$1 Billion Johnson & Johnson COVID-19 Contract Weakens IP and Data Protections for Taxpayers

On November 7, 2020, the Department of Health and Human Services (HHS) posted another COVID-19 vaccine contract: the $1 billion agreement between Janssen Pharmaceutical (a component of Johnson & Johnson (“J&J”)) and the U.S. government (through an intermediary called Advanced Technology International) for the advanced research and development and purchase of at least 100 million doses of J&J’s COVID-19 vaccine candidate. The contract uses a special contracting vehicle called an Other Transaction Agreement (OTA) to weaken, in material ways, the government’s rights in intellectual property (IP) and data in a standard government contract.

A standard contract is required, under federal law, to include certain provisions memorializing the government’s rights in publicly-funded IP and data and the contractor’s obligations under the Bayh-Dole Act. These rights and obligations include the contractor’s obligation to make a taxpayer-funded invention available to the public “on reasonable terms”, i.e. price, and the government’s authority to “march-in” to authorize competition if the contractor fails to satisfy this obligation. This obligation was eliminated from the contract, instead requiring J&J only to manufacture an invention “capable of being utilized” — a much lower bar that undermines the government’s ability to address reasonable pricing. Under a standard contract implementing the Bayh-Dole Act, the government is also authorized to march-in for three other reasons, including to alleviate health or safety needs, or if the contractor fails to substantially manufacture the publicly-funded invention in the United States. In the J&J contract, the entire march-in section is rewritten to authorize the remedy only in cases related to formal declarations of public health emergencies.

Another important safeguard under the Bayh-Dole Act is the government’s “nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world[.]” This license, which could be utilized to help ensure access and affordability of COVID-19 technologies, was narrowed in the J&J contract to specify that it does not include commercial purposes — a specification that does not appear under the Bayh-Dole Act or standard contracts implementing the statute — introducing unnecessary ambiguity into the scope of the license.

Finally, the data rights under the J&J contract are significantly weaker than what the government would have obtained under a standard contract. Because the contract is between J&J and the Army, the data rights would normally be prescribed by the Defense Federal Acquisition Regulation Supplement (DFARS). Had the DFARS (DFARS 252.227–7013 ) applied, the government would have have the following data rights:

  • Unlimited rights in technical data delivered under the contract if developed exclusively with government funds, as well as “[s]tudies, analyses, test data, or similar data produced for the contract when the study, analysis, test, or similar work was specified as an element of performance;”
  • Government purpose rights in data developed with public and private funds; and
  • Limited rights in data developed exclusively with private funds.

Technical data is defined as scientific or technical information in recorded form.

Unlimited rights are true to their name and would allow the government to use the data for any purpose and to authorize others to do so, including allowing a competitor to use the data for commercial purposes.

Government purpose rights can be used without limit within the government, and outside the government for uses to which the government is a party.

Limited rights can only be used for research purposes within the government.

The J&J contract limits the government’s rights in data in the following ways:

  1. It defines “data” to exclude production/manufacturing know-how, trade secrets, and clinical data–a limitation not present in the DFARS.
  2. The contract eliminates the government’s rights in data developed exclusively with government funds. Rather, the government has only the lower category of government purpose rights in such data, where there is less certainty about the scope of permissible uses.
  3. It eliminates the government’s unlimited rights in clinical data.
  4. The contract eliminates the government’s rights in data developed with mixed funds. Rather, the government only has limited rights in such data — which extends only to use within the government, for research purposes.

NPR’s coverage of the J&J contract here.