Transcript Title of Presentation

Selling Technology to the U.S.
Government While Preserving IP
Rights
Tech Transfer Speaker Series
Joseph Billings, Esquire | Montgomery County Department of
Economic Development | October 8, 2014
Common Forms of U.S.
Government Contracts Used to
Acquire Technology Products
The process for procurement of goods and services is
governed by the Federal Acquisition Regulation (FAR) and
agency supplements such as the Defense FAR Supplement
(DFARS).
Agency’s technical office defines the agency
“requirements”.
The agency’s contracting office performs market research to
determine private sector capabilities and interest.
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The agency procures an item:
•
As a “commercial item” or
•
As an item requiring significant development under
government contract
This threshold determination directly affects the protection
and allocation of intellectual property rights.
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Commercial Item Sales
Commercial items are preferred.
Now simpler than it was historically to sell commercial products to the
government.
The number of standard government contract clauses that apply commercial
items have been significantly reduced.
General Services Administration – Multiple Award Schedules
Direct “commercial item” contracts with vendors or through prime contract
with systems integrators who acquire commercial items through
subcontractors with “commercial item” suppliers. FAR Part 12.
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Commercial Item
A “commercial item” is:
•
Any item, customarily used for non-governmental purposes, that
has been sold, leased, or licensed to the general public or that has
been offered for sale, lease, or license to the general public.
•
An item that evolved from a commercial item described above. For
example, a new model of an existing commercial product, product
upgrades, or a new version of a commercial software package.
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Commercial Item (continued)
“An item that meets the description in the first bulleted paragraph, but with minor modification to
meet government needs or modifications of the type normally done for commercial customers.
For example, products that are customized commercially, and products with government unique
modifications that do not change the item’s basic properties or function.
•
Any combination of items meeting this definition of a commercial item, if it is normally combined
and sold commercially.
•
A service bought to support commercial items.
•
A service of a type offered and sold competitively in the commercial market at catalog or market
prices.
•
Any item or service described in bulleted paragraphs 1 through 6 above, even though it is
transferred between separate divisions of a contractor.
•
A non-developmental item, if the item was developed exclusively at private expense and sold in
substantial quantities, on a competitive basis, to multiple state and local governments.
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Funding
•
Developed exclusively at private expense means development accomplished
with costs charged to indirect cost pools, costs not allocated to a government
contract, or any combination thereof.

(i) Private expense determinations should be made at the lowest
practicable level.
•
Developed exclusively with government funds means development was not
accomplished exclusively or partially at private expense.
•
Developed with mixed funding means development was accomplished
partially with costs charged to indirect cost pools and/ or costs not allocated
to a government contract, and partially with costs charged directly to a
government contract.
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Non-developmental item
•
Any previously developed item of supply used exclusively for
government purposes by a Federal agency, a State or local
government, or a foreign government.
•
Any item described in the preceding bullet that requires only minor
modification or modifications of a type customarily available in the
commercial marketplace.
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Contracts for Developmental
Items
Developmental items are:
•
Products that are to be uniquely designed and developed for a
federal agency, or
•
A commercial product that is to be modified for a federal agency in
a manner that does not fall within the above definition of a
commercial item.
A standard government contract will be used to procure the item,
including standard contract clauses.
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Other Agreements
Certain federal agencies, most notably the Department of Defense, have statutory
authority to award non-standard contracts that diverge from many of the standard
federal contract clauses
These agreements usually involve significant technology products that the agency
believes will not be available to it because:
•
A vendor is not a regular government contractor
•
The vendor will not make the product available to the government on standard
contract terms, especially affecting intellectual property.
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Treatment of Intellectual
Property
FAR Part 27 sets policies, procedures, and contract clauses
pertaining to intellectual property (IP) including rights in
patents, data and software.
DFARS Part 227 adds policy guidance for defense contracts.
In general, under the FAR and DFARS, the government
acquires certain rights in IP that is created in the
performance of work under a government contract.
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IP Rights Overview – Civilian
•
•
•
•
Generally, the government does not obtain greater intellectual
property rights in the “commercial items” it procures than would a
commercial customer. The standard commercial license is generally
applicable.
For technologies/information that contractors develop or deliver
under federal contracts, contractors are generally permitted to retain
ownership (e.g., title) of the IP rights applicable to those items.
For such developed items, the agency receives only a nonexclusive
license to use that IP – the scope of the license depends on the nature
of the data, the relative source of funding for development, and
negotiation between the parties.
In exceptional circumstances, the government can acquire IP
ownership.
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Patent Rights – Rights in
Inventions and Patents
Patent rights refer to the government’s rights to “practice”
an invention that is, or will be, protected by a U.S.
patent.
A “subject invention” is an invention that is first “made”
during the performance of a Government contract.
• Generally, the contractor is permitted to retain title to the
invention, and the government receives a nonexclusive
license to use that invention for Government purposes.
• While the granting of a license to the Government for a
patent first made during performance of a Government
contract is not negotiable in a FAR contract, the terms of
that license may be negotiable.
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Patent Rights – Rights in
Inventions and Patents
(continued)
A “background invention” is any invention – other
than a subject invention – that is owned or
licensed by the contractor, and that will be
incorporated into contract deliverables.
The government’s license in subject inventions may
not be adequate to fully utilize the product.
Parties need to identify and agree upon what
rights in applicable background inventions to the
government may need.
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Technical Data and Computer
Software Rights
DFARS Subparts 227.71 and 227.72 establish a DoD –
unique process for acquiring IP license rights governing
technical data or computer software that is developed or
delivered under a contract.
In general, the contractor-developer retains title to the IP,
and the Government receives a nonexclusive license to
use, reproduce, modify, release, perform display, or
disclose the data or software. The specific license
depends on whether the technical data or computer
software is noncommercial or commercial technology:
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Technical Data and Computer
Software Rights (continued)
For noncommercial technology, the DFARS defines a set of
standard license categories that vary according to the
parties’ relative financial investments in the
development of the underlying technology. Specifically
negotiated licenses are possible.
When acquiring commercial technologies, DoD normally
receives only those deliverables and associated license
rights that are customarily provided to the public. There
is no DFARS clause prescribed for commercial computer
software; the parties incorporate the negotiated license
agreement into the contract.
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Identification of Intellectual
Property Restrictions and
Related Issues
Many acquisitions involve a mix of commercial and noncommercial
technologies. The contract should include provisions to cover both types of
technologies and to clarify how they apply to the deliverables.
Key issues include:
•
Identification of IP restrictions and related issues,
•
Distinguishing IP deliverables from license rights,
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Specifically negotiated license agreements, and
•
Markings and restrictive legends.
The DFARS prescribes certain mandatory pre- and post-award identification
procedures to help ensure that key IP issues have been identified and
resolved.
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DFARS Mandatory Listing
Requirements
DFARS includes a mandatory requirement for each contractor to identify in a
list, all noncommercial technical data and computer software it plans to
deliver with less-than-unlimited rights, and to assert specific restrictions on
those deliverables.
•
Preaward List. DFARS 252.227-7017 requires prospective offerors to include
the above list as part of the proposal. The Government may use the list
during source selection to evaluate the impact of the identified restrictions.
•
Postaward List. The contractor’s ability to modify its assertions is limited to
cases where a new assertion is based on new information or was
inadvertently omitted from the postaward list, but would not have
materially affected source selection. Data/software may not be delivered
with restrictive markings unless identified on the lists.
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Supplemental Intellectual
Property Listings
The mandatory DFARS listing requirements covers only asserted restrictions on
deliverable noncommercial technical data and computer software.
•
Commercial Computer Software and Commercial Technical Data. The absence of a
particular data/software deliverable on the mandatory DFARS list may be because it
is being offered with unlimited rights, or because it is commercial data/software.
Background Inventions. Even if all of the technical data and computer software is
delivered with unlimited rights or Government purpose license rights (GPLR), these
deliverables may include background inventions. The license rights granted under
the DFARS clauses in technical data and computer software do not grant rights in any
inventions incorporated into that data/software. Use a list of background inventions,
which identify (1) the U.S. patent or patent application covering the invention, (2) the
contract deliverables that incorporate the invention, and (3) the license rights that the
contractor is willing to grant the government for the background invention.
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Distinguishing Intellectual
Property Deliverables from
License Rights
“IP deliverables” refers to the contractual obligation to
deliver IP having a predetermined content and format.
The government may own the delivered physical medium
on which the IP resides, but it generally will not own the
IP rights.
“License rights” refers to the government’s ability to use,
reproduce, modify, and release the delivered IP.
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Intellectual Property
Deliverables – Content, Format
and Medium
The standard DFARS clauses that establish the rights in technical data
or computer software generally do not specify delivery
requirements. The contract should specify:
•
Content (e.g., level of detail or nature of information),
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Recording/storage format (e.g., image files versus word processing
format), and
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Deliver/storage medium (e.g., paper, CD-ROM, or on-line access).
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Options for Resolving
Intellectual Property Deliverable
Issues
Options for structuring mutually acceptable IP deliverable requirements:
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Altering the form of content of the deliverable. E.g., the level of detail required might
be reduced (e.g., requiring “form, fit, and function” data for detailed design data); or
delivery might be required in a different format.
•
Establishing life-cycle maintenance/support agreements with the original contract-
developer/supplier.
•
Utilizing deferred ordering under DFARS 252.227-7027. DoD can require delivery of
any data/software that was generated for three years.
•
Utilizing deferred delivery procedures under DFARS 252.227-7026. This provision
may apply to any data/software that is designed in the contract for two years.
•
Utilizing third-party escrow arrangements. The government may obtain delivery of
the item if certain conditions occur. The parties negotiate the escrow period and the
conditions under which the government can require delivery.
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Specifically Negotiated License
Agreements
The standard license rights may not adequately balance the parties’
interests.
The DoD suggests the following in negotiating a special license
agreement:
• If the negotiation involves commercial technologies, start with the
license agreement customarily offered to the public
• If the negotiation involves noncommercial technologies, start with
the standard DFARS license most closely paralleling the relative
funding of the parties.
• For development primarily funded at private expense, start with
limited or restricted rights and add the additional rights the
government needs.
• For development primarily funded at Government expense, start
with Government Purpose License Rights and add limitations to
preserve additional rights for the contractor-developer.
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Specifically Negotiated License
Agreements (continued)
Several general principles the government applies:
•
The government cannot accept less than limited rights in noncommercial
technical data, the standard “7015 rights” in commercial technical data, or
restricted rights in noncommercial computer software (without a waiver).
•
The license should identify specific deliverables or establish well-defined
classes, categories, or types of deliverables; and the license should
enumerate all restrictions on the government’s ability to use, reproduce,
modify, release, perform, display, and disclose the licensed materials, and
authorize others to engage in those activities.
•
The government’s license should be royalty-free, worldwide, irrevocable,
and nonexclusive.
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Markings and Restrictive
Legends
Rights and obligations concerning restrictive markings or
notices play a central role in many forms of IP.
Restrictive markings are either required or permitted on all
forms of technical data or computer software that is to be
delivered to DoD.
The specific format and content of these markings depends
on whether the data or software is noncommercial or
commercial.
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Restrictive Markings on Noncommercial Data and Software
Restrictive markings are required for all noncommercial technical data
and computer software being delivered with less-than-unlimited
rights.
DFARS establishes specific procedures governing the placement of
restrictive markings on deliverables.
• A notice of copyright,
• The Government Purpose License Rights legend,
• The limited-rights legend,
• The restricted-rights legend,
• The special-license-rights legend, and
• Pre-existing markings authorized under a previous government
contract.
Any alterations of the prescribed content or format result in the
marking being considered “nonconforming.
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Restrictive Markings on
Commercial Data and Software
For commercial technical data and computer software, the rules are
more flexible.
For commercial technical data, no prescribed legend.
DFARS provides no liability for the release or disclosure of technical
data not marked to indicate that data is subject to restrictions.
While markings on commercial computer software are not addressed in
DFARS, it is wise to mark software with copyright and proprietary
information legends.
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The General Rule
The general rule to follow when making a Data
Rights determination in Government contracting
is that the rights to data or software follow the
money.
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Quick Primer on 10 USC 2320
•
•
Describes three funding “pathways” and
consequences as to use of Technical Data.
Relies on -7013, -7014 and -7018 clauses for
Technical Data and Computer Software
- Funding Exclusively by the Government
• SBIR Funding per other laws
- Funding Exclusively by the Contractor
- Mixed Funding
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Tech Data Rights Categories
from the DFARS
1.
Funding Exclusively by the Government Means
Unlimited Rights
2.
Mixed Funding Means Govt. Purpose License
Rights
3.
Funding Exclusively by the Contractor Means
Limited/Restricted Rights
4.
SBIR Rights
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Administrative Disputes Process
Disputes process
Contracting officer determination
Appeals
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