Recovery for IP infringement under PREP

In 2005, Congress passed the Public Readiness and Emergency Preparedness Act (42 U.S.C. Section 247d-6d) to encourage production of necessary measures during health emergencies in part by immunizing certain entities from liability. In March 2020, the secretary of the U.S. Department of Health and Human Services invoked the PREP Act to support fulfillment of demand for COVID-related products by providing immunity from liability for the manufacture, distribution and sale of certain COVID-19 countermeasures.

It is clear that the PREP Act is meant to provide broad immunity, but few cases have examined the contours of that immunity -- and none have addressed whether and to what extent it applies to claims for infringement of intellectual property rights.

The act allows defendants to shield themselves from liability if they satisfy four criteria:

First, the defendant must be a "covered person," defined as any manufacturer, distributor, program planner, prescriber or administer of a covered countermeasure.

Second, the product must be a "covered countermeasure," defined as a drug, vaccine or device used "to diagnose, mitigate, prevent, treat, or cure a pandemic ... or to limit the harm" caused by a pandemic. Countermeasures must be approved by the U.S. Food and Drug Administration, investigational under the Federal Food, Drug, and Cosmetic Act, or otherwise authorized by an emergency use authorization.

Third, there must be a causal relationship between the asserted claim and the administration, distribution or use of the covered countermeasure.

Finally, the claim against them must be a "claim for loss."

Once these criteria are met, application of PREP Act immunity can be overcome only with clear and convincing evidence that "willful misconduct ... proximately caused death or serious injury."

The PREP Act defines "loss" as "any type of loss, including" death, physical, mental, or emotional injury, and loss of or damage to property, including business interruption loss. No court has addressed whether this applies to claims for intellectual property infringement.

It is clear that the focus of the PREP Act is shielding manufacturers and distributors from product liability claims. But it is also clear that Congress intended that the PREP Act confer broad immunity for covered claims. Claims for intellectual property infringement could be construed as claims for "any type of loss." Does this mean that a trademark owner is powerless to stop the distribution of masks bearing a counterfeit of its trademark? Probably not.

Claims for intellectual property infringement have an equitable component. An HHS advisory opinion makes clear that the PREP Act "does not provide immunity ... against suit and liability for claims under federal law for equitable relief." No court has weighed in on this question, but it appears that, at least in HHS's opinion, equitable relief does not fall within the definition of "loss" to which PREP Act immunity extends. A reasonable conclusion is that even if PREP Act immunity extends to intellectual property claims for damages, it would not immunize a defendant against a claim for an injunction.

Without addressing the PREP Act's application, at least one court has issued an injunction in a trademark infringement case brought by 3M involving masks. See 3M Company v. Performance Supply LLC, 20-02949 (S.D.N.Y., filed April 10, 2020).

Equitable relief, however, encompasses more than injunctions. It is common for plaintiffs in trademark infringement cases to seek recovery of the profits a defendant earns as a result of its infringing conduct under a theory of unjust enrichment -- also a claim "under federal law for equitable relief." Arguably, a defendant's unjust enrichment is not a "loss," and the language of the HHS advisory opinion suggests that such equitable remedies are not prohibited by the PREP Act.

It goes without saying that the public policy objectives of the PREP Act -- immunizing certain conduct to ensure that potentially life-saving countermeasures will be efficiently developed, deployed and administered -- are important to public health and safety. The policy objectives of the Lanham Act -- protecting consumers from confusion in the marketplace, including by dis-incentivizing the use of confusing or misleading trademarks -- are also important to public health and safety. Allowing the equitable recovery of profits is consistent with the policy aims of both the PREP Act and the Lanham Act.

Ample time is left for courts to weigh in on questions of the PREP Act's scope and applicability -- the current declaration issued in response to COVID-19 is effective through October 1, 2024. While the declaration is effective, it stands to reason that lawsuits relating to pandemic countermeasures may increase in the coming years as the pandemic wanes and litigation relating to such countermeasures becomes more palatable. 