Current State of U.S. Patent Law Regarding
Infringement of Drug Patents by the Government

By Paul Janicke
Director of the Intellectual Property and Information Law Program
University of Houston Law Center

There seems to be some misunderstanding about the U.S. law governing enforcement of patents that claim pharmaceutical compositions, especially in epidemic situations. The press often reports on efforts to "revoke" or "cancel" patents on drugs perceived to be in great public need and not available in quantities or at prices regarded as reasonable. There is sometimes talk of compulsory licensing of these patents. While such procedures are available in some other countries, the United States has a different, simpler, and more expeditious statutory regime for dealing with public health emergencies vis-a-vis extant patents: The government and its contractors simply go ahead and infringe them. There is no injunctive remedy against such activities, and no remedy at all against contractors or others operating with the government’s permission.

The applicable statutory provision is 28 U.S.C. § 1498, which provides in part:

(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....

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.

This section was enacted "for the purpose of enabling the Government to purchase goods for the performance of its functions without the threat of having the supplier enjoined from selling patented goods to the Government." Coakwell v. United States, 372 F. 2d 508, 511 (Ct. Cls. 1967).

Thus the government can order any amount it wishes of any drug, from any contractor; and can authorize any person to take the drug. There is no need to revoke, repeal, or do anything else to the applicable patent.

The requirements for "authorization or consent" by the government are quick and virtually automatic in practice. Any governmental purchase order will do – there is no need for a high-level blessing by a cabinet officer. There is no waiting period. There are no formalities, no notice to the patent holder, no hearing. In fact, the order need not even mention the patent or specify an authorization to operate within it; implicit authorization or consent for an infringement has been found, at least where government contracts require an infringement in order to secure fulfillment. See, e.g., Bereslavsky v. Esso Standard Oil Co., 175 F.2d 148 (4th Cir. 1949).

Section 1498 has had a rich developmental history in the case law. There has been some concern expressed in recent years that the 1994 Agreement On Trade Related Intellectual Property Rights (TRIPS) has restricted the ability of member governments to use, and to authorize contractors to use, patented inventions. The subject of U.S. treaty obligations under TRIPS is complex, and I will not attempt to address it fully here.*  Suffice it the say that the United States has made no changes to Section 1498 in the seven years since we ratified the TRIPS agreement, and I am not aware of any grievance filed at the WTO against the United States for failure to change that section. Hence, the provision is in full force and effect. The government can infringe, and authorize its contractors to infringe, any patent. This means, for example, that at any time and for any reason the government could authorize anyone to make 5,000,000 Cipro tablets for delivery to the Public Health Service, which could then further distribute them and authorize patients to ingest them. If Bayer and the government could not come to terms on reasonable compensation, Bayer’s sole remedy would be a compensation action against the government in the Court of Federal Claims.
 

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* The treaty language seems to me rather vague on exactly what member states can do by way of carving out statutory exceptions to patent rights. Article 30 recites a general permission to do such carving, as long as the exceptions "do not unreasonably conflict with a normal exploitation of the patent." Article 31 then goes on to allow yet additional exceptions, and governmental use is explicitly mentioned here as an example. Article 31 imposes restrictions regarding careful consideration in granting permission, limited duration of the permission. Moreover, a prior attempt must normally be made to obtain permission of the patent owner, but this requirement may be waived by a member state’s government in cases of "national emergency" or "extreme urgency." I am not clear whether we could fit our governmental immunity under the general rubric of Article 30, or whether we would have to cope with the more restrictive Article 31.

12/07/01