IP Risks To Consider When Joining ‘Open COVID Pledge’

June 30, 2020Articles Law360

As the COVID-19 pandemic continues to negatively impact the world, many organizations are starting to share information and collaborate to find ways to combat the virus. It is imperative to avoid lengthy negotiations, which are often a part of such collaborative efforts. Therefore, a number of initiatives are being launched to resolve the plethora of challenges associated with sharing of intellectual property and knowledge in the fight against the COVID-19 pandemic.

One of these initiatives is the "Open COVID Pledge," which states that "it is a practical and moral imperative that every tool we have at our disposal be applied to develop and deploy technologies on a massive scale without impediment. We therefore pledge to make our intellectual property available free of charge for use in ending the COVID-19 pandemic and minimizing the impact of the disease."

To make the pledge, pledgers, who may be "individuals, companies and other organizations who hold intellectual property rights," must publicly commit to making their IP freely available for the purpose of fighting the pandemic, implement the pledge via a license falling within the Open COVID License specifications, and submit their pledge to the Open COVID organizers.

Participation in the Open COVID Pledge will allow others to use the pledger's IP, as long as the use is specifically related to fighting against COVID-19, without extensive negotiations or royalty payments. The license can cover "patent, copyright and other intellectual and industrial property rights (other than trademarks and trade secrets)." In this case, "other intellectual and industrial property rights" include rights such as those arising under utility models, petty patents, invention registrations, design registrations, rights in data and databases, and moral rights.

There is no single form of license that pledgers are required to adopt, and the Open Covid Pledge provides three options, namely: (1) Pledgers may adopt one of three model Open Covid Licenses, or OCLs, created by the Open COVID Pledge organizers and founding pledgers, (2) create an "Open COVID Compatible License," or (3) create an "Open COVID Alternative License."

Each of the three OCLs is a short license where pledgers grant a worldwide, limited-term, royalty-free license to their IP rights for a limited field of use, i.e., for the purpose of diagnosing, preventing, containing and treating COVID-19. The term of each OCL begins on Dec. 1, 2019, and ends one year past a World Health Organization declaration of the end of the COVID-19 pandemic; or in some license versions, the earlier of that date or Jan. 1, 2023. Each OCL also requires that the licensor will not assert regulatory exclusivity in its licensed intellectual property.

Compatible licenses carry out the intent of the pledge, because they contain terms deemed compatible with the terms of the model OCLs. Specifically, pledgers may create their own, custom compatible license, so long as it includes at least the following: a public offer of a license that can be accepted by anyone, no royalty fees, grant of one or more IP rights (other than trademarks and trade secrets), no assertion of regulatory exclusivity, and a duration similar to the OCLs.

The Open COVID Pledge website provides examples of compatible licenses. Under the compatible license, the licensor may choose to grant broader permissions than those listed above, however they may not seek to narrow the permissions.

A license that does not meet the requirements of an "OCL-compatible" license discussed above, but is considered compatible with the Open COVID Pledge is called an alternative license. Terms impermissible under the compatible licenses may be included in the alternative license.

While cooperation and collaboration are essential for the rapid development of a cure for COVID-19, there are certain precautionary measures that companies (IP owners or potential licensees) should undertake in order to avoid future controversies and legal battles.

Best Practices for IP Owners

Most companies devote substantial sums of money to develop their IP, with the expectation of recouping the investments using patents, copyrights, and other IP protections. Therefore, they need to balance data sharing and open access to technology during this international crisis, with financial stability and potential legal issues that may arise from participation in the Open COVID Pledge.

First, IP owners should carefully assess which IP they are permitted to contribute to the pledge, by reviewing their contractual obligations. Specifically, IP owners should ascertain that a commitment to the pledge will not breach their obligations with respect to previously granted licenses or other agreements. Any IP that is subject to an existing obligation (e.g., a prior exclusive license) should be omitted from the pledge.

IP owners should also carefully identify the type of IP that they wish to commit to the pledge. For example, a company may commit to the pledge patents relating to a certain technology, but may protect the corresponding software (e.g., object code or source code) as proprietary, in order to protect its confidential protocols and methods.

As discussed above, IP owners can license their IP under their own licenses that are either compatible with the OCL (compatible license) or the Open COVID Pledge (alternative license). Therefore, IP owners should consider drafting their own license agreement, and include terms that are uniquely tailored to protect their interests.

Examples of provisions that can be included in such custom license agreements include: clear definitions of the IP and/or the type of IP included or excluded from the license; a definitive termination date that is independent of when the pandemic will be declared "ended"; provisions that govern post termination duties and obligations of a potential licensee; provisions restricting use of licensed IP for commercial sale of one or more technologies; notification requirements such as requiring potential licensees to inform the IP owner of use of pledged IP and compliance with the license terms, commercial sale of any products developed using the licensed IP, any patent or copyright protection filings for technology derived from the licensed IP; etc.

IP owners should also consider having robust IP policies and procedures such as nondisclosure agreements, timely patent filings, and good record-keeping, for protection, as well as development of their IP rights. For example, participation in the pledge may increase the importance of an IP owner's trade secrets (not included in the pledge). An IP owner should, therefore, have robust trade secret protection protocols in place, including nondisclosure agreements, assignment agreements, and other trade secret protection policies.

Similarly, an IP owner should update its patent portfolio regularly by, for example, promptly filing patents relating to any new IP. This may protect the owner from being circumvented by a potential licensee that uses the licensed IP for developing its own novel, yet similar technologies. This will also help avoid ownership issues that may arise with respect to new inventions.

IP owners should also practice good record-keeping because sharing of IP to combat the COVID-19 pandemic will likely give rise to IP disputes once the pandemic ends. For example, conflicts may arise relating to ownership of derivative IP created using the IP owner's IP. Good record-keeping and documentation of IP owner's activities relating to the pledged IP can be crucial in dispute resolution.

Finally, since open IP sharing may be counter to business and commercial needs, IP owners should proactively investigate other options for creating financial advantages, such as reviewing agreements with customers to create exclusive arrangements, or other preferred customer protections.

Best Practices for Potential Licensees

While it may be tempting to rely on IP owners' altruistic pledges to allow royalty free usage of IP, before taking the license under the Open COVID Pledge, potential licensees should evaluate whether the Open COVID license terms fit their needs. It may be worth the extra effort and cost to negotiate an individual license to avoid unfavorable terms under the Open COVID Pledge licenses.

As an example, since sublicensing is not permitted under the Open COVID Pledge licenses, a potential licensee should consider whether use, manufacture, or sale of any future products developed using the licensed IP will require the grant of a sublicense to the licensed IP. If sublicensing will be required, the potential licensee should negotiate a different license with the IP owner that allows for sublicensing of the licensed IP. If that is not desirable or feasible, the potential licensee will need to plan its development activities to avoid requirement of a sublicense.

Open COVID Pledge licenses also do not include any boilerplate language relating to choice of jurisdiction, venue, governing law, etc. As such, a potential licensee should evaluate whether the benefits from the license outweigh the uncertainty arising due to the lack of such terms in the license.

Finally, while the use of IP licensed under the pledge may not require compensation at the current time, it may provide disproportionate bargaining power to the IP owner when the license is terminated (such as when the licensee's key product falls within the licensed IP, and the product cannot be easily redesigned and/or is already being sold). In such scenarios, negotiating an individual license may be more prudent.

If the benefits of a license under the Open COVID Pledge outweigh any potential concerns, a licensee seeking to use the IP still needs to be mindful of potential risks of such use. A licensee must carefully investigate license terms, and either fashion their use of the licensed IP to comply with such terms or consider getting a different license from the IP owner.

Since an IP owner can selectively offer parts of its IP portfolio for use through the COVID pledge, it is imperative to check the scope of IP included in a license. Furthermore, an Open COVID Pledge license typically allows use of IP for the sole purpose of developing COVID-19 diagnosis, prevention or treatment products, and the licensee will have to ensure that its use of the licensed IP does not exceed the scope of the license, in order to avoid infringement liability.

For example, if the licensed IP can also be used for diagnosis, prevention, or treatment of infections from other pathogens, the licensee will need to limit usage to COVID-19-related activities only. A licensee should, therefore, investigate whether its use of the licensed IP can be limited to just COVID-19, or whether there are other potential applications. It is important to note that trade secrets and trademarks are specifically not included in the pledge. Therefore, a licensee should avoid using the brand names or logos of an IP owner (e.g., for marketing or establishing credibility), which could lead to a claim of trademark infringement.

A licensee should also understand terms relating to termination. By knowing the termination date and any obligations associated with termination, a licensee can timely undertake risk mitigation and avoid liability due to noncompliance.

In addition to understanding the license terms, a licensee should also undertake specific steps to mitigate liability risks to third parties because the Open COVID Pledge licenses typically do not include any warranties and/or indemnification provisions. Examples of such mitigation steps can include, performing quality testing, seeking regulatory approvals, and including adequate disclaimers and labeling on their products.

Licensees should also not make unsubstantiated claims, or claims of intended uses. Moreover, licensees should investigate whether the use of the licensed IP requires use of IP belonging to owners who have not taken the pledge. For example, use of the licensed IP beyond the scope of what is claimed in a patent could infringe on the patented technology of another patent holder.

Since open sharing of IP can give rise to conflicts in the future, licensees should also practice good record-keeping by documenting all activities and access relating to the licensed IP. Such documents may play an important role in establishing the licensee's activities during the resolution of future disputes.

The practice tips listed above should be considered for participation in any collaborative effort that includes sharing of IP under an open license such as the Open COVID Pledge.

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