Moderna Claims Compulsory License from U.S. Government to Use Third Party Patents in its Covid-19 Vaccine

A legal brief filed by Moderna, Inc. (“Moderna”) on May 6, 2022 argues that 28 U.S.C. § 1498(a) immunizes the company from liability if it infringes on any third-party patents involved in the manufacture of its Covid-19 vaccine (marketed as Spikevax).

The brief asks the United States District Court for the District of Delaware to dismiss a patent infringement lawsuit filed against Moderna by Arbutus Biopharma Corporation (“Arbutus”) and Genevant Sciences (“Genevant”) in February of 2022. Arbutus claims that it developed the lipid nanoparticle encasing used to deliver the Moderna vaccine’s mRNA into human cells, that it licensed the patents to Genevant, and that Moderna is practicing the patented inventions without its permission through the manufacture and distribution of Spikevax.

Moderna’s legal defense, at this point, reduces to one argument: that the government gave its “authorization and consent” for Moderna to infringe any third-party patents when manufacturing the vaccine, and that any infringement actions need to be taken up with the U.S. government. In other words, Moderna is claiming shelter behind what amounts to a compulsory license in third-party patents needed to manufacture its vaccine.

The defense is rooted in a statute known as 28 U.S.C. § 1498(a) and a Federal Acquisition Regulation (FAR) clause that incorporates the statute into Moderna’s contract with the government for the manufacture of the vaccine.

Section 1498, as the statute is known, provides that whenever an invention covered by a U.S. patent “is used or manufactured by or for the United States without a license,” the owner of the patent must sue the U.S. for damages in the United States Court of Federal Claims. And the remedies the owner may seek are limited to damages, not injunctive relief. This gives the U.S. government or a third party operating on its behalf a compulsory license to use the patent, subject to compensation to the patent owner.

Before a manufacturer can claim this compulsory license, it must have the authorization and consent of the United States. See Sevenson Env’t Servs., Inc. v. Shaw Env’t, Inc., 477 F.3d 1361, 1365 (Fed. Cir. 2007) (citing Hughes Aircraft Co. v. United States, 534 F.2d 889, 897–98 (Ct. Cl. 1976)). One of the ways such consent is obtained is through insertion of the following clause in a government procurement contract:

FAR 52.227-1
Authorization and Consent (Jun 2020)

(a) The Government authorizes and consents to all use and manufacture, in performing this contract or any subcontract at any tier, of any invention described in and covered by a United States patent-

(1) Embodied in the structure or composition of any article the delivery of which is accepted by the Government under this contract; or

(2) Used in machinery, tools, or methods whose use necessarily results from compliance by the Contractor or a subcontractor with (i) specifications or written provisions forming a part of this contract or (ii) specific written instructions given by the Contracting Officer directing the manner of performance. the entire liability to the Government for infringement of a United States patent shall be determined solely by the provisions of the indemnity clause, if any, included in this contract or any subcontract hereunder (including any lower-tier subcontract), and the Government assumes liability for all other infringement to the extent of the authorization and consent hereinabove granted.

As Moderna points out in its motion to dismiss, the clause is broad and its coverage includes “the structure or composition of any article the delivery of which is accepted by the Government under this contract.”

Moderna attached Contract No. W911QY20C0100 as “proof” that it had the authorization and consent of the U.S. government to use any U.S. patents involved in the manufacture of its Covid-19 vaccine. Though motions to dismiss are normally decided on the basis of pleadings, Moderna argues that the government may take judicial notice of the contract, because it is posted on the Department of Health and Human Services’ website.

The contract was originally awarded to Moderna on August 9, 2020, and initially gave the company $1.525 billion to manufacture 100 million doses of the vaccine. It has been amended at least 21 times since then, and is now worth $8,145,794,804.60. A separate contract funds the research and development of the vaccine.

The “Authorization and Consent” clause is located at page 46 of the contract.

Moderna’s filing is an important reminder of existing flexibilities that the U.S. government can leverage to expand vaccine access. Apparently, at least when doing so is consistent with a company’s legal or financial interests, they are willing to embrace such flexibility.

If Moderna prevails and the Court dismisses the Arbutus lawsuit, Arbutus will need to file an infringement case against the government in the Court of Federal Claims.

There are several reasons why this filing is important. It constitutes a compulsory licensing case for a vaccine, demonstrating how patent thickets on mRNA vaccines are problematic and how government action to grant non-voluntary uses is needed. It also raises the possibility that the U.S. government could use the “Authorization and Consent” clause and 28 U.S.C. § 1498(a) more broadly to address abuses of patent rights, something for which many academic experts and non-government organizations have long advocated.