Case 1:22-cv-00252-MSG Document 59 Filed 03/02/23 Page 1 of 11 PageID #: 1011
`Nathan R. Hoeschen
`I.M. Pei Building
`1105 North Market Street, 12th Floor
`Wilmington, DE 19801
`(302) 298-0709
`nhoeschen@shawkeller.com
`
`
`
`
`
`March 2, 2023
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`
`BY CM/ECF
`The Honorable Mitchell S. Goldberg
`United States District Court
`Eastern District of Pennsylvania
`James A. Byrne U.S. Courthouse, Room 17614
`601 Market Street
`Philadelphia, PA 19106-1797
`
`
`Arbutus Biopharma Corporation, et. al. v. Moderna, Inc., et. al.
`C.A. No. 22-252-MSG
`
`Re:
`
`
` Dear Judge Goldberg:
`
`
`We write on behalf of Plaintiffs Arbutus and Genevant pursuant to Your Honor’s order
`directing the parties to submit letter briefs regarding the impact of the Government’s Statement of
`Interest on the scheduling of this matter. D.I. 51. The Government’s Statement (D.I. 49) does not
`change the scope of this case or disturb the Court’s holding last November that the resolution of
`Moderna’s affirmative defense under 28 U.S.C. § 1498(a) “is not appropriate . . . in a Rule 12(b)(6)
`motion.” D.I. 31 at 13. Indeed, as discussed below, both Moderna and the Government concede
`that regardless of § 1498(a), Plaintiffs’ claims related to significant sales to the Government, as
`well as significant non-governmental sales, must be adjudicated here and not in the Court of
`Federal Claims. And in any event, the Government’s Statement is merely one piece of evidence
`that the Court or jury eventually may consider, but it is not dispositive, particularly on the
`pleadings, of the crucial contested issue here: whether the accused manufacture, offers for sale,
`sale, and use of Moderna’s COVID-19 vaccine was “for the Government” or for the U.S.
`population. Adjudication of that question is reserved for this Court. The Government’s view is
`mere attorney argument entitled to no deference and, in any event, contradicts binding precedent
`that this Court previously followed and should not now ignore.
`
`
`In denying Moderna’s partial motion to dismiss, the Court correctly observed that
`§ 1498(a) requires Moderna to make two independent showings: that its infringement of Plaintiffs’
`patents was (1) “for the Government,” and (2) with the Government’s “authorization or consent.”
`28 U.S.C. § 1498(a); Sevenson Evnt’l Servs., Inc. v. Shaw Envt’l, Inc., 477 F.3d 1361, 1365 (Fed.
`Cir. 2007); D.I. 31 at 8. Despite the uniform body of precedent requiring both prongs of § 1498(a)
`to be met, the Government urges the Court to perform a “truncated inquiry” focusing entirely on
`the inclusion of “FAR 52.227-1” in the -0100 Contract between Moderna and the Government,
`without considering any other evidence. D.I. 49 at 9. According to the Government, FAR 52.227-
`1 definitively resolves the “authorization or consent” inquiry, and the Court has no further role to
`play regarding the other prong of § 1498(a)—whether Moderna’s infringement was “for the
`Government”—simply because Moderna “compli[ed] with the contract’s obligations.” Id. at 10.
`
`That is a radical departure from the law. Even if the Court could consider a single,
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`selectively produced document at the Rule 12 stage, the Government’s “truncated inquiry” finds
`no support in Sevenson, the sole case cited in the Government’s Statement for that proposition, nor
`anywhere else. The Government’s reading, and the expansive application of § 1498(a) it now
`urges, is contrary to the statute’s text and history, and also to Larson v. United States, 26 Cl. Ct.
`365 (1992), as this Court found in denying Moderna’s motion. D.I. 31 at 9–13 (analyzing Larson,
`Advanced Software Design Co. v. Fed. Reserve Bank of St. Louis, 583 F.3d 1371 (Fed. Cir. 2009),
`and Saint-Gobain Ceramics & Plastics, Inc. v. II-VII Inc., 369 F.Supp.3d 963 (C.D. Cal. 2019)).
`As the Court held, whether Moderna’s infringement was for the benefit of the U.S. population or
`the Government is a factual dispute that can only be resolved on a fully developed record. D.I. 31
`at 13–14. The Government is not the trier of fact, and its opinion on the case law regarding
`§ 1498(a), the subject of the majority of its Statement, is entitled to no deference.
`
`If anything, the Government’s Statement makes clear why Plaintiffs should be afforded an
`opportunity to develop a full factual record. Astonishingly, the Government’s submission reveals
`that Moderna knew—while its motion “to dismiss with prejudice Plaintiffs’ claims based on
`Moderna’s sale and provision of COVID-19 doses to the U.S. Government” was pending, D.I. 17
`at 14 (emphasis added)—that the Government had disclaimed authorization and consent under one
`of the two contracts between them. Even Moderna now agrees that Plaintiffs’ claims regarding
`sales under the second contract should not be dismissed, Feb. 16, 2023 Tr. (Ex. 1) 28:7–14, such
`that its initial motion (never amended even upon execution of the second contract) sought improper
`relief. Yet Moderna never brought this fact to either Plaintiffs’ or the Court’s attention. Had the
`Court granted Moderna’s motion without discovery—an approach Moderna advocated and still
`advocates—neither the Court nor Plaintiffs ever would have known that Moderna’s request was,
`by its own belated admission, improper. The Government’s revelation is precisely why courts
`routinely hold that the application of § 1498(a) should be decided at summary judgment, rather
`than on the pleadings. Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379, 1382 (Fed. Cir. 2002).
`
`Nor would waiting to decide the application of § 1498(a) have a material impact on the
`scope of discovery in the case. While there is certainly discovery to be taken as to the application
`of § 1498(a) itself, see infra at 7, the core issues in the case—infringement, invalidity, and the
`reasonable royalty—will be unchanged irrespective of whether the Court ultimately determines
`that some damages should be collected in the Court of Federal Claims. For these reasons and the
`reasons that follow, Plaintiffs request that the Court resolve the parties’ disagreements in the
`proposed case schedule, D.I. 46, and enter a scheduling order setting a date for trial.
`
`I.
`
`Background and Procedural Posture
`
`Plaintiffs filed their Complaint over a year ago asserting patents covering the lipid
`nanoparticle (“LNP”) technology in Moderna’s COVID-19 vaccine. Plaintiffs’ LNP technology
`solved the key challenge underlying the new class of medicines to which Moderna’s mRNA-based
`vaccine belongs: the protection of the fragile mRNA (and other nucleic acids) from degradation in
`the human body and the delivery of those molecules into human cells where they can exert their
`therapeutic effect. D.I. 1 ¶¶ 21–28. This lawsuit followed not only Moderna’s refusal to negotiate
`a reasonable license to Plaintiffs’ patents, but also its failed effort to invalidate certain claims of
`the patents-in-suit in inter partes review proceedings before the USPTO. D.I. 1 ¶¶ 31–38, 55–64.
`Moderna’s failed IPR attacks and unsuccessful efforts to reverse them on appeal to the Federal
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`Circuit, 18 F.4th 1352 (Fed. Cir. 2021); 18 F.4th 1364 (Fed. Cir. 2021), leave Moderna statutorily
`estopped from advancing in this lawsuit its primary arguments against Plaintiffs’ patents. 35
`U.S.C. § 315. Moderna’s effort to avert the estoppel flowing from those failed proceedings provide
`important clues as to why the Government and Moderna, as part of their ongoing, politically-
`charged negotiations,1 would seek (improperly) to shift the billions of dollars of liability at issue
`away from Moderna and to the Government. See infra at 7.
`
`Moderna moved for partial dismissal of Plaintiffs’ Complaint on May 6, 2022, on the basis
`that all of its COVID-19 vaccine sales to the U.S. Government were subject to the so-called
`“government contractor defense” under 28 U.S.C. § 1498(a). Section 1498(a) is an affirmative
`defense that requires Moderna to prove that its infringement be (1) “for the Government” and (2)
`with “the authorization and consent of the Government.” D.I. 17 at 10–11; 28 U.S.C. § 1498(a).
`In an effort to meet its burden, Moderna requested the Court take judicial notice of its “-0100
`Contract” with the Government, including the incorporation of FAR 52.227-1. D.I. 17 at 7–8.
`Plaintiffs opposed because, as alleged in the Complaint, Moderna’s vaccines sales, while funded
`by the Government, were not for the Government—but “for the benefit of individual vaccine
`recipients in the United States.” E.g., D.I. 21 at 3, 7, 9–16; D.I. 1 ¶ 51; see also Larson, 26 Cl. Ct.
`at 369. Plaintiffs also pointed out that, in addition to the sufficiency of their allegations, discovery
`would be needed to ascertain whether in fact all of Moderna’s government sales were both “for
`the Government” and with the Government’s “authorization or consent.” D.I. 21 at 17–20.
`
`On November 2, 2022, the Court denied Moderna’s motion, agreeing that “this case [is]
`more akin to Larson than Advanced Software Design or Saint-Gobain Ceramics” and that whether
`Moderna’s infringement was “for the Government” and with its “authorization or consent” were
`disputes “best considered under a more fully developed record.” D.I. 31 at 12, 16. Unbeknownst
`to the Court or Plaintiffs, Moderna and the Government executed the “-0017 Contract” months
`earlier, in July 2022 for 300 million more doses.2 As the Government’s Statement makes clear,
`D.I. 49 at 4, and Moderna agrees, Feb. 23, 2023 Tr. (Ex. 1) 28:7–14, § 1498(a) does not apply to
`the -0017 Contract, such that even if Moderna’s partial motion were granted, this Court would still
`be left with claims to adjudicate, as to sales to the Government and others.
`
`II.
`
`The Government’s Statement Does Not Control the Application of § 1498(a) or
`Address the Full Scope of Its Requirements.
`
`A.
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`The Government improperly vitiates “for the Government” from § 1498(a).
`
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`1 See, e.g., https://www.bostonglobe.com/2023/01/25/business/two-senators-accuse-moderna-
`greed-its-plan-quadruple-covid-vaccine-cost/ (Exhibit 4); https://www.sanders.senate.gov/wp-
`content/uploads/Moderna-Letter-01.09.20231.pdf (Exhibit 5); https://www.warren.senate.gov/
`imo/media/doc/2023.01.24%20Letter%20to%20Moderna%20re%20COVID%20Vaccine%20Pri
`ce%20Hikes.pdf (Exhibit 6).
`2 https://investors.modernatx.com/news/news-details/2022/Moderna-Announces-New-Supply-
`Contract-With-The-U.S.-Government-For-An-Initial-66-Million-Doses-Of-A-Moderna-Bivalent-
`Covid-19-Booster-Vaccine-With-Options-For-U.S.-Government-To-Purchase-Up-To-An-
`Additional-234-Million-Doses/default.aspx (Exhibit 7).
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`The Government’s Statement offers no reason to depart from the Court’s prior ruling. The
`Government focuses heavily on the incorporation of FAR 52.227-1 in the -0100 Contract. D.I. 49
`at 1–4, 8–10. But the incorporation of that provision is not new. Moderna’s motion made FAR
`52.227-1 its centerpiece, D.I. 17 at 6, 12–14, and the Court rejected that provision as singularly
`dispositive of § 1498(a)’s application, because the statute requires more than authorization and
`consent: the infringement must also be for the benefit of the Government, D.I. 31 at 13–14.
`
`Rather than address that distinct legal requirement Moderna failed to meet, D.I. 31 at 13,
`the Government advances the unprecedented theory that when FAR 52.227-1 is present, “the ‘for
`the Government’ inquiry” under § 1498(a) should “collapse[] into the ‘authorization and consent’
`inquiry.” D.I. 49 at 9. The Government’s interpretation of precedent manifestly cannot supplant
`the Court’s. And the Government is wrong. Its sole support is Sevenson, a case that this Court
`cited for the exact opposite point: that “[a] defendant” like Moderna “bears the burden of
`establishing that ‘(1) the [infring]ing use is “for the Government” and (2) the [infringing] use is
`“with the authorization and consent of the government.”’” D.I. 31 at 8.
`
`Sevenson on its face does not support the Government’s position. There, as in all of the
`§ 1498(a) cases cited by Moderna and the Government, the Federal Circuit separately analyzed
`both prongs of the statutory inquiry. The court began its analysis by expressly rejecting the
`appellee’s argument that “for the Government” requires the “primary purpose” of the contract be
`to benefit the Government. 477 F.3d at 1365–66. In doing so, the court simply adhered to the
`statutory text, which imposes no such requirement. Id. The Federal Circuit proceeded to address
`whether there was a genuine dispute as to the second prong—whether the infringement was “with
`the authorization and consent of the Government.” Id. at 1367–68.
`
`In doing so, the Court of Appeals did not find that a “truncated inquiry” under § 1498(a)
`would be appropriate. Instead, as the Government’s own parenthetical quote from Sevenson makes
`clear, D.I. 49 at 9, to the extent courts have “bypassed a separate inquiry into whether infringing
`activity was performed ‘for the Government,’” they have done so only “where infringing activity
`has been performed by a government contractor pursuant to a government contract and for the
`benefit of the Government.” 477 F.3d at 1366 (emphasis added). In other words, in a case like
`Sevenson where the benefit to the Government is undisputed under the correct legal standard—the
`use of patented technology to remediate toxic waste on a parcel of Government property—and the
`patent owner’s only argument rests on an extrastatutory requirement that the “primary purpose” of
`the infringement be “for the Government,” there is no factual dispute that the “for the Government”
`prong of § 1498(a) is met. Put another way, as with all legal tests, where one prong of a two-prong
`test is not disputed (or not disputed under the correct legal standard), the inquiry turns on the single,
`disputed prong. Here, however, the parties dispute—fiercely—the “for the Government” prong.
`The posture in which Sevenson was decided—summary judgment—also confirms that resolution
`of the “for the Government” inquiry cannot be “truncated” merely by the Government’s after-the-
`fact say-so. See also infra at 7.
`
`Given Sevenson’s plain import, it is unsurprising that counsel for the United States
`backtracked from the Statement during the February 16, 2023 conference, stating that Sevenson
`had merely “suggested” the possibility of the Government’s “truncated inquiry.” Feb. 16, 2023
`Tr. (Ex. 1) 26:14–19. In reality, Sevenson “suggested” no such thing. Every court to address the
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`§ 1498(a) inquiry, before Sevenson and after, has reiterated that two distinct prongs must be
`satisfied for its invocation. E.g., Sevenson, 477 F.3d at 1365; Advanced Software, 583 F.3d at
`1376; Saint-Gobain, 369 F.Supp.3d at 970; IRIS v. Japan Airlines Corp., 769 F.3d 1359, 1362
`(Fed. Cir. 2014); Hughes Aircraft Co. v. United States, 534 F.2d 889, 898 (Ct. Cl. 1976). Not even
`Moderna, in multiple briefs, D.I. 17, 23, has argued that the Court should ignore this avalanche of
`precedent or “collapse” the statute’s two-pronged test into one. It is a simple matter of logic that
`“standing alone, a governmental grant of authorization or consent does not mean that the alleged
`use or manufacture is done ‘for the United States’ under § 1498(a).” IRIS, 769 F.3d at 1362.
`
`During the February 16 hearing, the Government also urged the Court to look to Advanced
`Software. Feb. 16, 2023 Tr. (Ex. 1) 26:14–19. That case does not support the Government’s
`position either. As in Sevenson, the court in Advanced Software carefully examined the factual
`record to ascertain whether both of the statutory requirements “for the Government” and “with the
`authorization or consent of the Government” were met. That analysis considered testimony from
`a U.S. Treasury official, as well as the benefit to the Government in the form of detecting
`fraudulent checks purportedly from the U.S. Treasury, to resolve summary judgment, not a motion
`to dismiss under Rule 12(b)(6). Advanced Software, 583 F.3d at 1374, 1376 (quoting Sevenson’s
`legal standard as providing “two criteria for application of § 1498(a) to activity of private parties”).
`
`The Government’s belated invitation to overturn decades of precedent to erase the “for the
`Government” prong of § 1498(a) is as transparent as it is baseless. Rather than finding any case
`law support, the Government’s misreading of Sevenson was first advanced in a 2016 Yale Law
`Journal article—and later by a Senator—urging the Government to pursue a price reduction
`scheme by invoking § 1498(a) to buy “generic versions of [approved medicines] at less than 1%
`of their list price plus a reasonable royalty.” H. Brennan, A. Kapczynski, C.H. Monahan & Z.
`Rizvi, A Prescription for Excessive Drug Pricing: Leveraging Government Patent Use for Health,
`18 Yale J.L. & Tech. 275, 275 (2016) (“Yale Article”); Letter from Senator Elizabeth Warren to
`Xavier Becerra (Apr. 22, 2022), (Exhibit 2). The authors of that article quoted the same portion
`of Sevenson as the Government does now to assert that “where the infringing party has shown that
`they are acting pursuant to a contract with the federal government, courts typically assume use
`‘for’ the government without further inquiry.’” Yale Article at 333 & nn.271–72. A month after
`Moderna filed its reply brief, D.I. 23, a faction of legislators again urged the Department of Health
`and Human Services, the agency on behalf of which the Government submitted its Statement, to
`“use compulsory licensing under 28 U.S.C. § 1498(a) . . . to lower prescription drug prices.” Letter
`to the Honorable Xavier Becerra (June 23, 2022) (Exhibit 3).
`
`The reason that the Government’s Statement—parroting the law review article—urges this
`Court to erase the “for the Government” prong of the § 1498(a) inquiry, is that medical treatments
`and interventions, such as Moderna’s COVID-19 vaccine, fail to satisfy that prong. The law could
`not be clearer: “Medical care is provided for the benefit of the patient, not the government.”
`Larson, 26 Cl. Ct. at 369. Moderna’s inability to satisfy § 1498(a) is no reason to change it outside
`of the proper legislative avenue. The Government’s argument is nothing more and nothing less
`than an invitation to rewrite the statute for political purposes, as ensuing commentators—including
`the former Chief Judge of the Court of Federal Claims herself—have explained. Chief Judge
`Braden and others have criticized a reading of Sevenson that permits the Government to abrogate
`unilaterally the statutory text requiring that the infringing conduct be “for the Government,” as the
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`Government urges here, and endorsed this Court’s interpretation of precedent. Susan G. Braden
`& Joshua A. Kresh, Section 1498(a) is Not a Rx to Reduce Drug Prices, 77 Food & Drug L.J. 274,
`283 & n.53, 285 n.74 (2022) (Exhibit 11). Chief Judge Braden further observed that “continued
`pressure on the executive branch to exert 28 U.S.C. § 1498(a) should be expected.” Id. at 275.
`
`That “continued pressure” ostensibly has succeeded, and the executive branch (through the
`Government’s Statement) now beseeches this Court to ignore the text of § 1498(a) and its own
`prior interpretation of Sevenson and Larson that are inconsistent with the Government’s apparent
`policy goal of expanding § 1498(a) into the realm of medical care. No court has advanced the
`view of § 1498(a) that the Government now urges. Contra the Government’s suggestion, “it is
`emphatically the province and duty of the judicial department,” not the executive or legislative
`branches, “to say what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803).
`
`B.
`
`This Court correctly applied the controlling precedent in Larson to the facts
`alleged in the Complaint.
`
`Aside from erasing the “for the Government” test, the Government offers no new response
`to Larson, Plaintiffs’ lead case that the Court carefully considered in denying Moderna’s partial
`motion to dismiss, D.I. 21 at 10, D.I. 31 at 12. The Larson Court determined that the provision of
`infringing medical equipment to patients through Medicare and Medicaid was not “for the
`Government” because “the fact that the government has an interest in [a] program generally, or
`funds or reimburses all or part of its costs, is too remote to make the government the program’s
`beneficiary for the purposes underlying § 1498.” 26 Cl. Ct. at 369 (emphasis added). Larson’s
`reasoning applies full force, notwithstanding the Government’s Statement. As in Larson, “the
`benefit and convenience,” id., of “free public distribution” of Moderna’s vaccine, D.I. 49 at 10,
`funded or reimbursed by the Government, flowed to the “patient and provider, with no benefit to
`the government,” 26 Cl. Ct. at 369 (emphasis added). Again, “[m]edical care is provided for the
`benefit of the patient, not the government.” Id. All that Moderna and the Government have cited
`to date is the generalized programmatic interest in “thwart[ing] the COVID-19 pandemic,” D.I. 49
`at 10, which this Court properly found is insufficient. See also Windsurfing Int’l., Inc. v.
`Ostermann, 534 F.Supp.581, 588 (S.D.N.Y. 1982).
`
` The Government downplays Larson by reprising Moderna’s failed argument that
`Larson’s facts can be distinguished by the absence of an express government contract. See D.I.
`49 at 12; D.I. 23 at 3–4. But that fact was irrelevant in Larson, and neither Moderna nor the
`Government cite a case where it has proven dispositive. The Government and Moderna’s
`argument seems to be that the invocation of FAR 52.227-1 is enough on its own to definitively
`establish the applicability of § 1498(a). That express Government contract may be relevant to the
`“authorization and consent” prong of the test, but it does not change the fact that, as to the first
`prong, “[m]edical care is provided for the benefit of the patient, not the government.” Larson, 26
`Cl. Ct. at 369. The patient receives that benefit identically, without regard to whether the
`Government signed a contract or provides funding or a reimbursement. Arlton v. Aerovironment,
`Inc., 2021 WL 1589302, at *7–8 (C.D. Cal. Apr. 22, 2021) (requiring and finding “more than
`incidental benefit” to the Government, notwithstanding contract with FAR 52.227-1).
`
`In reality, the key distinction between this case and the cases relied upon by the
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`Government and Moderna finding § 1498(a) to be applicable is that there is (at best for Moderna)
`a genuine factual dispute regarding whether Moderna’s infringement was “for the Government.”
`In each of those cases, the Government benefit was indisputable. In Saint-Gobain, the infringing
`sapphire sheets were used in F-35 fighter jets; in Advanced Software, the technology at issue was
`to detect fraudulent U.S. Treasury checks; in Sevenson, the infringing “phosphoric-acid based
`stabilization system” was to remediate toxic waste at a Government-owned property. The only
`case analogous to the facts here—subsidized private medical treatment—is Larson. The
`Government’s position that a “contractor’s compliance with the contract’s obligations alone” is
`sufficient to invoke § 1498(a) whenever a clause like FAR 52.227-1 is present, D.I. 49 at 10, fully
`embraces the error that the Court observed in Moderna’s nearly identical position, i.e., “that every
`government-funded product used to advance any policy goal articulated by the U.S. Government—
`such as IV needles to fight HIV to cancer drugs to fight the war on cancer—would be subject to a
`§ 1498(a) defense,” D.I. 31 at 13. That misapplication of § 1498(a) was wrong in Moderna’s
`motion, and it fares no better now repeated by the Government (which apparently seeks to expand
`§ 1498(a) to the examples identified by the Court that are plainly beyond the reach of the statute).
`
`C.
`
`The Government’s Statement does not address Plaintiffs’ indirect
`infringement allegations.
`
`Even as the Government’s Statement errs regarding the application of § 1498(a) to the sale
`of Moderna’s vaccine doses to the Government, it is completely silent about an entire, and distinct,
`category of infringement alleged in the Complaint: Moderna’s indirect-infringement liability for
`inducing and contributing to direct infringement by the numerous non-governmental actors
`involved in the distribution and administration of Moderna’s infringing vaccine. E.g., D.I. 1 ¶ 9.
`None of these infringing uses are “by or for the United States”—the Government is nowhere to be
`found. The Government never asserts otherwise. Thus, separate and apart from any other acts of
`infringement addressed by the Government, there can be no doubt that these acts of infringement,
`which apply to every dose of the accused vaccine ever used in the United States, are not subject to
`§ 1498(a). The law is clear that “section 1498(a) is a waiver of sovereign immunity only with
`respect to a direct governmental infringement of a patent . . . the Government is not liable for its
`inducing infringement by others, for its conduct contributory to infringement of others.” Decca v.
`United States, 640 F.2d 1156, 1167 (Ct. Cl. 1980); Madey v. Duke Univ., 307 F.3d 1351, 1359
`(Fed. Cir. 2002) (§ 1498(a) “acts as a waiver of sovereign immunity” and “waivers of sovereign
`immunity are to be strictly construed.”). The authority cited by the Government, D.I. 57 at 3, does
`not address liability for indirect infringement by use of a patented invention by private parties, as
`alleged in Plaintiffs’ Complaint here. Accordingly, even were government sales under one contract
`somehow subject to § 1498(a) (they are not), Moderna would remain accused of indirect
`infringement with respect to every dose, and such allegations would not be subject to § 1498(a).
`
`III. The Government’s Statement Underscores that Discovery is Needed to Determine
`the Applicability of § 1498(a).
`
`In denying Moderna’s motion, the Court held that “this dispute is not appropriate for
`resolution in a Rule 12(b)(6) motion” and that the “dispute should be resolved by summary
`judgment rather than on a motion to dismiss.” D.I. 31 at 13; Toxgon, 312 F.3d at 1382. In Saint-
`Gobain, a case cited by both the Government and Moderna, D.I. 49 at 10, the court “converted
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`defendants’ motion to dismiss into a motion for summary judgment” and “directed the parties to
`conduct discovery and submit supplemental briefing on the applicability of § 1498.” 369
`F.Supp.3d at 966. The Government’s Statement neither requires nor warrants departure from the
`Court’s earlier decision. Indeed, the revelation that Moderna was seeking dismissal with prejudice
`of all claims relating to sales to the Government, while knowing the Government had expressly
`revoked any authorization and consent as to certain sales, only underscores why courts do not
`make legal determinations on less than a full record. Feb. 16, 2023 Tr. (Ex. 1) 28:7–14.
`
`Discovery in this case is still needed into both prongs of Moderna’s § 1498(a) defense—as
`it is with respect to all of the disputed issues of infringement, validity, and damages. As to the
`“authorization and consent” prong, although the Government has offered to produce unredacted
`versions of the contracts, it still has not done so. It has offered no legal basis for the Court to
`consider those documents—and those documents alone—in deciding whether Moderna has met
`its burden to establish an affirmative defense at the pleading stage. And Plaintiffs have been
`afforded no opportunity to take discovery into whether there are any formal or informal
`communications outside of the -0100 Contract that might modify or limit the scope of the
`Government’s authorization and consent.
`
`But even if authorization and consent were present, extensive fact discovery remains as to
`whether Moderna can meet the “for the Government” prong of § 1498(a). Tellingly, the
`Government’s Statement entirely avoids the factual dispute in favor of a contorted interpretation
`of Sevenson that simply reads the inquiry out of the statute. And here, the question of whether the
`Government is more than an “incidental” beneficiary is hotly disputed. That distinguishes this
`case from those in which courts have relied on Statements of Interest. In Arlton, cited by the Court,
`D.I. 31 at 15, for example, the alleged infringement involved “Mars Helicopters” built for NASA,
`2021 WL 1589302, at *7.3 In IRIS v. JAL, referenced by Moderna during the hearing, Feb. 16,
`2023 Tr. (Ex. 1) 20:20–21:3, the infringement involved the “uniquely governmental function” of
`border security and the “quasi-governmental function” of screening for fraudulent passports, 469
`F.3d at 1362. As Larson makes clear, the alleged infringement for healthcare here is far different.
`And as both the Government and Moderna acknowledged at the Court’s conference, the
`Government’s Statement is not conclusive. See Feb. 16, 2023 Tr. (Ex. 1) 20:14–19 (“not accepted
`without question”), 26:1–6 (“the Court always has a role in determining whether § 1498 applies”);
`see also IRIS, 769 F.3d at 1363 (“the government’s statement is not dispositive”).
`
`Plaintiffs thus intend to take discovery relevant to the application of § 1498(a) in this case,
`including (i) the complete and unredacted terms of Moderna’s contracts with the Government and
`any other related agreements and communications; (ii) the negotiations that culminated in the
`terms of those agreements; (iii) the nature and extent of the Government’s involvement in the
`development and specifications of the infringing vaccine, (iv) how the purchased doses were
`distributed and to whom—whether to customers of drug stores, grocery stores, private medical
`practices, or others; (v) Moderna’s and the Government’s respective understandings of who were
`
`
`3 Arlton underscores the need for discovery as the court in that case (1) vacated summary judgment
`after the defendant “publicly showcased” a new product that it had failed to disclose and (2)
`ordered limited discovery on that product. 2021 WL 4902186, at *3–5 (C.D. Cal. June 24, 2021).
`
`
`
`
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`

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`Case 1:22-cv-00252-MSG Document 59 Filed 03/02/23 Page 9 of 11 PageID #: 1019
`SHAW KELLER LLP
`The Honorable Mitchell S. Goldberg
`Page 9
`
`the true beneficiaries of the contract; and (vi) any discussions of Plaintiffs’ patents, including
`efforts to avoid the effects of inter partes review estoppel by shifting liability. See, e.g., Order,
`Racing Optics, Inc. v. Clear Defense, LLC, No. 16-cv-288, D.I. 22, D.I. 23 (M.D.N.C. Sept. 30,
`2016 & Oct. 13, 2016) (ordering production of “all of [defendant’s] communications with the
`Government concerning sales of the Accused Products” and depositions of “persons with
`knowledge of the facts and documents related to [defendant’s] § 1498(a) defense.”); Crater Corp.
`v. Lucent Techs., Inc., 1999 WL 33973795, at *2–3 (E.D. Mo. Aug. 25, 1999) (granting discovery
`on § 1498(a), including evaluating the Government’s claim to privilege based on state secrets).
`
`The current circumstances especially warrant discovery. The Government’s Statement
`comes nearly a year after Moderna filed its motion, in the midst of ongoing negotiations between
`them, the day before Moderna announced it would make vaccines “available at no cost for insured
`people,” and after paying $400 million to settle part of an ongoing patent dispute.4 It would hardly
`be surprising, given the attendant media