Merits and Drawbacks in Compulsory Licenses of COVID-19 Vaccines: Protecting Public Health or Rewarding Innovation?

The coronavirus disease 2019 (COVID-19), the acute illness due to severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), was announced as a global pandemic by the World Health Organization (WHO) in March 2020.[1] Since then, leading pharmaceutical and biotechnology companies have started to race to create coronavirus disease 2019 (COVID-19) vaccines through a variety of platforms and candidates; the academia, the governments, and private companies have been collaborating in unprecedented ways.[2]

One critical question arises concerning such private and public funded development of COVID-19 vaccines: could the U.S. government seek compulsory licenses for government- or private-owned technologies and if it could, should it do so?

I. The Law Allows Compulsory Licenses for Both Public and Private Funded Research

Compulsory licensing is defined as “the grant of permission . . . seeking to use another’s intellectual property to do so without the consent of its proprietor.”[3] The Bayh–Dole Act allows compulsory licenses for federally funded research through the “march-in rights,” which permit the relevant federal agencies to grant a license to a responsible third party when the patent owner has:

[N]ot taken effective steps to achieve practical application of the invention; not reasonably satisfied health and safety needs; not reasonably met requirements for public use specified by federal regulation; or granted an exclusive right to use the patented invention to somebody without obtaining a required promise, or where the licensee in that case breaches a required promise, that the invention will be manufactured substantially in the United States.[4]

However, the federal government has never exercised such “march-in rights” although advocacy groups have petitioned the National Institutes of Health (NIH) several times to exercise march-in rights based on the high prices of certain drugs developed with federal funding, such as treatments for HIV/AIDS.[5]

The government also has a legal basis to force private sectors to license out their patented vaccines through compulsory licenses when such licenses are necessary to serve a larger public interest. Under 28 U.S.C. § 1498, the U.S. government has the authority to use or manufacture any patented invention “without license[s],” and the patent owners can later bring actions to recover their “reasonable and entire compensation” if they had not been provided such.[6] Also, enforcement of the antitrust laws by government entities and private parties can result in compulsory licenses. In cases where an enterprise “has been found to have acted in an anticompetitive manner in connection with its patents,” the government may call for the enterprise to license out such patents to interested third parties.[7]

Globally, a significant multilateral agreement that speaks to compulsory patent licensing is the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, one of the most important components of the international agreements within the World Trade Organization (WTO).[8] It listed fundamental limitations while keeping some flexibility of when and how a government may issue compulsory licenses.[9] For example, Article 31 of the TRIPS Agreement required that the compulsory license must be nonexclusive.[10]

Unlike the United States where compulsory licensing of private funded inventions is not codified in the Patent Act, some other WTO-member countries, such as Brazil, Germany, and India, have provisions of compulsory licensing in their national patents laws.[11] The European Union (EU) has implemented legislation to address public health problems of least-developed and developing countries through compulsory licensing of pharmaceutical products.[12] EU law provides that every EU Member State shall grant a compulsory license for the manufacturing and distribution of medicine to least-developed and developing countries, so long as the conditions listed in Article 31 of the TRIPS are fulfilled.[13]

II. Compulsory Licenses, With Certain Limitations, Should Be Encouraged

Innovation and the protection of intellectual property are significant driving engines of the U.S. economy. As such, some commentators have argued that compulsory licensing harms incentives of innovation and thus could sabotage the economy.[14] While this could be true if compulsory licensing is used with unrestricted governmental power, it may not be the case for the U.S. government in the context of COVID-19 vaccines.

According to a recent CRS Report, the U.S. government has not ever actually invoked a compulsory license.[15] For example, since 1997, several customer groups formally filed “march-in rights” petitions to urge patent owners of federally-funded medicines to commercialize such inventions as affordable drugs, but the U.S. government refused to exercise its rights to march-in on such patents in all these petitions.[16] In In re CellPro, CellPro, Inc., sued by the Johns Hopkins University (JHU) for patent infringement about a federally-funded antibody, petitioned the NIH to march-in because JHU allegedly had failed to effectively commercialize the invention.[17] NIH declined, reasoning that JHU was taking reasonable efforts to gain market entry, even if such efforts were slower than those of CellPro.[18]

In fact, in the United States, compulsory licenses can be invoked only under limited circumstances, including:

Circumstances of national emergency or extreme urgency; [w]here the invention serves vital public health needs; [a] strong societal interest has arisen in access to the patented invention; [t]he patent owner has failed to practice the patented invention in the jurisdiction that granted the patent within a reasonable period of time; [t]he patent owner has abused its economic power in such a manner as to violate the antitrust laws; [or]. . . where multiple patents held by different owners cover a particular technology.[19]

With such limited conditions, compulsory licenses, though could be burdensome to some patent owners, would benefit the public as a whole.

In the context of COVID-19, public interests would almost certainly surpass private patent rights of vaccines. Although the TRIPS and the U.S. law have not defined what constitutes “national emergency” or “vital public health needs” for the purpose of compulsory licenses, the COVID-19 pandemic, and COVID-19 vaccines probably satisfy that requirements without doubt. Ensuring public access to vaccines and other medical countermeasures is a fundamental component of the basic human right to live a healthy and safe life and under circumstances like the COVID-19 pandemic, the governments should put public interest as their top priority.

Therefore, as set up by the U.S. law, compulsory licenses are allowed and should even be encouraged for licensing COVID-19 vaccines.

However, what is missing in the current law is a clearer framework listing more specific circumstances where such non-exclusive, compulsory licenses may be issued while ensuring the patent owners’ “reasonable and entire compensation.”[20] Moreover, public disclosures of at least some licensing terms, such as the royalty payment provision, should be disclosed to call for public surveillance in negotiating fair licensing terms. Private sectors who might face compulsory licenses may need such clearer frameworks too as guidance to know when to expect compulsory licenses and how the process or terms would be like in preparing for negotiations.

III. Examples of How This Issue Currently Plays Out in Two Recently Released COVID-19 Vaccine Licensing Agreements

On October 23, 2020, the United States Department of Health and Human Services (HHS) released the redacted versions of its licensing agreements with Moderna, Inc., and Ology Bioservices, Inc., both of which are enlisted by the U.S. government’s Operation Warp Speed program to develop COVID-19 vaccines.[21] The heavily redacted contract between the government and Moderna does not include the details concerning ownership of patent rights in the released version, but likely the agreement has a clause reserving the government’s “march-in rights,” a standard term in licensing federally-funded drugs, to take control of the vaccine if the manufacturer engages in conducts like price gouging.[22]

The licensing agreement with Ology Bioservices, on the other hand, specifically excluded such rights of the government (“This Agreement is not subject to the Bayh-Dole Act, 35 U.S.C. §§ 200-212.”[23]). As some commentators have criticized, the government should have reserved its “march-in rights,” and in addition, should have included an exceptional-circumstances authority to allow itself to own the vaccine patents.[24] With such an authority, the government does not have to go through a series of administrative and court proceedings and an appeal process currently required under the Bayh–Dole Act given the priority of public interest and urgency in practicing COVID-19 vaccine patents.[25] This is probably reasonable as long as the exact proceedings can ensure the patent owners’ rights to subsequently seek reasonable remedies.

In addition, in both agreements, the redacted clauses in the publicly released versions can be obstacles for public surveillance.[26]

Overall, the government could and should ensure public accessibility of COVID-19 vaccines through compulsory licensing as long as it is subject to certain limitations, while a more clear framework and publicly-disclosed licensing terms are desired.

[1] Rolling Updates on Coronavirus Disease (COVID-19), The World Health Organization (Jul. 31, 2020), (last visited Oct. 16, 2020).

[2] For example, in the United States, some components of the federal government are partnering with each other through the Operation Warp Speed program to accelerate the development, manufacturing, and distribution of COVID-19 vaccines. Assistant Secretary for Public Affairs (ASPA), Fact Sheet: Explaining Operation Warp Speed, U.S. Department of Health & Human Services (2020), (last visited Oct. 16, 2020). Also, the National Institutes of Health (NIH) announced the Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) public-private partnership on April 17, 2020. Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV), The National Institutes of Health (2020), (last visited Oct. 16, 2020). The ACTIV aims at bringing the powers and strengths of each of academia, industry and government, and advocate that they collaborate in unprecedented ways to best promising the accessibility of safe and effective COVID-19 treatments and vaccines. Id. Through the ACTIV, the United States Department of Health and Human Services (HHS) announced agreements with leading pharmaceutical and biotechnology companies about billions of federal grants and the access of millions of doses of the most promising candidates. ASPA, supra note 2. Besides, the U.S. government is partnering with the European Union and other global regulators to foster the development of safe and effective medical products, including vaccines, for COVID-19. Office of the Commissioner, Partnering with the European Union and Global Regulators on COVID-19, U.S. Food and Drug Administration (2020), (last visited Oct 16, 2020).

[3] -name redacted-, Cong. Research Serv., R43266, Compulsory Licensing of Patented Inventions 1 (2014).

[4] 35 U.S.C. §§ 203(a)(1)-(4); see also Nafsika Karavida, Dara Onofrio and Deena Merlen, Patent Rights and Wrongs in the COVID-19 Pandemic: EU and U.S. Approaches to Compulsory Licensing, IP Watchdog (May 29, 2020), (last visited Oct. 17, 2020).

[5] Kevin J. Hickey & Erin H. Ward, Cong. Research Serv., R46399, Legal Issues in COVID-19 Vaccine Development 20 (2020).

[6] 28 U.S.C. § 1498(a) (1998).

[7] In addition, some statutory provisions provide legal basis for compulsory licenses for other subject matters. -name redacted-, supra note 3. For example, the Atomic Energy Act allowing compulsory licenses “if the invention . . . is of primary importance in the production or utilization of special nuclear material or atomic energy”; the Clean Air Act allowing compulsory licenses of “devices for reducing air pollution”; and the Plant Variety Protection Act allowing compulsory licensing of “seed-bearing plants [] protected by plant variety certificates . . . .” Id.

[8] Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994).

[9] Id.

[10] Id., Art. 31(d).

[11] -name redacted-, supra note 3, at 9-11; see also Claire Sheridan, The Connection Between a COVID-19 Vaccine, Compulsory Licensing and Potential Claims Before Investment Tribunals, Blog of the American Review of International Arbitration (Sep. 8, 2020), (last visited Oct. 17, 2020).

[12] Karavida et al., supra note 4.

[13] Council Regulation (EC) No 816/2006 of the European Parliament and of the Council of 17 May 2006 on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems [2006] L157/1.

[14] -name redacted-, supra note 3, at 13.

[15] Id., at 7.

[16] ‌Paul A Calvo, March-in Rights and Compulsory License in the United States (Oct. 16, 2017), Sterne Kessler Goldstein & Fox PLLC, (last visited Nov. 1, 2020).

[17] Id.

[18] Id.

[19] -name redacted-, supra note 3, at 3-4.

[20] 28 U.S.C. § 1498(a) (1998).

[21] Sydney Lupkin, A Federal Coronavirus Vaccine Contract Released At Last, But Redactions Obscure Terms, KNAU Arizona Public Radio (Oct. 24, 2020), (last visited Nov. 1, 2020).

[22] Defense Contract Management Agency, Contract No. W911QY20C0100, United States Department of Health and Human Services, (last visited Nov. 1, 2020); Lupkin, supra note 21.

[23] Defense Contract Management Agency, Defense Contract Management Agency, Amendment No. P0005, United States Department of Health and Human Services, (last visited Nov. 1, 2020).

[24] Lupkin, supra note 21.

[25] Id.

[26] In addition, other important clauses could have been disclosed to the public. For example, how soon the public may get access to the vaccines is one of the essential issues in such contracts arising from the OWS program. Moderna disclosed that it will get an extra $300 million if it receives approval or an emergency use authorization from the Food and Drug Administration “on or before January 31, 2021.” The term regarding such speed bonuses, however, is one of the redacted clauses in the released contract. Id.