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.

Amicus Briefs For Reversal

1.  The United States

The Department of Justice brief focuses on arriving at the “proper interpretation” of Section 1498, particularly regarding injunctions (which another amicus dismisses on “public interest” grounds).  Concerns raised by the government in its brief include a characterization by the government that:

[U]nworkable interpretation exposes the government’s procurement efforts to disruption by injunctions issued in private-party litigation, threatens to chill contractors from working with the government, creates substantial uncertainty regarding government contractors’ exposure to treble damages that could inflate the prices the government must pay, and permits district courts to second-guess the government’s decision that its acquisition of goods is “for the Government.”

The government thinks the District Court was wrong and raises the issue of whether the government’s intention or the statutory provisions rule?  The Justice Department asserts that the “benefit to the government is inherent,” which raises the question of whether that or the government’s Statement of Interest should be enough to convince the Federal Circuit in this case?  Further, the government asks whether it or should it have made a difference if the contract contained an express provision that the vaccine made/obtained from Moderna were made “by and for” the government?  This brief argues that “[i]n conformity with the plain language of the statute as a whole, this Court has interpreted that phrase to require that an alleged infringer’s activities [performed with the government’s authorization and consent] benefit the government—as Moderna’s performance of a government contract formed to combat a nationwide public health emergency plainly did.”

The brief also makes practical arguments in favor of Moderna’s argument regarding uncertainty, unwillingness to deal, threat of injunctions, and the purported certainty a decision in Moderna’s favor would provide.

In the government’s view, the “for the government” requirement “impose[s] only a requirement that the use or manufacture of a patented method or apparatus occur pursuant to a contract with the government and for the benefit of the government,” citing Sevenson Env’t Servs., Inc. v. Shaw Env’t, Inc., 477 F.3d 1361, 1365 (Fed. Cir. 2007), and is satisfied when the accused [i.e., of infringement] activities are “in furtherance and fulfillment of a stated Government policy which serves the Government’s interests and which is for the Government’s benefit,” even where the government is not the “sole beneficiary” of the accused activities,” citing IRIS Corp. v. Japan Airlines Corp., 769 F.3d 1359, 1362 (Fed. Cir. 2014).  Satisfaction of the first, “for Government” prong of the test is “straightforward” according to the Justice Department insofar as “the relevant unit of government” has concluded that there is a need that can be satisfied by statutory authorization.  “The benefit to the government is thus inherent in the nature of the procurement contract” is how the brief sets forth the argument.  Execution of authorization and consent is “per se sufficient” to preclude patent infringement against a government contractor according to the brief.

If this conclusion was straightforward (as the government contends) then the District Court’s decision to the contrary was error according to the government (calling the basis for the District Court’s decision the “ultimate recipient rule” not supported by the statute and that “disregards statutory history, contravenes congressional objectives, defies common sense, and threatens to undermine government procurement”).  The government finds no support for these rules and statutory interpretations in precedent, citing decisions to the contrary (Hughes, Advanced Software, IRIS), and distinguishing Larson based on later case law (Sevenson and Advanced Software).

In sum, according to the government: “Section 1498(a) does not empower courts to substitute their judgment for that of the federal government regarding the benefits of federal contracts or otherwise circumscribe the intentionally broad scope of § 1498(a)” so as to “defeat the Congressional intent to allow the Government to procure whatever it wishe[s] regardless of possible patent infringement,” citing TVI Energy Corp. v. Blane, 806F.2d 1057, 1060 (Fed. Cir. 1986).

2.  American Intellectual Property Law Association (AIPLA)

While this amicus favors reversal, the brief asks the Federal Circuit to affirm the analytical framework representing both the “for the government” and “authorization and content” prongs recognized by other amici and that they are not co-extensive.  Also, and contrary to the government’s “Statement of Interest,” this amicus argues that the mere presence of FAR authorization and consent does not automatically provide satisfaction thereof (nor serve as a “nonreviewable determination”).  Finally, amicus asks the Court to affirm that the activities undertaken by Moderna were “for the government” under the circumstances of the pandemic.

The brief characterizes the facts in this case as “exceptional” due to the nature of the need for a vaccine to satisfy the urgent needs created by the pandemic.  Agreeing with the District Court and most amici, this amicus recognizes that there are two distinct requirements in the statute under the interpretive canon against superfluity illustrated by Montclair v. Ramsdell, 107 U.S. 147, 152 (1883), but then agrees with Moderna about the proper application of the statute to these unique circumstances (there being a little of the “eat your cake and have it too” about this argument).

This amicus recognizes that FAR clauses in the C-100 contract may be relevant but are not enough by themselves (“relevance is not equivalence”) because they would provide a route to “unilaterally expand § 1498(a)’s reach—and correspondingly limit the patent rights of inventor” merely by their inclusion, which itself raises separation-of-powers concerns.

As elsewhere, the brief mentions the effect of the Loper-Bright decision that courts must independently determine whether Section 1498 applies.

In the end, this amicus argues that the “extraordinary circumstances” here justify a conclusion opposite to the District Court’s as a matter of law, arguing that “[t]he Government directly procured COVID-19 vaccines during a declared national emergency, financed the manufacturing, directed distribution, and received the direct benefit of fulfilling its emergency response obligations.  This is the kind of government procurement that § 1498(a) was designed to address,” citing Hughes and Advanced Software and distinguished from Larson.

And the brief argues that the circumstances – “declared emergency authorities” from HHS (public health emergency) and the President (national emergency) and the contract being executed under (former) 10 U.S.C. § 2304(c)(2) (non-competitive bidding) – fall under provisions where “the agency’s need for the property or services is of such an unusual and compelling urgency that the United States would be seriously injured absent expedited procurement, followed by a litany of harms and direct negative impacts on variety of national activities, including national security, Federally funded research, Federal revenues from use of federal lands and federal oil and gas revenues, travel restrictions and lockdown orders, summarizing that “the pandemic was an existential challenge to the Government’s ability to discharge its most fundamental obligations.”

3.  Texas Conservative Research Institute (TCCRI)

This brief perhaps more than any of the others provides policy statements / arguments regarding protections given to private contractors under Section 1498, focusing on the question of “what does ‘for the United States’ mean”?

This amicus’ definition: “When the government contracts for a good, purchases the good, and takes possession of the good, that good was produced ‘for’ the government (i.e. ‘for the United States’), regardless of what the government subsequently does with said good.”  This interpretation is supported by statutory construction and case law and the Federal Circuit should reverse, amicus argues.  The factors involved in this decision include that the federal government declared a public health emergency under 42 U.S.C. § 247(d) and that HHS launched Project Warp Speed under a partnership between “the Department of Health and Human Services (HHS), including the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), and the Biomedical Advanced Research and Development Authority (BARDA), and the Department of Defense (DoD).”  Under these circumstances, contractual agreement between Moderna and the government, express “authorization and consent” from the government, performance by Moderna, and reliance by Moderna on the provisions of Section 1498 and inclusion of FAR in those contracts, and the need for certainty without which there would be “significant deteren[ce] for any private company considering a procurement with the federal government” support Moderna’s position that the requirements of Section 1498 were satisfied.

The brief specifically criticizes the District Court for picking one dictionary definition out of 31 in an instance where amicus argues “government procurement for a good or service that the government ultimately passes on to others is still a procurement for the government” (emphasis in brief).

This brief states that amicus’ argument is supported by the logical context of Section 1498 historically.  Using a widget hypothetical example, whether production at the behest of the government would not prevent Section 1498 protection by the identity of whom the widget were for.

The brief also cites the first sale doctrine as recognized in copyright, Bobbs-Merrill Co. v Straus, 210 U.S. 339 (1908), and by statute for patents, Bauer & Cie. v. O’Donnell, 229 U.S. 1 (1913), for the principle that “[o]nce a new owner takes possession of an item, that new owner controls the item and makes the decisions affecting it.  The scope of possession and ownership cares not for what the owner actually does with the item subsequently” (there being some dispute over whether the government took possession in this case, however).  In this regard, the brief also invokes the principles of exhaustion, wherein “the new owner’s subsequent activity does not affect his or her authority or status as the owner,” supported by United States v. Univis Lens Co., 316 U.S. 241 (1942); Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008); and Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. 360 (2017)

Uniquely, the brief also adds Equal Protection considerations arising in cases such as Zelman v. Simmons-Harris, 536 US 639 (2002); Espinoza v. Montana Dep’t of Revenue, 591 U.S. 464 (2020); and Carson v. Makin, 596 U.S. 767 (2022) (a little strained); and Free Exercise cases such as Mueller v. Allen, 463 U.S. 388 (1983); Witters v Washington Dep’t of Servs. for the Blind, 474 U.S. 481, 487 (1986); and Zobrest v. Catalina Foothills Sch. Dist., 509 U.S. 1 (1993), in its reasoning for reversal by the Federal Circuit.

4.  National Association of Manufacturers (NAM)

The voice of the manufacturing community argues that its members have “skin in the game” because these manufacturers sell products to the government that the government requisitions.

The basis for the arguments set forth in this brief are based on expectations and reliance and the problems with uncertainty.  This amicus provides an interesting aspect then it writes: “Manufacturers that sell to the government face exceptional capital requirements, because government contractors must often build out capacity before a contract is awarded.”  This amicus purports to be in something of a Catch-22 as a result, because its members patent rights are equally important to them so they are not keen to have patent rights degraded.

This amicus provides a way to come to a reasoned solution:

This case should be adjudicated on its specific facts—a manufacturer stepping up to make a life-saving product during a global public health crisis.  It is not a broader vehicle to expand the government’s ability to undermine private patent rights or to upend longstanding notions of government authorization and consent to patent infringement in government contracts.

While the brief cites government promises and inclusion of FAR provisions, the question is whether the government had the authority to make an enforceable promise in view of the limitations in Section 1498 in what the executive can promise to do if Congress hasn’t authorized it.

The brief also makes the procedural argument that deciding on summary judgment results in there being a less developed record, and argues that a better explained record would provide more clarity (unlikely the court will be persuaded by this argument).

Much of the brief provides policy commentary about the consequences of the decision being affirmed.  The brief cites Sevenson to the effect that in most instances courts de facto do what Moderna proposes to do here: bypass a separate inquiry regarding whether infringement was performed “for the government,” and further argues the distinctions relied upon by the District Court and argued by Arbutus should not make a difference:

it should make no difference whether the Government, upon buying and paying for stockpiles of goods (such as bread, iron, or Covid vaccines), provides those goods to their own employees, distributes them to the broader public as part of the government’s response to a public health crisis, natural disaster, or national security situation, or does countless other things with those goods, from storing them in strategic stockpiles to sharing them with state and local governments or international allies. Regardless of whether the contractor’s goods are manufactured for ultimate use by Government employees or by persons the Government deems best placed to support core Government efforts, the contractor still acts pursuant to an agreement with the Government to produce goods “for the United States.”

Which is what should have happened here according to amicus, the brief drawing distinctions with cases where the courts have not extended immunity, including that the government had solicited Moderna’s activities.  The brief also makes statements about what should be done not particularly tied to the legal issues (and statements without support except by reference to prior caselaw not particularly relevant).

The brief further speaks to deleterious consequences for national security, argues that patentees as well as contractors are protected by their interpretation of the statute, and makes the case that Court of Federal Claims awards can be significant (more than $100 million) as well as attorneys’ fees and costs, contrary to the almost presumptive arguments made by Arbutus/Genevant and other amici to the contrary.

The brief also discusses proposals that could hurt patent rights; intention to present a balanced argument pro and con, makes the point that “this is not a case where intellectual property rights are threatened” and that as a policy, NAM “vigorously opposes efforts by policymakers and courts to expand march-in rights or otherwise create compulsory licensing regimes.”

As presented by other amici, NAM makes a “settled expectations” argument regarding certainty, in circumstances where obtaining a contract requires evidence that the contract can be fulfilled, i.e., having made sufficient investment to show “the necessary production, construction, and technical equipment and facilities. . .” and “adequate financial resources,” which liability can be expected to raise either “contractors being more circumspect about developing and supplying goods at the behest of the Government or charging higher prices for goods the Government deems important to mitigate the risk of later facing patent infringement liability for its government sales,” citing Advanced Software Design Corp. v. FRB of St. Louis and Iris Corp. v. Japan Airlines Corp. as illustrating these needs by contractors ex ante.

For these reasons, this amicus asserts that “[t]he applicability of Section 1498 should turn on bright-line rules amenable to determining ex-ante whether a contractor’s manufacture or use of a product is immunized from patent liability.  It should not turn on litigation decisions made by a plaintiff bringing a patent claim long after the contractor has performed its contract.”

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