Canada Wins NAFTA Arbitration on Canadian Patent Law
A NAFTA Arbitration Panel has dismissed Eli Lilly's claim for compensation from the Canadian government for the invalidation of two of its patents by the Supreme Court of Canada. Lilly claimed that Canada's utility standard under patent law failed to meet its NAFTA obligations, and that the invalidation of its patents amounted to an expropriation that entitled it to a remedy under NAFTA's investor protection provisions.
Lilly's argument sought to leverage international trade investor protection provisions to shape the general contours of substantive intellectual property law. The Panel rejected that invitation, declining to challenge courts' supervisory role over patentability in the Canadian patent system, stating that "a NAFTA Chapter Eleven tribunal is not an appellate tier" and that it would be inappropriate for a NAFTA tribunal to assess judicial conduct against NAFTA obligations other than in "exceptional circumstances, in which there is clear evidence of egregious and shocking conduct."