Manufacturers Disappointed by U.S.–Canada Investment Ruling That Sidesteps Core IP Questions to the Detriment of U.S. Manufacturing

Co-authored by Patrick Forrest, NAM Vice President of Litigation and Deputy General Counsel

Manufacturers in the United States are deeply disappointed by an international panel decision that ruled in Canada’s favor purely on a threshold issue, sidestepping core investment and intellectual property (IP) issues at the heart of the case. In so doing, the panel failed to provide relief from Canada’s actions that undermine innovation and IP protection to the detriment of U.S. manufacturing and jobs.

Since 2005, Canadian courts have applied a unique rule, known as the “promise utility doctrine,” to invalidate patents that are widely granted in countries around the world. Through arbitrary and inconsistent decisions, Canadian courts have interpreted this doctrine to require a new criteria for patentability: strict rules that patents must fulfill their “promise” in ways that are inconsistent with international obligations or used by any other country around the world. Since 2005, Canadian courts have revoked 25 patents that were invented to help millions of patients suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions. The National Association of Manufacturers’ (NAM) Manufacturers’ Center for Legal Action raised these and other issues in a February 2016 amicus brief filed with and accepted by the Eli Lilly and Company v. Canada panel.

Yet, the panel failed to reach the crux of the case, ruling instead on narrow grounds that this clear departure in Canadian patent practices did not constitute a sudden change. This baffling decision ignores a broad range of evidence, including the significant uptick of patent invalidation claims since 2005, significant revisions to Canada’s patent examination manual to include the doctrine and internal communications indicating patent examiner confusion at the sudden change, that points to just such a dramatic shift.

While some may claim otherwise, let’s also be clear that this decision does:

More importantly, this decision does not resolve the significant uncertainty for innovative investors in Canada caused by the anti-innovation promise utility doctrine. Such challenges have chilled Canada’s ability to promote growth and investment for innovative manufacturers that rely on strong IP protections. Indeed, Canada has experienced a substantial decline in its innovation score in the World Economic Forum’s Global Competitiveness Report, falling from 10th in 2006 to 24th in 2016, placing Canada behind countries like New Zealand, Malaysia and Qatar.

As the U.S. government finalizes this year’s Special 301 report and action plans to combat global IP challenges, this decision makes concrete action more critical. The NAM urges the U.S. government to work effectively with the Canadian government to engage the United States to develop a solution that promotes strong bilateral commercial ties and innovation on both sides of the border. Manufacturers are counting on it.

Linda Dempsey

Linda Dempsey

Linda Dempsey is the vice president of international economic affairs at the National Association of Manufacturers (NAM). In this capacity, Ms. Dempsey leads the NAM’s efforts to improve the global competitiveness of manufacturers in the United States by advocating intellectual property protection, increased export financing and the elimination of trade barriers as well as pushing for agreements and treaties to open up new export markets to create jobs. Ms. Dempsey is noted for her experience on a wide range of international trade and investment policy issues.
Linda Dempsey

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