## Facts

- Eli Lilly, a U.S. pharmaceutical company, held two Canadian patents: one for olanzapine (Zyprexa) and one for atomoxetine (Strattera).
- Canadian federal courts invalidated both patents for lack of “utility” under a doctrine requiring the patentee to meet the “promises” of utility stated in the patent disclosure (the “promise doctrine”).
- Eli Lilly exhausted domestic appeals: the Federal Court of Appeal affirmed, and the Supreme Court of Canada denied leave in both matters.
- Eli Lilly initiated NAFTA Chapter 11 arbitration under the UNCITRAL Arbitration Rules (1976), administered by ICSID.
- Eli Lilly alleged its patents and related rights in Canada were protected investments and sought at least CAD 500 million plus interest and costs.
- Canada argued, among other defenses, that the tribunal could not function as an appellate body over Canadian court judgments and that the challenged decisions reflected ordinary development of domestic patent law.

## Issues

1. Whether the claims were admissible and within NAFTA’s limitation periods, and whether the tribunal could review the challenged judicial decisions without acting as an appellate court.
2. Whether Canada breached NAFTA Article 1105 (minimum standard of treatment) by an alleged dramatic, arbitrary, or discriminatory shift in patent utility law and by the courts’ application of that law.
3. Whether invalidation of the patents constituted an expropriation under NAFTA Article 1110, including in light of NAFTA Article 1110(7) concerning intellectual-property measures.

## Decision

- The tribunal dismissed all claims, finding no breach of NAFTA Article 1105 and no breach of NAFTA Article 1110.
- The tribunal held NAFTA Chapter 11 does not permit re-litigation of domestic court outcomes; its review was limited to whether the judicial conduct violated international standards.
- On Article 1105, the tribunal found Eli Lilly did not prove a fundamental or dramatic change in Canadian law, nor arbitrary or discriminatory application of the utility requirement.
- On Article 1110, the tribunal held that procedurally fair judicial invalidation of patents under generally applicable law did not amount to expropriation on the facts presented.
- The tribunal ordered Eli Lilly to bear the arbitration costs and to reimburse Canada for 75% of its legal fees and expenses.

## Legal Principles

- Investor–state tribunals may assess whether domestic judicial acts breach international obligations but do not sit as appellate courts correcting alleged errors of domestic law.
- A minimum-standard-of-treatment claim based on domestic judicial development requires a high showing (e.g., manifest arbitrariness, discrimination, or denial of justice), not mere disagreement with jurisprudential change.
- Evolution in domestic law, if reasonably connected to prior jurisprudence and applied through regular process, generally does not establish an Article 1105 breach.
- Revocation or limitation of intellectual-property rights through due process and under non-discriminatory, generally applicable standards is unlikely to constitute expropriation absent an independent international-law breach.
- A claimant must establish causation and evidentiary support linking the challenged state conduct to the alleged loss under the treaty standard invoked.

## Conclusion

The tribunal rejected Eli Lilly’s challenge to Canadian patent invalidations, holding that the development and application of the utility doctrine did not breach NAFTA’s minimum standard of treatment and that the loss of patent rights through regular judicial process did not constitute expropriation; it also shifted most costs to Eli Lilly.


Eli Lilly & Co. v. Gov’t of Can., ICSID Case No. UNCT/14/2 (Final Award Mar. 16, 2017)