Fair and Equitable Treatment and Judicial Patent Decisions

40 Pages Posted: 26 Jan 2016

See all articles by Kathleen Liddell

Kathleen Liddell

University of Cambridge - Faculty of Law

Michael Waibel

University of Vienna - Faculty of Law

Date Written: January 10, 2016


This article focuses on the increased scope for tension between obligations under investment treaties, particularly fair and equitable treatment, and the interpretation of national patent law by domestic courts. Precisely because investment treaties were created to protect investors from State-led mistreatment and bias, and investment treaties include intellectual property (IP) rights in their definition of investment, the question is how much flexibility national courts retain in applying, interpreting and developing IP laws. The implication of international investment treaties limiting longstanding flexibilities in IP law could be serious and profound. What more precisely are the implications of the IIL fair and equitable treatment standard for patent law and domestic court interpretations?

Our main conclusions are: first, that investment tribunals should defer substantially to interpretations of patent law by domestic courts, limiting themselves to reviewing decisions for lack of a rational basis or lack of elementary procedural fairness (denial of justice). They should not engage in closer scrutiny. Second, if investment tribunals engage in closer scrutiny (for instance, in relation to patent decisions by other State organs, or if they reject our first conclusion), fair and equitable treatment provides limited stability for existing patents and for patent law. Investors have no legitimate expectation that national patents will be irrevocable, that national courts will interpret domestic rules of patentability – such as utility – in a particular way, or that patent law will be static over time. However, domestic courts (and other State organs) breach FET if they contradict settled patent law and apply this to existing patents in such a way that the patent rights are diminished, or adopt an interpretation with no rational basis.

Keywords: intellectual property rights, patents, patent offices, patent invalidation, fair and equitable treatment, state responsibility for judicial conduct, deference to judicial conduct, Eli Lilly v. Canada

JEL Classification: K11; K41; O34

Suggested Citation

Liddell, Kathleen and Waibel, Michael, Fair and Equitable Treatment and Judicial Patent Decisions (January 10, 2016). University of Cambridge Faculty of Law Research Paper No. 4/2016. Available at SSRN: https://ssrn.com/abstract=2722452 or http://dx.doi.org/10.2139/ssrn.2722452

Kathleen Liddell (Contact Author)

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

Michael Waibel

University of Vienna - Faculty of Law ( email )

Schottenbastei 10-16
Vienna, A-1010

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