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In 1918, the U.S. Supreme Court held that government contractors could be sued for patent infringement even if their products were manufactured specifically for the U.S. government. Franklin D. Roosevelt, then acting secretary of the Navy, wrote an urgent letter to Congress warning that contractors were hesitant to build equipment for the Navy that could expose them to expensive litigation. Congress responded swiftly, amending federal law to shield contractors from patent suits when they were manufacturing products for the government. That statutory immunity, now codified as 28 U.S.C. § 1498, has protected defense manufacturers for over a century. But a recent federal court ruling in Delaware shows the limits of that protection for the modern procurement era.
The case in Delaware involves patent litigation over a COVID-19 vaccine, not a weapons system. But the legal principle at stake — what it means for a product to be made “for the Government” and protected from litigation — carries direct implications for the rising class of defense technology companies known as “neoprimes”: firms like Anduril, Palantir, Shield AI, and others that are using private research and development budgets to build dual-use technologies designed to serve both military and commercial customers. The parties recently settled for $2.25 billion, with $1.3 billion contingent on how the appeals court resolves the patent immunity question. If the Delaware court’s interpretation holds, these companies may find that their defining business model makes them more vulnerable to patent litigation than their legacy competitors.
Section 1498 immunity works like this: When a contractor uses or manufactures a patented invention “for the Government and with the authorization or consent of the Government,” the patent holder’s only recourse is to sue the United States itself in the Court of Federal Claims for reasonable compensation. The contractor is shielded entirely from litigation. The statute originated in 1910 and was expanded in 1918 precisely because patent infringement lawsuits were disrupting wartime production. Courts have historically interpreted Section 1498 broadly, extending it over the decades to cover products manufactured abroad and to preclude other types of infringement claims like inducement. Today, explicit government consent to patent infringement is a standard clause in bid solicitations and procurement contracts.
When Arbutus Biopharma sued Moderna in Delaware federal court, alleging that Moderna’s COVID-19 vaccine used its patented mRNA delivery technology, Moderna invoked Section 1498 immunity. Because Moderna’s vaccine was developed under a government contract during Operation Warp Speed, and with the express authorization and consent of the United States, Moderna asked the court to dismiss the case against it.
In a February order, the Delaware court rejected this argument for the vast majority of Moderna’s vaccine sales. The key distinction: the phrase “for the Government” in Section 1498, the court held, requires the product to benefit the government itself. The government ordered over $8.2 billion worth of Moderna vaccines during the pandemic, but those doses were distributed to ordinary citizens, not consumed by government employees in their official capacity. Only a narrow slice of doses administered directly to government personnel qualified for statutory immunity.