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Did Canada Cave on the Pharmaceutical Patent ISDS Issue in CETA?: Still No Text, But Official Comments Suggests It Did

Michael Geist - Wed, 08/06/2014 - 06:42

For the second time in less than a year, Canada and the EU have announced that they reached agreement on the Canada – EU Trade Agreement.  Back in October 2013, there was an announcement of an agreement “in principle”.  The announcement did not include a release of the text and the parties said there was still further work to be done on drafting and legal analysis. Yesterday, brought another announcement of an agreement on the text. Once again, the announcement did not include a release of the text and the parties said there was still further work to be done on legal review and translation into 23 languages.

Given the agreement is 1,500 pages, the additional work is expected to take a considerable amount of time. While government ministers claimed that CETA “is ready for debate and ratification”, the reality is that there cannot be a meaningful, informed debate without the actual text. Releasing it for full study and comment is the essential next step.

Analysis without the text is difficult, however, the combination of prior leaks and media reports indicate that Canada caved on its concerns regarding the potential replication of Eli Lilly-style pharmaceutical patent lawsuits. I wrote about the issue earlier this week, with the $500 million lawsuit by Eli Lilly prompting the Canadian government to propose an ISDS carve out for court decisions and administrative tribunal rulings involving pharmaceutical patents. The Canadian proposal stated:

For greater certainty, this Article does not apply to a decision by a court, administrative tribunal, or other governmental intellectual property authority, limiting or creating an intellectual property right, except where the decision amounts to a denial of justice or an abuse of right.

The EU countered with a proposal to merely include the following in a separate annex or joint understanding:

For greater certainty, the revocation, limitation or creation of intellectual property rights to the extent that these measures are consistent with TRIPS and the IPR Chapter of CETA, do not constitute expropriation. Moreover, a determination that these actions are inconsistent with the TRIPS Agreement does not establish that there has been an expropriation.

The EU offer was obviously far less than what Canada proposed: it was a side understanding rather substantive provisions within the agreement and it did not carve out anything (rather it sought to “clarify” the scope of the provision).

So how did they resolve the issue?  IPolitics reports that Canadian officials said the following yesterday:

We did agree to a declaration that relates to investor-state dispute settlement when it comes to pharmaceutical products, and we have made it clear in that joint declaration with the EU that investor-state disputes are not to be used as an appeal mechanism for decisions made in domestic courts. We have undertaken to review three years after the entry into force, at the request of either party, how investor-state dispute settlement is working with respect to the pharmaceutical area. And we would be prepared to make changes if necessary. We’ve also talked about parties possibly issuing binding interpretations if we find that arbitration panels may be drifting away from what our intention has been.

In other words, Canada caved. The EU proposal for a joint understanding was adopted with some clarifying language and no carve out. The only real addition was a three year review, which ironically is a favourite giveaway for the Conservatives to the opposition (reviews were added to C-13 and C-36 over the past two months) when it seeks to show a willingness to compromise but not actually change anything of substance.

The post Did Canada Cave on the Pharmaceutical Patent ISDS Issue in CETA?: Still No Text, But Official Comments Suggests It Did appeared first on Michael Geist.

How a 20 Year Old Patent Application Could Up-End Canada’s Biggest Trade Deal

Michael Geist - Tue, 08/05/2014 - 06:26

In the early 1990s, pharmaceutical giant Eli Lilly applied for patent protection in Canada for two chemical compounds, olanzapine and atomoxetine. The company had already obtained patents over the compounds, but asserted that it had evidence to support new uses for the compounds that merited further protection. The Canadian patent office granted the patents based on the content in the applications, but they remained subject to challenge.

Both patents ultimately were challenged on the grounds that there was insufficient evidence at the time of the applications to support the company’s claims. The Federal Court of Canada agreed, invalidating both patents. Eli Lilly proceeded to appeal the decision to the Federal Court of Appeal and later to the Supreme Court of Canada. The company lost the appeals, as the courts upheld the decision to invalidate the patents.

My weekly technology law column (Toronto Star version, homepage version) notes that under most circumstances, that would conclude the legal story as nine Canadian judges reviewed Eli Lilly’s patent applications and ruled that they failed to meet the standards for patentability. Yet in June 2013, the company served notice that it planned to file a complaint under the North American Free Trade Agreement claiming that in light of the decisions, Canada is not compliant with its patent law obligations under the treaty. As compensation, Eli Lilly is now seeking $500 million in damages.

The Eli Lilly claim is winding its way through the legal process – the Canadian government filed its defence several weeks ago – but the implications are being felt far beyond the specifics of the case.

If the pharmaceutical giant succeeds, it will have effectively found a mechanism to override the Supreme Court of Canada and hold Canadian taxpayers liable for hundreds of millions in damages in the process. The cost to the health care system could be enormous as the two Eli Lilly patents may be the proverbial tip of the iceberg and claims from other pharmaceutical companies could soon follow.

Indeed, it appears that the Canadian government has awoken to the danger associated with dispute resolution systems that risk trumping domestic regulations and place billions of dollars at risk.

Last week, reports out of Germany indicated that the German government might not support the Canada – European Union Trade Agreement (CETA) if it includes such a system (referred to as an investor-state dispute settlement or ISDS). ISDS has attracted considerable attention there, due to concerns over a multi-billion dollar claim involving Germany’s decision to phase-out nuclear power.

While the ISDS concerns have centered on Germany, the reality is that the Canadian government has been holding up finalizing the agreement due to related fears stemming from fears of more Eli Lilly-style cases. The pharmaceutical industry is a powerful lobby group in Europe and some may be willing to pursue similar litigation over Canadian patent law.

According to leaked versions of CETA texts, Canada is requesting that court decisions and administrative tribunal rulings involving the creation or limitation of intellectual property rights be carved out of the treaty’s ISDS provisions.

The European Union has thus far rejected the Canadian proposal.  However, given the mounting opposition to ISDS in Europe, it may be willing to shift its position.  From a Canadian perspective, the Eli Lilly case has provided a powerful reminder that the risks associated with ISDS may outweigh the benefits with legal cases that can take decades to resolve.

The post How a 20 Year Old Patent Application Could Up-End Canada’s Biggest Trade Deal appeared first on Michael Geist.

How a 20 Year Old Patent Application Could Up-End Canada’s Biggest Trade Deal

Michael Geist - Tue, 08/05/2014 - 06:25

Appeared in the Toronto Star on August 1, 2014 as How a 20 Year Old Patent Application Could Up-End Canada’s Biggest Trade Deal

In the early 1990s, pharmaceutical giant Eli Lilly applied for patent protection in Canada for two chemical compounds, olanzapine and atomoxetine. The company had already obtained patents over the compounds, but asserted that it had evidence to support new uses for the compounds that merited further protection.  The Canadian patent office granted the patents based on the content in the applications, but they remained subject to challenge.

Both patents ultimately were challenged on the grounds that there was insufficient evidence at the time of the applications to support the company’s claims. The Federal Court of Canada agreed, invalidating both patents. Eli Lilly proceeded to appeal the decision to the Federal Court of Appeal and later to the Supreme Court of Canada. The company lost the appeals, as the courts upheld the decision to invalidate the patents.

Under most circumstances, that would conclude the legal story as nine Canadian judges reviewed Eli Lilly’s patent applications and ruled that they failed to meet the standards for patentability. Yet in June 2013, the company served notice that it planned to file a complaint under the North American Free Trade Agreement claiming that in light of the decisions, Canada is not compliant with its patent law obligations under the treaty. As compensation, Eli Lilly is now seeking $500 million in damages.

The Eli Lilly claim is winding its way through the legal process – the Canadian government filed its defence several weeks ago – but the implications are being felt far beyond the specifics of the case.

If the pharmaceutical giant succeeds, it will have effectively found a mechanism to override the Supreme Court of Canada and hold Canadian taxpayers liable for hundreds of millions in damages in the process. The cost to the health care system could be enormous as the two Eli Lilly patents may be the proverbial tip of the iceberg and claims from other pharmaceutical companies could soon follow.

Indeed, it appears that the Canadian government has awoken to the danger associated with dispute resolution systems that risk trumping domestic regulations and place billions of dollars at risk.

Last week, reports out of Germany indicated that the German government might not support the Canada – European Union Trade Agreement (CETA) if it includes such a system (referred to as an investor-state dispute settlement or ISDS). ISDS has attracted considerable attention there, due to concerns over a multi-billion dollar claim involving Germany’s decision to phase-out nuclear power.

While the ISDS concerns have centered on Germany, the reality is that the Canadian government has been holding up finalizing the agreement due to related fears stemming from fears of more Eli Lilly-style cases. The pharmaceutical industry is a powerful lobby group in Europe and some may be willing to pursue similar litigation over Canadian patent law.

According to leaked versions of CETA texts, Canada is requesting that court decisions and administrative tribunal rulings involving the creation or limitation of intellectual property rights be carved out of the treaty’s ISDS provisions.

The European Union has thus far rejected the Canadian proposal.  However, given the mounting opposition to ISDS in Europe, it may be willing to shift its position.  From a Canadian perspective, the Eli Lilly case has provided a powerful reminder that the risks associated with ISDS may outweigh the benefits with legal cases that can take decades to resolve.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

The post How a 20 Year Old Patent Application Could Up-End Canada’s Biggest Trade Deal appeared first on Michael Geist.

CRTC Finds Rogers Engaged in Unjust Discrimination With Its Domestic Roaming Agreements

Michael Geist - Fri, 08/01/2014 - 06:53

From seemingly the moment in launched in Canada, Wind Mobile argued that it was being placed at a competitive disadvantage due to unfair roaming agreements with Rogers. As a new entrant, the company was reliant on roaming agreements to offer nationwide service, yet it claimed that Rogers was tilting the playing field against it. Rogers unsurprisingly disagreed.  In a Senate appearance in 2009, the company was asked directly about the issue:

Senator Zimmer: Have you had any requests from new wireless entrants for roaming and tower-sharing agreements, and how have you handled those? What is the progress on these arrangements to date?

Mr. Engelhart: I am glad you asked that question, because we have been reading in the press some grumbling by some of the new entrants, and it has left us puzzled. Mr. Roy and I, mostly Mr. Roy, have successfully concluded roaming agreements with all the new entrants who have approached us, and we did that in a business negotiation that did not need arbitration or enforcement from Industry Canada. We have also provided access to a huge number of our towers to the new entrants. We believe the government policy that requires us to make those facilities available is working, and we are proud of what we have done.

A year later, Wind filed a complaint with the CRTC over dropped calls when its customers roamed on the Rogers network, arguing that it was an undue preference since Chatr (a Rogers flanker brand) did not face the same problem. The Commission rejected the complaint, finding that there was insufficient evidence and that:

the fact that the terms and conditions of the roaming agreement negotiated between WIND and Rogers do not require seamless roaming, the Commission is not persuaded that WIND has demonstrated the existence of a preference in the circumstances of this case.

By 2013, the regulatory environment for wireless services in Canada had changed and the government was displaying a clear willingness to regulate wholesale wireless services to encourage greater competition. The CRTC began investigating the issue in 2013 with a fact-finding exercise that found:

some Canadian mobile wireless carriers were charging or proposing to charge significantly higher rates for wholesale mobile wireless roaming services to other Canadian mobile wireless carriers than to U.S.-based carriers. For instance, the rates that some Canadian carriers contracted to pay or were being asked to pay were many times higher than those that U.S.-based carriers paid, particularly with respect to data services. Further, some Canadian carriers were subject to more restrictive terms and conditions than those that applied to U.S.-based carriers.

While Rogers remained dismissive, warning against cheaper roaming agreements that it says discourage network development, those findings raised the possibility of a violation of Canadian telecom law, with the incumbent carriers granting themselves an undue preference or engaging in unjust discrimination.

Yesterday, the CRTC ruled that Rogers had engaged in unjust discrimination, charging new entrants far higher prices than those for U.S. carriers and including exclusivity clauses that prevented the new entrants from negotiating better terms with other carriers. As a result, the Commission has created a ban on exclusivity clauses in wholesale domestic wireless roaming agreements.

Further regulatory measures may be forthcoming in the fall when the CRTC conducts a more extensive review of wholesale wireless services.  While the practical effect may be limited given the new legislated cap on domestic roaming, the decision provides some vindication for Wind and affirms that unlawful, discriminatory tactics were used by incumbent carriers to hamstring new wireless competitors in Canada.

The post CRTC Finds Rogers Engaged in Unjust Discrimination With Its Domestic Roaming Agreements appeared first on Michael Geist.

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