Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 1 of 16 PageID #: 710
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`ARBUTUS BIOPHARMA CORPORATION
`and GENEVANT SCIENCES GMBH,
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`Plaintiffs,
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`MODERNA, INC. and MODERNATX, INC.,
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`Goldberg, J.
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`CIVIL ACTION
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`NO. 22-252
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` November 2, 2022
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`MEMORANDUM
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`During the course of the COVID-19 pandemic, Defendants Moderna, Inc. and ModernaTX, Inc.
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`(collectively, “Moderna”) brought to market an mRNA-based vaccine in an effort to combat the effect
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`of the COVID-19 virus. Plaintiffs Arbutus Biopharma Corporation (“Arbutus”) and Genevant Sciences
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`GmbH (“Genevant”) (collectively “Plaintiffs”) claim that, in order for the vaccine to succeed, Moderna
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`used a revolutionary lipid nanoparticule (“LNP”) delivery platform—created and patented by
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`Plaintiffs—without paying for it or requesting a license.
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`On February 28, 2022, Plaintiffs filed suit seeking compensation for the use of the patented
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`technology they claim to have developed. On May 6, 2022, Moderna filed a partial Motion to Dismiss,
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`arguing that to the extent Plaintiffs seek royalties on the sale and provision of COVID-19 Vaccine doses
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`to the United States Government, such claims can only proceed in the Court of Federal Claims and must
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`be dismissed from this Court. For the following reasons, I will deny Moderna’s Motion.1
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`1
`On May 18, 2017, then Chief Judge D. Brooks Smith of the United States Court of Appeals for
`the Third Circuit designated me as a visiting judge for the District of Delaware, pursuant to 28 U.S.C. §
`292(b), to handle this matter and other District of Delaware cases.
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`

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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 2 of 16 PageID #: 711
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`I.
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`FACTUAL BACKGROUND
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`The following facts are taken from Plaintiff’s Complaint.2
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`A.
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`General Background Regarding Virus Vaccines
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`As explained in the Complaint, viruses are typically described as small packets of
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`deoxyribonucleic acid (“DNA”) or ribonucleic acid (“RNA”). If a virus enters a living host cell, the
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`virus’s DNA or RNA can hijack the cell’s machinery and instruct the cell to make copies of the virus.
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`These copies, often numbering into the millions, leave the infected cell and enter other cells where the
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`process repeats. Infected cells can be damaged or die while hosting the virus, and, left unchecked, the
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`host organism itself can die. Vaccines traditionally work by injecting into the body a weakened or
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`inactive form of the virus that is unable to cause infection, but nonetheless retains features of the
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`infectious virus and can teach the immune system to recognize and attack the infectious virus it if it
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`invades in the future. (Id. ¶¶ 19–20.)
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`Moderna’s COVID-19 vaccine belongs to a new class of medicines that deliver nucleic acids
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`into the cells of the body to treat diseases or trigger an immune response to protect a person from future
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`infection. Nucleic acids are molecules that encode the genetic information essential to sustain life. One
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`type of nucleic acid is DNA, which is found within chromosomes and contains genetic information. In
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`order to make the protein encoded by a particular gene, the cell first converts the genetic code in the
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`gene’s DNA into another type of nucleic acid known as messenger ribonucleic acid, or “mRNA,” which
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`is effectively a copy of the portion of DNA that the cell’s protein-making machinery uses as a blueprint
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`to assemble the protein encoded by the gene. (Id. ¶¶ 21–23.)
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`2
`In deciding a motion under Federal Rule of Civil Procedure, the court must accept all factual
`allegations in the complaint as true, construe the complaint in the light most favorable to the plaintiff,
`and determine whether, under any reasonable reading, the plaintiff may be entitled to relief. See
`Erickson v. Pardus, 551 U.S. 89, 93–94 (2007).
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`2
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 3 of 16 PageID #: 712
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`Vaccines using RNA technologies are an emerging frontier in medicine to address many
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`previously intractable diseases and new viruses. RNA-based medicines, however, have been difficult to
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`develop because RNA molecules are fragile and, without adequate protection, are susceptible to
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`degradation in the body. For decades, the need for an effective delivery technology had been the most
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`significant challenge in the development of RNA-based products since, without the means to protect the
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`mRNA, mRNA-based vaccines have been ineffective. (Id. ¶¶ 24–25.)
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`B.
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`Plaintiffs’ Invention
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`Plaintiffs allege that functional RNA-based medicines eluded researchers until the work by
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`Plaintiffs’ scientists. After years of research, Plaintiffs developed lipid nano-particle (“LNP”)
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`technology that relies on fat-like molecules called lipids to encapsulate and protect nucleic acids like
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`mRNA from degradation in the body. Once inside, the LNP releases the nucleic acid so that it can
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`express the protein it encodes. The lipid components of Plaintiffs’ technology include structural lipids,
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`such as phospholipids and cholesterol; “cationic” (positive charge-bearing) lipids, including “ionizable”
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`lipids that are positive charge-bearing at certain pH levels; and conjugated lipids, which are lipids
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`attached to a polymer such polyethyleneglycol (“PEG”). (Id. ¶¶ 26–27.)
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`Plaintiffs’ scientists’ efforts led to the first FDA-approved RNA-based therapeutic in the form
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`of a drug called Onpattro®, used to treat a rare disease called amyloidosis. The company that developed
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`Onpattro® did so under an LNP license from Plaintiffs. Building on this initial success, Plaintiffs have
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`granted licenses for its LNP technology to other companies. From 2011 to 2021, the United States Patent
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`and Trademark Office (“PTO”) issued to Plaintiffs six different patents for its LNP-based inventions.
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`(Id. ¶ 28–29.)
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`C.
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`The Alleged Infringement and Related Litigation
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`According to the Complaint, Moderna has been on actual notice of Plaintiffs’ patents before
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`development of its COVID-19 vaccine, the “Accused Product” in this matter. Indeed, in May 2015,
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`Moderna attempted to acquire rights to Plaintiffs’ LNP delivery technology for four specific viral targets
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`3
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 4 of 16 PageID #: 713
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`through sublicense from a Canadian company called Acuitas Therapeutics (“Acuitas”). Although
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`Acuitas had licensed the LNP technology in 2012, its license agreement limited its ability to grant
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`sublicenses. Nonetheless, Acuitas granted Moderna the sublicense. In August 2016, after learning of
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`the sublicense agreements, Plaintiffs notified Acuitas of material breach, and Acuitas filed suit in the
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`Supreme Court of British Columbia seeking to prevent Plaintiffs from terminating the license. In
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`February 2018, Plaintiffs and Acuitas settled their dispute and agreed that Acuitas could no longer use
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`the LNP technology except for the specific sublicenses given to Moderna for vaccines targeting specific
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`viruses remaining in effect. SARS-CoV-2, the virus that causes COVID-19, was not among the
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`surviving sublicenses. (Id. ¶¶ 31–34.)
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`Moderna then began filing inter partes review (“IPR”) petitions, requesting that the PTO cancel
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`certain of Plaintiffs’ patents, including some asserted here. Although the first IPR petition was
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`successful, the remaining IPR petitions were not. (Id. ¶¶ 35–38.)
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`On January 10, 2020, with the novel SARS-CoV-2 virus quickly spreading around the world,
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`scientists identified the virus’s complete genetic sequence and posted it for free on the internet, thus
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`revealing the complete RNA sequence that encodes the virus’s components, including its distinctive
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`“spike protein.” With that information in the public domain, researchers around the world, including
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`Moderna, begin designing vaccines to target the virus. (Id. ¶ 39.)
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`Relying on Plaintiffs’ LNP technology covered by the Asserted Patents, Moderna was able to
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`begin producing its COVID-19 vaccine within just a few days of the genomic sequence entering the
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`public domain. Moderna’s success was unprecedented. On February 24, 2020, Moderna shipped
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`clinical drug product, and, less than one month later, Phase I trials began. Plaintiffs contend that
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`Moderna’s COVID-19 vaccine could not have been developed on such a short timeline without
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`Plaintiffs’ proven and patented LNP delivery technology. Plaintiffs further allege that published articles
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`and statements released by Moderna explicitly showed Moderna’s use of Plaintiff’s patents. (Id. ¶¶ 41–
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`49.)
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`4
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 5 of 16 PageID #: 714
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`Moderna’s distribution of its Accused Product and its administration to persons in the United
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`States and worldwide commenced around December 18, 2020, immediately after the FDA granted
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`Moderna’s COVID-19 vaccine an Emergency Use Authorization (“EUA”). In 2021, Moderna shipped
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`807 million doses, and, as of February 2022, Moderna had signed advance purchase agreements worth
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`approximately $19 billion for all of 2022. The Complaint alleges that the vaccine doses made and
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`administered in the United States were distributed to hospitals, pharmacies, clinics, and numerous other
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`entities for the benefit of individual vaccine recipients in the United States. (Id. ¶ 51.)
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`On June 1, 2021, Moderna announced that it had initiated the FDA process for a Biologics
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`License Application (“BLA”)—full-fledged licensure of its COVID-19 vaccine. The FDA approved the
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`BLA on January 31, 2022. As of February 24, 2022, the vaccine had received at least emergency
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`authorization from more than seventy countries. Moderna has contracted with a number of companies
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`around the world to manufacture its COVID-19 vaccine, including companies that employ facilities in
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`the United States. (Id. ¶¶ 52–54.)
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`Plaintiffs claim that they did not seek to inhibit development and distribution of the vaccine but
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`only requested fair and reasonable compensation. As such, they proposed that Moderna pay for a
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`mutually acceptable license, but Moderna has declined to engage meaningfully in licensing discussion,
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`necessitating this lawsuit. (Id. ¶¶ 55–61.)
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`On February 28, 2022, Plaintiffs filed suit alleging infringement of six different patents,
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`prompting Modern to file the partial motion to dismiss currently pending before me. 3
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`II.
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`STANDARD OF REVIEW
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`Under Federal Rule of Civil Procedure 12(b)(6), a defendant bears the burden of demonstrating
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`that the plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6); see
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`3
`The Complaint seeks damages for all sales of the COVID-19 Vaccine within the United States.
`Moderna’s Motion to Dismiss addresses only those sales that were made to the United States
`Government and does not seek dismissal of claims relating to any other sales.
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`5
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 6 of 16 PageID #: 715
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`also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The United States Supreme Court has
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`recognized that “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires
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`more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotations
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`omitted). “[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
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`statements, do not suffice” and “only a complaint that states a plausible claim for relief survives a motion
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`to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the
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`plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant
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`is liable for the misconduct alleged.” Id. A complaint does not show an entitlement to relief when the
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`well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct. Id.
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`The United States Court of Appeals for the Third Circuit has detailed a three-step process to
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`determine whether a complaint meets the pleadings standard. 4 Bistrian v. Levi, 696 F.3d 352 (3d Cir.
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`2014). First, the court outlines the elements a plaintiff must plead to state a claim for relief. Id. at 365.
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`Next, the court must “peel away those allegations that are no more than conclusions and thus not entitled
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`to the assumption of truth.” Id. Finally, the court “look[s] for well-pled factual allegations, assume[s]
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`their veracity, and then ‘determine[s] whether they plausibly give rise to an entitlement to relief.’” Id.
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`(quoting Iqbal, 556 U.S. at 679). The last step is “a context-specific task that requires the reviewing
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`court to draw on its judicial experience and common sense.” Id. (quoting Iqbal, 556 U.S. at 679).
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`III.
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`DISCUSSION
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`Moderna contends that it contracted with the Government for production and delivery of the
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`vaccine for use in combatting the pandemic. It presses that, under 28 U.S.C. § 1498(a), any infringement
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`claims relating to a Government contract must be litigated exclusively in the Court of Federal Claims.
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`4
`The Federal Circuit applies the law of the circuit in which the district court sits to nonpatent
`issues such as the standard for motions to dismiss for failure to state a claim under Federal Rule of
`Civil Procedure 12(b)(6). In re TLI Commc’ns LLC Patent Litig., 823 F.3d 607, 610 (Fed. Cir. 2016).
`6
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`Accordingly, Moderna seeks dismissal, under Federal Rule of Civil Procedure 12(b)(6),5 of any of
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`Plaintiffs’ infringement claims premised on Moderna’s sale and provision of COVID-19 vaccine doses
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`to the United States Government.
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`28 U.S.C § 1498(a) provides:
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`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.
`Reasonable and entire compensation shall include the owner’s
`reasonable costs, including reasonable fees for expert witnesses and
`attorneys, in pursuing the action if the owner is an independent inventor,
`a nonprofit organization, or an entity that had no more than 500
`employees at any time during the 5-year period preceding the use or
`manufacture of the patented invention by or for the United States.
`Not[]withstanding the preceding sentences, unless the action has been
`pending for more than 10 years from the time of filing to the time that
`the owner applies for such costs and fees, reasonable and entire
`compensation shall not include such costs and fees if the court finds that
`the position of the United States was substantially justified or that special
`circumstances make an award unjust.
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`For the purposes of this section, the use or manufacture of an invention
`described in and covered by a patent of the United States by a contractor,
`a subcontractor, or any person, firm or corporation for the Government
`and with the authorization of the consent of the Government, shall be
`construed as use or manufacture for the United States.
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`Id. at § 1498(a).
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`The “intention and purpose of Congress” in enacting this statute was “to stimulate contractors to
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`furnish what was needed” by the government, “without fear of becoming liable themselves for
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`infringements to inventors or the owners or assignees of patents.” Richmond Screw Anchor Co. v.
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`United States, 275 U.S. 331, 345 (1928). “Th[is] provision provides a cause of action against the United
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`5
`Since section 1498(a) is an affirmative defense rather than a jurisdictional bar, a court may not
`dismiss such an action under Federal Rule of Civil Procedure 12(b)(1). Toxgon Corp. v. BNFL, Inc.,
`312 F.3d 1379, 1382 (Fed. Cir. 2002).
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`7
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 8 of 16 PageID #: 717
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`States (waiving sovereign immunity) for a patent owner to recover damages for the unauthorized use or
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`manufacture of a patented invention ‘by or for the United States.” Astornet Techs. Inc. v. BAE Sys.,
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`Inc., 802 F.3d 1271, 1277 (Fed. Cir. 2015) (internal quotations omitted) (emphasis in original). Section
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`1498 “creates an independent cause of action for direct infringement by the Government or its
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`contractors that is not dependent on 35 U.S.C. § 271(a).” Zoltek Corp. v. United States, 672 F.3d 1309,
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`1326–27 (Fed. Cir. 2012). For claims that fall within the statute’s ambit, the remedy against the United
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`States is exclusive. Astornet, 802 F.3d at 1277.6
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`Section 1498(a) establishes an affirmative defense, not a jurisdictional bar. Manville Sales Corp.
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`v. Paramount Sys., Inc., 917 F.2d 544, 554 (Fed. Cir. 1990). A section 1498 affirmative defense is a
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`highly factual determination. Saint-Gobain Ceramics & Plastics, Inc. v. II-VI, Inc., 369 F. Supp. 3d 963,
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`970 (C.D. Cal. 2019). A defendant bears the burden of establishing that “(1) the [infring]ing use is ‘for
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`the Government’ and (2) the [infringing] use is ‘with the authorization and consent of the Government.’”
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`Sevenson Envt’l Servs., Inc. v. Shaw Envt’l, Inc., 477 F.3d 1361, 1365 (Fed. Cir. 2007).
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`A.
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`“For the Government”
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`The first part of the test under § 1498 is whether the infringing use was “for the Government.”
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`“A use is ‘for the Government’ if it is ‘in furtherance and fulfillment of a stated Government policy’
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`which serves the Government’s interests and which is ‘for the Government’s benefit.’” BAE Sys. Info.
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`& Elec. Sys. Integration Inc. v. Aeroflex Inc., No. 09-cv-769, 2011 WL 3474344, at *9 (D. Del. Aug. 2,
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`2011) (quoting Madey v. Duke Univ., 413 F. Supp. 2d 601, 607 (M.D.N.C. 2006)). The Federal Circuit
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`has remarked that this prong is satisfied where “the use or manufacture of a patented method or apparatus
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`occur[s] pursuant to a contract with the government and for the benefit of the government.” Sevenson,
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`477 F.3d at 1365. The Government’s benefit need not be the “primary purpose” of a government
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`contract. Id. at 1365. Likewise, the Government need not be the sole beneficiary. IRIS Corp. v. Japan
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`6
`Federal Circuit law applies to issues of substantive patent law. In re Spalding Sports Worldwide,
`Inc., 203 F.3d 800, 803 (Fed. Cir. 2000).
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`8
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 9 of 16 PageID #: 718
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`Airlines Corp., 769 F.3d 1359, 1362 (Fed. Cir. 2014) (quoting Advanced Software Design Corp. v. Fed.
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`Reserve Bank of St. Louis, 583 F.3d 1371, 1378 (Fed. Cir. 2009)). This provision must be applied on a
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`“case-by-case basis to determine whether a use meets the articulated statutory requirements.” Madey,
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`413 F. Supp. 2d at 607.
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`Nonetheless, “[i]ncidental benefit to the government is insufficient.” IRIS Corp. v. Japan
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`Airlines Corp., 769 F.3d 1359, 1361 (Fed. Cir. 2014). Moreover, a governmental grant of authorization
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`or consent, standing alone, does not mean that the alleged use or manufacture is done “for the United
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`States” under § 1498(a). Id. at 1362. “Even where ‘the government has an interest in the program
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`generally, or funds or reimburses all or part of [that program’s] costs,’ the Government’s interest is too
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`remote ‘to make the government the program’s beneficiary for the purposes underlying § 1498.’”
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`Sheridan v. United States, 120 Fed. Cl. 127, 131 (Fed. Cl. 2015) (quoting Larson v. United States, 26
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`Cl. Ct. 365, 369 (1992)).
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`Here, Moderna alleges that, under its contract with the United States Government, its supply of
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`the COVID-19 vaccine is for the benefit of the Government and thus § 1498(a) is applicable. Moderna
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`reasons that, in August 2020, the Government used its emergency powers to contract with Moderna to
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`supply doses of the COVID-19 vaccine. (Def.’s Ex. A.) 7 The Contract notes that the novel coronavirus
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`had spread globally resulting in an outbreak in the United States, which constituted a national
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`emergency. (Id. § C.1.1.) The Contract further provides that, “[t]he Department of Defense and Health
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`and Human Services (HHS) require large scale manufacturing of vaccine doses in support of the national
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`7
`The Contract is a public document published on the internet at https://www.hhs.gov/sites/
`Default/files/moderna-covid-19-vaccine-contract.pdf. Federal Rule of Evidence 201(b) permits a
`district court to take judicial notice of facts that are “not subject to reasonable dispute” in that they are
`either (1) “generally known within the territorial jurisdiction of the trial court” or (2) “can be accurately
`and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid.
`201(b). Courts regularly take notice of similar documents, particularly federal government or federal
`agency documents published on websites or otherwise. See U.S. ex rel. Spay v. CVS Caremark Corp.,
`913 F. Supp. 2d 125, 140 (E.D. Pa. Dec. 20, 2012) (citing cases).
`9
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 10 of 16 PageID #: 719
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`emergency response to the Coronavirus Disease 2019 (COVID-19) for the United States Government
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`(USG) and the US population.” (Id. § C.1.) Specifically, the Contract states:
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`Under Operation Warp Speed (OWS), the Department of Defense and
`HHS are leading a whole of nation effort to ensure development of
`promising vaccine, diagnostic and therapeutic candidates and ensure that
`these medical countermeasures are available in the quantities required to
`reduce SARS-CoV-2 transmission, identify prior and/or current
`infection, and improve patient care, thereby mitigating the impact of
`COVID-19 on the nation and its people. The DoD Joint Program
`Executive Office for Chemical, Biological, Radiological and Nuclear
`Defense (JPEO-CBRD) is providing expertise and contracting support to
`HHS, in compliance with PL 115-92 Authorization Letter for DoD
`Medical Priorities, through an Interagency Agreement, signed April 23,
`2020. As OWS products progress to clinical trials to evaluate the safety
`and efficacy of vaccines and therapeutics, it is critical that, in parallel,
`the USG supports large scale manufacturing so that vaccine doses or
`therapeutic treatment courses are immediately available for nationwide
`access as soon as a positive efficacy signal is obtained and the medical
`countermeasures are authorized for widespread use.
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`(Id. § C.1.1.1.)
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`Moderna contends that this contract language unequivocally demonstrates that its production of
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`the COVID-19 vaccine was “for the Government.” It claims that it supplied, and continues to supply,
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`COVID-19 vaccine doses to the U.S. Government for the Government to achieve a specific government
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`objective, i.e., supporting a nationwide vaccination effort.
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`Plaintiffs respond that for the infringing acts to be “for the Government,” the Government benefit
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`must be direct and not merely incidental. Thus, when the Government authorizes third-party action, it
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`is not liable for any infringement caused by the third party, but rather only for the infringement actually
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`done for the U.S. Government. Under this standard, Plaintiffs claim that Moderna cannot meet its burden
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`at the pleading stage to show that the government-funded sales of the vaccine were “for the
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`Government.” Plaintiff presses that the Complaint alleges that the infringing acts were not for the
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`Government’s benefit, but rather for the benefit of individual vaccine recipients in the United States, i.e.,
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`the American people. (See Compl. ¶ 51 (“Moderna’s vaccine doses made in the United States and
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`administered in the United States were distributed to hospitals, pharmacies, clinics, and numerous other
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`10
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 11 of 16 PageID #: 720
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`entities for the benefit of individual vaccine recipients in the United States. All of the manufacturing
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`and sales of vaccines distributed in the United States were for the benefit of the American public.”).)
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`According to Plaintiffs, the Contract between Moderna and the Government is not contrary as it merely
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`emphasizes the importance of the goal in finding an effective COVID-19 vaccine.
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`In Advanced Software Design Co. v. Fed. Reserve Bank of St. Louis, 583 F.3d 1371 (Fed. Cir.
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`2009), the Federal Circuit considered what constituted a use “for the government.” There, the United
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`States Treasury required privately owned and operated Federal Reserve Banks to use a certain “seal
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`encoding” system to identify fraudulent bank checks. Id. at 1373. Subsequently, the plaintiff sued three
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`Federal Reserve Banks and the company that supplied their fraud detection technologies, alleging that
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`the use of the mandatory seal encoding system constituted infringement of its patented methods. Id.
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`The Federal Circuit found that the Government benefitted from averting fraud in Treasury checks and
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`in saving Treasury resources through more efficient technology. Id. at 1378. Affirming the district
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`court’s grant of judgment for the plaintiff, the court noted that “the benefits to the government of using
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`the seal encoding technology on Treasury checks are not incidental effects of private interests.” Id. at
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`1379.
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`Similarly, in Saint-Gobain Ceramics & Plastics, Inc. v. II-VII Inc., 369 F. Supp. 3d 963 (C.D.
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`Cal. 2019), the plaintiff filed an infringement suit against defendants based on defendants’
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`manufacturing and sale of single crystal sapphire sheets used in the manufacture of windows for
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`aircrafts. Following discovery, defendants moved for summary judgment raising a defense under §
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`1498. Id. at 966–67. In granting summary judgment, the United States District Court for the Central
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`District of California found that defendants’ research and development of the sapphire sheets was “for
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`the government” in order to fulfill the window panel contracts defendants had executed with government
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`contractor, Lockheed Martin, and that defendants sold their sapphire sheets exclusively to the United
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`States Government through Lockheed Martin. Id. at 980. Although the court recognized that defendants
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 12 of 16 PageID #: 721
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`stood to benefit financially from developing the capability to grow sapphire sheets, it noted that, for §
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`1498(a) to be triggered, the United States did not need to be the sole beneficiary. Id.
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`By contrast, the United States Claims Court8 reached the opposite conclusion in Larson v. United
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`States, 26 Cl. Ct. 365 (Cl. Ct. 1992). There, the plaintiffs were the owner of patents for splints used in
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`treating patients for broken bones, strains, arthritis, and burn injuries, as well as for application of the
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`split to the patient under certain specified conditions. Id. at 367. Health care providers participating in
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`the government programs of Medicare, Medicaid, and the Civilian Health and Medical Program for the
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`Uniformed Services used the plaintiff’s splints in medical treatment, the costs of which were reimbursed
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`by the government programs. Id. The plaintiffs argued that the language of the Medicare Act supported
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`the assertion that the infringing activity was “for” the benefit of the government because the government
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`has an interest in providing treatment to certain segments of the population and it received a benefit from
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`services reimbursed under Medicare. Id. at 369. The Claims Court disagreed, finding that “[m]edical
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`care is provided for the benefit of the patient, not the government.” Id. It reasoned that “[a]ny use of
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`plaintiffs’ casts and splints was for the benefit and convenience of the patient and provider, with no
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`benefit to the government. The fact that the government has an interest in the program generally, or
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`funds or reimburses all or part of its costs, is too remote to make the government the program’s
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`beneficiary for the purposes underlying § 1498.” Id.
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`At this early stage of the litigation, I find this case more akin to Larson than Advanced Software
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`Design or Saint-Gobain Ceramics. Based on the allegations of the Complaint, which I must accept as
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`true, the development and sale of the vaccines was for the benefit of the vaccine’s recipients. According
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`to the Complaint, the U.S. Government was an incidental beneficiary who bore an interest in ensuring
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`the safety of its citizens. As Plaintiffs convincingly note, to credit Moderna’s argument based on the
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`8
`In the Court of Federal Claims Technical and Procedural Improvements Act of 1992, the statute
`substituted the “Court of Federal Claims for the “Claims Court.” See Keene Corp. v. United States, 508
`U.S. 200, 206 n.2 (1993).
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`Case 1:22-cv-00252-MSG Document 31 Filed 11/02/22 Page 13 of 16 PageID #: 722
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`preamble language of the contract—a contract produced here only in redacted form—could mean that
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`every government-funded product used to advance any policy goal articulated by the U.S. Government-
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`—such as IV needles to fight HIV to cancer drugs to fight the war on cancer—would be subject to a §
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`1498(a) defense. This is particularly true in this case where the race to develop a COVID-19 vaccine
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`may have occurred even in the absence of Government involvement and was simply expedited by the
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`national effort to hasten the process.
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`Absent clear language, either in the Complaint or the Contract, establishing that the development
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`of the vaccine was “for the Government,” I find that this dispute is not appropriate for resolution in a
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`Rule 12(b)(6) motion. As noted above, section 1498(a) is an affirmative defense rather than a
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`jurisdictional bar. Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379 (Fed. Cir. 2002). Accordingly, the
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`moving party bears the burden of proving that defense, and, if appropriate, a § 1498(a) dispute should
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`be resolved by summary judgment rather than on a motion to dismiss. Id. at 1382–83. Consistent with
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`this principle, every case cited by the parties on this issue resolved the matter on a motion for summary
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`judgment, after the parties had taken discovery, and not on motions to dismiss.9 Such an issue cannot
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`be resolved without some inquiry into the full and complete terms of the contract regarding
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`In its reply brief, Moderna cites cases wherein the court granted Rule 12(b)(6) motions to dismiss
`claims under § 1498(a). These cases do not undermine the general principle that an analysis under §
`1498(a) is a highly factual inquiry that generally should not be resolved on a motion to dismiss. Nor do
`these cases detract from the fact that the vast majority of § 1498(a) arguments are resolved on summary
`judgment motions.
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`Indeed, upon review, the cases cited by Moderna are aligned with these precepts. In IRIS Corp.
`v. Japan Airlines Corp., 769 F.3d 1359, 1363 (Fed. Cir. 2014), the district court placed heavy reliance
`on the facts that (a) the contract at issue involved a “uniquely governmental function” and (b) the
`Government had “unequivocally stated its position that suit under § 1498(a) is appropriate.” Id. at 1363.
`In D3D Technologies, Inc. v. Microsoft Corp., No. 20-cv-1699, 2021 WL 2194601, at *1 (M.D. Fla.
`Mar. 22, 2021), the district court, in a truncated analysis, observed that the complaint explicitly conceded
`that the alleged infringing technology was developed pursuant to a contract with the United States Army
`to supply the Army with augmented reality technology. Id. at *2. Finally, in Astornet Technologies Inc.
`v. BAE Systems, Inc., 802 F.3d 1271, 1277–78 (Fed. Cir. 2015), the complaint alleged no claims of
`direct infringement against the defendant, but rather pled only indirect infringement based solely on the
`Government’s use—through the Transportation Security Administration—of the alleged infringing
`technology. Accordingly, there was no factual dispute that the alleged infringement was “for the
`Government.” Id.
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