The government accuses it of applying for patents based on guesses.
That response is laid out in a submission filed with a NAFTA panel, made public this week, which seeks to rebut multiple claims in a suit from drug-maker Eli Lilly (NYSE:LLY).
The company sued after Canadian courts struck down its exclusive right to produce two drugs. It has claimed Canada's patent protections are unpredictable, and weaker than the international norm. That complaint has been echoed by the U.S. government, resulting in Canada being placed on an intellectual-property watchlist.
But the Canadian government attacked those claims in a 178-page response.
It disputed the legitimacy of Eli Lilly's own patents. It accused the company of a scattershot practice — blast away with patent applications in every direction, and claim whatever gets hit.
"(The) claimant adopted a scattershot approach," said the document, filed Jan. 27.
"(It claimed) dozens of new uses of known and previously-patented compounds on the basis of little apparent evidence, only to abandon the vast majority of these applications."
It lists all the different patent claims made for the two drugs in question.
For the attention-deficit drug Atomoxetine, it said Eli Lilly had filed for 12 separate patents between 1992 and 2004 claiming it could treat: psoriasis, stuttering, incontinence, hot flashes, anxiety, learning disabilities, tic disorders and, finally, ADHD.
For the anti-psychotic drug Olanzapine, the government listed 16 patent applications for: excessive aggression, fungal dermatitis, bipolar disorder, sexual dysfunction, insomnia, nicotine withdrawal, tic disorder, anorexia, autism, mental handicaps, pain, substance abuse and Alzheimer’s disease.
"Canadian law does not grant patents for almost-inventions," said the submission.
"Even if the applicant's speculation at the time of filing is later confirmed."
Canada's Federal Court struck down those two patents between 2009 and 2011, essentially allowing generic drug-makers access to products that had been marketed under the name Strattera and Zyprexa.
The document attacks the suit on other fronts:
—On the idea that Canadian courts are now changing the rules, it said Canadian cases since at least the 1970s have reaffirmed that patent applications must include evidence to support claims that a drug might become useful.
—To the claim that Canada's high proof-of-usefulness standards are killing patents, the government said only one-third of challenges were successful in Canada on utility grounds, while a far greater margin — half — succeeded on other grounds.
—It said there was almost always an additional reason when a Canadian court struck down a patent on utility grounds. It listed three exceptions — two involved Eli Lilly.
"(The) claimant’s own patent filing behaviour actually suggests the importance of Canada's rules," said the document.
—The company said Canada was an international outlier. It said it had the ADHD drug in 36 jurisdictions, but was only challenged in three countries and only lost its patent in Canada.
But the Canadian response argued that the drug is only sold in four major markets. It was challenged in three, and was struck down in two before a U.S. district court overturned a New Jersey decision.
Eli Lilly isn't backing away from the case.
It said in a statement that it's not alone in criticizing Canadian standards for proving the utility of a patent. In addition to the U.S. government, Eli Lilly said the U.S. Chamber of Commerce also considers Canada an international outlier.
"Nothing in their filing changes our strongly held belief that Canada's improper invalidation of our patents under its unique and burdensome promise utility is inconsistent with Canada's NAFTA obligations and that Lilly is entitled to compensation for its losses," the company said in a statement.
The Canadian government shrugged off its appearance as the only G7 country on last year's U.S. Trade Representative watchlist. It described the list as a bunch of allegations from U.S. companies, published by the U.S. government.