WASHINGTON—The Information Technology and Innovation Foundation (ITIF), North America’s top-ranked science- and tech-policy think tank, today released the following statement from Stephen J. Ezell, ITIF vice president for global innovation policy, on the outcome of the dispute between Eli Lilly and Canada under the North American Free Trade Agreement (NAFTA) dispute settlement provisions:
The NAFTA tribunal ruling is both faulty and contrary to actual evidence. It failed to recognize that the evolution of Canada’s intellectual property policy known as the “promise utility doctrine” represented a dramatic shift in policy, nor did it recognize the harm it causes to pharmaceutical innovators investing in Canada. While Canada won this case, uncertainty regarding the country’s IP policies will ultimately hurt the Canadian economy as well as the cause of global innovation.
While the NAFTA tribunal did not rule on the legitimacy of Canada’s aberrant IP policy, it found that the doctrine, instituted in 2005, marked only an “incremental”—not “dramatic”—shift in Canadian patent law, and therefore didn’t meet the heightened standards required under NAFTA’s rules on disputes between investors and states. Canada’s policy, referred to as the “promise doctrine,” enables Canadian courts to retroactively invalidate patents that the courts deem didn’t meet the “promise” of the patent—as construed by Canadian courts years after the patent was issued. The tribunal’s ruling is mistaken in not seeing the promise utility doctrine as a dramatic shift. Before the policy was implemented in 2005, exactly zero pharmaceutical patents were invalidated for lack of utility in Canada. But since 2005, 25 patents underpinning innovative life-sciences drugs have been invalidated—despite the fact that similar patents on these same products have been issued and upheld in scores of countries throughout the world.
While the Canadian government won the case, global citizens lost, for the policy is simply another way for Canada to not pay its fair share to support the costs of biomedical innovation. Canada continues to benefit from the investments made in other nations, but through this policy refuses to make its fair contribution. The Trump administration should raise this issue with Canadian Prime Minister Trudeau at the earliest stage and insist on addressing the issue as part of any re-negotiation of NAFTA.
