It’s unthinkable that bad actors could take advantage of patent law and keep the public from getting access to COVID-19 tests and treatment, but they can and will—it already happened this month. Fortunately, an often-overlooked section of U.S. patent law allows the government to do something about it.
Patent troll Labrador Diagnostics LLC recently used a portfolio of old patents to sue a company that makes and distributed COVID-19 tests. The story gets weirder: those patents were originally issued to Theranos, the notoriously fraudulent blood-testing company that closed up shop in 2018. It’s a particularly outrageous example of an all-too-common story: a company fails, yet its patents live on as fodder for legal bullying against practicing companies in the same field.
The Labrador Diagnostics case is a clear example of a time when the incentives don’t line up right: in this case, exclusivity is standing in the way of innovation.
We’re relieved that Labrador has now agreed to grant royalty-free licenses for COVID-19 testing, but this case shows how high the stakes become once a U.S. patent issues and grants its owner the right to stop others from engaging in productive—and here, potentially life-saving—activities. It also shows that these stakes are high because of the power that patents convey—not because patent owners necessarily provide any benefit to the public.
At its core, the patent system exists to enhance the public’s access to innovation, not to compensate individual rightsholders. The patent grant isn’t a paycheck; it represents a trade between an inventor and society. Inventors agree to disclose certain information to the public about how an invention works; in return, they get the right to stop others from making, using, or selling the patented invention without permission for 20 years. In principle, this period of exclusivity allows inventors to recover the costs of research and development and make a profit.
The most vocal defenders of a rigid patent system believe that innovation simply would not happen without that period of exclusivity—in other words, that innovation is simply impossible without government-backed restrictions on access. But the Labrador Diagnostics case is a clear example of a time when the incentives don’t line up right: in this case, exclusivity is standing in the way of innovation. Nonprofit researchers have developed low-cost tests for COVID-19—truly life-saving innovation—that companies like Labrador could block by asserting their patents and thus invoking their right to exclude.
Fortunately, the U.S. government can do something about it. 28 U.S.C 1498 allows the government to use or authorize others to use any invention “described in and covered by a patent of the United States.” If such authorization is granted, patent owners can sue the United States, but only for reasonable compensation. That means they cannot seek injunctions against private entities working for the United States government. Nor can they engage in protracted litigation in patent-friendly jurisdictions like the Eastern District of Texas; they must sue the government in a bench trial in the Court of Federal Claims in Washington, D.C.
To stop Labrador and any bad actors that might follow, the government could invoke Section 1498, and thereby make itself—rather than private entities—the defendant in a patent infringement lawsuit. That would save the public from the risk of an injunction that would cut off the public’s access to desperately-needed tests. Long before the current crisis, scholars in the pharmaceutical field have advocated for the government to use Section 1498 to enhance access and reduce drug prices.
As Labrador’s patents on methods of testing show, the effects of patents on access to medical care goes beyond the accessibility and affordability of pharmaceuticals. That is especially true as software-based tools and services become more and more integral to our health care system. We already have evidence showing that software patents generally serve to transfer resources from more to less innovative companies. And we have seen patent trolls go after innovative health care companies, as a patent assertion company called “My Health” did, when it sued numerous remote healthcare monitoring services despite the fact that it wasn’t offering any services to the public. Patent abuse could stop software-based healthcare solutions from getting to people who need them.
During the current crisis, we hope the United States government will use its statutory authority under 28 U.S.C. § 1498 to issue compulsory licenses on patents that stand in the way of access to existing technologies and the space to develop new technologies to benefit public health. Whether those technologies are rooted in biochemistry or computer science, the government has the power to mitigate the damage done by opportunists using the patent system to stop practicing companies from bringing needed services to the public. Owners of valid patents would still be entitled to reasonable compensation for the use of their inventions, but they wouldn’t be entitled to stop private companies and nonprofits from doing important work that benefits us all.