On March 31, 2020, KEI received a copy of the contract between Johnson & Johnson (“J&J”) and the Department of Health and Human Services (HHS) for the development of J&J’s COVID-19 vaccine.The contract, which is now valued at $1.3 billion, was originally executed in 2017 but was expanded in 2020 to encompass the development of the vaccine. Because the contract is an Other Transaction Agreement (OTA), the transparency of the agreement is critical, as OTAs are regarded by federal agencies as being exempt from laws that apply to standard contracts, including the Bayh-Dole Act. The contract was provided in response to KEI’s Freedom of Information Act (FOIA) request submitted in April of 2020.
The contract redacts the definition of terms such as “Field,” “Subject Invention,” and “Practical Application”–definitions that are essential to the public’s ability to petition for the exercise of march-in rights on any invention funded in the contract. The redactions thus undermine the public’s ability to exercise its rights in taxpayer-funded inventions. Some IP and data terms that are not redacted are weakened.
Value of the Contract
The contract dates back to September 15, 2017, when HHS announced that it had entered into a partnership with J&J valued for the development of treatments and vaccines against the flu. The HHS press release announcing the partnership stated that the contract was valued at $43 million, with an upper limit of $273 million, On February 11, 2020, HHS issued a press release stating that HHS and J&J were “expand[ing] an existing partnership” to support J&J’s development of a COVID-19 vaccine, referring to the contract KEI obtained under the FOIA. Prior to February of 2020, the upper limit of the contract was approximately $233 million. Today, the contract is valued at $1.3 billion. J&J has received approximately $1 billion from HHS to bring its COVID-19 vaccine to market.
Transparency Issues Undermines the Exercise of Public Rights
As noted above, the J&J vaccine R&D contract is an OTA, meaning that the government treated the IP terms under the Bayh-Dole Act as flexible/optional when it negotiated the contract. KEI has reviewed dozens of OTAs executed by HHS or the Army for COVID-19, and the majority of them weaken key Bayh-Dole terms in a way that is favorable to contractors and undermines the public interest in the affordability and accessibility of inventions conceived or reduced to practice under the contracts.
In the J&J vaccine OTA, HHS redacted the definitions of the terms “Field”, “Subject Invention”, and “Practical Application”. Following is an overview of how those terms define the scope of the march-in rights under the Bayh-Dole Act and how the redactions undermine the public’s right to file a march-in petition.
The Bayh-Dole Act Framework
The Bayh-Dole Act authorizes the government to march-in and grant a compulsory license in a “subject invention” in “any field of use” if the contractor fails to “achieve practical application of the subject invention”. 35 U.S.C. § 203. “Practical application” is defined as manufacturing, practicing, or operating an invention “under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.” (Emphasis added). A “subject invention” is “any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement”. 35 U.S.C. § 201(e). Stated more clearly, a contractor is obligated, under the Bayh-Dole Act, to make any technology that is invented or becomes operational in the course of a funding agreement available to the public on reasonable terms, and that includes the price on which it is sold. If the contractor fails to do so, the government can allow another company to manufacture the invention.
March-in rights are a right that belong to the public. The Senate Committee Report for the Bayh-Dole Act, S. Rep. No. 96-480, states that the Senate anticipated that the majority of march-in petitions would be filed by members of the public. This has proven to be the case, as most of the march-in petitions submitted to date have been filed by organizations that represent the interests of the public.
The Contractual Framework
March-in rights under the J&J contract are located at pages 21-22. The contract states that the march-in license must be “within the Field” — meaning, the Field as defined in the contract and redacted. This is contrary to march-in rights under the Bayh-Dole Act which, as noted above, permit a compulsory license in any field of use. Because of this redaction, the public does not know if the march-in license can be used only for COVID-19, for other variants, or for other diseases or conditions in which an invention funded under the contract may be useful. (Note that many inventions now used for COVID-19 were developed to address other diseases such as the Zika or Ebola viruses).
Another issue is the scope of any march-in rights under the contract. If the contract tracked the Bayh-Dole Act, any invention resulting from or reduced to practice under the contract would be a “subject” invention and the government would be able to march in. However, the definition of “subject invention” is redacted in the contract, making it unclear whether that is the case. KEI previously reported how another J&J OTA, for a COVID-19 therapeutic, narrowed the definition of “subject invention” so that it required conception of an invention and its reduction to practice, rather than either or.
The contract also obscures when failure to achieve practical application is a trigger for the exercise of march-in rights. The first basis for march-in under the contract, similar to the Bayh-Dole Act, is “Such action is necessary because Recipient or assignee has not taken steps, consistent with the intent of this Agreement, to achieve “Practical Application of the Subject Invention”. Because the definition of “Practical Application” is redacted, it is impossible to know when failure to achieve it occurs. KEI has also previously reported how the J&J COVID-19 therapeutic OTA weakened the definition of practical application, to impose a much lower obligation of an invention that is “capable of being utilized”.
Because HHS has prevented the public from knowing the definition of “subject invention”, “practical application”, and “field” in the J&J vaccine contract, the public will be limited in its ability to craft a meaningful march-in petition, should the need arise. Without these operative terms, the march-in petition may be meaningless, because it may ask the government to do something that it is legally prohibited from doing, per the contract terms.
The second basis for march-in rights in the vaccine contract under the contract is weakened because it is limited to a formal declaration of a public health emergency that affects the United States. The use of vaccine or therapeutic for COVID-19 may extend beyond a formal period of an emergency and other non-COVID-19 uses may well take place outside of a declared emergency.
Finally, data rights in the contract are weaker than the data rights term prescribed by the Federal Acquisition Regulation. That term gives the government unlimited rights in technical data delivered under the contract, regardless of how its development was funded. Unlimited rights allow the government to do anything it wants with the data, including allowing the contractor’s competitor to use it. The contract gives the government only limited rights in certain data. Limited rights are much less useful than unlimited rights because they permit only use within the government, for research purposes.
Another transparency-related issue is that HHS provided two amendments to the contract along with the original agreement. HHS may not have realized that it already provided the same two amendments to KEI, in June of 2020, because the amendments it provided on March 31, 2021 were more redacted than the June 2020 version.
KEI will litigate the redactions in its FOIA lawsuit against HHS and the Army in the United States District Court for the District of Columbia (No. 20-cv-2986 (KBJ)).