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Open COVID Pledge and Free Licensing Opportunities: Issues to Consider Before Accepting

Client Alert

Authors: Stephen T. Kong and Christian Chad Warpula

4/24/2020
Open COVID Pledge and Free Licensing Opportunities: Issues to Consider Before Accepting

Many of the world’s leading technology companies have signed on to the “Open COVID Pledge,” which calls for companies to make intellectual property licensable for free for purposes of ending and minimizing the impact of the COVID-19 pandemic. More information about which companies have signed on to the pledge and other important terms of the licenses granted can be found at https://opencovidpledge.org/ (the COVID Pledge Site). The offer of these licenses from pledging companies is generous, but certain limitations and lack of clarity about the legal effect of certain terms for the licensing scheme require that companies carefully consider several elements before accepting the offered licenses.

Which companies have signed on to the pledge so far?

While the election to participate in the Open COVID Pledge is entirely voluntary, an impressive list of technology companies have signed on as of April 22. These companies include Amazon, Intel, Microsoft, Hewlett Packard Enterprise and Facebook. It would be surprising if other major technology companies did not sign on to the pledge as well.

What intellectual property is licensed?

The specific intellectual property offered may be patents, copyrights or both patents and copyrights, and each of the pledging companies can offer any subset of its patents and copyrights. There is no requirement that an entire patent portfolio or copyright portfolio be offered, and each pledging company is free to exclude any of its patents or copyrights. This makes it imperative to check the scope of intellectual property licensed by each pledging company. The scope of licensed intellectual property can be found at the COVID Pledge Site and should be reviewed carefully since there are material differences between what is being offered for license. Some companies are offering “all” of their technology, and some are only offering their patents. For example, IBM and Microsoft have pledged to license their entire patent portfolios. Intel has described its intellectual property pledged as its “entire” intellectual property portfolio (subject to a key limitation described in further detail below), which would include software.

The pledge is structured so that the only intellectual property that is licensed under the pledge are patents and copyrights. Proprietary software is a copyright, but license rights in trade secrets and trademarks are not offered under this program so any statements similar to Intel’s that its “entire” intellectual property portfolio is included in the pledge must be read with this key limitation in mind.

What are the licensing terms?

There are a wide range of licenses that may apply because there is no one required form of license that pledging companies must agree to use. It is likely that a flexible licensing scheme was deemed necessary in order to entice a wide variety of technology companies to take the Open COVID Pledge, but the result is that there are already at least eight possible license terms that may apply, with possibly additional license terms moving forward.

There is a set of three fairly similar licenses that were created for the Open COVID Pledge, referred to as an “Open COVID License” or an “OCL.” The terms of the three versions can be found at https://opencovidpledge.org/open-covid-licenses-and-alternative-licenses/. Each OCL is a very short license where anyone who wishes to obtain the license gets a worldwide, limited-term, royalty-free license to exploit the licensed IP for purposes of developing COVID-19 diagnosis, prevention or treatment products. The term of each OCL runs from December 1, 2019 until one year past when the World Health Organization (WHO) has declared an end to the COVID-19 pandemic or January 1, 2023, whichever is sooner. Each OCL also contains terms that require the licensor not to assert regulatory exclusivity in its licensed intellectual property.

Currently, Amazon, Facebook and Microsoft have chosen to offer their intellectual property under one of the Open COVID Licenses.

However, there is an option for a pledging company to offer its intellectual property under a license that is deemed by the steering committee for the Open COVID Pledge project as “compatible” with an Open COVID License because these license contains terms that meet the following requirements:

  • A public offer is made to obtain a license that can be accepted by anyone.

  • The licensed intellectual property is patents and/or copyrights but not necessarily all of a pledging company’s patents and copyrights.

  • There are no royalty fees, and the license is considered fully paid up.

  • The pledging company must agree, to the extent applicable to its licensed intellectual property, not to assert any regulatory exclusivity or seek any judicial or regulatory relief for use of such intellectual property.

  • The term of the license must begin no later than December 1, 2019 and last until one year past when the WHO has declared an end to the COVID-19 pandemic. A pledging company can also set a term end date if there is no declaration of an end date by the WHO as long as the license term is at least until January 1, 2023.

Currently, IBM and Intel have crafted their own “OCL-compatible” licenses.

There is a third option for “OCL-alternative” license terms that do not meet the requirements of an “OCL-compatible” license discussed above, but that are considered “compatible” with the Open COVID Pledge. At this point, the COVID Pledge Site lists Sandia National Laboratories as one entity which has crafted its own license that is not “OCL-compatible.”

Should I obtain rights in the licensed intellectual property under the Open COVID License terms?

Since there is no royalty and the license is freely available to the public, thereby avoiding negotiations and payments, there are at least some obvious benefits and ease in licensing a pledging company’s licensed IP under the terms offered as part of the company’s participation in the Open COVID Pledge. However, this ease must be balanced against the fact that each OCL and, so far, each current “OCL-compatible” license has terms that have the following issues:

  • A licensee gets no warranties or indemnification regarding any claims of intellectual property infringement that may be brought against the licensee as a result of exercising license rights. A user of the licensed patents and copyrights must do so at its own risk of claims by third parties.

  • The term is limited. A fair question is what happens if a licensee wants to continue offering a licensed product past the term of the license offered under the Open COVID Pledge. The leverage that a pledging company would have to negotiate the terms of a license that will cover such use will be quite high as the term of the license granted under the Open COVID Pledge comes close to expiration.

  • The scope of the license is limited to use of the licensed intellectual property solely for purposes of developing COVID-19 diagnosis, prevention or treatment products. To the extent a licensee uses the licensed intellectual property for other purposes, even unintentionally, it could be subject to claims by the licensor for exceeding the scope of the license and being an infringer liable for royalties and damages. A key factual question is whether the licensed product’s use can be limited to just COVID-19 or whether there are other viruses that may be diagnosed, prevented or treated by the licensed product. If the licensed product’s use will exceed the scope of the license, the licensee will have to plan carefully how to address minimizing its risk of exceeding the scope of the license.

  • No rights in trade secrets or trademarks are licensed. Formulations or methodologies that are not the subject of patents cannot be licensed under the Open COVID Pledge scheme. A licensee that wishes to tout the use of intellectual property licensed from a well-known technology company will have to tread carefully to avoid a trademark infringement claim.

  • Many boilerplate-type provisions that specify governing law, venue for litigation, and dispute resolution clauses do not exist in the license. For licensees that feel strongly about how disputes in their commercial agreements are handled, they will not have an opportunity to specify these types of terms.

Is this part of other “free” licenses offered for fighting or diagnosing COVID-19?

Patents formerly owned by Theranos and asserted by Labrador Diagnostics LLP in litigation were announced by Labrador’s parent company, Fortress Investment Group LLC, as freely licensable by anyone who wants to exercise rights in the patents for purposes of developing COVID-19 tests. Medtronic and Abbvie have also made similar pledges. But all of these pledges and statements are not part of the Open COVID Pledge, and potential licensees should review the applicable licensing terms of each COVID-19 related offer for royalty-free licenses before proceeding.

Key Takeaways

  • Check the scope of actual intellectual property licensed. Each pledging company may license all or a subset (including none) of its patents and copyrights. There is no obligation that a pledging company must license all of its patent and copyright portfolios. Consider whether a licensee needs to license software if only patents are licensed or whether use of trade secret-protected formulas or methodologies are needed.

  • No standard license. There is no standard license that a licensee can assume controls the licensing. Each license other than the three versions of the OCL may contain any number of custom terms. This makes it crucial that all licenses be reviewed individually.

  • Consider negotiating license using negotiated and custom terms. A company seeking to offer a treatment or diagnostic tool to combat COVID-19 may still seek to negotiate its own license terms for use of a pledging company’s intellectual property. The lure of a royalty-free license may not outweigh the downside of not obtaining protections often obtained in commercially negotiated licenses or obtaining more certainty around the time period when licensing rights can be exploited.

  • Ensure all uses are for permitted purposes. A company using licensed intellectual property should ensure that all such licensed intellectual property is used solely for developing COVID-19 diagnosis, prevention or treatment products. If these products can be used for other viruses, there are risks that the company will exceed the scope of the license.

  • Not all pledges for “free” licenses to combat COVID-19 are the same. There have been other offers by other intellectual property owners to grant royalty-free licenses for purposes of developing COVID-19 related products. A licensee should not assume that all such offers are part of the Open COVID Pledge.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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