Who's Afraid of Section 1498? A Case for Government Patent Use in Pandemics and Other National Crises.

AuthorMorten, Christopher J.

Table of contents Introduction I. Historical Role of Government Patent Use in Times of Crisis A. Origin of the Statute B. World War I C. World War II D. Bioterrorism Threats After September 11 E. Lessons for the COVID-19 Pandemic II. The Government's Innovation Policy Toolbox A. Grants B. Prizes C. Patent Buyouts D. Government Patent Use Under Section 1498 III. Section 1498 As Policy Tool in a National Emergency A. Four Key Features of Government Patent Use in a National Emergency 1. Speed 2. Flexibility 3. Ex Post Remedy Determination 4. Determination of Compensation by an Impartial Adjudicator B. A Case Study for the Use of [section] 1498: Remdesivir in the COVID-19 Pandemic 1. Remdesivir: An Experimental Drug That Promises Modest but Important Benefits 2. Two Problems: Shortages and Overpricing 3. Patents Are the Sole Significant Barrier to Access 4. Government Patent Use Offers a Way Forward IV. Conclusion V. Appendix: Memorandum from Alfred B. Engelbergt Senator Charles e. Schumer INTRODUCTION

Among certain patent lawyers, one number generates some awe and trepidation: 1498. It is the section number of a statute in Title 28 of the United States Code, a law that provides the U.S. government with the power to manufacture and use any patented invention at the cost of "reasonable and entire compensation for such use and manufacture." (1) This seemingly unremarkable statutory language has sat on the books for over a century. Yet 28 U.S.C. [section] 1498 and government patent use are regularly characterized in the language of extremity. Commentators describe the statute as "breaking" patents, (2) "seizure" of rights, (3) "stealing," (4) "expropriating private property," (5) "taboo," (6) "a radical change," (7) a "specter," (8) a "nuclear option," (9) and equivalent to eminent-domain condemnation. (10) Even supporters of invoking the law sometimes characterize use of [section] 1498 as exceptional. (11) And the COVID-19 pandemic, despite having elicited numerous calls to invoke [section] 1498, (12) has not changed the views of many that government patent use is a destabilizing intervention, tantamount to "throw[ing] our IP system out the window." (13)

To be sure, [section] 1498 can be used in bold, interventionist ways. For example, Senators Bernie Sanders and Elizabeth Warren, along with the New York Times editorial board, have called for the use of [section] 1498 to discipline the pricing of certain vital and best-selling prescription drugs. (14) Though the United States has not used [section] 1498 in this dramatic way, there is much merit to such bold use, which could save billions in public and private drug spending. (15)

But the statute is not limited to such uses, and our focus in this Article is to show that [section] 1498 need not be at all extreme in its operation or impact. Under its authority to have patented inventions "used or manufactured by or for the United States" at the cost of "reasonable and entire compensation," the government can fine-tune the scope and duration of its invocation of [section] 1498 to make modest interventions in the market, perhaps with only limited disruption to investment-backed expectations. And as a matter of history, [section] 1498 is not nearly as exceptional as some modern critics make it out to be. The government has long exercised both [section] 1498 and even stronger government patent-use powers, often with substantial support from the stakeholder community.

To highlight this more modest, ordinary role that [section] 1498 can play in national policy, we consider a specific class of uses: federal responses to complex large-scale crises, including the COVID-19 pandemic that the world faces today. While the statute's effectiveness can go well beyond crisis management, a focus on emergency contexts reveals particular aspects and advantages of [section] 1498 that illuminate its value and carry over into non-emergency contexts as well. To be sure, national emergencies entail some policy considerations different from those of non-emergency times, but nevertheless they helpfully draw focus to latent features of [section] 1498 that might otherwise escape attention. We find that [section] 1498 is well suited to a perfectly ordinary role as a crisis management policy tool, on the same plane as other emergency powers such as the Defense Production Act, the invocation of which many have supported to tackle COVID-19. (16)

This Article is, to our knowledge, the first to consider in detail the special role of government patent use in cases of national emergency in the United States. (17) Past scholarship on the historical development and use of [section] 1498 has tended to focus on judicial cases where patents were actually used by the U.S. government under the statute or its predecessors, (18) which are useful for explicating the scope and nature of the statute but less helpful for assessing the appropriateness of invoking it in the first place (since, after all, a case about government patent use can only arise after the government has used the patent). A handful discuss its legislative history and note in passing its connection to American involvement in World War I. (19) Turning to normative analyses, substantial literature addresses the question of whether government patent use under [section] 1498 constitutes a Fifth Amendment taking of property, (20) a proposition that the Federal Circuit recently rejected. (21) That literature does not generally distinguish emergency conditions from other situations. (22) Others have considered the role of [section] 1498 in specific fields such as health care, (23) government contracting and procurement, (24) and human rights. (25)

Commentators have, to be sure, considered the applicability of [section] 1498 to certain specific emergency contexts. (26) Several commentators have suggested that [section] 1498 may be useful in a public health emergency, for example. (27) Some have specifically supported government patent use as a relief measure during the COVID-19 pandemic. (28) Others have noted the statute's relationship to war, generally in service of concluding its use is inappropriate outside of wartime. (29) But this research generally stops at observing that [section] 1498 could remediate (or not remediate) particular situations, without developing a more comprehensive theoretical basis for when and why the government should make use of third-party patents during national emergencies. And some scholars, (30) including Hemel and Ouellette, (31) have advocated for an alternative approach to expanding access to patented anti-COVID-19 technologies--patent buyouts of some sort--without (to our knowledge) weighing the advantages and disadvantages of a buyout against those of government patent use under [section] 1498.

This Article thus makes several contributions. First, it provides an up-to-date primer on government patent use--what it is, how it works, and how it compares to other policy tools to incentivize new inventions and allocate access to those inventions. (32) Second, it makes a novel descriptive contribution by synthesizing the history of the use of [section] 1498 and related statutes in times of national emergency. We include numerous early examples of government patent use that have not been explored in the legal academic literature. Even though the law has never been limited to those contexts and has broader application, [section] 1498 and norms of government patent use were shaped by national emergencies like the two world wars, and government patent use was widely accepted to be a valuable and critical tool during such emergencies. Third, the Article makes a novel, general normative case for government patent use in national emergencies, based on four key features of [section] 1498: (1) speed, (2) flexibility, (3) ex post determination of the appropriate compensation and (4) determination of that compensation by an impartial adjudicator. Whenever these four features are advantageous--which will be true in most national emergency situations, as we show, but may also apply in peacetime--the U.S. government should strongly consider government patent use over patent buyouts and other policy tools. Government patent use under [section] 1498 can be used in many ways, big and small, in a national emergency. Fourth, we provide a novel roadmap to government patent use in one particularly practical use case: ensuring adequate and affordable access to remdesivir, an antiviral drug, in the COVID-19 pandemic.

While the focus of this Article is the utility of [section] 1498 in the context of a national crisis, government patent use does not need to be reserved for extraordinary circumstances. We aim to demonstrate that government patent use is a flexible, highly useful policy tool. As we show below, [section] 1498 can be used modestly as well as massively to achieve various public benefits--lowering prices, expanding supply, or shielding socially useful activity from the risk of liability or injunction. The four key features of [section] 1498 that we highlight are permanent features of the section, and their benefits may warrant government patent use in ordinary circumstances as well as extraordinary ones, and not just in times of crisis but in times of relative calm, too. Ultimately, [section] 1498 is as much a Swiss Army knife as a sledgehammer.

The Article proceeds as follows. Part I reviews the historical development of [section] 1498 and government patent use, particularly from a legislative and policy perspective, to assess perceptions and legislative expansions of the role of government patent use during times of national emergency. Part II briefly describes the present-day nature of [section] 1498 and places it in the context of other policy tools relevant to technological development and national crisis management. Part III then identifies several key advantages of [section] 1498 that are especially pertinent to...

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