Sovereignty Under Siege: Corporate Challenges to Domestic Intellectual Property Decisions

Abstract

Countries face a new threat that strikes at their ability to balance protection of intellectual property rights against other priorities, such as public health. They may have to pay substantial compensation to companies that dislike domestic intellectual property laws. This threat is much more significant than a landmark international agreement concluded twenty years ago in conjunction with the World Trade Organization (WTO) that for the first time required all countries to provide “minimum” levels of intellectual property rights; before that time, countries were not obligated to provide any such rights at all. Since the conclusion of the WTO, policy makers and scholars have strived to preserve domestic flexibilities to consider domestic policies such as public health. However, those flexibilities may quickly evaporate if companies can bring claims against countries for compromising their investments under so-called “investor-state arbitration” claims. This is not a theoretical problem – Eli Lilly is currently seeking $500 million in compensation from Canada because Canadian courts invalidated two of its patents under prevailing law.

Although investor-state arbitration claims have been broadly criticized in recent years, there are unique issues associated with expanding this remedy to domestic actions consistent with the WTO agreement. If Eli Lilly’s claim were to succeed, it would disrupt internationally agreed norms that permit countries to have different standards of protection. This Article provides a detailed analysis of Eli Lilly’s case of first impression. In so doing, the Article offers both an explanation of why Eli Lilly’s claims should be rejected, as well as a prediction of other likely impending threats to domestic regulation of public health that intersect with the interests of pharmaceutical companies. This Article ultimately proposes specific language to incorporate in pending agreements to forestall the predicted harms.

Keywords: intellectual property, patent, investor-state arbitration, ISDS, investment arbitration, NAFTA, TRIPS, drug, pharmaceutical, public health, access to medicine,TPP, TTIP, CETA, expropriation, FET, fair and equitable treatment, clinical data

JEL Classification: O31, O32, O33, O34, O38, O39, L59, K49, K41, K39, K33, K19, K29, L19, L18, H89