By Kevin E. Noonan –

The parties in the appeal of the District Court’s grant of summary judgment to Arbutus and Genevant over Moderna, holding Moderna liable for $1.3 billion in patent infringement damages attracted a fair amount of amicus support.  Although Plaintiffs Arbutus and Genevant had more amici writing in their favor, there appear to be factors at play causing this slight imbalance.

Perhaps the easiest and most consistent of these factors was the apprehension that permitting Section 1498 to be interpreted for the government to properly accept liability for COVID-19 vaccine production could, in other hands and contexts permit the Executive Branch to abrogate private patent rights in favor of public policy goals.  The most fraught of these risks regard “solutions” to high drug prices, and it did not take the pandemic for several prominent politicians and lawmakers to have made this argument (so far, to no avail).  These arguments (and others) absent avoidable repetitiveness will be addressed for each of these amici.

Amicus Briefs For Affirmance

1.  Bayh-Dole Coalition (BDC)

This brief focuses on whether a determination in favor of Moderna could “enlarg[e] the U.S. government’s ability to exercise a statutorily limited ‘march-in’ power as to licenses executed by owners of patents under the Bayh-Dole Act.”  The brief justifies this concern with the statistic that “[s]ince its passage, the [Bayh-Dole] Act has led to the creation of more than 15,000 startup companies, and more than 6.5 million American jobs.”

As with other amici, the BDC’s brief characterizes Section 1498 as an “eminent domain statute,” and argues that patented products produced at the behest of the government but subsequently passed on to third parties should not preclude satisfaction of the requirement that they be produced “for the U.S.”  In addition, these amici argue that the purported overreach that Moderna is proposing (“Moderna proposes a holding that any contract to which the U.S. government is a party, regardless of its purpose or its ultimate beneficiary, is a use ‘by or for the government’ as § 1498(a) expressly requires”) has as a caveat that “§1498(a) is not to apply to products being made by the private sector merely because those products are purchased by the government, and especially where the government purchases those products for other private sector entities” (emphasis added).

Unavoidably perhaps the brief recites a “litany of horribles” with regard to innovation and investment, to the extent that “[i]nvestment in unpredictable and risky ventures [should the Federal Circuit hold for Moderna] would go overseas, fueling foreign development of competing technologies, including jurisdictions that do not share our democratic values and devotion to free and open markets.  Our greatest sources of disruptive innovation – the upstart independent inventor and the entrepreneur – would struggle to secure funding for the development of new, improved products and industries, and resulting revolutionary advances will be still more rare” particularly with regard to “life-saving therapies, integrated communications systems, [and] efficient and reliable energy solutions.”

2.  Biopharmaceuticals Innovators (BPI) – Novartis Pharmaceuticals Corporation; AbbVie Inc.; Bayer Healthcare Pharmaceuticals Inc.; A28 Therapeutics, Inc.; JURA Bio, Inc.; Elutia, Inc.; Eloxx Pharmaceuticals, Inc.; Archetype Therapeutics, Inc.; and Yokina Biome, Inc.

These amici express the fear that construing Section 1498 as Moderna argues could interfere with the provisions of the Hatch-Waxman Act and the Biosimilar Price Competition and Innovation Act (BPCIA).  Their interpretation of Moderna’s position would be to permit Section 1498 to benefit private citizens, as well as influencing outcomes for some of these amici in their ongoing patent infringement litigation involving the C-100 contract here.  Moderna’s position would have the potential to produce “unbounded executive authority to strip patent holders of their exclusionary rights by routing infringing products to private citizens through [government] procurement contracts.”  It would permit the government to “allow agencies to bypass those [statutory] schemes [i.e., Hatch Waxman and BPCIA] entirely—routing injunction-proof infringing drugs to the public through procurement contracts while leaving new-drug manufacturers with only post-market money damages against the Government.”

When it applies, amici argue the proper benefits of § 1498 that “remov[es] the threat of injunction,” citing Advanced Software Design Corp. v. Fed. Rsrv. Bank of St. Louis, 583 F.3d 1371, 1375 (Fed. Cir. 2009), and limits the patent holder to suing the Government in the Court of Federal Claims for “only reasonable and entire compensation” without “increased damages,” citing Leesona Corp. v. United States, 599 F.2d 958, 969 (Ct. Cl. 1979).

As does Arbutus in its responding brief, these amici argue that the proper interpretation of the statute is that “for the government” and “authorization and consent” were separate requirements, citing IRIS Corp. v. Japan Airlines Corp., 769 F.3d 1359, 1362 (Fed. Cir. 2014), and further that “the statute does not immunize government funded healthcare for private citizens” under Larson v. United States, 26 Cl. Ct. 365, 367, 369 (1992).

Also argued by these amici, Moderna’s position is a violation of the major questions doctrine to the extent that Congress did not intend to delegate authority over major policy decisions to the Executive or it agencies, citing West Virginia v. EPA, 142 S. Ct. 2587, 2609 (2022), and that Moderna’s position amounts to the Executive having “blank check authority” to violate patent rights and the right to trial by jury.  The brief also evokes a fear that “boilerplate” FAR clauses contained in government procurement contracts would enable the government to avoid patent rights (with transfers of the costs to the tax-paying public)(citing in a footnote so far unsuccessful efforts to have the Executive lower drug pricing using Section 1498 methods).

These arguments focus on the potential for abuse, which raises the issue of whether this risk justifies the potential to prevent the government from being able to mandate or at least accommodate the need for vaccines and other necessary media for addressing major societal concerns.

Interestingly, the brief makes no mention of the government’s responsibility to the society to prevent disruption uniquely caused by the pandemic and treats vaccination as if it were some private reward.

3.  Alliance of Startups and Inventors for Jobs (USIJ) (23 member companies)

This brief is also principally concerned by the impetus for price controls that will lead to overreach of Section 1498.  It suggests there is a need for the Federal Circuit to render a decision that creates a boundary distinguishing the difference between “government funding of private activities that are ‘for the Government’” and what is outside them – that there be a bright line, suggested to involve delivery to a vendor other than the government even when on behalf of the government.  In this regard the brief asserts that “[d]elivery to a vendor for further distribution to the public is not delivery to the government for its own use, and Section 1498 should not apply to such deliveries” (which is one way to characterize the circumstances in this case).

The brief notes that this is “not a chameleon” argument, citing Clark v. Martinez, 543 U.S. 371, 380 (2005) (Scalia, J), wherein statutes should not be interpreted to accommodate facts.  This rubric should be properly applied that “[i]nterpreting Section 1498 as Moderna and its amici are seeking would have consequences far beyond the instant litigation” because, inter alia, “[s]uch a ruling would establish a legal doctrine without limiting principles” and “infringement defendants are likely to look for any plausible basis for setting up such a defense.”

The argument in this brief can be set forth based on these principles (in interpreting Section 1498):

Federal funding is not government use. Government collaboration is not Government use.  Government payment or reimbursement is not Government use.  Trial sponsorship is not Government use.  And a public-health objective is not Government use.

Underlying these amici‘s argument is the threat of price controls by “a few politicians and consumer groups to control the prices of patented drugs.”

4.  Judges, Academics, and Officials (including former Chief Judges Michel and Rader)

The argument in this brief is also that Section 1498 is an eminent domain statute involved in compensation under the Takings clause for property taken for U.S. government use and thus providing vaccine doses to members of the public is outside the scope of this constitutional power.

As might be suspected, the brief cites a plethora of 19th Century cases involving government takings of patent rights, including:

United States v. Burns, 79 U.S. 246, 252 (1870); Cammeyer v. Newton, 94 U.S. 225, 234 (1876);Brady v. Atlantic Works, 3 F. Cas. 1190, 1192 (C.C.D. Mass. 1876); and McKeever v. United States, 14 Ct. Cl. 396, 421 (1878).

affirmed by more recent cases:

Irving Air Chute Co. v. United States, 93 F. Supp. 633, 635 (Ct. Cl. 1950); United States v. Adams, 383 U.S. 39 (1966); Croll-Reynolds Co. v. Perini-Leavell- Jones-Vinell, 399 F.2d 913 (5th Cir. 1968); Carter-Wallace, Inc. v. United States, 449 F.2d 1374, 1390 (Ct. Cl. 1971); Hughes Aircraft Co. v. United States, 534 F.2d 889 (Ct. Cl. 1976); Decca Ltd. v. United States, 544 F.2d 1070, 1082 (Ct. Cl. 1976); Hughes Aircraft Co. v. Messerschmitt-Boelkow-Blohm, 625 F.2d 580 (5th Cir. 1980); Larson v. United States, 26 Cl. Ct. 365, 369 (1992)(a case relied upon by the district court that may be closest case factually); Florida Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 642–43 (1999);Advanced Software Design Corp. v. Federal Reserve Bank of St. Louis, 583 F.3d 1371 (Fed. Cir. 2009) (which these amici characterize as “correct, legally and commonsensically”); and Horne v. U.S. Dept. of Agriculture, 135 S. Ct. 2419, 2427 (2015) (quoting James v. Campbell, 104 U.S. 356, 358 (1882) (Roberts, CJ).

Statutory interpretation that can be gleaned from this case law (i.e., that the circumstances in this case do not support government liability under Section 1498) is supported, according to amici, by the plain meaning of the statutory language  and the legislative history, the brief asserting that the statute “does not create any liability; it simply gives a remedy upon an existing liability.”

This brief also provides an exegesis of the C-100 contract terms consistent with their arguments.

5.  Northwestern University

The interest frankly set forth in this brief is the University’s reliance on Federal funding for supporting academic research, noting in particular its International Institute for Nanotechnology which has had lipid nanotechnology-related inventions that have been asserted against Moderna (and that that case could be influenced (negatively) by the Federal Circuit’s decision in this case).

Amici argue that the statute can be considered a waiver of sovereign immunity statute that should be construed in the government’s favor, citing Zoltek Corp. v. United States, 672 F.3d 1309, 1318 (Fed. Cir. 2012).  As elsewhere, the brief considers the “remoteness” issue and the “reading ‘for’ out of the statute” (authorization and consent being not enough), and notes the eminent domain character under Decca Ltd. v. United States, 544 F.2d 1070, 1082 (Ct. Cl. 1976).

The brief explicates the statutory language and context, legislative and precedential history essentially duplicative of other amicus briefs filed in this case and makes the same arguments distinguishing Moderna’s providing vaccine doses to the public and not the government.  “While Moderna equates supplying vaccines to private citizens during a pandemic to a contractor supplying military supplies to the government to fight a war, civilians do not receive torpedo boat destroyers” being one way the brief draws the distinctions between traditional applications of Section 1498 and Moderna’s arguments here.

Fittingly for a University, amici expressly set forth in their view the negative effects a decision reversing the District Court in Moderna’s favor would have on the Bayh-Dole Act, particularly with regard to the provisions of 35 U.S.C. §202(c)(4) (which specifies that the government receives a “nonexclusive, nontransferrable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention”).  Amici also caution against interpreting the Moderna license broadly enough to impact/broaden this provision, particularly with regard to “march-in” rights (which would provide an “end-run” around those provisions and the limitations on them).

6.  Eagle Forum*

Eagle Forum Education and Legal Defense Fund makes three points: first, that Section 1498 has not been applied to pharmaceutical products previously (as evinced by the lack of precedent for such products cited by the parties or other amici); second, that deciding in Moderna’s favor would violate Congressional authority as well as violating the “constitutional avoidance clause”; and third, that Moderna’s interpretation would be contrary to textualist interpretations of the statute as well as being contrary to “sound policy considerations.”

The brief emphasizes the importance of patents in the pharmaceutical industry (“the lifeblood” thereof) due to large investment costs (billions of dollars), as well as “long development timelines, large capital investment requirements, stringent regulatory approval hurdles, and high failure rates.”

These amici join with others in arguing that the phrase “for the government” must be taken literally, consistent with the history of the statute insofar as the subject matter was providing necessities for war-waging.  The brief further argues that by its express terms Section 1498 “convert[s] a valuable patent infringement claim against a private infringer into a weaker claim against the federal government” and “substantially reduces the value of the patent.”  The products at issue here (vaccines) are unlike those “typically designed for government consumption” such as weaponry, while Moderna’s product, in contrast, “was plainly made for the public” and thus does not fall within the ambit of the liability-shifting provisions of the statute.

While there is a tone in the brief that seems to accuse Moderna of taking advantage of the government efforts for vaccine development and production during the pandemic (for example, “[t]o allow Moderna to get a free ride while their competitors and others play by the rules of making licensing payments”) that while seemly unjustified, given the purported consequences (“would be highly disruptive and would create a disincentive to pharmaceutical invention”) may certainly be warranted.  More to the point is that Moderna rather than the government was in the better position to determine appropriate royalty terms, and these differences, by “limiting remedies for infringement and shifting liability to the federal government in these circumstances would inflict an unjustified distortion on the development of new drugs.”

Regarding separation of powers issues, the brief mentions (uniquely) the Appropriations Clause of the Constitution (and violation thereof) as being implicated in Moderna’s position (particularly with regard to the “extraordinary $1.3 billion in patent infringement liability” that would be imposed upon (“shift[ed] on to the back of”) the government by Executive action rather than by any Act of Congress), which leads amicus to urge that the Federal Circuit reject Moderna’s appeal, raising the specter that the executive branch could bypass Congress using this stratagem, for example, for the benefit of a “favored contractor.”

Turning to what the brief calls a “textualist approach,” amicus argues that phrases like “manufactured by . . . the United States” means the United States government, despite later broadening using phrases including “used . . . by or for the United States,” which the brief argues means the same thing, namely “the federal government and not the general public” (noting that the latter made up the vast majority of Moderna’s vaccine sales).  Legislative intent analysis supports this conclusion according to the brief.

Amici‘s policy arguments include that Moderna’s position is a “Pandora’s box” (a common analogy) of “liability-shifting” in the context of recent patent application filings having “sharply declin[ed]” compared to, for example, China.

There are three “compelling reasons” amicus asserts for affirming the District Court’s decision.  First, that this would “open the door” to “infringement[] without compensation” to pharmaceutical companies; second, that it would upset the balance between the branches of government; and third, it would be contrary to the plain meaning of the statutory text.  The brief cautions in reciting these reasons that while some of these reasons for affirming may not have reached by the District Court that would not be an impediment for the Federal Circuit to adopt such reasoning under Simio, LLC v. Flexsim Software Prods., 983 F.3d 1353, 1365 (Fed. Cir. 2020), and Luv N’ Care, Ltd. v. Laurain, 98 F.4th 1081, 1094 (Fed. Cir. 2024).

Turning to the first reason, this amicus asserts that by applying the scope of Section 1498 as Moderna advocates the decision would “strike[] at the heart of the incentive necessary for innovation in this important field,” reciting a familiar (because generally true) litany of the need for pharmaceutical companies to have “secure, robust patent rights” to support the enormous investment needed to bring a pharmaceutical product to market.  The brief asserts that Congress has determined that “patent protection for pharmaceutical innovation needs to be stronger than for other types of inventions” by citing the patent term extension provisions of the Hatch-Waxman Act (while ignoring the countervailing provisions providing a “safe harbor” permitting activities in support of generic competition prior to pharmaceutical patent expiry).  The alternative remedy at the Court of Federal Claims would provide only “limited” compensation that would constitute “a harmful step backwards . . . creating a disincentive that discourages investment in the most challenging and important therapeutic areas.”  This would lead to incentives to “copy and infringe,” resulting in “fewer breakthrough therapies and diminished progress against illnesses.”  And if Moderna wishes to make an argument that its actions during the pandemic were for “the good of the country,” amici suggest they do so by lobbying Congress, or taking advantage of other alternatives to infringement such as “licensing, redesign, or pricing for expected royalties.”

The brief also contrasts the Federal Circuit reasoning in Biotechnology Indus. Org. v. District of Columbia, 496 F.3d 1362, 1374 (Fed. Cir. 2007), and enactments of local laws for reducing drug pricing that the Court found “contrary to the goals established by Congress in the patent laws.”  Such laws provide the “bottom line” for patenting pharmaceuticals with which the Federal Circuit has “consistently abided.”  In this regard the brief asserts (most directly than all other amici) the concerns in misusing Section 1498 as a “powerful tool” for lowering drug pricing, citing as an example a letter from Senator Elizabeth Warren to Xavier Becerra as Secretary of Health and Human Services to this end.  The consequences of following this path would be the evisceration of a pharmaceutical company’s investment in developing important drugs in amici‘s view.  Similar arguments and sentiments by the Federal Circuit are quoted in the brief, for instance in Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1383-84 (Fed. Cir. 2006), quoting Patlex Corp. v. Mossinghoff, 758 F.2d 594, 599 (Fed. Cir. 1985).  The consequences of the Court adopting Moderna’s position would make victims of “everyone who stands to benefit from future innovation in [the pharmaceutical] industry.”

The second reason for affirmance advocated by these amici are constitutional and structural with regard to the relationships between the branches of government.  Part of amici‘s purported opposition to Moderna’s position was the size of the claimed amount at issue, which represented a “vast, unbounded expansion in liability” for the government, and another the separation of powers concerns enunciated by their brief.  The brief counsels that the Federal Circuit should adopt a parsimonious view as the basis for a decision that avoids the constitutional issue, consistent with Supreme Court precedent, citing Pub. Citizen v. United States Dep’t of Justice, 491 U.S. 440, 466 (1989) (quoting Edward J. DeBartolo Corp. v. Florida Gulf Coast Building & Construction Trades Council, 485 U.S. 568, 575 (1988).  The brief also notes that Moderna is asking a court (the Federal Circuit) to appropriate funds (over a billion dollars), a power vested in Congress in Article I, Section 9 and not in either the Executive and Judicial Branches and would infringe upon that power of Congress.  In an interesting rhetorical twist, the brief contrasts the emphasis Moderna applies to the pandemic to justify their advocacy over having Section 1498 as the route for reimbursement with the “significance of silence by Congress in never assuming this specific, colossal liability of Moderna” (in contrast to other Acts of Congress including the CARES Act and Operation Warp Speed (“OWS”)).  The brief makes its point regarding the Authorization and Consent clause in Section 1498 by saying “the executive branch cannot bypass the Appropriations Clause any more than the judiciary should” and resorts to Loper Bright for the principle that it is the Federal Circuit and not the Executive that interprets an ambiguous statute (to the extent that it is ambiguous).  Loper Bright Enters. v. Raimondo, 603 U.S. 369, 413 (2024).  Neither branch can compel Congress to spend monies it did not authorize and in that the Clause is “a bulwark of the Constitution’s separation of powers” according to Justice Kavanaugh in United States Dep’t of the Navy v. Fed. Labor Rels. Auth., 665 F.3d 1339, 1346, 1347 (2012).”  Any waiver of sovereign immunity resulting in expenditures of government monies must be unambiguous” these amici declare.

The brief turns finally to a textual reading of the statute in support for their position that the Federal Circuit should affirm the District Court.  This point is simply put – the plain meaning of the phrase “manufactured . . . for the United States” is limited to products made for the United States and not the public.  And this amicus asserts that Moderna’s argument in trying to convince the Federal Circuit otherwise is “incoheren[t]” and (or maybe because of) “be[ing] unfair to competitors who play by the rules, and who negotiate and pay royalty fees for their patent infringement.”  Moderna’s behavior is something this amicus clearly does not want other companies to emulate (although it must be recognized that the pandemic that provided the backdrop for this eventuality has been a “once in a century” event).  “Surprises later of this magnitude, which Moderna’s arguments here would encourage, should not be allowed,” amicus asserts.

This portion of the brief makes arguments for Section 1498’s legislative and precedential history not particularly unique nor different from many other amici advocating for affirmance.

The amicus concludes with a prediction that:

If accepted, Moderna’s sweeping new approach would create an unprecedented new incentive for patent infringement by nearly any company that does business with the federal government, and introduce new impediments for patent-holders to obtain appropriate and timely remedies.  A statute designed narrowly to facilitate a wartime effort would thereby be turned into an incentive to steal intellectual property from others without the infringing party ever paying for it.  Such an incentive to misappropriate is not what Congress enacted in Section 1498, and Moderna’s interpretation would be significantly detrimental to the value of our patent system.

*This brief was authored by Andrew Schafley, son of renowned conservative activist Phyllis Schafley

The arguments by both sets of amici reflect their interests and the potential outcomes expected to arise depending on how the Federal Circuit rules.