Government Access to Technologies During the COVID-19 Pandemic and Practical Realities for Patent Owners
Given the COVID-19 pandemic affecting every facet of daily life, many questions have arisen as to (1) the scope of the government’s rights relating to intellectual property owned and exclusively licensed by MIT; (2) how such governmental rights may be exercised; and (3) other, related issues faced by all patent owners, including MIT.
Patents Generated from Federally Funded Research
MIT, like most research universities, regularly accepts federal funding to conduct fundamental research. When MIT accepts funding from the federal government as a part of a research grant, the Bayh-Dole statutory framework (35 U.S.C. § 201 et seq.) governs any resulting inventions developed at MIT and sets forth certain requirements for the subsequent licensing of such inventions by MIT. The broad goal of Bayh-Dole is to ensure that federally funded technology is further developed and commercialized for the benefit of the public.
More specifically, when MIT receives money from the federal government for purposes of conducting certain research, MIT investigators perform such research pursuant to a “funding agreement.” When inventions are “conceived or first actually reduced to practice in the performance of work under a funding agreement[,]” they are termed “subject inventions” under Bayh-Dole. (Any ‘invention’ under Bayh-Dole is one that can be afforded patent protection under law.)
When an invention is a “subject invention,” MIT has certain obligations to the federal agency that awarded the research funds. Once a subject invention arises, MIT has the option to elect title to the subject invention. Once MIT does elect title, it must pursue patent prosecution and report to the government on such prosecution’s progress. MIT may then license such subject invention to third parties, subject to certain requirements.
One such requirement is that the government retains certain rights in subject inventions – the most basic of which is the right to use the subject invention on a non-exclusive basis for the government’s use or on the government’s behalf (e.g., allowing a government contractor to use the subject invention for the government’s purposes).
Another set of rights that the government retained under Bayh-Dole are so-called “march-in rights.” March-in rights permit the government to require the patent holder, or exclusive licensee of a patent covering a subject invention, to grant a nonexclusive, partially exclusive, or exclusive license in any field of use upon reasonable terms “under the circumstances” if the applicable federal agency determines, among other things, that “action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor [i.e., the patent holder], assignee, or their licensees.” 35 U.S.C. § 203.
The Government’s Use of March-In Rights
Because COVID-19 affects the public’s health and safety, march-in rights are currently getting attention in the news. To-date, march-in rights have not been exercised by the government in response to the disease. While the possibility that they could be exercised is a much discussed topic – particularly for exclusive licensees of government-funded technology – the government has been hesitant to pursue this remedy to address a “health or safety need” to-date.
Much of the historic concern around the march-in rights provision involves exclusive licensees in the therapeutics industry. Particularly because drug development takes enormous investment there is ongoing concern that the government could use its march-in rights to take action that would result in lowering prices. However, were the government to decide to exercise its rights during the current (or any) national health emergency it is likely that the government would do so only in order to increase the supply of a certain product by requiring additional licenses be granted – it is unlikely that the government would use march-in rights to impose price controls. This is because imposing price controls does not appear consistent with a reasonable interpretation of the statute, and it would not benefit the future of the pharmaceutical industry if the government set a precedent of using march-in rights as a price-control mechanism. [1]
Of course, there are other mechanisms by which the government could attempt to control prices of COVID-19 drugs—legislation. For instance, on April 15, 2020, a group of senior House members outlined their approach to pricing COVID-19-related pharmaceuticals with a ban on exclusivity (i.e., the period when, separate from the exclusion afforded patents, in which drug manufactures get a monopoly on selling the medicines they developed without competition from generic offerings), a requirement of reasonable prices and transparent corporate reporting on expenses.[2]
Using the Government’s Retained Non-Exclusive License to Practice COVID-19 Related Subject Inventions
If MIT is the patent holder of patents covering subject inventions that are related to the diagnosis, treatment or prevention of COVID-19, and such technology has been exclusively licensed to a private entity, then it is possible that the government could decide to exercise its retained, non-exclusive, royalty free license to make products covered by such subject inventions – or permit a contractor to make them on its behalf. Pursuant to standard interpretations of Bayh-Dole, however, these products would need to be used for governmental purposes only. The boundaries on what constitutes governmental purposes are somewhat ill-defined, but in a national pandemic, the government may adopt a broad interpretation of what use is “for” the government.
Other Mechanisms Available to the Government
Another option available to the government to spur production of products needed to treat, diagnose or prevent COVID-19 (even where such products are covered by third party patents) is to exercise an option not tied to any federal funding: 28 U.S.C. § 1498. Section 1498 generally permits the government to use or make a product covered by a third party’s patent without getting prior permission, provided that the government may be required to provide such third party “reasonable compensation” for any infringement. To recover such reasonable compensation, however, the patent holder must first sue the federal government in the United States Court of Federal Claims.
Section 1498 appears more likely to be used by the government in a national emergency than a reliance on march-in rights because: (1) it may be used for any patent – not just those based on federally funded subject inventions and (2) providing compensation to the patent holder places the burden first on the patent holder to bring suit (which may winnow the number of patent holders that attempt recovery).
Further, there is some precedent for the government using Section 1498. The government has relied on Section 1498 several times, including threatening its use during the 2001 anthrax crisis while seeking to obtain less expensive versions of the antibiotic Cipro. Ultimately, the government did not exercise Section 1498 in 2001, but the mere threat resulted in the manufacturer of Cipro lowering its cost.[3]
Therefore, using Section 1498 may ultimately not be necessary. That does not mean, however, that patent holders or their exclusive licensees will not treat patent assets differently during the pandemic.
Practical Realities for Patent Holders and Exclusive Licensees during the COVID-19 Pandemic
Aside from the government’s recourse to ensure availability and accessibility of certain technologies during the pandemic, the options that patent holders have to exercise their patent assets may be limited to a certain extent given the realities of global concerns. Particularly when it comes to patents covering potentially life-saving treatments and vaccines, patent holders (or, in the case of MIT, its exclusive licensees) are unlikely to take action that might hinder, or be seen to hinder, making such treatment accessible and available. Such companies will certainly be motivated to act in the public interest to make their technology available and engender goodwill among consumers. They will also be hesitant to incur reputational harm based on any attempt to enforce such patents against potential infringers and therefore potentially exclude other entities from practicing technologies with potentially life-saving outcomes.
With the above in mind, instead of threatening enforcement, companies may look increasingly to other mechanisms to generate value from patent assets. Companies are more likely to proactively solicit partners to either sublicense for further development or negotiate reasonable (or, even below-average) royalties on licensed products. The shift toward more lenient partnering strategies will be an interesting trend to follow in the future, post-pandemic world.
In addition to exclusive licensees in the private sector finding creative ways to leverage patent assets while increasing availability, research universities are pursuing other mechanisms to ensure that, where possible, technology that may be useful for preventing, diagnosing and treating COVID-19 can be made accessible and available. For instance, Harvard, MIT and Stanford released the COVID-19 Technology Access Framework on April 7, 2020, to set forth a commitment to COVID-19 technology licensing principles, in order to maximize access to university innovations.