By Jorge L. Contreras
On October 8, 2020, Moderna, the maker of one of the first mRNA-based vaccines for COVID-19 and the recipient of billions of dollars of U.S. government funding, announced that it felt “a special obligation … to use our resources to bring this pandemic to an end as quickly as possible.” As a result, it publicly promised that “while the pandemic continues, Moderna will not enforce our COVID-19 related patents against those making vaccines intended to combat the pandemic.” Moderna broke that promise on August 26, 2022, when it sued Pfizer and BioNTech, the producers of a competing mRNA vaccine, for patent infringement in the U.S. and Germany. This post explains why Moderna’s lawsuits should fail given its irrevocable and continuing nonenforcement pledge.
A “patent pledge” is a voluntary, public commitment that a patent holder makes to refrain from exercising some or all of its rights in a patent. These pledges can take a variety of forms and have been made for decades in industries ranging from automotive (e.g., Tesla and Toyota) to software (e.g, IBM and Google) to biotechnology (e.g., Monsanto and Myriad) (this 2015 article discusses the history and taxonomy of patent pledges, many of which are collected in this online database).
Legally speaking, patent pledges are comparable to the open source software licenses that underlie much of the world’s technology infrastructure and the Creative Commons licenses that make billions of online images, videos and other content freely available (both discussed here). In short, these public statements, if made in a manner that is intended to be taken seriously (e.g., in an official company press release that is posted on the company’s website), are for all intents and purposes legally binding commitments (as discussed further below).
The unprecedented scope of the COVID-19 pandemic quickly gave rise to a surge of pledging activity, which is detailed in this article (see pp. 863-87). Among others, ventilator manufacturers Medtronic and Smiths Group, drug maker AbbVie, a patent assertion entity named Labrador Diagnostics, and the Innovative Genomics Institute at University of California Berkeley all made unilateral patent pledges in the early days of the pandemic. Then, in April 2020, a group of large technology firms and national laboratories joined the Open COVID Pledge, a platform that enabled the large-scale pledging of patents to the pandemic response. An estimated 500,000 patents were pledged under the Open COVID Pledge, with over a million more pledged under a similar Japanese effort. Importantly, most of the commitments made under the Open COVID Pledge were designed to expire at the end of the COVID-19 pandemic as determined by the World Health Organization (WHO) or January 1, 2023, whichever occurs first (the 2023 date is now in the process of being extended).
On October 8, 2020, amid press coverage of an emerging inventorship dispute with the U.S. National Institutes of Health (NIH), Moderna issued a press release announcing that “while the pandemic continues, Moderna will not enforce our COVID-19 related patents against those making vaccines intended to combat the pandemic.”
Moderna’s motivations for making this pledge are not stated, but include several possibilities: altruism, corporate social responsibility, an attempt to appear to be a responsible steward of the billions of dollars it was receiving from the federal government, or an attempt to defuse its brewing dispute with NIH (I speculate about these motives here). But, whatever the underlying reasons, Moderna’s announcement fits all of the requirements of a binding legal commitment: it is a voluntary public statement made by a company through official communication channels with a reasonable expectation that others will rely on it.
Moderna’s pledge, however, does not last forever. Like the Open COVID Pledge before it, Moderna’s pledge expressly states that it is valid only “while the pandemic continues.” Moderna brings this point home in the next sentence of its pledge, where it describes how it will behave after the pandemic: “upon request we are also willing to license our intellectual property for COVID-19 vaccines to others for the post pandemic period.” Moderna thus sets up a fairly straightforward two-stage approach: during the pandemic, everyone has free access to its patents. After the pandemic, it is willing to offer paid licenses. Licensing structures like this go back at least to World War II, when the U.S. government required patent holders accused of anticompetitive conduct to make their patents available for free during the “present emergency,” and at reasonable rates thereafter, a history that I discuss in this article (pp. 50-51).
“Updating” the Pledge
From 2020 to 2022, the U.S. government purchased millions of doses of Moderna’s mRNA vaccine, along with large quantities of vaccines manufactured by Pfizer. At the same time, international discussions of a “COVID IP Waiver” were being conducted at the World Trade Organization (discussed here), and the pharmaceutical industry was calling on governments to reject the weakening of IP rights at the WTO. Against this backdrop, on March 7, 2022, Moderna issued a new press release titled “Moderna’s Updated Patent Pledge.”
Moderna begins by casting the Update as a goodwill gesture toward the less fortunate: “To underscore our commitment to low-and middle-income countries, Moderna is now updating our patent pledge to never enforce our patents for COVID-19 vaccines against companies manufacturing in or for the 92 low- and middle-income countries in the Gavi COVAX Advance Market Commitment (AMC), provided that the manufactured vaccines are solely for use in the AMC 92 countries” (emphasis added). This commitment signified an important extension of Moderna’s original pledge. Rather than terminating at the end of the pandemic, Moderna’s pledge for users in the 92 AMC countries would last forever.
The Update, however, is coy about Moderna’s pledge during the pandemic in non-AMC countries like the United States and the members of the European Union. It states that “In non-AMC 92 countries, vaccine supply is no longer a barrier to access. In these countries, the Company expects those using Moderna-patented technologies will respect the Company’s intellectual property. Moderna remains willing to license its technology for COVID-19 vaccines to manufacturers in these countries on commercially reasonable terms” (emphasis added).
What is the legal significance of Moderna’s “expectation” that other companies will “respect” its IP? Don’t companies using Moderna’s pledged technology extend it the greatest admiration and respect? Does respect mean payment? Is the fact that Moderna “remains willing” to license its technology for money surprising? What company wouldn’t be willing to earn some extra revenue if others wanted to pay? But is simple willingness a formal demand for payment? Can this vague language repudiate Moderna’s prior commitment to make its patents available for free during the pandemic? It certainly would have been easy enough for Moderna to say so directly (whether or not such a statement would have been effective). But, as any good contract law professor will explain, the kind of mealy-mouthed prevarication on display in Moderna’s Update is precisely what gets companies into trouble when they seek to enforce their rights.
Enforcing Pledged Patents?
On August 26, 2022, Moderna sued Pfizer and BioNTech, the producers of a competing COVID-19 mRNA vaccine, for patent infringement in the U.S. District Court for the District of Massachusetts and the Regional Court of Düsseldorf in Germany. How could Moderna bring this suit when it pledged in 2020 that “while the pandemic continues, Moderna will not enforce our COVID-19 related patents against those making vaccines intended to combat the pandemic”? Below I consider some of the theories that Moderna hints at in its Complaint, and that others have speculated about in the press.
- Moderna’s 2020 Pledge Was an Altruistic Gesture, But Never a Binding Obligation
Moderna does not make this argument expressly, but many in the Twitterverse and elsewhere have asked how a gratuitous “promise” like Moderna’s 2020 pledge can be legally binding. Actually, there are several theories that support the enforceability of patent pledges like these.
First, a pledge like Moderna’s acts as a “public license.” It is a written grant of rights under patents that is extended to anyone who wishes to accept it. Though it’s not “signed” by the licensee, this does not matter. Acceptance of the license is inherent in use of the licensed rights. In this sense, Moderna’s pledge is legally identical to the open source code licenses that underlie Linux, Android, and many other software programs that run on billions of devices across the globe. Moreover, the enforceability of open source licenses has been validated by courts in the U.S. (see Jacobsen v. Katzer (Fed. Cir. 2008)) and Germany. As noted above, patent pledges are also similar to the Creative Commons suite of copyright licenses that enable the use of billions of online images, videos, and other copyrighted works without signed agreements or any compensation. Thus, Moderna’s patent pledge grants a public license under its vaccine patents.
Second, even if a license isn’t granted, Moderna’s public promise justified reliance by others, and Moderna is thus prevented from retracting that promise under the doctrine of “promissory estoppel.” This age-old common law doctrine holds that someone who makes a promise is bound by that promise if others reasonably and detrimentally rely on it. That is, if I, a book collector, publicly promise to give $1,000 to anyone who brings me a vintage Ray Bradbury paperback, and you show up at my door with such a book, which you bought on eBay for $3, you have relied on my promise, you were reasonable in doing so (given that I’m a known collector), and you spent your own money to do it. Thus, I am bound by my promise and I owe you $1,000. Similarly, Moderna publicly promised not to assert its patents during the pandemic against anyone who used them to make a COVID-19 vaccine. Pfizer made such a vaccine. Did it rely on Moderna’s promise in doing so? Arguably, Pfizer, in alliance with BioNTech, would have made an mRNA vaccine anyway, given the huge government payments that were available (and the fact that they began development long before Moderna made its pledge). But even if it might be challenging for Pfizer to prove that Moderna’s pledge was the only reason it made an mRNA vaccine, this isn’t required for promissory estoppel. The promise need not be the only reason, but simply a reason for the action taken. Moreover, even if Pfizer would have made its vaccine anyway, it certainly would have priced it differently had it known it would have to pay a royalty to Moderna. So detrimental reliance should not be hard for Pfizer to prove, and Moderna should also be prevented from enforcing its patents during the pandemic on the basis of promissory estoppel.
For all of these reasons (plus a few more), Moderna’s patent pledge, which was made through an official, written press release on the company’s website, should be interpreted as a legally binding obligation that extended rights under Moderna’s patents to any company that wished to make an mRNA-based COVID-19 vaccine during the pandemic.
- Even if the 2020 Pledge Was Binding, Moderna Revoked it in March, 2022
Moderna takes the position that its March 2022 Update terminated its patent pledge as to non-AMC 92 countries. This is evident in the Complaint that it filed against Pfizer and BioNTech, which only seeks damages for commercial (non-government) uses of Moderna’s technology after March 7, 2022. Thus, it feels that no pledge existed after that date. This, however, is only wishful thinking on Moderna’s part.
First, as noted above, Moderna didn’t actually say that it revoked its 2020 pledge in its 2022 Update. Non-confrontational, passive aggressive terms like “expect,” “respect,” and “willing” do not sound in the blunt lexicon of patent infringement litigation. Had Moderna wished to revoke its pledge, it easily could have found lawyers to craft a very clear revocation peppered with familiar lawyerly terms like “revoked, terminated, and nullified,” “continuing practice of the patents constitutes willful infringement,” and “cease and desist immediately.” Thus, it is not clear that Moderna actually did intend to revoke its pledge in March 2022. At the time, my own interpretation of the Update was that it extended the pledge for AMC 92 countries past the end of the pandemic (kudos to Moderna!) but didn’t affect the ongoing pledge in other countries.
Second, and more importantly, even if Moderna had wanted to revoke its 2020 pledge back in March 2022 (which is questionable), and had clearly stated its intention to do so (which it did not), it actually could not have done so. Why not? Because, as discussed above, Moderna granted a public license with respect to its patents, and induced reliance on them. Anyone who used the patents after the issuance of Moderna’s pledge was legally entitled to do so, and still is (given that, as far as I know, Moderna has still not formally retracted its 2020 pledge). Moderna cannot retroactively cancel rights that it has already granted. Thus, while Moderna could, theoretically, terminate its pledge as to new patents, it cannot today revoke rights that it has already granted for use during the COVID-19 pandemic.
- Even if the 2020 Pledge Wasn’t Revoked in March, the Pandemic Was Over by the Time Moderna Sued in August 2022
Even if Moderna’s 2020 pledge was binding and enforceable and not revoked by the Update, it still expires, by its own terms, once the COVID-19 pandemic ends. So Moderna takes the position in its Complaint that “By early 2022 … the collective fight against COVID-19 had entered a new endemic phase” (p. 7). According to the U.S. Centers for Disease Control and Prevention, “Endemic refers to the constant presence and/or usual prevalence of a disease or infectious agent in a population within a geographic area.” In other words, an “endemic” disease is neither an epidemic nor a pandemic. Ergo, in Moderna’s view, the pandemic is over. But this self-serving, hindsight-inspired statement is hardly definitive.
The WHO, whose assessment panel meets every three months to evaluate the status of the current Public Health Emergency of International Concern (PHEIC) (pandemic), has not yet downgraded this designation, and some experts estimate that it will be another 2-3 years before it does so. As noted above, the Open COVID Pledge, as well as vaccine availability programs by Pfizer, Merck and others, are all tied to the WHO’s determination of pandemic status, as are the commitments of the 196 countries bound by the WHO’s International Health Regulations. For most people, when we say “pandemic,” we are thinking about the WHO-declared status.
Of course, if Moderna had wanted to condition its pledge not on the termination of the WHO-declared pandemic, but on some determination of its own, it could have used simple wording such as “during the pandemic, as defined by Moderna in its sole discretion.” But, as it did not include such a caveat, the only reasonable interpretation is that Moderna’s 2020 pledge is tied to the end of the COVID-19 pandemic, as determined by the WHO. And because the WHO still considers the pandemic to be in force (and increasing in seriousness in many areas), Moderna’s 2020 pledge has not expired by its own terms.
Why Should We Care?
I’ve argued here that Moderna’s existing 2020 patent pledge prevents it from prosecuting a patent infringement suit against Pfizer and BioNTech. But why should we care? What would happen if Moderna won its suit against Pfizer and BioNTech? Moderna isn’t seeking an injunction to prevent them from manufacturing doses (it is extremely unlikely that any U.S. court would grant such an injunction, though German courts have proven to be a bit more injunction-friendly). At most, the defendants would be required to pay Moderna a small percentage royalty, likely in the single digits, on non-government commercial sales of vaccines. This royalty would drive up the price of these vaccines, which would largely be paid by insurance carriers, who would then pass along the cost to consumers through higher premiums and co-pays. Ultimately, however, the increased cost of an individual vaccine dose or an annual insurance premium would be small in the grand scheme of things.
The reason that Moderna’s attempt to renege on its 2020 patent pledge is so important is its potentially damaging effect on the integrity of the much larger patent pledging ecosystem. As noted above, patent pledges underlie industries ranging from telecommunications and computing to transportation and agriculture. Casting doubt on the legal enforceability of these pledges, not to mention related open source software and Creative Commons content licenses, would have massively disruptive effects across the global economy. Thus, for compelling legal and policy reasons, Moderna’s cynical attempt to take back its COVID-19 vaccine patent pledge must fail.