The spread of SARS-CoV-2 has created an urgent need to scale up the production and supply of essential medical equipment, including so-called Rapidly Manufactured Ventilator Systems (RMVSs), to treat COVID-19 patients. To help meet this challenge, the UK government announced on 3 April 2020 that it will indemnify designers and manufacturers of RMVSs for claims relating to infringement of third-party intellectual property (IP) rights and for product liability claims resulting from defective equipment.
Formal notification of the two indemnities was given by the Minister for the Cabinet Office, Michael Gove, to the Public Accounts Committee on 3 April 2020. In the notice, Minister Grove noted that he could not give the normal fourteen sitting days’ notice because “commercial negotiations have only just concluded and contract signature did not allow further delay”. Details of the terms of the referenced agreement have not, however, been provided, as they were said to be commercially sensitive and would continue to be until negotiations had been finalised. It is therefore not yet clear who are the parties to the agreement, whether any cap will apply to the indemnities, whether the government will offer the same terms across the board, or whether it will negotiate them in individual supply agreements.
Many UK engineering companies are working to address the challenge of designing and manufacturing RMVSs. This includes VentilatorChallengeUK, a consortium of UK industrial, technology and engineering businesses from across the aerospace, automotive and medical sectors which announced on 16 April 2020 that it had received approval from the UK Medicines and Healthcare products Regulatory Agency (MHRA) for the Penlon Prima ESO2 device which had been undergoing testing and clinical trials.
The development of new devices for medical use requires a lengthy process of innovation and regulatory approval. Designers and manufacturers of ventilators would, under normal circumstances seek IP exclusivity for technical innovations in the development of new medical devices through strategic filing of patent and registered design applications. As part of that process, care is taken to understand the patent and design rights landscape and to consider third-party intellectual property rights in order to “design-around” such patents and designs, to license-in the technology, to seek to invalidate such rights, or to launch at risk.
As a result of the accelerated processes required to respond to COVID-19, there is less time to consider the risks of infringing third party IP rights, and so it is anticipated that the UK government’s indemnity will compensate designers and manufacturers of RMVSs in the event that third party IP owners seek to assert their rights and bring infringement claims. How the indemnity will work in practice is not clear. The UK government may require some involvement in the defence of any such dispute and negotiations to settle. It is, however, unlikely for the UK government to have sole control of an IP infringement dispute, not least because the interests of the defendant(s) may not always be aligned with those of the UK government.
If IP rights holders decide to assert their rights aggressively before the UK courts, they may find that the courts are not minded to grant a key remedy typically available to successful litigants of IP disputes: the injunction. This equitable remedy is usually granted, amongst other things, to stop third parties from using the relevant IP in the design, manufacture, sale, storage, and importation of infringing products. In the context of the COVID-19 pandemic and the need for ventilators at short-notice, we anticipate that the UK courts will be less likely to grant such a remedy. Instead, we expect IP rights owners that successfully show that their IP has been infringed to be more likely to receive compensation by way of damages or an account of profits. That is, of course, assuming they are unable to settle out of court.
It remains to be seen whether IP rights owners who believe their patents and designs are being infringed by designers and manufacturers of RMVSs will actually commence an IP infringement action. From a purely legal perspective, they would be entitled to assert their rights, the acquisition of which often requires a significant investment of time and financial resources. Such an action would, however, run the risk of significant public backlash. Given the unprecedented circumstances and the urgent need for more ventilators to save lives, IP rights owners may well decide against taking any action, at least not in the short-term.
The 3 April 2020 announcement from the UK government is another example of governments providing protection to corporations developing and delivering products and services to support the response to the COVID-19 pandemic. For information regarding protection from liability in the US, see our advisory: The Public Readiness and Emergency Preparedness (PREP) Act: Liability Protection for Suppliers of COVID-19 Countermeasures.