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Apotex Inc. v USA: Differentiating Patents and Other Intangible Rights

Apotex Head Office Canada

Canadian generics manufacturer Apotex filed notices of arbitration against the United States in 2008 as Apotex Inc. and again in 2012 as Apotex Holdings Inc. The dispute concerned FDA measures which it believed harmed its abbreviated new drug applications (ANDAs) to produce and distribute Sertraline and Pravastatin in the United States. Sertraline is a generic version of Pfizer’s anti-depressant drug, Zoloft or sertraline hydrochloride. The patents connected to Zoloft were No. 4,356,518 or the “‘518 patent” and No. 5,248,699 or the “‘699 patent”. Bristol Myers Squibb is the owner of the patent for Statin Pravachol and Apotex developed pravastatin as the generic version for marketing and distribution in the United states. The drug, which is used for reducing cholesterol and as a preventative treatment for cardiovascular disease, was the subject of an FDA decision and three federal court decisions.

Under the Hatch-Waxman Amendments in United States patent law,approved ANDAs, can be described as patent-related, intangible rights that provide a shorter route to market entry for generic pharmaceuticals. While ANDA applications are not IPRs in the strict legal sense, final FDA approval of paragraph IV ANDAs gives the generic applicant, a 180-day generic exclusivity for a specific dosage formulation. The first generic manufacturer to apply for and be granted ANDA approval is rewarded with the exclusive right to synthesise, manufacture, market and distribute generic versions of particular dosages of branded drugs, within a commercially viable window of a patent’s expiration; ensuring quick market entry and diminished competition from other generic companies, once the originator company’s patent exclusivity no longer applies. Therefore, ANDAs and the work that goes into their preparation cannot be equated to a "mere import license" as suggested by the Tribunal. The Tribunal seems to conflate Apotex's failure to meet rationae personae and rationae materiae jurisdictional requirements, with the objective legal category into which ANDAs fall in general patent law. The company failed to meet the necessary jurisdictional requirements to be categorised as an investor because it lodged the claim as Apotex Inc only and did not submit evidence that it was a shareholder of its U.S. affiliate and distributor Apotex Corp. Furthermore its ANDA applications were not yet approved, at the time it launched its claim, so that even under the broadest definitions of investment, they did not meet the standard of, “property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes.”. The Tribunal's analysis of jurisdictional requirements is not at issue here. It is the Tribunal's obiter dicta, with respect to its analysis of the nature of ANDAs as property.

Differentiating ANDAs and Patents

The Tribunal's analysis in the Apotex investment claims against the USA, adopted an approach to the interpretation of intangible property rights and patents, which appears to be out of step with U.S. patent law, including regulations regarding various non-patent intangibles, for which that law makes provision. The legal reasoning provided by the Tribunal for its analysis on the proprietary nature of Abbreviated New Drug Applications (ANDAs), which were the subject of the claim, might prove to be problematic for future investment disputes, involving investors whose core business is the production of generic and biosimilar pharmaceuticals.

The analysis offered by the Tribunal for differentiating patent rights, from the rights afforded under approved ANDAs is problematic. The Tribunal opined that, " an ANDA, ultimately, remains simply an application for revocable permission to (in this case) export a product for sale (by others) in the United States." Like an ANDA application, a patent application or grant is also a revocable permission or right (pursuant to prior art claims for example). Both patents and ANDAs fall into the category of intangibles, the limits of which are determined by the host state, not an investment Tribunal. Municipal laws take on the characteristic of facts in evidence in international litigation. Therefore, any tribunal would be acting beyond its power, if it aimed to determine the proprietary scope of intangibles, pursuant to anything other than the current status of the host state's jurisprudence and laws on the matter.

Patent rights grant time limited (20 years) property rights for new products or processes that involve inventive step and are capable of industrial application. The novelty and originality of the contribution are the important points of differentiation when compared with ANDAs. In contrast ANDAs are extremely narrow proprietary rights in both time (180 days) and subject matter(specific dosage of existing pharmaceutical compounds), for non-original products, usually considered for approval toward the end of the life of an existing patent . ANDAs are not merely import licenses, owing to the complexity of regulatory compliant generic drug development. Furthermore, they are also open to generic manufacturers, having the nationality of the host state. What differentiates them from patents, is that they are derivative rights for the first to submit a safe, compliant copy of a drug; they are not origination rights for novel products or processes. Both are intangible rights, but patents occupy a higher status within property law. Furthermore, under the U.S. tax code, ANDAs qualify as section 197 intangibles.

The Tribunal went further to justify its categorisation of ANDAs as not meeting the criteria for 'true' property by suggest that the FDA could revoke both tentative approval and even final approval of ANDAs. It noted that ANDAs could be revoked for reasons related to safety, effectiveness and threats to public health based on clinical or other tests or scientific data. However, this also applies to tentatively approved and finally granted patents. All intangibles are subject to requirements created by the State. 'True' property is what the State deems it to be. In the case of patents, this is circumscribed by TRIPS and US patent law, while the proprietary nature of ANDAs are only subject to U.S. law and case law. The key attribute which sets ANDAs apart from patents, is that patents are property rights awarded for new, original and useful innovations. ANDAs are intangibles which exhibit characteristics of both property and licenses, granted for the first to create a viable, safe and compliant copy of an existing drug.


- Apotex Inc. v. The Government of the United States of America, ICSID Case No. UNCT/10/2, Award on Jurisdiction and Admissibility, 2013

- Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID Case No. ARB(AF)/12/1, Award, 2014

- United States Code Title 35 - Patents

- TRIPS Agreement

- Canada Patent Act (R.S.C., 1985, c. P-4), as amended on 2019-10-30

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