By Donald Zuhn —

Last week, in a letter addressed to the Secretary of the U.S. Department of Veteran Affairs, Senator Bernard Sanders (I-VT) urged Secretary Robert McDonald to use his authority as Secretary "to break the patents on Hepatitis C medications for the treatment of veterans suffering with the disease."  Senator Sanders (at right) notes in the letter that as Chairman of the Senate Committee of Veterans' Affairs, he held a hearing in December 2014 regarding the impact of Hepatitis C drug pricing on veterans' access to treatment, and "raised concerns that the price of these new Hepatitis C drugs, specifically Sovaldi, which is manufactured by Gilead Sciences, even when discounted, would preclude veterans from accessing these life-changing drugs."

With regard to Solvaldi, Senator Sanders indicates that the drug is priced at $1,000 per pill, or about $84,000 for a course of treatment, and contends that "[t]his price was not a function of cost.  It was, pure and simple, an abuse of monopoly power."  As a result of the drug's price, the Senator states that "the concerns I raised last year have become a reality — VA is being forced to stop enrollment of new patients in treatment because of lack of funds."

While suggesting that one solution to the problem would be for "Gilead Sciences to simply provide the drug to VA at no cost, as they have done abroad in the Republic of Georgia, India, and other places throughout the world with high rates of HCV infection," the letter notes that "the company has not stepped up to do this for our country's veterans," and declares that "[i]nstead, they have prioritized an outrageous compensation package for Gilead's CEO John Maitin, valued at over $190 million, including stock options and shares."

Senator Sanders proposes an alternative course of action to Secretary McDonald, asking the Secretary "to utilize federal law, specifically 28 USC § 1498, to break the patents on these drugs to authorize third parties to manufacture or import them for government use."  The Senator concludes that "I cannot think of a more clear-cut situation where the government use provision should be applied," adding that "[o]ur nation's veterans cannot, and should not, be denied treatment while drug companies rake in billions of dollars in profits."

In the letter, Senator Sanders suggests that Secretary McDonald utilize 28 U.S.C. § 1498.  Section 1498(a) of Title 28 provides that:

§ 1498. Patent and copyright cases

(a) Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.  Reasonable and entire compensation shall include the owner’s reasonable costs, including reasonable fees for expert witnesses and attorneys, in pursuing the action if the owner is an independent inventor, a nonprofit organization, or an entity that had no more than 500 employees at any time during the 5-year period preceding the use or manufacture of the patented invention by or for the United States.

Nothwithstanding the preceding sentences, unless the action has been pending for more than 10 years from the time of filing to the time that the owner applies for such costs and fees, 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.

For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States. . . .

A discussion of the history of § 1498 can be found at pages 10-14 of Zoltek Corp. v. United States (Fed. Cir. 2012).  The opinion notes that a precursor to the section was initially enacted by Congress in 1910 in response to the Supreme Court's decision in Schillinger v. United States (1894), where the Court held that patent infringement was a tort for which the Government had not waived sovereign immunity, and as a result, determined that a patentee lacked a remedy for infringement by the United States.  In William Cramp & Sons Ship & Engine Bldg. Co. v. Int’l Curtis Marine Turbine Co., 246 U.S. 28 (1918), the Supreme Court applied the 1910 Act to the issue of patent infringement by government contractors who constructed warships for the U.S. Navy during World War I, finding that the 1910 Act did not shield the contractors from infringement.  The Acting Secretary of the Navy, Franklin D. Roosevelt, responded to the Court's decision by writing to the Senate Committee of Naval Affairs that:

[I]t seems necessary that amendment be made of the Act of June 25, 1910 [as] the decision is, in effect, . . . that a contractor for the manufacture of a patented article for the government is not exempt . . . from injunction and other interference through litigation by the patentee[, and as a result] manufacturers are exposed to expensive litigation, involving the possibilities of prohibitive injunction payment of royalties, rendering of accounts, and payment of punitive damages, and they are reluctant to take contracts that may bring such severe consequences.

Acting Secretary Roosevelt proposed an amendment in which the Government waived sovereign immunity for its own unlawful use or manufacture of a patented invention, but also assumed liability when its contractors did so for the Government.