section 12.8.01 of the draft 2009 MOPOP “does not appear to be in line with our practice”).
493
Wilson Second Report ¶35; C-412, Application No. 592,567 (Patent No. 1,341,621), Decision of the Commissioner
of Patents number 1303 (June 4, 2010) , ¶28 (“What we need to determine then is whether the compositions defined
111
361. However, as noted above, the Tribunal must be cautious in drawing conclusions from
additions to MOPOP’s text. The obvious inquiry is whether MOPOP itself indicates that
this promise standard is derived from new jurisprudence. It does not. None of the cases
cited by Professor Siebrasse for the promise standard is referenced. Instead, MOPOP cites
Consolboard:
The Supreme Court affirmed in Consolboard Inc. v. MacMillan
Bloedel (Saskatchewan) Ltd. that, for the purposes of Canadian law,
a lack of utility exists if “the invention will not work, either in the
sense that it will not operate at all or, more broadly, that it will not
do what the specification promises that it will do” and that “[i]f and
when used in accordance with the directions contained in the
specification, the promised results are obtained, the invention is
useful in the sense in which that term is used in the patent law”. This
was merely the reiteration of a long-accepted and extant standard.494
362. Accepting Claimant’s position would require the Tribunal to dismiss this clear statement
of the Patent Office regarding the source of the promise standard in MOPOP. The Tribunal
is not prepared to do so.
363. With respect to the other elements of the promise utility doctrine (prohibition on pre-filing
evidence and disclosure of the factual basis for sound prediction), Claimant cites the
following provisions:
12.08.05 Relevant date
The applicant must be in a position to establish the utility of their
invention no later than at their filing date. Consequently, the factual
basis upon which either the demonstration or sound prediction are
based must necessarily exist as of the filing date. Similarly, if a
sound prediction is to be relied upon, the articulable and sound line
of reasoning referred to in 12.08.04 must also exist as of the filing
date. As put by Binnie J. in Apotex, “[n]or, in my view, is it enough
in these claims could be soundly predicted to have the promised utility; viz. to be superconductive at a temperature of
77 K or higher. This determination is based on the disclosure, the state of the art and the common general knowledge
available to a person skilled in the art”).
494
C-059, MOPOP §12.08.01 (December 2009).
112
for a patent owner to be able to buttress speculation with post-patent
proof, and thereby to turn dross into gold”.495
9.04.01a Disclosure of the factual basis
The factual basis needed to render the line of reasoning sound must
be disclosed. If some or all of the facts being relied on are found in
another publicly available document, this document must be
properly identified. Any necessary facts that are not otherwise
publicly available must be included in the description.496
364. The Tribunal has discussed above the prohibition on post-filing evidence and found that
the Supreme Court clarified this rule in the 2002 AZT decision. This is reflected in the
citation to Justice Binnie’s decision in Section 12.08.05. In the present context, the Tribunal
observes that (i) nothing in the 1990 MOPOP suggests that post-filing evidence of utility
would be admitted, and (ii) the rule set out in AZT finds support in the 1990 MOPOP
requirement that “Utility must be disclosed”.497
365. Regarding the requirement that the factual basis for sound prediction be disclosed, the
Tribunal does not see how MOPOP assists Claimant, given that sound prediction was not
addressed at all in the 1990 MOPOP.
366. On the basis of this analysis, the Tribunal concludes that Claimant’s evidence relating to
MOPOP and Patent Office practice does not support its allegation of a dramatic change in
the law.
Statistical Evidence
367. Setting aside the details of patent law jurisprudence and CIPO practice, Claimant argues
that the stark effect of the promise utility doctrine on litigation outcomes speaks for itself.
In this context, Claimant puts forward quantitative evidence (through its expert, Professor
Levin) to illustrate a spike in (i) the number of successful utility challenges, and (ii) the
495
C-059, MOPOP §12.08.01 (December 2009).
496
C-060, MOPOP §9.04.01 (December 2010).
497
C-054, MOPOP §§ 12.02, 12.03 (January 1990).
113
rate of success of such challenges since 2005. Claimants’ data is summarized in Table 1
below.
Table 1: Utility Outcomes Before and After 1 January 2005 (Pharmaceutical Patents)498
Period
Cases invalidating patent
for lack of utility
Cases upholding patent on
utility grounds
Total
Rate of
Invalidity
1980 to 2004 0 3 3 0%
2005 to 2016 28 41 69 41%
368. At the outset, the Tribunal notes its doubts regarding Claimant’s selection of 1 January
2005 to serve as the dividing line between “before” and “after” the promise utility doctrine.
First, on Claimant’s case, the final element of this allegedly unitary doctrine did not come
into existence until 2008.499
Second, this date does not correspond to any of the court
decisions cited by Claimant, or for that matter, any other event that is apparently relevant
to Claimant’s case. Professor Levin explained that he was not the one who selected this
date, describing it as a “legal decision”.500
However, the legal significance of this date is
questionable, and Claimant has failed to adequately explain the basis of its instruction to
Professor Levin.
369. The difficulty for Claimant is that, given the small number of cases before 2005, changing
the cut-off date, even just slightly, erases any increase in the rate of utility-based
invalidations of pharmaceutical patents, thereby undermining the conclusions Claimant
seeks to draw from the statistical evidence. Respondent illustrated this during the Hearing
by moving the cut-off date to 2 September 2005, the date of the first decision cited by
Professor Siebrasse for the promise standard. The results are shown in Table 2 below,
showing a decrease in the rate of invalidities after the alleged adoption of the promise
standard.
498
Claimant’s Opening Presentation, slide 68; C-PHM ¶121.
499
C-115/R-200, Raloxifene.
500
Day 5, 1255:12-15.
114
Table 2: Utility Outcomes Before and After 2 September 2005 (Pharmaceutical Patents)501
Period
Cases invalidating patent
for lack of utility
Cases upholding patent on
utility grounds
Total
Rate of
Invalidity
1980 to 1 Sep 2005 2 3 5 40%
2 Sep 2005 to 2016 26 41 67 39%
370. Similarly, if the cut-off date is set at the date of the Raloxifene Decision (5 February 2008),
when the court adopted the final element of the promise utility doctrine, the increase in the
rate of invalidations of pharmaceutical patents for lack of utility becomes barely
apparent.502
371. The small data set poses a more fundamental problem for Claimant, even when 1 January
2005 is applied as the cut-off date. Professor Levin did not identify any statistically
significant difference between the rate of invalidations pre- and post-2005, as there are
simply too few pre-2005 cases.503
As Professor Levin explained, it cannot be concluded
from the data whether there was a significant increase in invalidity rates or not.504
372. Clearly, the number of utility-based invalidations of pharmaceutical patents has increased
sharply. There were essentially no such court decisions until 2005, compared to almost 30
over the last decade.505
The Tribunal understands that Claimant would be concerned by
this development. However, it is undisputed that at the same time there has been a spike in
501
Respondent’s Opening Presentation, slide 85; R-PHM ¶164.
502
See Brisebois First Statement, Table 11, p. 13. Mr. Brisebois counts patents rather than court judgments, which
Professor Levin called into question.
503
C-PHM ¶126; Tr. 1276:23 – 1277:8 (“THE PRESIDENT: Is that because the sheer number you have is not too
sensitive to make actually a meaningful – you say statistically significant analysis here? PROFESSOR LEVIN: The
point you’re raising is exactly the point I drew as an important caveat when I testified about table 2. If you recall, I
said I draw no conclusion from the lack of significance between pre and post, and the reason is precisely that. The
number of cases pre-2005 challenged on utility was too small.”).
504
Id. The main focus of Professor Levin’s report was showing the difference between the proportion of
pharmaceutical and non-pharmaceutical patents held invalid on grounds of utility in the post-2005 period, not showing
the difference in invalidity rates over time.
505
Respondent’s Opening Presentation, slide 85; R-PHM ¶164.
115
utility challenges in the pharmaceutical sector.506
Absent evidence of a corresponding
increase in the rate of invalidations, there is nothing striking about an increase in
invalidations as more patents are challenged.507
373. Notably, around the same time in the mid-2000s, validity challenges of pharmaceutical
patents on other grounds (such as obviousness and anticipation) also increased, as did the
number of invalidations, to varying degrees.508
This suggests a broader trend of increasing
pharmaceutical patent litigation and greater numbers of invalidations.
374. The increase in utility litigation could plausibly be motivated by developments in the law
that make success more likely for generic manufacturers, but again there is nothing on the
record to demonstrate a greater rate of success (much less any causal connection). And
there are other plausible causes for an escalation in litigation relating to a particular sector
or statutory provision. Respondent has offered some explanations of its own, such as the
introduction of PM(NOC) proceedings and the growing prevalence of secondary patents.509
375. Without having been presented with any strong indication toward a single factor, the
Tribunal considers it most likely that a combination of developments, including those in
patent litigation procedures, the application of substantive patent law, and the
pharmaceutical sector, has led to a rise in challenges directed at pharmaceutical patents and
more invalidations.
376. In sum, Claimant’s quantitative data provides insufficient evidentiary support for its
allegation of a dramatic change in the law.
506
See Claimant’s Opening Statement, Tr. 95:12-16(“In the early period utility was rarely challenged in that sector
and never successfully but, since 2005, given the change in Canada’s test, utility challenges have spiked and 28 cases
(41 percent) have been successful.”).
507
The Tribunal accepts the logic of Claimant’s statement that “the mere fact that there was a higher absolute incidence
of pharmaceutical patent litigation after 1993 cannot explain the higher rate (or proportion) of invalidity findings
under the utility doctrine”. Reply ¶196. However, as discussed, no significant increase in the rate of invalidations has
been shown.
508
See Brisebois Second Statement, Figure 1, p. 15 and Figure 2, p. 16.
509
R-PHM ¶167. The Tribunal notes that PM(NOC) proceedings were introduced in 1993 and have not been shown
to have sparked the increase in litigation in 2005. However, many of the post-2005 cases cited by Claimant are
PM(NOC) proceedings, suggesting that the availability of this process has played a role during this period.
116
Comparison with Other Jurisdictions
377. In its Post-Hearing Memorial and Reply Post-Hearing Memorial, Claimant submits that
the dramatic change in Canadian law is confirmed by the utility requirement in United
States and Mexican law, as well as by discussions among the members of WIPO and the
WTO.510
Although it is difficult to see how a comparison across jurisdictions can
demonstrate a change over time within a single jurisdiction, the Tribunal has carefully
considered the Parties’ extensive submissions and evidence on these issues.
378. The Tribunal has paid particular attention to the 2014 and 2015 editions of the Special 301
Report of the USTR. In these documents, USTR notes that the United States “has serious
concerns about the lack of clarity and the impact of the heightened utility requirements for
patents that Canadian courts have applied recently”.511
This comment cannot be dismissed
outright as a lobbying effort by Claimant, as suggested by Respondent. However, the
Special 301 Report stands alone in the record as a complaint regarding Canada’s utility
doctrine from any other State, including Mexico, in the decade since the promise utility
doctrine was allegedly adopted.512
For the Tribunal, that silence speaks louder than the
single, brief criticism contained in the USTR’s Special 301 Report.
379. Ultimately, the Tribunal is not persuaded that Claimant’s comparative analyses alters our
findings above.
510
Claimant has argued throughout this arbitration that Canada’s utility requirement is unlike that of its NAFTA
partners or other countries, but in its Post-Hearing Memorial, it tied this issue directly to its allegation of a change in
the law.
511
C C-331, Office of the United States Trade Representative, Special 301 Report (2014), pp. 49-50 (April 2014)
(“The United States also has serious concerns about the lack of clarity and the impact of the heightened utility
requirements for patents that Canadian courts have applied recently. Under this amorphous and evolving standard,
courts can invalidate a patent on utility grounds by construing the “promise of a patent” years after the patent has been
granted, leading to uncertainty for patent holders and applicants and undermining incentives for investment in the
pharmaceutical sector. In applying this standard, courts have invalidated a number of patents held by U.S.
pharmaceutical companies, finding now that those products lack utility (i.e., not capable of industrial application),
even though such products have been in the market and benefiting patients for years.”). (emphasis added); C-332,
Office of the United States Trade Representative, Special 301 Report (2014), pp. (April 2015) (same language).
512
In addition, Respondent has confirmed that “Canada is not aware of any complaints regarding its utility requirement
from any State or international organization prior to Claimant’s initiation of this arbitration”. R-PHM ¶174.
117
Legitimate Expectations
380. Claimant alleges that the Canadian courts’ application of the alleged promise utility
doctrine to invalidate the Strattera and Zyprexa Patents contravened its legitimate
expectations. The Tribunal notes that this allegation, made primarily in the context of
Claimant’s claim under NAFTA Article 1105, depends on Claimant establishing a dramatic
change in the Canadian law on utility.513
Therefore, Claimant’s allegation of a violation of
its legitimate expectations must be dismissed on the basis of the Tribunal’s findings above.
381. The Tribunal has considered whether there is any other factual basis on which Claimant
could establish a violation of any legitimate expectation. For this limited purpose, the
Tribunal need not, and does not, determine the contentious legal question of whether a
violation of an investor’s legitimate expectations can constitute a breach of NAFTA Article
1105.
382. As summarized above, Claimant argues that its asserted expectations were reasonably
based on the traditional utility requirement in Canadian patent law, as well as the grant of
the Strattera and Zyprexa Patents. In this regard, the Tribunal notes that all patentees,
including Claimant, understand that their patents are subject to challenge before the courts
on the ground that the invention does not satisfy one or more patentability requirements.
383. The record shows that at the time Claimant made its investments, it was aware that
Canadian patent law required patented inventions to be useful. Eli Lilly executives testified
that they understood the Canadian utility requirement to be a low threshold.514
In fact, it
appears that the utility of Strattera and Zyprexa in Canada was taken for granted within the
company. Claimant expected its patents would not be invalidated for lack of utility.
384. However, this perception cannot amount to a legitimate expectation. For the reasons stated
above, the Tribunal has found that each of the three elements of the alleged promise utility
doctrine had a foundation in Canadian law when Claimant’s patents were filed. At that
513
See Claimant’s Closing Presentation, slide 140.
514
For example, Claimant’s former General Counsel, Mr. Armitage, stated that he would have been “shocked if there
were evidence that advice on Canadian utility law had been given during that time frame, since it was so well
understood that the threshold for meeting the Canadian utility requirement for pharmaceutical inventions was so low”.
Tr. 344:20-25.
118
time, although Claimant may not have been able to predict the precise trajectory of the law
on utility, it should have, and could have, anticipated that the law would change over time
as a function of judicial decision-making. The record in this case shows that the law did in
fact undergo a reasonable measure of change and development.
385. Therefore, for these reasons, the Tribunal finds that Claimant has not met its burden of
proving a violation of its legitimate expectations.515
Conclusion
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.
387. For all of the reasons in subsections (1) to (5) above, the Tribunal finds that, on the record
in this arbitration, Claimant has not demonstrated a fundamental or dramatic change in
Canadian patent law. For the interrelated reasons in subsection (6) above, the Tribunal
finds that Claimant has not demonstrated, as a factual matter, that its legitimate
expectations were violated by the application of Canadian patent law to the Zyprexa and
Strattera Patents.
388. As noted above, Claimant has acknowledged that it must demonstrate a dramatic change
in the law to succeed on its claims under NAFTA Articles 1105 and/or 1110.516
The
515
Claimant has also alleged that its legitimate expectations were grounded in, or at least reinforced by, Respondent’s
obligations under NAFTA Chapter 17 and the form and contents requirement of the PCT. The Parties have exchanged
extensive submissions on these international instruments, all of which the Tribunal has considered. However, nothing
therein alters the Tribunal’s analysis. For all of the reasons stated above, Claimant has failed to establish, as a matter
of fact, that Respondent breached any international obligations by invalidating the Strattera and Zyprexa Patents.
516
See ¶307 above.
119
Tribunal agrees that this is what Claimant is required to show to establish a breach of
Article 1105 or 1110 in the circumstances of this case.
389. Having failed to demonstrate a fundamental or dramatic change in Canadian patent law,
the Tribunal would properly dismiss the claims without further inquiry. Without detracting
from this, for completeness and the avoidance of doubt, the Tribunal notes that in the course
of the proceedings Claimant alleged that the promise utility doctrine is both arbitrary and
discriminatory.517
Given that an arbitrary or discriminatory measure could, as a matter of
hypothesis, violate NAFTA Articles 1105 and/or 1110 in the absence of a fundamental or
dramatic change in the relevant area of law, the Tribunal considers it appropriate to address
Claimant’s allegations in the following section.
THE ALLEGED ARBITRARY AND DISCRIMINATORY NATURE OF THE
UTILITY REQUIREMENT UNDER CANADIAN LAW
The Parties’ Positions
Claimant’s Position
a. Arbitrariness
390. Claimant alleges that the promise utility doctrine is arbitrary because it (i) “is unpredictable
and incoherent”, and (ii) “serves no legitimate public purpose”.518
391. According to Claimant, all three elements of the promise utility doctrine contribute to its
arbitrariness. First, as stated by Professor Siebrasse, the subjective process of construing
the promise of a patent is “inherently arbitrary” in that it allows courts to ignore the
distinction between the claims and the disclosure.519
Claimant argues that the process
differs from court to court and that even the same court can reach conflicting conclusions
517
Memorial ¶¶248-249, 261, 266, 347-348; Reply ¶¶339, 348; C-PHM ¶219, 226-227; 293-321.
518
C-PHM § IV.C.B.2(a).
519
Memorial ¶263, citing C-146/R-016, Eli Lilly Canada Inc. v. Novopharm Ltd., [2011] F.C. 1288, at ¶209; Reply
¶339; C-PHM ¶296, quoting Tr. 633:3-634:25.
120
as to the promised utility of a patent in two different cases.520
According to Claimant,
generic drug companies—the principal beneficiaries of the promise doctrine—have
acknowledged that it is “a hopeless tangle of contradictory approaches” in which the
“outcome of cases depends upon the particular judge or panel hearing the dispute, rather
than legal authority”.521
392. Second, Claimant submits that the heightened evidentiary burden is arbitrary and
unpredictable because it bars post-filing evidence that validates earlier tests showing a
drug’s likely effectiveness.522
In Claimant’s view, patent applicants currently have no way
of knowing how much, and what type, of evidence a judge will require to demonstrate or
soundly predict a patent’s utility.523
Claimant argues that the rule leaves pharmaceutical
companies caught, because if they invest in extensive clinical trials (which may or may not
be required by the court) before filing a patent application, the drug may no longer meet
the obviousness and novelty conditions of patentability.524
In addition, Claimant finds the
application of the bar on post-filing evidence arbitrary; while the use of such evidence is
prohibited to establish utility, it is permitted to demonstrate other patentability criteria and
to attack utility.525
393. Third, Claimant contends that the heightened disclosure obligation for sound prediction is
“unprincipled and unfair”.526
According to Claimant, this rule introduces an unjustified
distinction whereby Canadian courts rely on evidence outside of the patent application to
determine whether utility was demonstrated at the date of filing, but that same evidence
cannot be relied upon to establish whether utility was soundly predicted. The resulting
520
Claimant refers to the Canadian patent for Latanoprost, a glaucoma drug, arguing that it was construed differently
by two Federal Court of Appeal panels, resulting in one determination of validity and one determination of invalidity
for inutility. Claimant argues that Latanoprost is not an isolated or extreme case. Memorial ¶¶64, 68, 263; Reply
¶¶341-342; C-PHM ¶¶298-300.
521
Reply ¶343; C-PHM ¶297, quoting C-375, Notice of Application for Leave to Appeal of Apotex Inc. et al, Apotex
Inc. v. Sanofi-Aventis, S.C.C. File No. 35562 (30 September 2013), ¶14.
522
C-PHM ¶301.
523
Memorial ¶265; Reply ¶339; see also Reply §II.A.2.
524
Memorial ¶266; Reply ¶¶192-194; Claimant’s Observations on 1128 and Amicus Submissions ¶¶50-51; C-PHM
¶303. Claimant contends that it faced this situation with respect to the Strattera and Zyprexa Patents, and could have
missed its chance to patent them if it had waited until comprehensive clinical testing had been completed.
525
Memorial ¶268; Siebrasse First Report ¶¶55-56; C-PHM ¶302.
526
Memorial ¶¶269-270; Siebrasse First Report ¶¶67-68; C-PHM ¶304.
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unpredictability is compounded by the fact that the disclosure obligation’s scope of
application remains unclear.527
Claimant also argues that the disclosure rule is unfair
because it is used to invalidate patents that were filed when rule did not exist.528
394. According to Claimant, the unpredictable and incoherent nature of the promise utility
doctrine as a whole is illustrated by the invalidation of the Zyprexa and Strattera Patents:
the Canadian courts implied a promise of long-term effectiveness without any basis in the
patents, discounted pre-filing scientific studies, and applied the heightened disclosure
requirement.529
As a result, the courts determined that these revolutionary, successful drugs
were not useful.530
395. Claimant submits that the promise utility doctrine serves no legitimate policy purpose.
Citing Occidental v. Ecuador, Claimant asserts that an incoherent rule of law such as the
promise utility doctrine cannot support a policy objective because it leads to inconsistent
results and does not promote compliance.531
396. In any event, Claimant argues that Respondent has failed to identify any credible policy
objective advanced by the promise utility doctrine.532
Specifically, Claimant rejects
Respondent’s position that the doctrine is meant to enforce the patent bargain in relation to
new use and selection patents. According to Claimant, there is no legal basis for applying
special rules to such patents, and in fact, the promise utility doctrine has been applied to
invalidate all types of pharmaceutical patents.533
Similarly, Claimant argues that no
evidence supports Respondent’s assertion that the doctrine addresses speculative
patenting.534
527
Memorial ¶269; Reply ¶339; Siebrasse First Report ¶67; C-PHM ¶304.
528
C-PHM ¶304.
529
Claimant acknowledges that the disclosure rule for sound prediction of utility was applied in the Strattera case but
not in the Zyprexa case.
530
C-PHM ¶307. Claimant also points to confusion among Canadian patent examiners as an illustration of the
doctrine’s arbitrary nature. See Reply ¶192; Claimant’s Closing Statement, slides 9-13; C-PHM ¶305.
531
C-PHM, citing CL-097/RL-033, Occidental Exploration and Production Co. v. Republic of Ecuador, UNCITRAL,
LCIA Case No. UN 3467, Award, 1 July 2004.
532
Reply ¶348; C-PHM ¶¶310 et seq.
533
C-PHM ¶311.
534
Reply ¶345; citing Counter-Memorial §II.E; see also Reply §II.D.3.
122
b. Discrimination
397. Additionally, in the context of its claims under both NAFTA Articles 1105 and 1110,
Claimant submits that the promise utility doctrine discriminates against pharmaceutical
patents as a field of technology, which NAFTA Article 1709(7) expressly prohibits.535
398. According to Claimant, although the promise utility doctrine is facially neutral, it has
“differentially disadvantageous effects” on the pharmaceutical sector.536
As evidence of
these effects, Claimant refers to statistical data presented by Professor Levin showing that:
a. Before 2005 (when the Federal Courts began to apply the doctrine), no pharmaceutical
patents were invalidated for lack of utility.537
b. Since 2005, courts have found that more than two dozen pharmaceutical patents lack
utility, but have not reached this conclusion with respect to a patent in any other
technological field. This constitutes a statistically significant difference between
utility-based invalidity rates for pharmaceutical and non-pharmaceutical patents.538
c. Also since 2005, 41 percent of utility decisions concerning pharmaceutical patents have
found a lack of utility, compared to zero percent in all other sectors.539
399. Claimant asserts that Respondent’s counter-arguments fail in light of these undisputed
facts.540
535
Memorial ¶¶216-226; Reply ¶¶291-300; C-PHM ¶¶318-321.
536
C-PHM ¶257.
537
Reply ¶294 and Figure 1; C-342, “Annual Number of Canadian Inutility Decisions, 1980 – present”.
538
Memorial ¶221 and Figure 2; C-PHM ¶258; C-305, “Chronological List of Canadian Utility Decisions from
1980 to Present”.
539
Memorial ¶222 and Figure 3; Claimant’s Opening Statement, Tr. 2114:19-24; C-PHM ¶258.
540
For example, Claimant contends that Respondent is wrong to argue that there cannot be discrimination against the
pharmaceutical sector since most pharmaceutical patents challenged on the basis of utility are found to be valid. This
argument ignores that the relevant comparison is between sectors, not within the pharmaceutical sector. Reply ¶298;
Levin Report ¶9.
123
400. Further, Claimant argues that although evidence of discriminatory intent is not required,
such intent on the part of Respondent can be inferred.541
In this context, Claimant makes
the following allegations:
a. The promise utility doctrine was adopted by the courts in litigation over pharmaceutical
patents.
b. The Federal Court has expressly acknowledged the gap between treatment of
pharmaceuticals and other sectors, holding that the “basis for sound prediction, at least
in respect of a pharmaceutical, must be disclosed in the descriptive part of the
patent”.542
c. There appears to be an elevated evidentiary standard for pharmaceutical inventions,
given that the utility of mechanical inventions can be shown by a model without
testing.543
d. The doctrine’s requirements “conflict, and would objectively be known to conflict, with
the reality of innovative drug development”.544
401. Claimant further submits that “[a]nother, less prominent aspect of discrimination, relating
to nationality, is also present in the application of the promise utility doctrine by Canadian
courts”.545
In support of this position, Claimant points out that only patents held by foreign
firms have been invalidated pursuant to this doctrine, despite its facially neutral character.
According to Claimant, the main beneficiary is the prominent Canadian generic drug
industry.546
541
Memorial ¶¶223-225; C-PHM, Appendix, pp. 9-10, Answer to Tribunal Question 18.
542
Memorial ¶224, quoting C-180, Pfizer Canada Inc. v. Pharmascience Inc., [2013] F.C. 120 (Can. Fed. Ct.), ¶¶157-
158 (emphasis added by Claimant).
543
Memorial ¶224, citing Siebrasse First Report ¶59.
544
Memorial ¶225.
545
Memorial ¶226; see Reply ¶368.
546
Memorial ¶226; Reply ¶368; C-PHM ¶321.Claimant identifies the following groups that have been affected:
Merck, Abbott Laboratories, Sanofi (through Sanofi-Aventis and Aventis Pharma), Pfizer, Eli Lilly and Company,
Shire Biochem., GlaxoSmithKline, Lundbeck, AstraZeneca, and Novartis (including through its affiliate Alcon).
Memorial, fn. 539, citing C-191, The World’s Biggest Public Companies, FORBES, 2014, filtered for the
pharmaceutical industry.
124
Respondent’s Position
a. Arbitrariness
402. In response to Claimant’s allegations of arbitrariness, Respondent again contends that the
promise utility doctrine is not a unitary doctrine, but rather several distinct rules of
Canadian patent law. In Respondent’s view, Claimant’s attempt to show that this fictional
doctrine is arbitrary fails as a matter of principle and fact.547
403. In any event, Respondent denies that any of the elements of the alleged promise utility
doctrine are arbitrary. First, Respondent rejects Claimant’s assertion that identifying the
promises contained in a patent is inherently unpredictable.548
Respondent argues that the
interpretation of a patent is based on sound principles of construction, as confirmed by
Claimant’s expert.549
This includes the longstanding principle that the patent is construed
as a whole (i.e. both disclosure and claims).550
For Respondent, the interpretation of the
patent is therefore not “arbitrary”, but rather what judges are called upon to do every day.551
404. In this context, Respondent also disagrees with Claimant’s argument that judges “scour”
patent applications to find promises; in fact, judges decide on the basis of competing
evidence presented by patent litigants and their lawyers.552
In response to Claimant’s
assertion that this exercise results in inconsistent outcomes, Respondent contends that
different outcomes are a product of the highly fact-dependent circumstances of each
case.553
547
R-PHM ¶240.
548
R-PHM ¶243-251.
549
R-PHM ¶245, citing Tr. 633:21-634:12 (“PROFESSOR SIEBRASSE: Yes, yes. The principles are sound
principles. I mean, they’re applying the same principles that are applied to claim construction.”); Dimock First Report,
¶¶85-88.
550
R-PHM ¶243.
551
Counter-Memorial ¶255, citing Dimock First Report ¶85; R-PHM ¶245.
552
Rejoinder ¶271; Dimock First Report ¶75.
553
Rejoinder ¶270. In relation to the two cases involving Latanoprost, Respondent explains that the legal standard in
the two cases was the same, but the expert testimony before the two panels was different. Rejoinder ¶272, quoting
Dimock Second Report ¶82. See also Rejoinder fn. 532.
125
405. As a policy matter, Respondent argues that there is nothing arbitrary about holding
patentees to the promises they make in their patents. Respondent points out that patentees
are not required to include any promise in the patent; they do so to satisfy other patent law
requirements, such as showing the advantages of a selection over a genus or the specified
new use of a known compound.554
406. Second, in response to Claimant’s criticism of the ban on post-filing evidence, Respondent
argues that it is not arbitrary to require inventors to demonstrate or soundly predict the
utility of an invention at the time of filing a patent.555
In Respondent’s view, this is
necessary to prevent patents on the basis of “bare speculation”, which is reasonable even
where the speculation later turns out to be correct.556
Respondent points to the testimony
of Claimant’s expert Professor Siebrasse, who acknowledged that the ban on post-filing
evidence is “rationally connected” to the goal of preventing patenting too far upstream.557
According to Respondent, Claimant’s argument that the ban leaves pharmaceutical
companies caught in relation to the timing of the patentability requirements is untenable
because (i) Canadian law does not require the clinical trials to which Claimant refers, and
pharmaceutical patents are routinely granted on the basis of animal studies; and (ii) the
number of pharmaceutical patents granted in Canada has increased each year since 2005.558
407. Third, Respondent contends that requiring patentees to disclose the basis of their sound
predictions in the patent is not arbitrary, but rather “an essential part of the patent
bargain”.559
The Supreme Court of Canada set out the rationale for this rule clearly in
AZT.560
According to Respondent, sound prediction is a permissive doctrine allowing
554
R-PHM ¶246.
555
R-PHM ¶¶252-262.
556
R-PHM ¶252.
557
R-PHM ¶254, citing Tr. 665:24-666:5 (“MR. JOHNSTON: And you would say that the court’s statement that
utility must be demonstrated or soundly predicted at the time of filing is rationally connected to the objective of
patenting too far upstream? PROFESSOR SIEBRASSE: I would say it’s rationally connected, yes.”); R-476, Norman
Siebrasse, Sufficient Description Blog Excerpts, p. 54 (“The principle that a patent may be granted for a speculative
invention is sound, and it may be that Lilly patented too soon.”).
558
R-PHM ¶¶260-261; see Counter-Memorial ¶258, citing Dimock First Report ¶100.
559
R-PHM ¶263, citing Dimock Report ¶¶99-100.
560
C-213/R-004, AZT, ¶70 (“In this sort of case … the sound prediction is to some extent the quid pro quo the
applicant offers in exchange for the patent monopoly.”).
126
inventors to obtain a patent before utility can be demonstrated; in return, the patentee must
explain to the public what makes its prediction sound.561
408. In sum, Respondent’s position is that all three of these elements of the alleged promise
utility doctrine serve important policy objectives, and while Claimant may disagree with
these policies, it has failed to show any evidence of arbitrariness. In the same way,
Respondent asserts that the application of the various rules of Canadian patent law to the
Strattera and Zyprexa patents “was well-reasoned and grounded in findings of fact rendered
after careful consideration of extensive adversarial records”; there is no indication that the
courts acted arbitrarily.562
b. Discrimination
409. Respondent submits that Claimant has also failed to establish that any aspect of the
Canadian courts’ interpretation and application of the utility requirement is
discriminatory.563
Respondent highlights Claimant’s acknowledgment that the alleged
promise utility doctrine does not on its face discriminate against the pharmaceutical
field.564
410. According to Respondent, there is also no evidence of de facto discrimination against
pharmaceutical patents, as Claimant alleges. Respondent finds the evidence that Claimant
puts forward in an attempt to show de facto discrimination to be flawed in several ways.565
411. With respect to Claimant’s statistical evidence, Respondent alleges several errors in the
data set Claimant provided to Professor Levin, including the following:
a. In cases involving findings of both utility and inutility, Claimant used inconsistent
coding rules to support its arguments.566
561
Rejoinder ¶275, quoting Dimock First Report ¶¶99-100; R-PHM ¶264.
562
R-PHM ¶242.
563
Counter-Memorial ¶¶186-203; Rejoinder ¶¶383-388; R-PHM ¶238.
564
Rejoinder ¶187, citing Memorial ¶214.
565
See, e.g., Rejoinder ¶188.
566
R-PHM ¶224 (“In pharmaceutical cases such as Novartis, where there were findings of both utility and inutility in
a single case, Claimant applied its rule to select the ‘not useful’ outcome to code the case. Conversely, in the non-
127
b. Claimant’s inclusion of PM(NOC) proceedings in its data set is inappropriate for a
comparison between pharmaceutical and non-pharmaceutical sectors, given that
PM(NOC) proceedings are the most prevalent type of patent proceeding and are
available only with respect to pharmaceutical patents.567
c. The data set double-counts inutility findings when the same patent was challenged
multiple times by different generic manufacturers under the PM(NOC) regime.568
412. According to Respondent’s witness Dr. Brisebois, once these errors are corrected, the data
show no statistically significant difference in utility-based invalidation rates between the
pharmaceutical sector and other sectors.569
413. In any event, Respondent argues that Claimant’s data analysis, even if done correctly,
“cannot possibly tell the whole story” because it focuses on litigation outcomes.570
Respondent points out that of the 25,760 pharmaceutical patents granted from 1980 to
2013, only 134 validity challenges were decided.571
For Respondent, to fully understand
the application of Canadian patent law to pharmaceuticals, one must consider the wider
universe of patents.572
In addition, Respondent asserts that Claimant has failed to account
for the many factors that influence litigation outcomes, such as facts and the skill of
counsel.573
pharmaceutical cases of Eurocopter and Uponor, where there were again findings of both utility and inutility in a
single case, Claimant applied its rule to select the ‘useful’ outcome to code the case.”) (internal citations omitted); C-
244, Novartis Pharmaceuticals Canada Inc. v. Teva Canada Ltd., 2013 FC 283 (aff’d 2013 FCA 244) (finding
allegations of lack of utility justified for one patent at issue, but not for the other). See Levin First Report, Appendix
C, p. 1 (“Where rulings were split by claim within a patent, such that some claims were found valid and others invalid,
a coding of ‘Y’ was applied for the relevant ground. … Where a case involved multiple patents challenged on the
same ground, and at least one patent was invalidated on a given ground, a coding of ‘N’ was applied for the relevant
ground.”).
567
Rejoinder ¶¶197-198; Brisebois Second Statement ¶21; Dimock Second Report ¶144.
568
Rejoinder ¶¶199-200; Brisebois Second Statement ¶¶14-15 and 23-24.
569
Brisebois Second Statement ¶¶4, 12; R-PHM ¶225.
570
R-PHM ¶228.
571
Rejoinder ¶190, citing R-436, WIPO Database, Patent Grants by Technology – Pharmaceuticals, Total Count by
Filing Office – Canada (1980-2013); Brisebois Second Statement, Annex F.
572
Rejoinder ¶190. Respondent points out that “even within the limited universe identified by Claimant”, many of the
cases involve patents that were invalidated for other reasons in addition to inutility.
573
R-PHM ¶228.
128
414. More fundamentally, Respondent argues that Claimant has failed to demonstrate any causal
connection between Professor Levin’s findings and the alleged promise utility doctrine.
Respondent highlights Professor Levin’s testimony acknowledging that he was “not
opining on causality”.574
For Respondent, this problem in Claimant’s case is illustrated by
the fact that Claimant improperly counted every inutility finding as an application of the
promise utility doctrine.575
Thus, the most that can be concluded from Claimant’s data is
that the utility requirement has more relevance in the pharmaceutical field than other
sectors.576
In Respondent’s view, this greater relevance is not surprising given
pharmaceutical patenting practice, and it in no way amounts to discrimination.577
415. Finally, in response to Claimant’s assertion that the principal beneficiaries of inutility
decisions are domestic generic drug makers,578
Respondent highlights that half of the top
18 generic drug makers (based on sales) are not Canadian-owned. In addition, contrary to
Claimant’s argument that foreign brand-name drug makers face discrimination,
Respondent submits that Canadian biopharmaceutical companies are subject to the same
rules as Claimant.
The Tribunal’s Analysis
Preliminary Observations
416. As noted above, notwithstanding the Tribunal’s rejection of Claimant’s contention that
there was a fundamental or dramatic change in Canadian patent law, it is appropriate to
address Claimant’s allegations of arbitrariness and discrimination for the reason that, as a
matter of hypothesis, an arbitrary or discriminatory measure could violate NAFTA Article
1105 and/or Article 1110 in the absence of a fundamental or dramatic change in the law.
417. For purposes of framing the discussion that follows, the Tribunal observes that, although
NAFTA Articles 1105 and 1110 address distinct issues and impose discrete obligations,
574
R-PHM ¶227, citing Tr. 1266:24-1267:6.
575
R-PHM ¶165.
576
R-PHM ¶229.
577
Id.
578
Memorial ¶291.
129
they are closely related. This relationship is illuminated by the reference to the requirement,
in NAFTA Article 1110(1)(c), that, to be concordant with NAFTA Article 1110(1), the
nationalization or expropriation of an investment must “be in accordance with due process
of law and Article 1105(1)”. The relationship between these provisions is engaged most
acutely in circumstances in which the allegations at issue go to acts of the judiciary, inter
alia, for the reason that an alleged breach of the minimum standard of treatment
requirement of Article 1105(1) informs an alleged breach of Article 1110(1).
418. Nonetheless, as noted above, NAFTA Articles 1105 and 1110 are separate provisions,
imposing distinct obligations. It is however unnecessary for present purposes to explore
the different standards applicable under Articles 1105(1) and 1110(1) in the present case.
That is because the Tribunal is satisfied that, under any plausible standard, the challenged
decisions of the Canadian courts are neither arbitrary nor discriminatory, nor can it be said
that the judicial measures taken were expropriatory within the meaning of Article 1110 in
the present case. The patent grants to Claimant were made in a legal system that historically
has, and necessarily, evolves, and this evolution resulted in later decisions, rationally and
not unforeseeably, that concluded the initial patent grants were invalid, just as the Canadian
statutory patent regime envisions. As such, the challenged decisions of the Canadian courts
cannot constitute either a breach of NAFTA Articles 1105 or 1110.
Arbitrariness
419. Claimant alleges that the promise utility doctrine applied by Canadian courts is arbitrary
because it is “unpredictable and incoherent” and lacks a legitimate public purpose.579
The
Tribunal has examined the record to determine whether there is evidence to support this
allegation with respect to the three elements of the doctrine identified by Claimant, taken
individually or together.
420. First, regarding Canadian courts’ process of construing the promise of the patent, Claimant
relies primarily on (i) its own description of the subjective nature of the process, (ii)
examples of inconsistent judicial decisions, and (iii) statements made by a generic drug
579
C-PHM § IV.C.2(a).
130
company in the context of patent litigation.580
Through these submissions, Claimant clearly
sets out its disagreement with the practice of looking to the disclosure for the promise of a
patent, but it has not shown that the exercise is unpredictable or incoherent. Rather, the
interpretive process undertaken by Canadian courts, as described by Claimant, falls well
within the scope of duties that courts are asked to perform every day. Claimant’s own
expert, Professor Siebrasse, agreed that in interpreting the disclosure, Canadian courts
apply sound principles of construction consistent with principles of statutory
construction.581
421. The Tribunal is unpersuaded by examples of courts (or a single court) reaching inconsistent
determinations of a patent’s promise. Some level of unpredictability is present in the
application of all law. In the Tribunal’s view, inconsistency in judicial interpretation at this
limited scale is to be expected, especially in an adversarial system in which courts are
presented with different evidence and expert testimony across cases.
422. The Tribunal is also unwilling to put significant weight on Apotex’s isolated statements
about the unpredictable nature of the promise doctrine.582
Claimant finds these statements
notable because it considers generic drug manufactures like Apotex to be the principle
beneficiaries of the promise doctrine. The Tribunal notes, however, that Apotex made this
statement in an application for leave to appeal to the Canadian Supreme Court a lower court
decision with which it was presumably unhappy.583
In this context, such criticism is
unexceptional.
423. Furthermore, the Tribunal finds that Respondent has asserted a legitimate public policy
justification for the promise doctrine. In particular, Respondent has explained that
enforcing promises contained in the disclosure helps ensure that “the public receives its
end of the patent bargain” (particularly but not solely in connection with “new use” and
“selection” patents) and that it “encourages accuracy while discouraging overstatement in
580
See ¶¶390-396 above for a more detailed summary of Claimant’s position.
581
Tr. 633:21-634:25.
582
C-375, Notice of Application for Leave to Appeal of Apotex Inc. et al, Apotex Inc. v. Sanofi-Aventis, S.C.C. File
No. 35562 (30 September 2013), ¶14.
583
Id.
131
patent disclosures”.584
The Tribunal need not opine on whether the promise doctrine is the
only, or the best, means of achieving these objectives. The relevant point is that, in the
Tribunal’s view, the promise doctrine is rationally connected to these legitimate policy
goals.
424. Second, the Tribunal has considered Claimant’s submissions concerning the alleged
arbitrary nature of the ban on post-filing evidence of utility.585
The Tribunal finds that
Claimant provided no persuasive evidence showing that this rule is unpredictable or
incoherent. To the contrary, it is a bright line rule that sets a clear date by which patentees
must prove utility.
425. Respondent states that it has chosen to set that deadline as the patent application’s filing
date to prevent patents from being granted on the basis of speculation. In the Tribunal’s
view, there is a rational connection between the rule and this stated goal, as Claimant’s
own expert has acknowledged.586
All patent regimes must determine the line between
speculation and invention, and as Respondent highlights, there is no perfect place to draw
this line. However, the Tribunal does not find anything arbitrary about selecting the patent
application’s filing date.
426. The Tribunal understands the difficulty for companies in innovative industries described
by Claimant, in terms of timing investments and patentability requirements.587
With many
potential products, it may be challenging to identify when all patentability requirements
can be met and thereby when to file a patent application. However, this is the consequence
of a rational policy approach in Canada, not an indication of arbitrariness in the law. In
584
R-PHM ¶244, citing Dimock First Report ¶¶72-74, 219.
585
In this context, Claimant has also stated that patentees have no way of knowing how much evidence will be required
by the courts to prove utility. This is not supported by the record. Claimant has not attempted to show, for example,
that courts have systematically applied different evidentiary rules in similar utility cases, or that they have required
evidence on the basis of personal preference.
586
Tr. 665:24-666:5 (“MR. JOHNSTON: And you would say that the court’s statement that utility must be
demonstrated or soundly predicted at the time of filing is rationally connected to the objective of patenting too far
upstream? PROFESSOR SIEBRASSE: I would say it’s rationally connected, yes.”).
587
See ¶392 above.
132
such circumstances, it is not the role of a NAFTA Chapter Eleven tribunal to question the
policy choices of a NAFTA Party.
427. Third, the Tribunal has reviewed the record in relation to Claimant’s allegation that it is
arbitrary for Canadian courts to require patent applicants to disclose the basis of a sound
prediction of utility in the patent. Claimant’s submissions on this point focus primarily on
the fact that the disclosure rule applies in cases of sound prediction but not in cases of
demonstrated utility. 588
428. In the Tribunal’s view, Respondent has advanced a legitimate justification for this
distinction: the sound prediction doctrine allows inventors to obtain a patent before they
can demonstrate that the invention is useful. In exchange for the monopoly granted, the
patentee must disclose to the public the basis of its prediction of utility and what makes it
sound. Whether or not this is the preferred approach, it is plainly not an irrational one.
429. With regard to Claimant’s argument that the scope of this disclosure rule remains unclear,
the Tribunal finds nothing unusual about this level of potential uncertainty. Questions about
the precise scope of application of legal rules abound in nearly all legal regimes. If that
were to render a legal rule arbitrary, the concept of arbitrariness would lose all meaning.
430. For the above reasons, the Tribunal finds, based on the record before it, that none of the
three elements of the promise utility doctrine identified by Claimant is arbitrary. Even if
the Tribunal were to accept Claimant’s position regarding the legal standards applicable,
i.e., that a measure is arbitrary: (i) when it is unpredictable and incoherent, even if it is not
motivated by bad faith; and (ii) when it has no legitimate purpose,589
Claimant would not
succeed in its allegation of arbitrariness. Furthermore, Claimant has not demonstrated
arbitrariness in the Canadian courts’ application of these rules in any combination. Notably,
this conclusion is supported by the decisions rendered in the Strattera and Zyprexa
litigations. As discussed above, these decisions have a foundation in Canadian law.590
They
588
The Tribunal need not analyse Claimant’s argument that the disclosure rule is unfair because it is used to invalidate
patents that were filed when the rule did not exist. This allegation is dismissed for the reasons stated in Section
VIII.B(2)c above.
589
C-PHM ¶294.
590
See ¶384 above.
133
are also coherent and consistent with the policy justifications stated by Respondent. It is
worth stating again that in these circumstances, the Tribunal will not question the
correctness of the policies or the courts’ decisions.
Discrimination
431. Claimant’s principal submission under the heading of discrimination is that the promise
utility doctrine discriminates against pharmaceutical patents as a field of technology.591
Claimant acknowledges that the doctrine is facially neutral but alleges that it has
“differentially disadvantageous effects” on the pharmaceutical sector, amounting to de
facto discrimination. As summarised above, Claimant’s primary support for this allegation
is Professor Levin’s statistical analysis of the outcomes of utility cases.592
Professor Levin
concludes that there is a statistical difference between between utility-based invalidity rates
for pharmaceutical and non-pharmaceutical patents since 2005.
432. As a preliminary point, for the reasons set out in Section VIII above, the Tribunal does not
accept Claimant’s attempt to artificially divide utility cases into “before” and “after” the
creation of the promise utility doctrine.593
In addition, the Tribunal finds some of
Claimant’s coding choices questionable. But the critical deficiency of the evidence is not
found in these methodological issues. Even if the Tribunal were to fully embrace
Professor’s Levin’s statistical determination, the Tribunal could not reach Claimant’s
conclusion that the promise utility doctrine has “differentially disadvantageous effects” on
the pharmaceutical sector.594
433. Throughout this proceeding, Claimant has asserted a causal relationship between the
promise utility doctrine and higher invalidity rates in the pharmaceutical sector. Yet this is
unsupported by the record.595
Professor Levin explained:
591
Memorial ¶¶216-226; Reply ¶¶291-300; C-PHM ¶¶318-321.
592
See ¶398 above.
593
See Reply ¶196 (“[I]t is only after 2005 that a disproportionate impact on pharmaceutical patents is observed”).
594
Memorial ¶217 (emphasis added); see Reply ¶293; C-PHM ¶127.
595
See, e.g., Memorial ¶220 (“A review of all patent utility decisions by the Federal Courts shows the striking,
disparate impact of the promise utility doctrine across different fields of technology.”); Reply ¶367 (“As explained by
Professor Levin, a statistical analysis of all Canadian patent validity cases decided between 1980 and the present
134
I am not opining on causality. I was not asked to do that; I am not
qualified to offer an opinion. I offered a statistical opinion which is
the rejection of the null hypothesis was consistent with a causal
hypothesis, that of Claimants. I agree there could be other causes;
I’m not here to say one way or the other.596
434. When the Tribunal posed a question to Claimant on this point, counsel acknowledged that
Professor Levin “does not provide an opinion on causation. He provides an opinion on
whether the dramatically disproportionate numbers would be due to chance or due to
something else. And he says they’re not due to chance”.597
435. Thus, setting aside methodological issues, the Tribunal can conclude from Professor
Levin’s analysis only that the higher proportion of inutility findings in the pharmaceutical
sector is not by chance. Claimant has not presented evidence establishing the crucial link
between that fact and the alleged promise utility doctrine. Based on the record, the Tribunal
cannot rule out the possibility that alternative factors may give rise or contribute to the
difference in rates of inutility finding. To offer just one example, Respondent has proposed
that the patenting practices of pharmaceutical companies result in patents more susceptible
to utility challenges. The Tribunal cannot determine on the basis of the record whether this
proposal is sound, but simply notes that it is one plausible alternative explanation for
Professor Levin’s conclusion.
436. In this context, it is worthwhile to identify another methodological issue because it both
illustrates and exacerbates the limitations of Claimant’s statistical analysis. Although
Claimant has acknowledged that, today, Canadian courts do not apply the promise utility
doctrine in all utility cases, Claimant did not attempt to isolate “promise cases” for the
purpose of its data set.598
reveals a statistically significant ‘disproportionate impact’ on pharmaceutical patents – one that appears to be
‘attributable to the ground of utility alone.’”); Claimant’s Closing Statement, Tr. 2120:21-2121:3 (“40 percent
invalidity decisions only in the pharmaceutical sector, we would posit are discrimination as to field of technology,
because no other sector is experiencing the invalidation rates of their patents under Canada’s promise utility doctrine
standard, other than the pharmaceutical sector. So yes, we would posit that there’s causation.”).
596
Tr. 1266:24-1267:6.
597
Claimant’s Closing Statement, Tr. 2120:13-17.
598
Tr. 1248:14-1250:13 (“MS. ZEMAN: The dataset provided to you does not make any distinction between utility
and promise utility outcomes. Is that right? PROFESSOR LEVIN: Not to my knowledge. MS. ZEMAN: So you also
135
437. In sum, Claimant asks the Tribunal to find a causal link between the alleged promise utility
doctrine and higher rates of inutility decisions in the pharmaceutical sector on the basis of
mere assumptions. The Tribunal will not do so.
438. Claimant also asks the Tribunal to infer discriminatory intent for the reasons set out in
paragraph 400 above. Claimant’s first allegation—that the Canadian courts adopted the
doctrine in pharmaceutical litigation—must be dismissed for the reasons stated in Section
VIII above.599
The Tribunal is also unpersuaded by Claimant’s reliance on the Federal
Court’s statement that “[t]he basis for sound prediction, at least in respect of a
pharmaceutical, must be disclosed in the descriptive part of the patent”.600
Claimant does
not allege that the disclosure rule for sound prediction applies only to pharmaceutical
patents, and has expressly acknowledged that the promise utility doctrine is facially neutral.
Therefore, the Tribunal does not see how the court’s reference to pharmaceuticals, in a
pharmaceutical patent case, expresses discrimination. Claimant’s remaining criticisms of
the doctrine simply do not speak to discriminatory intent.
439. For all of these reasons, the Tribunal concludes that Claimant has not proven its allegation
that the promise utility doctrine discriminates against pharmaceutical patents. Even if the
Tribunal were to accept Claimant’s position regarding the legal standards applicable, i.e.,
that a measure is discriminatory where there is (i) “any differential treatment of a foreign
investor. . . based on unreasonable distinctions and demands”,601
and (ii) “facially neutral
measures that in practice produce differentially disadvantageous effects on a particular
field of technology”,602
Claimant would not succeed in its allegation of discrimination.
440. The Tribunal notes that Claimant has advanced another allegation of discrimination,
“relating to nationality”.603
Specifically, Claimant’s position is that “the promise utility
doctrine discriminates in favor of a prominent domestic industry at the expense of foreign
did not make any distinction between utility and promise utility outcomes in your analysis. Is that right? PROFESSOR
LEVIN: I did not, no.”).
599
See C-118/R-011, Consolboard, at ¶¶36-37.
600
C-180, Pfizer Canada Inc. v. Pharmascience Inc., [2013] F.C. 120 (Can. Fed. Ct.), ¶¶157-158
601
C-PHM ¶¶319-320.
602
C-PHM ¶257.
603
Memorial ¶226.
136
patent holders”.604
Claimant does not allege that the promise utility doctrine discriminates
against foreign patent holders on its face, or that Canadian courts have shown any intent to
discriminate against foreign patent holders. Rather, Claimant argues that, in practice, the
application of the promise utility doctrine has resulted in the invalidation of patents held
by foreign firms only, and that the primary beneficiaries have been domestic generic drug
manufacturers.605
441. It appears to the Tribunal that Claimant has not made much effort to fully develop this
theory of de facto nationality-based discrimination. The only facts Claimant has come close
to establishing are that (i) since 1 January 2005, the pharmaceutical patents invalidated on
the ground of inutility (whether through the application of the promise utility doctrine or
not) have been held by foreign pharmaceutical companies, and (ii) the largest
pharmaceutical companies in the world are not Canadian.606
The Tribunal will not infer
discrimination from such a bare record. Claimant has wholly failed to demonstrate that the
promise utility doctrine discriminates against foreign patent holders.
Conclusion
442. For the above reasons, the Tribunal holds that even if it were to accept Claimant’s position
regarding the legal standards applicable to its allegations of arbitrariness and
discrimination, Claimant has failed to establish the factual premise on which its allegations
of arbitrariness and discrimination are based. The Tribunal has already concluded that
there was no fundamental or dramatic change in Canadian patent law. In the circumstances
presented in these proceedings, the evolution of the Canadian legal framework relating to
Claimant’s patents cannot sustain a claim of arbitrariness or discrimination going to a
violation of NAFTA Articles 1105(1) or 1110(1).
604
C-PHM ¶321.
605
Memorial ¶226; Reply ¶368; C-PHM ¶321.
606
Memorial, fn. 539, citing C-191, The World’s Biggest Public Companies, FORBES, 2014, filtered for the
pharmaceutical industry.
137
COSTS
Applicable Law
443. NAFTA Article 1135 states that “[a] tribunal may … award costs in accordance with the
applicable arbitration rules”.
444. Article 40 of the UNCITRAL Rules provides:
1. Except as provided in paragraph 2, the costs of arbitration shall
in principle be borne by the unsuccessful party. However, the
arbitral tribunal may apportion each of such costs between the
parties if it determines that apportionment is reasonable, taking
into account the circumstances of the case.
2. With respect to the costs of legal representation and assistance
referred to in article 38, paragraph (e), the arbitral tribunal,
taking into account the circumstances of the case, shall be free
to determine which party shall bear such costs or may apportion
such costs between the parties if it determines that
apportionment is reasonable.
Claimant’s Submission on Costs
445. Claimant submits that it should be awarded its costs of the arbitration under UNCITRAL
Article 40(1) and its costs of legal representation under Article 40(2) because: (i) Claimant
is the proper prevailing party in this arbitration, and (ii) Respondent introduced a number
of inefficiencies into the proceeding.607
446. In particular, Claimant identifies three ways in which Respondent’s conduct was
inefficient. First, Respondent raised an untimely, unfounded jurisdictional objection, which
delayed briefing on the amicus and Article 1128 submissions and forced Claimant to
prepare an additional written pleading. The way in which Respondent then pursued its
objection increased Claimant’s burden of defending against it.608
Second, Respondent,
through the testimony of Dr. Marcel Brisebois, introduced evidence on 68 patents related
to raloxifene and 27 patents for certain uses of olanzapine and atomoxetine, none of which
607
C-CS §I.A.
608
C-CS ¶5.
138
was at issue in this case.609
Third, Respondent’s expert, Professor Daniel Gervais,
introduced extensive documentary evidence concerning the substantive patent law
obligations of non-NAFTA States, which is entirely irrelevant.610
447. In contrast, Claimant asserts that it “consistently presented reasonable and focused
evidence” throughout the proceeding, and its costs are therefore reasonable.611
448. In these circumstances, Claimant argues that even if Respondent were to prevail, Tribunal
could reasonably order the Parties to bear their own costs. In this regard, Claimant notes
that:
Tribunals have recognized that claimants in investment arbitration
must often present “novel issues of international law, the resolution
of which cannot be easily predicted.” Moreover, arbitrators have
noted that awards of costs against claimants may deter investors
from seeking to enforce the rights accorded under investment
treaties.612
449. Claimant’s costs are set forth in the following two tables:613
609
C-CS ¶6.
610
C-CS ¶7.
611
C-CS ¶¶8-10.
612
C-CS ¶11, quoting CL-200, David D. Caron & Lee M. Caplan, The UNCITRAL Arbitration Rules: A Commentary
(2013) § 27.4.B(2).
613
Reproduced from C-CS, ¶¶12-13.
139
Respondent’s Submission on Costs
450. Respondent argues that it should be awarded all of its costs in this arbitration under
UNCITRAL Rules Article 40, including both its share of the Tribunal’s fees and expenses
and the reasonable costs of its legal representation and assistance.614
According to
Respondent, Canadian taxpayers should not be forced to pay the cost of Respondent’s
defence in this arbitration, which Claimant should never have initiated.615
451. Respondent asserts that each of the factors that tribunals normally consider in determining
the apportionment of costs (the relative success of the parties, quality of the claims,
complexity of the issues, and the reasonableness of the parties’ incurred expenses) weighs
in favor of awarding Respondent all of its costs.616
First, Respondent should prevail in this
arbitration because it has demonstrated that Claimant’s claim is manifestly without legal
merit for several independent reasons.617
Further, “[t]he lack of quality in Claimant’s
claims goes beyond a typical unsuccessful claim” because Claimant is seeking from the
614
R-CS §II.
615
R-CS ¶1, 6.
616
R-CS ¶4.
617
R-CS ¶¶1, 5.
140
Tribunal appellate review of Canadian court decisions, which all three NAFTA Parties
agree to be outside the jurisdiction of a NAFTA Chapter Eleven tribunal.618
452. In addition, Respondent argues that Claimant’s conduct in this proceeding introduced
unnecessary complexity into the proceeding. For instance, Claimant has (i) failed to clearly
articulate the nature and scope of its claim, (ii) taken inconsistent positions on certain
issues, (iii) changed its claim in the Reply, (iv) submitted extensive expert evidence that
was of limited relevance to its claims and (v) unreasonably insisted on reserving 11 full
days for the Hearing.619
453. Finally, Respondent submits that all of its costs are reasonable.620
Respondent’s costs are
as follows:
a. Arbitration costs: As of the date of its Cost Submission, Respondent had contributed
CAD 601,785.00 towards arbitration fees and expenses.621
b. Legal fees: The total amount of Respondent’s legal fees is CAD 4,579,260.92.622
c. Witness costs and additional disbursements: These costs are detailed in the table
below.623
618
R-CS ¶6.
619
R-CS ¶¶7-9.
620
R-CS §III.
621
R-CS ¶12.
622
R-CS ¶14. Respondent highlights that it was represented by lawyers and paralegals of the Government of Canada’s
Trade Law Bureau, which charges hourly rates that are substantially lower than those charged in the private sector.
623
Reproduced from R-CS, Annex II.
141
The Tribunal’s Decision on Costs
454. Article 40(1) of the UNCITRAL Rules adopts the “loser pays” principle in relation to the
“costs of arbitration”, unless the circumstances of the case weigh in favor of a different
apportionment. In respect of the “costs of legal representation and assistance”, Article
40(2) confers broad discretion on the Tribunal to determine any reasonable apportionment
of such costs in light of the circumstances of the case.
455. Although the UNCITRAL Rules do not elaborate upon the relevant “circumstances of the
case” to be considered, Article 40 has been interpreted and applied by numerous tribunals.
In the Tribunal’s view, Respondent has correctly identified four of the circumstances most
commonly examined in this context: (i) the relative success of the parties, (ii) quality of
the claims, (iii) complexity of the issues, and (iv) the reasonableness of the parties’ incurred
expenses. The Tribunal will consider each of these factors.
a. The relative success of the parties: Respondent is the successful Party, except in
relation to its objection to the Tribunal’s jurisdiction.
b. Quality of the claims: Although Claimant has not succeeded in this arbitration, its
claims were not in any sense frivolous, and Claimant pursued them in good faith.
142
Indeed, it must be noted that both Parties displayed the highest level of professionalism,
efficiency and courtesy in presenting their cases.
c. Complexity of the issues: This arbitration involved many complex issues of fact and
law, some of them before a NAFTA Chapter Eleven tribunal for the first time. The
complexity of the case is evidenced not only by the Parties’ submissions, but also by
the amicus and Article 1128 submissions.
d. Reasonableness of the parties’ expenses: In light of the complexity of the case, the
Tribunal does not consider the Parties’ expenses to be unreasonable.
456. Taking into account these factors and all of the surrounding circumstances, the Tribunal
does not see any reason to depart from the “loser pays” principle reflected in Article 40(1)
in relation to the costs of the arbitration. In this regard, the Tribunal notes that both Parties
have referred to the “loser pays” principle in their submissions on costs.
457. Therefore, Claimant shall bear the costs of this arbitration, including the Tribunal
Members’ fees (at USD 375/hour) and expenses, ICSID’s administrative fees and direct
expenses, amounting to (in USD):624
Arbitrators’ fees and expenses
Professor Albert Jan van den Berg
Sir Daniel Bethlehem
Mr. Gary Born
259,734.75
114,359.20
138,872.07
ICSID’s administrative fees 96,000.00
Direct expenses (estimated)625
140,731.95
Total 749,697.97
624
The ICSID Secretariat will provide the parties with a detailed Financial Statement of the case account once all
invoices are received and the account is final.
625
This amount includes estimated charges (courier, printing and copying) incurred in connection with the dispatch
of this Award.
143
458. The above costs have been paid out of the advances made by the Parties in equal parts.626
As a result, each Party’s share of the costs of arbitration amounts to USD 374,848.99, and
Claimant shall reimburse Respondent’s share of the costs.
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.
CONCLUSIONS
461. In this Section the Tribunal sets forth its conclusions reached in this Award with respect to
(i) jurisdiction; (ii) the merits; and (iii) costs, fees and expenses.
Jurisdiction
462. Respondent submits that Claimant’s claim is time-barred.627
In its view, Claimant’s claim
falls outside the Tribunal’s jurisdiction ratione temporis.628
463. As set out at ¶97 above, Claimant on the other hand requests that the Tribunal:
(i) reject Canada’s jurisdictional objection as untimely under
UNCITRAL Article 21(3) or, in the alternative, reject Canada’s
objection on the merits[…]629
464. In Section VI.E above, the Tribunal determines that Claimant’s NoA was timely, and that
Claimant’s claims fall within the Tribunal’s jurisdiction ratione temporis.630
626
The remaining balance will be reimbursed to the parties in proportion to the payments that they advanced to ICSID.
627
See R-PHM §III.
628
Rejoinder ¶91.
629
Opposition on Jurisdiction ¶50.
630
See ¶170 above.
144
465. The Tribunal therefore dismisses Respondent’s objection to the Tribunal’s jurisdiction
ratione temporis and finds that it has jurisdiction to hear Claimant’s claims as submitted to
it in this arbitration. Claimant’s request to reject Respondent’s objection on the merits is
granted.
466. In light of the foregoing, the Tribunal does not consider it necessary to decide whether
Respondent’s jurisdictional objection should be barred as untimely under Article 21(3) of
the UNCITRAL Rules.631
Merits
467. In relation to the merits of its claim, Claimant seeks the following relief, as set out at ¶95
above:
(i) damages for the full measure of direct losses and
consequential damages sustained as a consequence of
Respondent’s breach of its obligations under Chapter 11 of
the NAFTA, estimated in an amount not less than CDN $500
million plus any payments Claimant or its enterprise is
required to make arising from the improvident loss of its
Zyprexa and Strattera Patents or its inability to enforce its
Zyprexa and Strattera Patents;
[…]
(iii) pre-award and post-award interest;
(iv) payment of a sum of compensation equal to any tax
consequences of the award, in order to maintain the award’s
integrity[…]632
468. Respondent, on the other hand, requests an award “dismissing Claimant’s claim in its
entirety”.633
631
See ¶160 above.
632
SoC ¶85.
633
See ¶98 above; SoD ¶120.
145
469. As a consequence of the findings set forth in Sections VIII and IX above, the Tribunal
concludes that Claimant has failed to establish the factual premise of its claims.
Specifically, the Tribunal holds that, based on the record of this case, the challenged
measures—the invalidation of the Zyprexa and Strattera Patents through application of the
legal rules that Claimant refers to as the promise utility doctrine—cannot form the basis of
an expropriation claim under NAFTA Article 1110 or a claim for a violation of the
minimum standard of treatment under NAFTA Article 1105. The Tribunal also finds that
there was not an arbitrary or discriminatory measure in violation of NAFTA Article 1110
or NAFTA Article 1105.634
The Tribunal must dismiss Claimant’s claims without further
inquiry.
470. Since there has been no breach of Respondent’s obligations under Chapter Eleven of
NAFTA, the Tribunal denies Claimant’s primary relief sought in the form of damages.
Claimant’s further requests for (i) pre-award and post-award interest, and (ii) a “sum of
compensation equal to any tax consequences of the award”, therefore fall away.
471. Accordingly, the Tribunal grants Respondent’s request for an award dismissing Claimant’s
claim in its entirety.
472. In light of the Tribunal’s conclusions in relation to liability, there will be no second phase
of this arbitration in relation to damages.
473. The Tribunal does not deem it necessary or appropriate to give further consideration to the
Parties’ respective requests for “such further relief as the Arbitral Tribunal may deem just
and appropriate”635
and “any other relief that may seem just”.636
No argument or
particularized request has been made in relation to these requests. The Tribunal considers
that it would violate its mandate if it were to grant relief outside the pleaded cases of the
Parties. In the absence of further substantiation, these requests for relief are in the
Tribunal’s view meaningless legal recitations.
634
See ¶¶416 and 442 above.
635
SoC ¶85(e).
636
SoD ¶120.
146
Costs
474. Claimant seeks the following relief in relation to costs, as set out at ¶95 above:
the full costs associated with these proceedings, including all
professional fees and disbursements, as well as the fees of the
Arbitral Tribunal.637
475. Claimant also seeks its costs specifically in connection with Canada’s jurisdictional
objection.638
476. As set out at ¶98 above, Respondent requests an award “awarding Respondent its costs,
with applicable interest, pursuant to Article 1135(1) of the NAFTA and Article 40 of the
UNCITRAL Rules”.639
477. As the Tribunal determines in Section X above, in accordance with the “loser pays”
principle, Claimant shall bear the costs of this arbitration, including the Tribunal Members’
fees and expenses, ICSID’s administrative fees and direct expenses.640
478. With respect to the costs of legal representation and assistance, in the exercise of its
discretion under Article 40(2) of the UNCITRAL Rules, and considering that Respondent
prevailed on the merits but not on jurisdiction, the Tribunal concludes that it is appropriate
for Claimant to bear its own costs and to reimburse Respondent for 75 percent of
Respondent’s costs.641
479. The Tribunal therefore rejects Claimant’s requests for relief in relation to costs.
Respondent’s request for its costs is granted in full in relation to the arbitration costs, and
partially to the extent of 75 percent of its costs of legal representation and assistance.
637
SoC ¶85.
638
Opposition on Jurisdiction ¶50.
639
SoD ¶120.
640
See ¶457 above. The ICSID Secretariat will provide the parties with a detailed Financial Statement of the case
account once all invoices are received and the account is final.
641
See ¶459 above.
147
AWARD
480. For the reasons set forth above, the Tribunal decides as follows:
(1) Respondent’s objection to the Tribunal’s jurisdiction ratione temporis is dismissed.
The Tribunal has jurisdiction to hear the claims submitted to it in this arbitration.
(2) Claimant’s claim is dismissed in its entirety.
(3) Claimant shall bear the costs of the arbitration, amounting to USD 749,697.97.
Consequently, Claimant shall pay to Respondent USD 374,848.99 with appropriate
expedition.
(4) Claimant shall cover 75 percent of Respondent’s costs of legal representation and
assistance. Consequently, Claimant shall pay to Respondent CAD 4,448,625.32 with
appropriate expedition.
(5) All other claims and requests are dismissed.
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149
[signed] [signed]
[signed]