Federal agency patent enforcement: Gilead, 1

Set aside for the moment the standing of a contractor or contractor’s assignee for such stuff. Consider a federal agency. Does a federal agency have standing under Bayh-Dole’s extension of patent law–and especially 35 USC 200 and 207–to seek injunctive relief (stop use) or to demand financial compensation (that it has been damaged or deserves a royalty)?

Clearly, the Department of Health and Human Services believes it does have the authority to do so, because it did file an infringement action in 2019 against Gilead Sciences for infringement of four CDC patents covering the methods to use drugs pre-exposure to prevent HIV. A blog commentator, Daniel Boehnen, links to the HHS complaint and writes about how rare it is for the US to sue:

The lawsuit is highly noteworthy for many reasons.  It is very unusual — not unheard of, but very unusual — for the U.S. government, acting as a patent owner, to sue a company for patent infringement.  Second, the Complaint is extremely detailed in explaining the history of events leading to the invention as well as the history of interaction between HHS and Gilead leading to the filing of the Complaint.  Third, it does not take much reading between the lines to see that one of the government’s goals is to make the PrEP regimen as readily available and cost effective in the U.S. as it already is in many European and other countries, with Gilead being alleged as a primary roadblock in that path.

The HHS complaint asserts that the CDC developed and patented a treatment regimen (PrEP) involving two drugs to prevent the development of AIDS, and Gilead infringes by selling versions of the two drugs involved in that regimen:

The United States Patent and Trademark Office (PTO) granted CDC four patents that protect its innovative regimens and the taxpayers’ investment. These patents entitle CDC to license its PrEP regimens and receive a reasonable royalty for their use

Here we see that term “protect” PrEP regimens combined with the right to license the inventions and receive a royalty. But it’s not at all obvious that the patents “entitle” CDC to license its inventions or receive compensation for their use or to sue for infringement. If the patents did give CDC all these rights, then why does Bayh-Dole go out of its way to establish a statutory policy on the use of the patent system by CDC and an express authorization to obtain patents, to license inventions, and to grant the right to companies to enforce patent rights, but not to authorize federal agencies to do so?

The HHS complaint explains that Gilead provided the samples of the drugs–drugs that Gilead holds the patent rights to, in part from acquisition of Triangle, which held an exclusive license (=assignment) from Emory University for inventions on emtricitabine that were made in work receiving federal funding. It’s odd that HHS then sues for infringement if the issue is pricing. Pricing of Bayh-Dole subject inventions is a matter of march-in for failure to achieve practical application–for failure to make benefits of use of the invention (entricitabine) available to the public on reasonable terms. But HHS has taken the position that Bayh-Dole march-in cannot be used to control price. Thus, HHS turns to an infringement action. But does Bayh-Dole support HHS’s infringement action?

There’s reason to believe not. Under 35 USC 200, the patent system is to be used to promote the utilization of inventions arising from federally supported research and development. HHS alleges that Gilead is using the PrEP method patented by the CDC. But that’s the very utilization that is the objective of Bayh-Dole. Thus, with the goal realized, apparently without reliance on the patent system, at least for CDC’s inventions, how does HHS have any standing under Bayh-Dole to use the patent system to “promote the utilization” of the CDC’s inventions? How does suing for royalties promote utilization? It does not, on the face of it. And we are talking here entirely about “process” not compounds used by the process. The CDC claims patents on processes that clearly have been developed for use and are in use. There’s not any need, even, to dangle out an exclusive license to attract private money to develop as a product the methods identified by the CDC, but for which the public could not benefit. According to the HHS complaint, two critical tests of PrEP amounted to about $70m each, more than half of that total coming from the Gates Foundation.

And for that, CDC does not even appear to demand an exclusive license from Gilead. The CDC claims it has already two licenses to its patented method, one that’s worldwide non-exclusive with royalties due for sales (including in the United States), and another license for Germany only. Why HHS is controlling access to HIV treatments in other countries is troubling, at any rate–including the extraction of royalty payments and the suppression via barrier to entry of companies that might desire to sell drugs that use the CDC patented two-drug pre-exposure method. While the HHS complaint asserts that Gilead refused to take a license to the CDC patents, there’s nothing in the complaint that identifies what terms were on offer to Gilead–what scope, what payments, what restrictions, what reporting, what right of the government to audit, and the like.

It is worth keeping in mind that even if the drugs used in the CDC PrEP patented method were themselves in the public domain–generic, as it were–the CDC would still control public access to the drugs–world wide–through their patent positions.

HHS asserts that because it informed Gilead of its patent positions, and Gilead has refused to take a license to those patents, and instead has recommended that doctors follow the CDC clinical guidelines using Gilead products, Gilead willfully infringes the CDC patents:

Gilead’s actions in willfully infringing the Government’s patents are especially worthy of punishment and may properly serve as grounds for a finding of exceptionality under 35 U.S.C. § 285

Gilead, by using a method that is effective in preventing HIV, is “especially worthy of punishment.” How does this square with Bayh-Dole’s policy at 35 USC 200? More:

By its actions, Gilead has injured the Government and is liable to the Government for infringement of the ’509 patent pursuant to 35 U.S.C. § 271. The Government is entitled to recover from Gilead all damages that the Government has sustained as a result of Gilead’s infringement of the ’509 patent, including without limitation no less than a reasonable royalty.

It is difficult to see how Gilead’s encouragement of the use by doctors of the CDC method in any way “injures” the federal government. What “damage” has the government sustained? Clearly HHS believes this damage is at least the loss of a “reasonable royalty.” We might then ask–what would Gilead’s agreement to pay a royalty–essentially here a tax–to the federal government do to the price of treatments? Would the price go down? It’s difficult to imagine. The same is true for the companies that aim to offer generic two-drug PrEP treatments when certain of Gilead’s patents expire next year–will those generic treatments cost less if the companies owe a royalty to the federal government? No. Does anything about the licenses granted by CDC or the paying of royalties to the federal government promote the utilization of the methods. No. It’s difficult to find any basis on which the HHS use of the CDC patents promotes the use of the CDC methods.

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