Canadian patent law is corrupted and that will come back to haunt us when Trump re-opens NAFTA

Canadian taxpayers will be thankful that a sympathetic NAFTA tribunal recently saved them a $500-million-plus-costs haircut. The tribunal’s decision would have attracted a good deal more attention had Canada lost. As it is, the government can continue ignoring the problems created by a bit of Canadian law called the “promise doctrine.”

In patent law, every patent must be “useful” to be issued, even if for only a “mere scintilla” of usefulness. A drug patent, for instance, must be said to effectively treat some condition, or improve on such treatment. But the promise doctrine takes this much further. If a patent is challenged, the court will read it for “promises” of utility — inferences of utility that can be very broad, perhaps, for instance, for greater therapeutic effect. If the patent is proven not to have lived up to this expanded promise, it is invalidated.

Drug maker Eli Lilly had sued Canada for the invalidation of patents for two drugs, Strattera and Zyprexa, commonly used to treat ADHD and mental illness. It lost. Few Canadians will cry for Big Pharma being denied a payout from their government, but here’s what should worry them.

Since the “promise doctrine” was introduced in roughly 2005, nearly 30 Canadian drug patents have been invalidated. The promise doctrine has helped make Canada a bit of a rogue state in the intellectual-property community. The 2016 Special 301 Report of the Office of the U.S. Trade Representative has Canada on its watch list. The promise doctrine ranks high among its concerns. This doctrine has sapped billions of dollars in drug sales from the Canadian market.

The ‘promise doctrine’ will come up in Trump’s NAFTA talks. We had better have an answer

Eli Lilly patented Strattera in 81 jurisdictions. Only in Canada was the patent invalidated for lacking “utility.” Most people would find this odd given that enough people find the drug useful that global sales are around US$700 million.

In its ruling, the NAFTA tribunal found that the promise doctrine didn’t amount to a large-enough or sudden-enough change in Canadian patent law to qualify Eli Lilly for compensation under NAFTA’s investment protection provisions. The tribunal didn’t even get to Eli Lilly’s claim that the promise doctrine offends Canada’s intellectual-property obligations under NAFTA.

The promise doctrine is judge-made law, but even in a common law jurisdiction like ours, the tribunal reasoned, courts are clearly an arm of government and their decisions could be open for review. Intellectual-property law is the most international of laws; Canadian laws should be consistent with other countries’ approaches.

The promise doctrine is sure to come up in the NAFTA renegotiations President Donald Trump plans. We had better have an answer, and the only reasonable one is an end to its excesses. Moreover, as Canada again tries to promote an innovation agenda, nothing is more important than strong, clear intellectual property rights.

How to break the promise doctrine? Perhaps by clarifying the Patent Act by amending legislation. No doubt that would create further interpretative difficulties, but it would solve the present problem.

Alternatively, the case of AstraZeneca v. Apotex will soon be decided by the Supreme Court of Canada. This case provides the court an opportunity to clarify the promise doctrine, and it should take the opportunity. The Supreme Court can right the wrongs that courts, including itself, have wrought.

The promise doctrine seems to have grown out of the “sound prediction” doctrine. Sound prediction provides a secondary basis for patent-holders to satisfy the requirement for inventions to be useful. Sound prediction helps when utility hasn’t yet been fully demonstrated in fact (for example, “we believe this could cure rashes”).

From this sensible beginning the promise doctrine grew out of reasonable bounds. First, it led to courts seeking promises in statements in patents that may not have been intended as sound prediction; indeed, to potentially base them on any statement in the patent disclosure (“could cure rashes including poison ivy, heat rash and contact dermatitis”). Second, it led to the invalidation of patents where the scope of the described promise proved not to have been fully realized (“Oops! Turns out it doesn’t cure poison ivy”). Yet in this example the patent still meets the utility requirement (because it cures rashes other than poison ivy).

The promise doctrine is a long way from the “mere scintilla” of utility Canada nominally requires, and other countries actually require. A permissive doctrine has been turned on its head to invalidate patents instead.

The promise doctrine has corrupted Canadian patent law and irritated international relations. By legislation or by judicial intervention, it is time to excise it and return to a more sensible understanding of utility.

Richard C. Owens, is a lawyer specializing in intellectual property and a senior fellow at the Macdonald-Laurier Institute.

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