The $1 Billion Government Shield: Federal Circuit Grills Moderna on the Limits of 28 U.S.C. § 1498 Immunity

The Billion-Dollar Question

A three-judge Federal Circuit panel on November 5 pressed Moderna, Arbutus Biopharma, and Genevant Sciences with uncomfortable questions about whether the government contractor defense—codified at 28 U.S.C. § 1498—shields Moderna from potentially devastating patent infringement liability over its COVID-19 vaccine. The stakes could not be higher: if the panel affirms the district court's ruling that Moderna is not immune, the biotech giant faces more than $1 billion in damages for allegedly infringing lipid nanoparticle (LNP) delivery technology patents owned by Arbutus and Genevant.

The case sits at the intersection of emergency public health policy and intellectual property rights, and its resolution will reverberate far beyond mRNA vaccines. For practitioners advising government contractors in the life sciences, defense, and technology sectors, the Federal Circuit's eventual decision will either confirm or sharply limit the scope of § 1498 immunity—a statute that has long served as a critical shield for companies working under federal contracts.

The Statutory Framework: Section 1498's Broad but Not Unlimited Reach

Section 1498(a) provides that when an invention "is used or manufactured by or for the United States" with the "authorization or consent of the Government," the patent owner's exclusive remedy is a suit against the United States in the Court of Federal Claims—not an infringement action against the contractor. The statute was designed to prevent patent holders from disrupting critical government functions, particularly during wartime or national emergencies.

But § 1498 is not a blank check. The Federal Circuit has long held that immunity applies only when the government has provided "express authorization or consent" for the contractor to use the patented technology. See Advanced Software Design Corp. v. Fed. Reserve Bank of St. Louis, 583 F.3d 1371, 1375 (Fed. Cir. 2009). The government must have specifically directed or approved the use of the patented invention; merely contracting for a product that happens to infringe does not trigger immunity.

The district court in Delaware concluded that Moderna's COVID-19 vaccine supply agreements with the federal government did not include the requisite authorization to use Arbutus and Genevant's LNP technology. According to Reuters, the panel appeared skeptical of Moderna's argument that the government's Operation Warp Speed contracts implicitly authorized the use of any necessary technology, including patented LNP delivery systems.

Why This Matters for Government Contractors

If the Federal Circuit affirms, the decision will send a clear signal to government contractors: § 1498 immunity is not automatic, even in the context of a declared public health emergency. Companies that supply products to the government—particularly those in the pharmaceutical, biotechnology, and defense sectors—must ensure that their contracts explicitly address intellectual property rights and, where necessary, secure specific authorization to use third-party patents.

This is a critical practice point. Too often, contractors assume that the government's urgent need for a product or service will translate into § 1498 protection. The Moderna case demonstrates that courts will scrutinize the actual contractual language and the scope of the government's authorization. If the contract is silent on IP, or if the government has not expressly consented to the use of specific patented technology, the contractor may be left holding the bag.

Moreover, the case highlights the risks of relying on implied authorization. Moderna's argument—that the government's emergency procurement of COVID-19 vaccines necessarily included authorization to use all required technology—reflects a broader policy argument that § 1498 should be interpreted expansively during national emergencies. But the statute's text and Federal Circuit precedent suggest that courts will not infer authorization from the mere existence of a government contract, no matter how urgent the circumstances.

The Broader Context: PTAB Discretion and IPR Estoppel

The Moderna argument comes on the heels of two other significant Federal Circuit decisions this year that reshape the patent litigation landscape. In February, the court rejected Apple and Google's challenge to a USPTO internal rule giving PTAB judges greater discretion to deny inter partes review petitions. The panel held that the rule was a "general statement of policy" exempt from notice-and-comment rulemaking under the Administrative Procedure Act, 5 U.S.C. § 553(b)(A).

That decision is a major win for the USPTO and for patent owners, who have long complained that IPRs are weaponized by large technology companies to invalidate patents on the cheap. By upholding the agency's discretion to deny institution, the Federal Circuit has made it harder for accused infringers to secure PTAB review, forcing more disputes into district court where litigation costs are higher and the playing field is less tilted toward challengers.

And in January, the court limited the scope of IPR estoppel under 35 U.S.C. § 315(e)(1) in In re Gesture Technology Partners, holding that estoppel does not apply against the Patent Office in ongoing ex parte reexamination proceedings. The decision clarifies that once the PTO orders reexamination, the IPR requester is no longer a participant, and the agency is free to continue its own validity analysis without being bound by the estoppel provisions that would otherwise apply in district court.

Together, these decisions reflect a Federal Circuit that is increasingly protective of patent rights and skeptical of procedural mechanisms that make it easier to invalidate patents. For patent owners, this is welcome news. For accused infringers—particularly in the tech sector—it means that the PTAB is no longer the reliable forum for killing patents that it once was.

The Takeaway for Practitioners

The Moderna case is a stark reminder that government contracts are not a substitute for due diligence on intellectual property. Companies working under federal contracts must:

1. Review contracts carefully to determine whether the government has expressly authorized the use of third-party patents.
2. Negotiate IP indemnification clauses that shift infringement risk back to the government where possible.
3. Consider seeking explicit § 1498 authorization for any patented technology that may be necessary to perform the contract.
4. Monitor Federal Circuit precedent closely, as the scope of § 1498 immunity remains a hotly contested issue.

The Federal Circuit's decision in the Moderna case is expected in the coming months. If the panel affirms the district court, it will be a significant setback for government contractors and a major victory for patent owners. If it reverses, it will confirm that § 1498 provides robust protection during national emergencies—but only if the government's authorization is clear. Either way, the case is a wake-up call for anyone who assumes that working for the government means working without IP risk.