[Ip-health] U.S. Government’s $1.2 Billion Contract for Merck’s Investigational COVID-19 Drug Molnupiravir Redacts IP Terms, Contains Donation Clause and Very Limited Technology Transfer License

Kathryn Ardizzone kathrynardizzonekei at gmail.com
Mon Oct 4 12:50:49 PDT 2021


*U.S. Government’s $1.2 Billion Contract for Merck’s Investigational
COVID-19 Drug Molnupiravir Redacts IP Terms, Contains Donation Clause and
Very Limited Technology Transfer License*

October 4, 2021
Kathryn Ardizzone

Knowledge Ecology International (KEI) has obtained a copy of the $1.2
billion contract between the U.S. government and Merck to advance purchase
1,696,629 treatment courses of molnupiravir, an investigational COVID-19
drug that is taken in pill form. (PDF Link

According to the contract, the price per treatment course is $712.

KEI obtained the contract as part of its Freedom of Information Act (FOIA)
lawsuit against the Department of Health and Human Services and the Army
related to COVID-19 contracts executed by the U.S. government.

The contract, No. W911QY21C0031, was awarded by the Army on June 7, 2021.
It has an upper limit of $3.7 billion. The agreement includes options to
purchase additional courses of the drug, but quantities for those possible
future purchases are redacted.

*Intellectual Property*

Section H.10, titled “Intellectual Property Rights,” is redacted under
Exemption 4 of the FOIA, which is intended to protect trade secrets and
commercial or financial information that is privileged or confidential, but
is inappropriate here

When agencies receive FOIA requests for records that contain commercial
information, they first notify the source of the information (in many
cases, a contractor) that the request was received and provide a period of
time for the company to object to the release of the record in whole or in
part. In other words, when processing FOIA requests, agencies allow
contractors to be heard as to the information they think should be shielded
from the public.

The policy of seeking contractors’ input before releasing information to
the public likely explains the variability of redactions across the USG’s
COVID-19 contracts. KEI has obtained over 320 contracts or amendments
related to COVID-19. In most of the contracts, IP terms are disclosed,
although there are exceptions, which KEI is challenging in court.

Section H.15, titled “Subject Invention Not Expected,” states that the
parties do not “expect that conception or reduction to practice of any
Subject Inventions will result from performance under this contract.” This
term, which also addresses intellectual property rights but is not
redacted, is obviously directed at precluding the idea that any invention
arising from the contract is a subject invention, as that term is defined
by the Bayh-Dole Act of 1980, at 35 U.S.C. § 201(e). So here, where the
text can be read to give investors a more favorable view of the potential
profits, the company does not assert that an IP term is privileged.

There is an inconsistency between withholding the IP terms governing the
agreement on the one hand and explicitly stating that the parties do not
anticipate any invention arising from the contract on the other.

One possible motivation for the initial redactions is Merck’s desire to
downplay the perception that the government holds rights in molnupiravir,
per the Bayh-Dole Act. Merck is partnering with Ridgeback Therapeutics, a
small biotech company based in Florida founded by a husband-wife team with
backgrounds in finance, to develop the technology. Wendy Holman, the CEO of
Ridgeback, participated in a webinar centered on discouraging the use of
the U.S. government’s publicly-funded inventions to expand access to
COVID-19 vaccines and treatments. She called march-in rights, which enable
the government to authorize generic competition to alleviate health or
safety needs or when a drug is priced unreasonably (among other reasons),
“irrational” and “ridiculous.”

*Donation of Excess Product*

The contract includes a clause that allows the U.S. government to donate
any unneeded doses of molnupiravir “to any foreign nation that has an
active marketing approval in place for use of [molnupiravir] at the time of
donation,” or that has an active regulatory authorization and entered into
an indemnification agreement with Merck. Merck is obligated, under the
contract, to work in good faith with the USG to ensure that the regulatory
requirements and logistics needed to accomplish the donation are carried

*Technology Transfer*

The contract provides the USG with a limited technology transfer license:

a non-exclusive, nontransferable, irrevocable (except for cause),
royalty-free paid up license to practice or have practiced for or on behalf
of the U.S. Government any Merck Background Patent, Copyright, other Merck
Intellectual Property, Merck Know-How, Merck Technical Data rights
necessary to manufacture doses of [molnupiravir] subject to Merck’s ability
to obtain the consent to sublicense under an applicable Ridgeback license,
which Merck shall reasonably pursue in good faith;

The license also includes any necessary FDA filings or authorizations
controlled by Merck and outstanding deliverables under the contract. While
the scope of the license covers virtually everything needed to authorize
generic manufacture of the drug, its use is limited by the need for
Ridgeback’s consent, and three unlikely qualifying events

   1. Merck making a formal decision to stop manufacturing the product;
   2. Merck formally deciding to discontinue selling the product; or
   3. Merck filing for bankruptcy.

*Other Redactions*

The operative provisions in Section H.12 are not only redacted in full, but
the title is also redacted, making it impossible to know if or how any
other provisions are modified.

This is how the “Special license” provision (H.14) is redacted.

Kathryn Ardizzone, Esq.
Knowledge Ecology International
110 Maryland Avenue, Suite 511
Washington, DC 20002
kathryn.ardizzone at keionline.org
(202) 332-2670

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