Government License

28 U.S.C. § 1498 grants the US government broad rights to use patented inventions: STATUTORY TEXT: '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'; KEY FEATURES: (a) THE GOVERNMENT CAN USE ANY PATENT: no prior authorization needed; no license required; the government (or a contractor acting for the government) may simply use the patent; (b) EXCLUSIVE REMEDY IS COMPENSATION: the patent holder CANNOT get an injunction against the government; the only remedy is money damages in the Court of Federal Claims; (c) FOR GOVERNMENT USE: the activity must be 'for the United States' — for governmental purposes, by government contractors acting on the government's behalf; (d) REASONABLE COMPENSATION: the government owes 'reasonable and entire compensation' — similar to a reasonable royalty standard; what a willing licensor and licensee would have agreed upon; RATIONALE: the government cannot be enjoined from activities necessary for national defense, public health, or other sovereign purposes; just compensation satisfies the Fifth Amendment; CONTRACTORS FOR GOVERNMENT: if a private contractor uses a patented invention 'for the Government' — i.e., pursuant to a government contract — the contractor may invoke § 1498 protection; the patent holder's suit against the contractor is suspended while the government action is pending; SCOPE: § 1498 covers both products and processes; covers US military procurement; government-funded research; federal agency activities.

Not all government activities qualify for § 1498 protection — the use must be authorized and for governmental purposes: AUTHORIZED GOVERNMENTAL PURPOSE: the use must be authorized by a contracting officer or agency with appropriate authority; general government procurement activities qualify; defense production under government contracts qualifies; MILITARY PROCUREMENT: the most common context; military contractors producing weapons, equipment, or technology under government contracts; the contractor invokes § 1498 to shield against infringement claims; EXAMPLES OF QUALIFYING ACTIVITIES: DoD contractor producing patented electronics for military systems; NIH-funded research using patented research tools; FEMA acquiring patented emergency equipment; government hospitals using patented medical devices; HHS using patented vaccines in national immunization programs; NOT QUALIFYING: activities by government contractors for private commercial purposes (even if the government funded the contractor); activities by government-sponsored entities acting in a commercial rather than governmental capacity (some Fannie Mae/Freddie Mac activities); WHAT 'FOR THE GOVERNMENT' MEANS: the critical question for contractor § 1498 protection; the use must be 'for the Government' not just BY the government; a company that obtains government funding but uses the patented technology for its own commercial purposes may not be protected; COMPENSATION STANDARD: the Court of Federal Claims applies a reasonable royalty standard based on: what the parties would have agreed upon in a hypothetical negotiation; relevant Georgia-Pacific factors; prior licenses granted by the patent holder; market value of the patented technology; TUCKER ACT JURISDICTION: patent infringement claims against the federal government fall under the Tucker Act jurisdiction of the Court of Federal Claims; no jury trial available (the court is a specialized non-jury court).

The Bayh-Dole Act (35 U.S.C. §§ 200-212) grants the government rights to inventions made with federal funding: BACKGROUND: before Bayh-Dole (1980), the federal government claimed title to most inventions made with federal research funding; the result: inventions languished unused because no private company had incentive to invest in commercialization; Bayh-Dole reversed this: allowed universities, small businesses, and nonprofits to own inventions made with federal funds; GOVERNMENT LICENSE RIGHTS RETAINED: even when the grantee (university or company) owns the patent, the government receives: (a) A LICENSE: a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the invention throughout the world (§ 202(c)(4)); (b) MARCH-IN RIGHTS: the right to require the grantee to license the invention to third parties in certain circumstances (§ 203); see the March-In Rights guide for details; DISCLOSURE OBLIGATIONS: the grantee must disclose each invention to the funding agency; elect whether to seek patent protection; file within one year of disclosure; USE PREFERENCES: if the grantee patents the invention, it must: prefer licensing to small businesses; give preference to US-based manufacturing; for exclusive licenses: the licensee must substantially manufacture in the US unless waived; FEDERAL CONTRACTOR INVENTIONS: if a large business (not a university or small business) performs federally funded research, the rules differ; the agency may elect to take title or allow the contractor to retain ownership with retained government license rights; IMPACT: Bayh-Dole dramatically increased academic patenting and tech transfer; Stanford v. Roche (S.Ct. 2011): Bayh-Dole does not automatically vest title in the university — a Stanford researcher's individual assignment to Roche took precedence because the researcher assigned before Bayh-Dole title could vest.

Determining compensation in § 1498 cases involves a specialized analysis in the Court of Federal Claims: REASONABLE ROYALTY STANDARD: the Court of Federal Claims applies a reasonable royalty standard to § 1498 cases; the standard asks: what would the parties have agreed upon in a hypothetical negotiation assuming both were willing, had full information, and were negotiating at arm's length?; GEORGIA-PACIFIC FACTORS: the court considers relevant Georgia-Pacific factors in § 1498 cases; key factors in government procurement context: existing licenses for the patent at comparable rates; the government's need for the technology (national defense considerations); comparable procurement contracts; the contribution of the patented feature to the overall product; GOVERNMENT BARGAINING POWER: some cases recognize the government's unique bargaining power (large buyer; regulatory authority); this may reduce the hypothetical royalty compared to a private party transaction; PRIOR LICENSES: the most persuasive evidence is prior licenses for the same technology; if the patent holder has licensed the technology at specified rates, those rates inform the compensation; ENTIRE MARKET VALUE RULE: in complex government systems, the patented component may be one part of a much larger system; apportionment to the patented component's contribution is required; SOVEREIGN IMMUNITY LIMITATION: the government can only be sued in the Court of Federal Claims for § 1498 claims; normal district court patent litigation does not apply; NO ENHANCED DAMAGES: under § 1498, there are no enhanced damages for willful infringement; reasonable compensation is the ceiling; STATUTE OF LIMITATIONS: 6 years from the date the cause of action first accrued (28 U.S.C. § 2501); RETROACTIVE COMPENSATION: the government owes compensation for past unauthorized use as well as ongoing use; the patent holder should promptly identify government use and assert compensation claims.

The government's patent powers are most significant in national security and public health emergencies: DEFENSE PRODUCTION ACT: the government can direct production of critical materials under the Defense Production Act; § 1498 ensures that patent rights do not block such production; contractors compelled to produce under DPA can invoke § 1498 against patent holders; COVID-19 VACCINE CONTEXT: during COVID-19, there was significant public attention on government IP rights; mRNA vaccine patents: Moderna received substantial federal funding for mRNA technology development; the government had argued it retained Bayh-Dole license rights to Moderna's core mRNA patents; the potential § 1498 use was discussed for expanding access; MEDICINES PATENT POOL (MPP) ALTERNATIVE: in practice, the government negotiated voluntary agreements with pharma companies rather than invoking § 1498; fear of § 1498 invocation may incentivize voluntary licensing; NATIONAL SECURITY PATENTS: secrecy orders (35 U.S.C. §§ 181-188): the Commissioner of Patents may impose secrecy orders on applications whose publication would be detrimental to national security; secrecy order prevents publication and patent grant while the order is in effect; the government compensates the applicant for the delay in patent prosecution; MARCH-IN RIGHTS AND NATIONAL EMERGENCY: Bayh-Dole march-in rights (§ 203) can be invoked for 'health or safety needs'; the government has been petitioned to use march-in rights for pharmaceutical pricing; NIH has repeatedly declined, taking the position that Bayh-Dole march-in rights are not a price control mechanism; in 2023, the Biden administration proposed new march-in guidance that would consider price, but this was contested; FOREIGN GOVERNMENT USE: US § 1498 applies only to US government use; foreign governments using US-patented inventions without license must face normal infringement claims in US courts (if they consent to suit) or their own country's courts.