September 2020: Life Sciences Litigation Update

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Traditional Commercial Patent Incentives in the Spotlight in the Race to Develop a COVID-19 Vaccine

As the COVID-19 pandemic continues to persist, the race to develop a vaccine barrels forward.  Due to the breadth of the pandemic, traditional commercial incentives associated with intellectual property are under scrutiny, particularly given the rights available to the government arising from any investment in the development of a vaccine for COVID-19, and the societal pressure on companies to rapidly develop and mass produce a viable, safe, and affordable vaccine.

As reported, to date, the federal government has entered into agreements with several companies, providing billions of dollars toward the development of a vaccine.  In light of the government’s investment, ownership of intellectual property rights is an important question.  The Bayh-Dole Act of 1980 permits the government to retain ownership rights in certain patents that are created as a result of government-funded research.  See 35 U.S.C. §§ 200, 201(e), (c), 202(a).  The Act allows companies to “elect to retain title to any subject invention”, id. § 202(a), so long as they “fulfill a number of obligations imposed by the statute.”  Stanford Univ. v. Roche Molecular Sys., Inc., 563 U.S. 776, 782 (2011).  If a company fails to do so, the government may receive title to the invention  Id.  Moreover, the agencies that granted the federal funds receive “a nonexclusive, nontransferable, irrevocable, paid-up license to practice” the invention, 35 U.S.C. § 202(c)(4), and exercise march-in rights permitting “the agenc[ies] to grant a license to a responsible third party.”  Stanford, 563 U.S. at 782.  Though the government does not often take advantage of these rights, the urgency of finding a vaccine for COVID-19 and making it available to the public raises the specter of their use in a way not presented before.  

Indeed, even companies working to develop a vaccine absent government funding are not insulated from these issues.  The government may be able to exercise a quasi-eminent domain right and use any patented product, without permission, so long as it provides “reasonable compensation” to the patent holder.  See 28 U.S.C. § 1498.  That compensation may be delayed and is not without limitation, however, as “reasonable and entire compensation shall not include such costs and fees if the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.”  Id.  The upshot is that, to the extent the government side-steps patent rights for the sake of the public good, patent holders may not be fully compensated for the cost of developing the vaccine.  Such a concern is not without precedent:  in the early 2000s, the anthrax antidote was provided to the public at a 50% discount by the patent holder in the face of the government’s threat that it would exercise its rights under §1498.  (See Chinh H. Pham, The Race for a COVID-19 Vaccine is On: Key Factors May Impact Patent Protection, The National Law Review (May 26, 2020), https://www.natlawreview.com/article/race-covid-19-vaccine-key-factors-may-impact-patent-protection.) 

Beyond the rights of the government vis-à-vis the rights of a patent holder, there is tremendous pressure on private companies to share their intellectual property and make any resulting vaccine affordable and widely accessible.  (See Molly Callahan, Should Pharmaceutical Companies Give Up Their Patent Protections to Find a Vaccine for COVID-19?, News @ Northeastern (Apr. 14, 2020), https://news.northeastern.edu/2020/04/14/should-pharmaceutical-companies-give-up-their-patent-protections-to-find-a-vaccine-for-covid-19/.)  Although prices for patented products are typically determined by the company and the free market, given the pandemic companies are now being urged “to pool diagnostics, drugs, and vaccines” and make the vaccines affordable for all.  (Id.)  In fact, some have already agreed not to enforce their patent exclusivity rights and have agreed to make vaccines available on a not-for-profit basis.  (Id.)  In light of this societal pressure, it remains to be seen how commercial incentives and intellectual property will play out in the face of the COVID-19 global pandemic. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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