World Bank, Washington D.C.

As everyone is aware, a new European Unified Patent Court system is in the making. The Unified Patent Court Agreement (UPCA) has been signed by all of the EU Member States but Spain and Poland and is now waiting for at least 13 ratifications (including Germany, United Kingdom, and France) in order to eventually enter into force. And, there is a fierce debate as to whether or not the effects of this new system will be beneficial.

However, there appears to be some chance that another concurrent aspect of recent developments of relevance for Intellectual Property might get overlooked.

The Transatlantic Free Trade Area (TAFTA) or Transatlantic Trade and Investment Partnership (TTIP) is a proposed free trade area between the United States and the European Union. As we can learn from Wikipedia, it was considered in the 1990s and again in 2007. In 2013, “United States-European Union High Level Working Group on Jobs and Growth” recommended the start of negotiations on the Transatlantic Trade and Investment Partnership. It represents potentially the largest regional free-trade agreement in history, covering more than 40% of world GDP, and accounting for large shares of world trade and foreign direct investment.

On 14 June, Member States gave the European Commission the green light to start trade and investment talks with the United States. Currently, the negotiations are stalled due to the U.S. Government shutdown but there is little doubt that the talks will resume as soon as Government business is re-started in Washington, D.C.

Unfortunately, the negotiations are shrouded in secrecy, and so far no meaningful conference documents appear to have been leaked. It appears, however, quite clear that TAFTA/TTIP is not negotiated to be mainly about reducing customs tariffs or the like. On the contrary, the entire project is designed as an approach to revise a huge field of national U.S. and regional EU laws with effect on trade. It might well be seen as some sort of a ‘backdoor’ to amend many established acts enshrined in the respective statute books for the sake of creating trans-atlantic level field for influential businesses.

In this very context, Zach Carter and Ryan Grim recently wrote in the Huffington Post:

[O]ne aspect of the agreement, known as “investor-state dispute resolution,” would allow a company to appeal a regulatory rule or law to an international court, most likely the World Bank. The international body would be given authority to impose economic sanctions against any country that violated its verdict, including the United States. The international body would be given authority to impose economic sanctions against any country that violated its verdict, including the United States.

A spokesperson for the Office of the United States Trade Representative confirmed to HuffPost that the agency “will seek the inclusion of procedures for expeditious, fair and transparent investor-state dispute resolution” under a new pact with the EU, but said that the new legal framework will be “subject to appropriate safeguards and the protection of legitimate government regulatory interests.”

Up to now, I do not have any insight if TAFTA/TTIP might influence Intellectual Propertly law by imposing investor-state dispute resolution procedures on Intellectual Property disputes. But there is a corresponding precedent under the NAFTA agreement:

The North American Free Trade Agreement (NAFTA) is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It also comprises clauses for investor-state dispute resolution.

In December 2012, drug giant Eli Lilly brought a NAFTA case against the Canadian government after it invalidated a patent for one of the company’s medications.

Public Citizen Inc. and/or Public Citizen Foundation reported on www.citizen.org:

In November 2012, Eli Lilly and Company initiated formal proceedings under the North American Free Trade Agreement (NAFTA) to attack Canada’s standards for granting drug patents, claiming that the invalidation of a patent violated three special investor privileges granted by the agreement. The investor privileges provisions included in NAFTA and other U.S. “free trade” agreements (FTAs) empower private firms to directly challenge government policies before foreign tribunals comprised of three private-sector attorneys, to claim that the policies undermine investors’ “expected future profits,” and to demand taxpayer compensation. Eli Lilly’s NAFTA investor-state challenge marks the first attempt by a patent-holding pharmaceutical corporation to use the extraordinary investor privileges provided by U.S. “trade” agreements as a tool to push for greater monopoly patent protections, which increase the cost of medicines for consumers and governments. Eli Lilly is demanding $100 million in compensation.

Eli Lilly launched its NAFTA attack after Canadian courts invalidated Eli Lilly’s monopoly patent rights for an attention deficit hyperactivity disorder (ADHD) drug called Strattera. The Canadian courts did so after determining that Eli Lilly had presented insufficient evidence (a single study involving 22 patients) when filing for the patent to show that Strattera would deliver the long-term benefits promised by the company. While the $100 million NAFTA investor-state compensation demand relates to revocation of the Strattera patent, Eli Lilly makes clear in its formal “Notice of Intent” to Canada that it is not only challenging the invalidation of its particular patent, but Canada’s entire legal doctrine for determining an invention’s “utility” and, thus, a patent’s validity. While pushing for an entirely different patent standard, Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, is demanding $100 million from Canadian taxpayers as compensation for Canada’s enforcement of its existing patent standards.

Well, it appears as if the Elly Lilly proceedings under NAFTA rules have not been concluded yet, and no details are available with regard to the exposition of European Intellectual Propery statutes to any TAFTA/TTIP investor-state dispute resolution clauses. Hence, there is a lot of speculation. In summary, this news sound as if NAFTA may have precedence over ordinary patent law.

Could also take TAFTA/TTIP priority over ordinary EU and U.S. patent law? Perhaps even eventually forcing the EU (and, with it, EPC) to abandon the technicality requirement in the patent statues? Nobody knows for sure so far because of the negotiation documents are so sensitive that the general public may not be allowed to read them in advance.

And, of course, any disputes on the potential benefits and perils of the Unified Patent Court could well be dwarfed if TAFTA/TTIP really would render something like the World Bank into sort of an ultimate Supreme Patent Court of the U.S. and EU combined. Proper IT laws of EU and US preferably should determine IP conflict resolution procedures under TAFTA/TTIP, not vice versa. This is a proper example of a tail wagging the dog, isn’t it?

I can’t imagine that such move would be greeted in particular by SME businesses throughout the EU. Any legal certainty might be deteriorated if the World Bank could invalidate well-established national or regional law in the field of Intellectual Property by a scratch of a pen.

Be on the guard, stay tuned.

[UPDATE 2013-10-22] For more details on the Elly Lilly Case, see this article by MARC-ANDRÉ SÉGUIN on nationalmagazine.ca.

(Photo: (C) 2006 by Shiny Things via Flickr licensed under the Terms of a CC License as documented by Wikimedia)