The history of protecting government contractors in the defense sector from patent litigation in the United States dates back more than a century. In 1918, the U.S. Supreme Court held that government contractors could be held liable for patent infringement even if their products were manufactured specifically for government needs. At the time, Acting U.S. Secretary of the Navy Franklin D. Roosevelt urgently appealed to Congress in a letter, warning that fear of litigation was halting the production of critically important equipment. Congress responded swiftly by adopting an amendment to federal law that shielded contractors from patent lawsuits when manufacturing for the government. This immunity provision, now codified in 28 U.S.C. § 1498, has provided legal protection to defense manufacturers for over a century.
However, a recent decision by a federal court in Delaware demonstrates that the limits of this protection in the modern procurement environment are not unlimited. The case concerned a patent dispute surrounding Moderna’s COVID-19 vaccine. At its core was the interpretation of the phrase “for the Government” in Section 1498 and its application to products developed under government contracts.
Section 1498 provides that when a contractor uses or manufactures a patented invention “for the Government and with its authorization or consent,” the patent holder may seek compensation only from the United States through the Court of Federal Claims. The contractor is fully shielded from direct liability. This provision was originally enacted in 1910 and expanded in 1918 in response to the risk of production disruptions during wartime. Judicial practice has traditionally interpreted Section 1498 broadly: even products manufactured abroad have fallen within its protection, and the provision has been extended to other forms of infringement.
In Arbutus Biopharma v. Moderna, Moderna relied on Section 1498, arguing that its vaccine had been developed under the government’s Operation Warp Speed contract with explicit authorization and consent from the U.S. government.
In February 2026, the U.S. District Court for the District of Delaware rejected Moderna’s argument with respect to the majority of its vaccine sales. The court concluded that “for the Government” refers to the direct beneficiary—the government itself. Although the U.S. government purchased $8.2 billion worth of vaccines, those doses were distributed to the general public rather than used directly by government personnel. Only a small portion administered directly to government employees qualified for immunity under Section 1498.
This establishes a critical boundary: the government may order, fund, and authorize production, but if the ultimate beneficiary is the public rather than the government, the contractor risks losing protection from patent claims.
The Delaware decision has direct implications for a new category of defense technology companies, the so-called “neoprimes”: startups such as Anduril, Palantir Technologies, and Shield AI, which rely on private R&D budgets to develop dual-use technologies for both commercial and military customers. They differ from traditional contractors that build military systems exclusively for government use.
If the Delaware court’s reasoning becomes precedent, any dual-use technology that benefits the public but is produced with government funding may fall outside the scope of Section 1498 immunity. This creates a new risk for the neoprime business model: patent holders may bring claims even against products developed for mixed-use purposes.
Previously, AeroVironment, a defense contractor, successfully invoked Section 1498 to defend against a claim related to demonstrations of its Ingenuity Mars helicopter. The court found that the demonstrations did not constitute commercial activity, and the company prevailed. However, modern dual-use platforms with commercial sales will not present such “clean” factual scenarios.
The history of Section 1498 shows that Congress is capable of closing gaps in contractor protection. In 1910 and 1918, legislation was promptly revised to ensure uninterrupted production of naval vessels. In 1942, further amendments narrowed remaining gaps during World War II.
Today, Congress is working on the National Defense Authorization Act for fiscal year 2027, which aims to ease conditions for non-traditional contractors. However, the issue of patent immunity under Section 1498 remains unresolved. A clear statutory clarification that products developed or manufactured with government authorization fall within the immunity—regardless of whether the ultimate beneficiary is the government or the public—would be a logical addition to this legislative package.
The $1.3 billion at stake in the Moderna case hinges on the interpretation of just three words: “for the Government.” Even so, a favorable outcome for Moderna would not automatically extend protection to neoprimes—they would still need to persuade courts by analogy. If the Delaware court’s interpretation is upheld, it may establish a new legal theory for patent holders against dual-use companies, with significant consequences for the U.S. defense industry. The underlying problem remains the same as in 1918: fear of litigation may deter the production of critical technologies, even as the nature of contractors evolves.
Founder of Research & Patent group Intectica, author of patent algorithms for solving problems in the pharmaceutical industry, patent attorney certified in all intellectual property objects (Patents, Design, TM), with education in chemistry and law, chief expert of the patent institution of Ukraine UKRPATENT (1997-2004). Member of international organizations, including ECTA, PTMG, UAM, lecturer and blogger.
