Canada Blinks in Face of US/Pharma Pressure – Supreme Court Adopts Wink-Wink Patent Utility Rule

In a stunning reversal of policy, on June 30, 2017, the Supreme Court of Canada overturned decades of precedent making it easier for the biopharmaceutical industry to gain patents on medicines without any real proof of a claim that a putative invention has any meaningful utility.  This reversal in AstraZeneca Canada Inc. v. Apotex, Inc. is particularly disconcerting because Canada had just won an investor-state arbitration award in the long awaited Eli Lilly v. Canada case upholding its more stringent promise/utility doctrine that had been used successfully to overturn two dozen secondary patents, particularly those claiming new uses of known medicines, where patent claimants failed to present evidence in support of the prediction of therapeutic benefit promised in their patent applications.

Canada had been under intense pressure from the US, which had placed Canada on its Special 301 Watch List for five years threatening that the promise/utility doctrine unreasonably harmed Big Pharma in the US and from the pharmaceutical industry itself which claimed that the doctrine violated global patentability criteria.  President Trump’s hardball campaign promise to rewrite or leave the North American Free Trade Agreement because of its failure to adequately protect US intellectual property interests may also have played a role.  Likewise, President Trump’s more recent assertions that US payers are unreasonably subsidizing biomedical research and development because other countries, like Canada, are paying lower prices for innovator medicines than insurers and other payers in the US may also have increased pressure on the Court.

In addition, advocates have long been concerned about the deterrent effect of investor-state-dispute settlement cases like the one Eli Lilly filed against Canada claiming CAN$ 500 million in damages.  Although Canada ultimately won the case on the merits, the private arbitrators’ decision left Canada and other countries vulnerable to investor challenges against IP decisions and policies that thwart foreign drug companies’ expectations of unbridled profits.  The pressure of such claims by Novartis and Gilead have led to recent policy reversals in Colombia and Ukraine.  Colombia stepped down from its threat to issue a lawful compulsory licenses on Novartis’s overpriced cancer medicine, Glivec, and Ukraine deregistered a generic version of Gilead’s highly effective hepatitis C antiviral under the threat of multimillion dollar ISDS claims.

Under this barrage of pressure and additional more subtle pressure from five pro-Pharma interveners, the Canada Supreme Court retreated to the US-style safe harbor of requiring only a “scintilla” of evidence that a medicine might eventually prove to be useful – essentially a wink-wink rule that will allow drug companies wide discretion to game the patent system to build a thicket of patents around a base compound both to deter follow-on innovation by competitors and to extend the effective term of patent exclusivity well beyond the initial 20 year term.  Indeed, the basic patent bargain will be undermined.  Rather than granting patents only on inventions with a provable claim of utility at the time of filing, Big Pharma’s patent lawyers will be able to guess on future uses, even if those guesses do no pan out.  The predictable result will be higher drug prices for Canadian consumers and payers and less incremental innovation by Canadian companies.

In a more technical sense, under the Supreme Court’s ruling the promise of utility can now be found only in the claim itself, not in the patent description, and it is sufficient if even one promised use is supported by a mere scintilla of evidence even if multiple other promised uses are found wanting.  Such a miniscule and singular claim of utility must still be proven either by demonstration or sound prediction at the time of filing, which might play a limited role in weeding out purely speculative claims.  Although the Court opines that over-promising can be redressed in part by findings of partial invalidity or even revocation in cases of willful misleading, the new standard will not do much deter overly broad claims and a plethora of new use patents.

Access to medicines advocates, including myself, rallied to the defense of Canada’s promise/utility doctrine.  We thought Canada showed a lot of spine both trying to weed out unworthy patents on medicines but also standing up to Big Pharma and US bullying. The cool reasoning of the Canadian Supreme Court does not acknowledge or reference “external” pressures or the Eli Lilly v. Canada ISDS case.  However, courts do not decide cases in a vacuum.  This case, by contrast, seems to have been decided in a pressure cooker.