Government Contract Intellectual Property Presentation


Published on

Provides and overview of federal government contract intellectual property requirements and recent decisional law

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Government Contract Intellectual Property Presentation

  1. 1. Government Contract Intellectual Property Presented to NCMA Denver November 10, 2009 William C. Anderson United Launch Alliance, LLC 303-269-5120 [email_address] Steven M. Masiello McKenna Long & Aldridge LLP 303-634-4355 [email_address]
  2. 2. Agenda <ul><li>Introduction </li></ul><ul><li>Regulatory Scheme/Rights Granted </li></ul><ul><li>Comparison of Civilian Agency and Department of Defense (DoD) Regulations </li></ul><ul><li>Specifically Negotiated Licenses </li></ul><ul><li>Commercial Items </li></ul><ul><li>Protection of Proprietary Contractor Information </li></ul><ul><li>Managing Subcontracts </li></ul><ul><li>Risks/Tips Regarding the Management of IP </li></ul><ul><li>Illustrative Scenarios </li></ul>
  3. 3. Introduction <ul><li>Many types of regulated information exist, e.g. : </li></ul><ul><ul><li>Freedom of Information Act (“FOIA”), 5 U.S.C. § 552 and Trade Secrets Act, 18 U.S.C. § 1905 </li></ul></ul><ul><ul><li>Procurement Integrity Act, 41 U.S.C. § 423 </li></ul></ul><ul><ul><li>National Industrial Security Program, DoD 5220.22-M </li></ul></ul><ul><ul><li>International Traffic in Arms Regulations, 22 C.F.R. Parts 120-130 </li></ul></ul><ul><ul><li>Miscellaneous types of information, such as Privacy Act records, For Official Use Only, nonpublic information </li></ul></ul>
  4. 4. Introduction (cont.) <ul><li>Information may overlap several regulated areas and/or may constitute intellectual property (IP) </li></ul><ul><li>Relevant types of IP and related legal rights </li></ul><ul><ul><li>Inventions (patents) </li></ul></ul><ul><ul><li>Works of art or authorship, including technical data and computer software (copyrights/“data rights”) </li></ul></ul><ul><ul><li>Trade secrets (“data rights”) </li></ul></ul><ul><ul><li>Trademarks (not usually covered in government procurements) </li></ul></ul>
  5. 5. Introduction (cont.) <ul><li>Originator of the IP is the owner </li></ul><ul><ul><li>Unless the originator assigns the IP to the government or a statutory provision provides otherwise </li></ul></ul><ul><li>Owner permitted to restrict the use, reproduction, and/or disclosure of the IP </li></ul><ul><li>Owner may “license” IP and/or enforce its exclusive rights in “infringement” actions </li></ul><ul><ul><li>Exception - the Authorization and Consent statute, 28 U.S.C. § 1498 </li></ul></ul><ul><ul><ul><li>See, e.g., Zoltek Corp. v. United States , 85 Fed. Cl. 409 (Fed. Cl. 2009) (discussed infra) </li></ul></ul></ul>
  6. 6. Introduction (cont.) <ul><li>“ Bayh-Dole Model” applies - 35 U.S.C. §§ 202-204; 15 U.S.C. § 3710a </li></ul><ul><ul><li>Generally, ownership of IP developed under a contract is maintained by contractor, unless: </li></ul></ul><ul><ul><ul><li>Contract includes Work-Made-For-Hire provisions </li></ul></ul></ul><ul><ul><ul><li>Contractor fails to employ IP effectively </li></ul></ul></ul><ul><li>Executive Order 12,591 of April 10, 1987, established a similar model for large businesses - 52 Fed. Reg. 13,414 </li></ul><ul><ul><li>See also FAR § 27.201-2 (extending the Bayh-Dole Model to large business contractors, subject to exceptions) </li></ul></ul>
  7. 7. Introduction (cont.) <ul><li>Bayh-Dole Model intended to encourage the commercialization of technology developed under government contracts </li></ul><ul><ul><li>Bayh-Dole applies explicitly to small businesses and nonprofit organizations - 35 U.S.C. § 202 </li></ul></ul><ul><li>IP rights for procurement contracts governed under Federal Acquisition Regulation (FAR) Part 27 </li></ul><ul><ul><li>Relevant agency supplements may also govern, e.g., Department of Defense FAR Supplement (DFARS) Part 227 and NASA FAR Supplement (NFARS) Part 1827 </li></ul></ul>
  8. 8. Regulatory Scheme/ Rights Granted <ul><li>Patents </li></ul><ul><ul><li>“Subject inventions” include those “conceived or first actually reduced to practice” under the contract - 28 U.S.C. § 201(e) </li></ul></ul><ul><ul><li>Contracts regulated are those for “experimental, developmental, or research work” - FAR § 27.303(a) </li></ul></ul>
  9. 9. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Agencies generally follow Bayh-Dole Model allowing contractors and subcontractors to own patents on subject inventions </li></ul></ul><ul><ul><li>However, the agencies demand an unlimited rights license in technical data and computer software developed under contract </li></ul></ul><ul><ul><li>Exceptions to the Bayh-Dole Model for patents exist if the contractor is a large business </li></ul></ul><ul><ul><ul><li>Department of Energy </li></ul></ul></ul><ul><ul><ul><ul><li>42 U.S.C. § 2182; 42 U.S.C. § 5908 </li></ul></ul></ul></ul><ul><ul><ul><li>NASA </li></ul></ul></ul><ul><ul><ul><ul><li>42 U.S.C. § 2457(a) </li></ul></ul></ul></ul>
  10. 10. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Exceptions to the Bayh-Dole Model exist if the contractor is a large business (cont.) </li></ul></ul><ul><ul><ul><li>Department of Defense </li></ul></ul></ul><ul><ul><ul><ul><li>DFARS § 227.303 prescribes employing the large-business ownership clause DFARS § 252.227-7038. </li></ul></ul></ul></ul><ul><ul><ul><li>However, “title-taking” agencies like DoE and NASA are encouraged to “waive” their title to patent - see Executive Order 12,591, 52 Fed. Reg. 13,414 </li></ul></ul></ul>
  11. 11. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Standard FAR ownership clauses include: </li></ul></ul><ul><ul><ul><li>Ownership by contractor: Bayh-Dole Model </li></ul></ul></ul><ul><ul><ul><ul><li>Default ownership paradigm - see FAR § 27.303(b) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contract clause - FAR § 52.227-11 </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Contractor has right to elect ownership, subject to invention reporting requirement, government purpose license, and government “march-in” rights. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>If contractor fails to elect to file an application, the government may do so with a license back to the contractor with limited right to sublicense others. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Contractor’s failure to timely report an invention can lead to lead to loss of all rights in that invention – see Campbell Plastics Eng. & Mfg. , ASBCA 53,319, 2003 WL 1518313 (Mar. 18, 2003) </li></ul></ul></ul></ul></ul>
  12. 12. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Standard FAR ownership clauses include (cont.): </li></ul></ul><ul><ul><ul><li>Ownership by government </li></ul></ul></ul><ul><ul><ul><ul><li>Exceptions to ownership paradigm - see FAR § 27.303(e) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contract clause - FAR § 52.227-13 </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Contractor assigns ownership to government </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Contractor receives a revocable, nonexclusive, paid-up license </li></ul></ul></ul></ul></ul>
  13. 13. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Other standard FAR clauses include: </li></ul></ul><ul><ul><ul><li>Authorization and consent </li></ul></ul></ul><ul><ul><ul><ul><li>Government provides third-party infringement protection to the contractor - FAR § 27.201-2(a) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contract clause - FAR § 52.227-1 </li></ul></ul></ul></ul><ul><ul><ul><li>Indemnification: indemnifies government </li></ul></ul></ul><ul><ul><ul><ul><li>For delivery of commercial items, the government demands that the contractor indemnify the government from patent infringement liability - FAR § 27.201-2(c) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contract clause - FAR § 52.227-3 </li></ul></ul></ul></ul>
  14. 14. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Contractor’s obligations: </li></ul></ul><ul><ul><ul><li>Disclose “subject inventions” to the government </li></ul></ul></ul><ul><ul><ul><ul><li>Under contractor ownership clause, the contractor must disclose within 2 months of notifying the contractor’s patent personnel - FAR § 52.227-11(c)(1) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Under government ownership clause, the contractor must disclose within the shorter of 2 months of notifying its patent personnel or 6 months after becoming aware of the invention - FAR § 52.227-13(e) </li></ul></ul></ul></ul><ul><ul><ul><li>Elect to retain ownership </li></ul></ul></ul><ul><ul><ul><ul><li>Under contractor ownership clause, contractor must elect within 2 years of its disclosure to the government - FAR § 52.227-11(c)(2) </li></ul></ul></ul></ul><ul><ul><ul><li>File patent application </li></ul></ul></ul>
  15. 15. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Domestic manufacture preference </li></ul></ul><ul><ul><ul><li>Unless not commercially feasible, if a contractor obtains patent rights under a government contract, then product production must be manufactured domestically - 35 U.S.C. § 204 </li></ul></ul></ul><ul><ul><ul><li>Preference not reflected in various “patent rights” (DoD) or “New Technology” (NASA) clauses </li></ul></ul></ul>
  16. 16. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Patents (cont.) </li></ul><ul><ul><li>Government has march-in rights to require licensing by the contractor to third-parties - 35 U.S.C. § 203 </li></ul></ul><ul><ul><ul><li>Resulting license can be nonexclusive, partially exclusive, or exclusive </li></ul></ul></ul><ul><ul><ul><li>Justifications for marching-in include: </li></ul></ul></ul><ul><ul><ul><ul><li>Contractor’s failure, or anticipated failure, to achieve practical applications </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Public health needs, safety needs, or other public use specified by government regulations </li></ul></ul></ul></ul><ul><ul><ul><li>March-in option never used but times may be changing for bioterrorism inventions </li></ul></ul></ul>
  17. 17. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Rights in Technical Data and Computer Software (Data Rights) </li></ul><ul><ul><li>Government receives unlimited rights license to data/software first produced or created and delivered under contract </li></ul></ul><ul><ul><li>Exceptions to the unlimited rights license: </li></ul></ul><ul><ul><ul><li>Data/software identified by contractor as having been developed at private expense </li></ul></ul></ul><ul><ul><ul><ul><li>However, government always receives unlimited rights license to form, fit and function data, instructional materials, test data, etc.; </li></ul></ul></ul></ul><ul><ul><ul><li>Contractor grants government limited rights license to use (but not for manufacture) data/software; and </li></ul></ul></ul><ul><ul><ul><li>Data delivered with limited/restricted rights legends </li></ul></ul></ul><ul><ul><ul><ul><li>Failure to mark with restrictions conveys unlimited data rights - FAR § 52-227-14(f) </li></ul></ul></ul></ul>
  18. 18. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Executive agency specific “data rights” statutes </li></ul><ul><ul><li>10 U.S.C. §§ 2320-2321 (DoD technical data statute) </li></ul></ul><ul><ul><li>41 U.S.C. § 418a (civilian agencies, e.g. , NASA, technical data statute) </li></ul></ul><ul><li>No federal statute defines the government’s rights in computer software </li></ul><ul><ul><li>Computer Software Documentation is technical data </li></ul></ul><ul><ul><ul><li>“ Technical data” is defined in 41 U.S.C. § 403(8) and 10 U.S.C. § 2302(4) </li></ul></ul></ul><ul><ul><ul><li>See also FAR § 27.401 </li></ul></ul></ul>
  19. 19. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Data Rights (cont.) </li></ul><ul><ul><li>May not incorporate previously developed data/software in deliverables unless government permits and sufficient government license rights acquired </li></ul></ul><ul><ul><li>Deferred ordering rights </li></ul></ul><ul><ul><ul><li>Government can later order delivery of data first produced or used under the contract - FAR § 52.227-16; DFARS § 252.227-7027 </li></ul></ul></ul><ul><ul><ul><ul><li>Deferred ordering clause is to be used unless it is believed that all data requirements are known as of the time of contracting – FAR § 27.409(d); DFARS § 227.7103-8(b) </li></ul></ul></ul></ul>
  20. 20. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Proposal data </li></ul><ul><ul><li>Generally, government use of proposal data is subject to FAR Subparts 15.2 & 15.6 </li></ul></ul><ul><ul><li>But the government can acquire unlimited rights in proposal data through the successful contract – FAR § 27.407 </li></ul></ul><ul><ul><ul><li>Contractor can identify proposal data that it wishes to exclude from the unlimited rights, but this is non-dispositive </li></ul></ul></ul>
  21. 21. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Copyrights </li></ul><ul><ul><li>Previously copyrighted works </li></ul></ul><ul><ul><ul><li>Government permission required to incorporate previously copyrighted works in deliverables </li></ul></ul></ul><ul><ul><ul><li>Contractor must deliver unlimited license </li></ul></ul></ul><ul><ul><ul><li>Contract clause - FAR § 52.227-14(c) </li></ul></ul></ul>
  22. 22. Regulatory Scheme/ Rights Granted (cont.) <ul><li>Copyrights (cont.) </li></ul><ul><ul><li>Copyright in data first produced under the contract </li></ul></ul><ul><ul><ul><li>Contractor may assert copyright in works first produced under the contract, if it is published; otherwise: </li></ul></ul></ul><ul><ul><ul><ul><li>Government permission required (if copyright authorized, affix copyright & government notices) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Government granted an unlimited license </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Government granted a “nonpublic” license to copyrighted software </li></ul></ul></ul></ul><ul><ul><ul><li>Contract clause - FAR § 52.227(b)-(c) </li></ul></ul></ul>
  23. 23. Differences Between Civilian and DoD Rules <ul><li>Civilian </li></ul><ul><ul><li>Deliver form/fit/function data in lieu of limited/restricted rights, unless previously agreed to by government </li></ul></ul><ul><ul><ul><li>“Limited Rights Data” must already be reduced to an “item, process or component,” unless Alternate terms provided </li></ul></ul></ul><ul><ul><ul><li>Alternate terms also available to deliver proprietary data subject to limited/restricted rights and marking </li></ul></ul></ul><ul><ul><ul><li>See FAR § 52.227-14 </li></ul></ul></ul><ul><ul><li>Disputes clause permits government to cancel/ignore marking of proprietary data (subject to contractor appeal) </li></ul></ul><ul><ul><ul><li>FAR § 27.404-5(a) </li></ul></ul></ul>
  24. 24. Differences Between Civilian and DoD Rules (cont.) <ul><li>DoD </li></ul><ul><ul><li>Different “subject invention” disclosure obligations </li></ul></ul><ul><ul><ul><li>Shorter disclosure periods, negative disclosure reports, and R&D subcontractor notifications required </li></ul></ul></ul><ul><ul><li>Government data rights determined by who funded the creation of the data/software or its development: </li></ul></ul><ul><ul><ul><li>“Unlimited Rights” if government funding </li></ul></ul></ul><ul><ul><ul><li>“Government Purpose Rights” if mixed funding ― entitles contractor to 5 year commercial lockup </li></ul></ul></ul><ul><ul><ul><li>“Limited Rights” if private funding </li></ul></ul></ul><ul><ul><ul><li>“Specifically Negotiated License Rights,” infra , may be an exception </li></ul></ul></ul><ul><ul><ul><li>See DFARS § 227.7103-5 </li></ul></ul></ul>
  25. 25. Differences Between Civilian and DoD Rules (cont.) <ul><li>DoD (cont.) </li></ul><ul><ul><li>Delivery of data subject to limited/restricted rights </li></ul></ul><ul><ul><li>Permits incorporation of third-party copyrighted material with sufficient license rights </li></ul></ul><ul><ul><li>No permission required to assert copyright </li></ul></ul><ul><ul><li>Separate provision for noncommercial software and documentation </li></ul></ul>
  26. 26. Specifically Negotiated Licenses <ul><li>FAR </li></ul><ul><ul><li>Part 27 neither provides for nor expressly prohibits against use of specifically negotiated licenses </li></ul></ul><ul><ul><li>Basic data rights clause allows contractor to protect “minor modifications” of data or software – FAR § 52.227-14 </li></ul></ul><ul><ul><ul><li>No definition of “minor modification” </li></ul></ul></ul><ul><li>DFARS </li></ul><ul><ul><li>Explicitly allows specifically negotiated licenses to be used to modify the standard license rights granted to the government – DFARS § 227.7103-5(d) </li></ul></ul><ul><ul><li>May also be used when the government wants to obtain rights in data in which it does not have rights </li></ul></ul><ul><ul><ul><li>Example – technical data pertaining to an item, component or process that is not “developed” but created at private expense </li></ul></ul></ul>
  27. 27. Specifically Negotiated Licenses (cont.) <ul><li>Modifying the “Standard License Rights” </li></ul><ul><li>Options </li></ul><ul><ul><li>Extending the period during which the government enjoys “Government Purpose Rights” </li></ul></ul><ul><ul><li>Negotiating “government purposes” </li></ul></ul><ul><ul><li>Eliminating ambiguities in standard license rights </li></ul></ul><ul><ul><li>Expanding the scope of standard license rights </li></ul></ul><ul><ul><li>Defining “minor modifications” </li></ul></ul><ul><ul><li>Negotiating less than unlimited rights </li></ul></ul><ul><ul><li>Preventing reverse engineering of product / decompilation of source code </li></ul></ul><ul><ul><li>Establishing obligations of confidentiality </li></ul></ul>
  28. 28. Specifically Negotiated Licenses (cont.) <ul><li>Minimum license rights </li></ul><ul><ul><li>Limited Rights in technical data </li></ul></ul><ul><ul><li>Restricted Rights in computer software </li></ul></ul><ul><li>Government does not have to negotiate deviations from standard license rights </li></ul><ul><li>Must show value to government </li></ul><ul><ul><li>Must meet government’s minimum needs for technical data/computer software </li></ul></ul><ul><li>May have to prove that license has basis in DFARS regulatory text or that FAR does not prohibit these licenses </li></ul>
  29. 29. Commercial Items <ul><li>The First Gulf War and the Federal Acquisition Streamlining Act of 1994 (FASA) </li></ul><ul><li>Commercial Item definition includes IP (licensed or offered to be licensed to the general public) – FAR § 2.101 </li></ul><ul><ul><li>Includes “minor modifications” and “customary modifications” </li></ul></ul><ul><li>Permits a division of a company to be a “commercial item subcontractor” </li></ul>
  30. 30. Commercial Items (cont.) <ul><li>“Commercial Item” Contracts - FAR Part 12; DFARS Part 212 </li></ul><ul><ul><li>“Commercial Item” definition can include both supplies and services that are offered for sale or sold to non-government customers typically at market or catalog prices </li></ul></ul><ul><ul><li>Qualification as commercial item contract often will require justification to government contracting officer </li></ul></ul>
  31. 31. Commercial Items (cont.) <ul><li>FASA permitted waiver of data rights statutes for commercial item subcontracting </li></ul><ul><ul><li>41 U.S.C. §§ 253d & 418a; see FAR § 12.504 </li></ul></ul><ul><ul><li>10 U.S.C. §§ 2320-2321; see DFARS § 212.504 </li></ul></ul><ul><li>Waiver enables commercial item subcontractors to “flow up” standard commercial technical data licenses not inconsistent with law </li></ul><ul><ul><li>Standard license rights generally inapplicable </li></ul></ul><ul><li>FAR/DFARS policy is to acquire commercial item technical data and commercial computer software under commercial terms that are not inconsistent with law and satisfy government needs </li></ul><ul><ul><li>FAR §§ 12.211-.212 </li></ul></ul><ul><ul><li>DFARS §§ 212.211-.212; 227.7102 </li></ul></ul>
  32. 32. Commercial Items (cont.) <ul><li>Prime contractor offering commercial item still subject to waived statutes </li></ul><ul><li>DoD requires a broad grant of “unrestricted” license rights in technical data to permit the use and maintenance (but not manufacture) of the “Commercial Item” </li></ul><ul><ul><li>See DFARS § 252.227-7015 </li></ul></ul><ul><ul><li>Note that no equivalent exists in FAR </li></ul></ul><ul><li>No DFARS computer software license clause - But see FAR § 52.227-19 </li></ul><ul><li>“ Patent Rights” clauses inapplicable to commercial items (no experimental, research or developmental work) </li></ul>
  33. 33. Protection of Proprietary Contractor Information <ul><li>FOIA & Reverse FOIA </li></ul><ul><ul><li>Freedom of Information Act (“FOIA”) - 5 U.S.C. § 552 </li></ul></ul><ul><ul><ul><li>FOIA requires an agency to release information held by the agency, subject to enumerated exemptions, to the public upon request </li></ul></ul></ul><ul><ul><ul><li>Trade secrets and commercial or financial information that is privileged or confidential is exempted - 5 U.S.C. § 552(b)(4) (“Exemption 4”) </li></ul></ul></ul><ul><ul><ul><li>Issues arise when the agency plans to release records that ought to be exempted under FOIA Exemption 4 </li></ul></ul></ul>
  34. 34. Protection of Proprietary Contractor Information (cont.) <ul><li>FOIA & Reverse FOIA (cont.) </li></ul><ul><ul><li>Reverse FOIA </li></ul></ul><ul><ul><ul><li>Agency required under Executive Order 12,600 to coordinate with contractor prior to disclosure – 52 Fed. Reg. 23,781 (June 25, 1987) </li></ul></ul></ul><ul><ul><ul><li>Contractor may object to disclosure, including written testimony to support exemption status </li></ul></ul></ul><ul><ul><ul><li>If agency threatens disclosure over contractor objection, then an action under the Administrative Procedures Act is available to require the agency to withhold the records </li></ul></ul></ul><ul><ul><ul><li>See, e.g., Canadian Commercial Corp. v. Dep’t of the Air Force , 514 F.3d 37 (D.C. Cir. 2008) (affirming district court decision enjoining Air Force from disclosing contractor’s line-item pricing under FOIA Exemption 4) </li></ul></ul></ul>
  35. 35. Protection of Proprietary Contractor Information (cont.) <ul><li>Recent cases & developments </li></ul><ul><ul><li>Boeing Co. v. U.S. Dep’t of the Air Force , 616 F. Supp. 2d 40 (D.D.C. 2009) </li></ul></ul><ul><ul><ul><li>Reverse-FOIA case; Air Force sought to release labor cost information contained in Boeing contracts </li></ul></ul></ul><ul><ul><ul><li>Held release of current and future pricing information should be exempt from disclosure because of competitive harm </li></ul></ul></ul><ul><ul><ul><li>But affirmed release of past pricing information as not threatening contractor’s competitive position (unless competitor could extrapolate present pricing from past pricing information) </li></ul></ul></ul>
  36. 36. Protection of Proprietary Contractor Information (cont.) <ul><li>Recent cases & developments (cont.) </li></ul><ul><ul><li>Gen. Elec. Co. v. Dep’t of the Air Force , ___ F. Supp. 2d ___, 2009 WL 2749359 (D.D.C. Aug. 28, 2009) </li></ul></ul><ul><ul><ul><li>Reverse-FOIA case; jet engine manufacturer made FOIA request including pricing information about GE’s sole source contracts to supply engine spare parts </li></ul></ul></ul><ul><ul><ul><li>Air Force sought to release information arguing, in part, no actual competitive harm existed because the contracts were sole source awards </li></ul></ul></ul><ul><ul><ul><li>Held that evidence of competition need not be competition over the subject contracts but merely that GE has competition over the general subject matter of the contracts, here spare engine parts </li></ul></ul></ul>
  37. 37. Protection of Proprietary Contractor Information (cont.) <ul><li>Recent cases & developments (cont.) </li></ul><ul><ul><li>New U.S. Attorney General Guidelines for FOIA </li></ul></ul><ul><ul><ul><li>Memorandum dated March 19, 2009, rescinds earlier AG guidelines – 74 Fed. Reg. 49,892 (Sept. 28, 2009) </li></ul></ul></ul><ul><ul><ul><li>Implements President Obama’s January 21, 2009, FOIA memorandum that creates a presumption in favor of disclosure </li></ul></ul></ul><ul><ul><ul><li>Directions: </li></ul></ul></ul><ul><ul><ul><ul><li>Agencies should not withhold information merely because they may legally do so </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Agencies should make partial disclosures if possible whenever full disclosures are not possible </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Encourages agencies to proactively post information online prior to public requests </li></ul></ul></ul></ul>
  38. 38. Protection of Proprietary Contractor Information (cont.) <ul><li>Recent cases & developments (cont.) </li></ul><ul><ul><li>Plainville Elec. Prod. Co. v. Bechtel Bettis, Inc. , No. 3:06cv920 (SRU), 2009 WL 801639 (D. Conn. Mar. 26, 2009) </li></ul></ul><ul><ul><ul><li>Data rights case; prime contractor released subcontractor’s technical data to other bidders for follow-on subcontract </li></ul></ul></ul><ul><ul><ul><li>First subcontract included clause giving contractor unlimited technical data rights without reservations </li></ul></ul></ul><ul><ul><ul><li>Held that prime contractor did not breach subcontract </li></ul></ul></ul>
  39. 39. Protection of proprietary contractor information (cont.) <ul><li>Recent cases & developments (cont.) </li></ul><ul><ul><li>Zoltek Corp. v. United States , 85 Fed. Cl. 409 (Fed. Cl. 2009) </li></ul></ul><ul><ul><ul><li>Patent infringement case; portion of alleged patent infringement occurred by contractor in foreign country </li></ul></ul></ul><ul><ul><ul><li>Prior, the government had successfully argued that the Court of Federal Claims had no jurisdiction to hear infringement suit against United States under Tucker Act because of acts on foreign soil </li></ul></ul></ul><ul><ul><ul><li>Held here that derivative immunity conferred onto infringing contractor no longer existed </li></ul></ul></ul><ul><ul><ul><ul><li>Typically, a contractor alleged to have infringed a patent in the course of its contract receives indemnity from the government – see 28 U.S.C. § 1498(a) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>However, the Zoltek court held here that the plain language of 28 U.S.C. § 1498(c) provides that none of §1498 applies to a claim arising in a foreign country </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Thus, no derivative immunity existed because the claim arose in a foreign country </li></ul></ul></ul></ul>
  40. 40. Protection of proprietary contractor information (cont.) <ul><li>Recent cases & developments (cont.) </li></ul><ul><ul><li>National Defense Authorization Act For Fiscal Year 2010, Section 821 </li></ul></ul><ul><ul><ul><li>Statutory expansion of DoD Limited Rights License </li></ul></ul></ul><ul><ul><ul><li>Provides authority for “covered government support contractors” to have access to technical data belonging to prime contractors </li></ul></ul></ul><ul><ul><ul><li>Covered government support contractors </li></ul></ul></ul><ul><ul><ul><ul><li>Must be providing independent management advice to the government regarding the prime contract from which it is receiving a prime contractor’s technical data </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cannot be an affiliate of the prime contractor, a first-tier subcontractor, or a direct competitor of either </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Must execute a non-disclosure agreement (NDA) with the prime contractor </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Civilly liable to the prime contractor for breaches of NDA </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Civilly and criminally liable to government for breaches of the consulting contract </li></ul></ul></ul></ul>
  41. 41. Managing Subcontracts <ul><li>Flowing prime contract clauses to the subcontract </li></ul><ul><ul><li>Contractor required to obtain “all data and rights therein necessary to fulfill the Contractor’s obligations” – FAR § 52.227-14(h) </li></ul></ul><ul><ul><li>Clauses (with alternates) to flow-through (if applicable) include: </li></ul></ul><ul><ul><ul><li>Authorization and Consent (contractor indemnity) – FAR §52.227-1 </li></ul></ul></ul><ul><ul><ul><li>Patent Indemnity (for the government) – FAR § 52.227-3 </li></ul></ul></ul><ul><ul><ul><li>Patent Rights – Ownership by the Contractor – FAR § 52.227-11 (if applicable) </li></ul></ul></ul><ul><ul><ul><li>Patent Rights – Ownership by the Government – FAR § 52.227-13 </li></ul></ul></ul><ul><ul><ul><li>Rights in Data – General – FAR § 52.227-14 / DFARS § 252.227-7013, -7014, & -7015 </li></ul></ul></ul><ul><ul><ul><li>Additional Data Requirements (deferred ordering) – FAR §52.227-16 / DFARS § 252.227-7026 </li></ul></ul></ul><ul><ul><ul><li>Rights to Proposal Data – FAR § 52.227-23 / DFARS § 252.227-7016 </li></ul></ul></ul>
  42. 42. Managing Subcontracts (cont.) <ul><li>Additional subcontract clauses beyond prime contract flow-throughs </li></ul><ul><li>Subcontracts may benefit from additional IP clauses to facilitate prime contract performance, such as: </li></ul><ul><ul><li>Clause requiring a subcontractor to remove restrictive marks if the government requires removal </li></ul></ul>
  43. 43. Risks/Tips for Managing IP <ul><li>Understand the rules! </li></ul><ul><ul><li>Evaluate FAR/DFARS alternative clauses </li></ul></ul><ul><ul><li>Think! </li></ul></ul><ul><li>Be “empathetic” to the government’s needs </li></ul><ul><li>But, clearly understand your business goals </li></ul><ul><li>Set up a system to ensure proper administration of government IP contract terms, including the reporting of inventions </li></ul><ul><li>Avoid unanticipated or undesirable entanglements relating to development of IP by analyzing how the government obtains license rights </li></ul>
  44. 44. Risks/Tips for Managing IP (cont.) <ul><li>Prior to submitting a proposal or executing a government contract or subcontract: </li></ul><ul><ul><li>Negotiate “deliverables” </li></ul></ul><ul><ul><li>Negotiate scope and duration of licenses </li></ul></ul><ul><ul><li>Identify and list deliverable, privately developed technical data and computer software </li></ul></ul><ul><ul><li>Identify inventions that have not been “actually reduced to practice” </li></ul></ul><ul><ul><li>Track ( i.e., maintain records of) the development of data/software in anticipation of Data Rights challenges </li></ul></ul><ul><ul><li>Restrictively mark privately developed data/software using conforming, “authorized” legends to avoid impairment or loss of rights </li></ul></ul><ul><ul><ul><li>Neither over- nor under-inclusive </li></ul></ul></ul>
  45. 45. Risks/Tips for Managing IP (cont.) <ul><li>Analyze and, if appropriate, eliminate unnecessary/inappropriate FAR/DFARS clauses </li></ul><ul><ul><li>Work-Made-For-Hire clauses </li></ul></ul><ul><ul><li>Government deferred ordering terms </li></ul></ul><ul><ul><li>Additional Data Requirements – see FAR § 52.227-16 </li></ul></ul><ul><ul><ul><li>Certain data can be exempted </li></ul></ul></ul><ul><li>Ensure subcontract terms compatible with prime contract </li></ul>
  46. 46. Risks/Tips for Managing IP (cont.) <ul><li>Vigorously monitor agencies’ websites and other media for ‘pre-FOIA-request’ agency disclosures </li></ul><ul><li>When disputing FOIA disclosure, clearly demonstrate how release of past information will lead to future competitive harm </li></ul>
  47. 47. Illustrative Scenarios <ul><li>IP management arises in diverse ways in government contracting context </li></ul><ul><li>Two basic types of scenarios encountered </li></ul><ul><ul><li>Government - Prime contractor </li></ul></ul><ul><ul><li>Prime contractor - Subcontractor </li></ul></ul>
  48. 48. Illustrative Scenarios (cont.) <ul><li>Scenario #1 - Government - Prime contractor </li></ul><ul><ul><li>Contractor constructs complex weapons system for the U.S. Air Force. Those systems include embedded software applications that the Contractor developed at its sole expense. The contract includes DFARS § 252.227-7014 (Rights in Noncommercial Computer Software…Documentation). Contractor placed a legend on the display screen that only included the software version, Contractor name and date. </li></ul></ul>
  49. 49. Illustrative Scenarios (cont.) <ul><li>Scenario #1 - Government - Prime contractor (cont.) </li></ul><ul><ul><li>Government’s perspective </li></ul></ul><ul><ul><ul><li>Government believes it is entitled to unlimited rights in the software because Contractor did not comply with the strict marking terms of DFARS § 252.227-7014. </li></ul></ul></ul><ul><ul><ul><li>Government claims it is unable to determine what rights it possesses without appropriate marking. </li></ul></ul></ul><ul><ul><li>Contractor’s perspective </li></ul></ul><ul><ul><ul><li>Contractor developed software with its own funds prior to contract award and government should not obtain unlimited rights in embedded software. </li></ul></ul></ul>
  50. 50. Illustrative Scenarios (cont.) <ul><li>Scenario #1 - Government - Prime contractor (cont.) </li></ul><ul><ul><li>Solution </li></ul></ul><ul><ul><ul><li>Failure to use marking required by DFARS § 252.227-7014 allows the government to obtain unlimited rights in the software. See Gen. Atronics Corp. , ASBCA No. 49196, 2002 WL 450441 (Mar. 19, 2002). </li></ul></ul></ul><ul><ul><ul><li>Dispute process – see DFARS § 252.227-7037(e)-(i) </li></ul></ul></ul><ul><ul><ul><ul><li>Government sends letter to contractor challenging the marks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contractor has 60 days to respond, and that response is deemed a claim under the Contract Disputes Act </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Government then has 60 days to issue a final decision </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contractor can appeal that final decision to the Court of Federal Claims </li></ul></ul></ul></ul>
  51. 51. Illustrative Scenarios (cont.) <ul><li>Scenario #2 - Government - Prime contractor </li></ul><ul><ul><li>NASA contracts with World Security, Inc. for the development and installation of a new security system for Cape Kennedy which will include development of new hardware and software to implement the system. World Security, Inc. has never obtained a prime contract from NASA before and has tough competitors who have U.S. and foreign patents that cover products similar to those of World Security, Inc. </li></ul></ul>
  52. 52. Illustrative Scenarios (cont.) <ul><li>Scenario #2 - Government - Prime contractor (cont.) </li></ul><ul><ul><li>NASA’s perspective </li></ul></ul><ul><ul><ul><li>Ensure that it has sufficient patent and data rights to enable it to satisfy life-cycle requirements and safeguard the meta-security of the security system itself </li></ul></ul></ul><ul><ul><ul><ul><li>Concern about software security holes and breaches </li></ul></ul></ul></ul><ul><ul><li>World Security’s perspective </li></ul></ul><ul><ul><ul><li>Get the contract and build a long-term relationship with NASA </li></ul></ul></ul><ul><ul><ul><li>Protect as much of its data from future potential disclosures to competitors </li></ul></ul></ul><ul><ul><ul><li>Protect itself from patent infringement liability </li></ul></ul></ul>
  53. 53. Illustrative Scenarios (cont.) <ul><li>Scenario #2 - Government - Prime contractor (cont.) </li></ul><ul><ul><li>Solution </li></ul></ul><ul><ul><ul><li>Under the Basic Data Rights clause, FAR § 52.227-14, a contractor’s best method to protect its data is to withhold it from delivery </li></ul></ul></ul><ul><ul><ul><ul><li>May, however, not satisfy NASA’s data needs </li></ul></ul></ul></ul><ul><ul><ul><li>Instead employ Alternate II that will permit delivery of the data subject to a limited rights license that will prevent the government from using the data for manufacturing </li></ul></ul></ul><ul><ul><ul><li>Also, employ Alternate III to protect any software that must be delivered </li></ul></ul></ul><ul><ul><ul><li>Solicit FAR § 52.227-1, Authorization and Consent, Alternate I to protect against third party U.S. patent infringement claims </li></ul></ul></ul><ul><ul><ul><li>Consider negotiating additional indemnity clauses from the government to protect against alleged patent infringement – see Zoltek, supra </li></ul></ul></ul>
  54. 54. Illustrative Scenarios (cont.) <ul><li>Scenario #3 - Government - Prime contractor </li></ul><ul><ul><li>The U.S. Army issued an RFP for a new armored vehicle. In the RFP, the Army stated clearly that it needs to obtain reprocurement data and rights in order to meet the Army’s life cycle support requirements. The RFP included DFARS § 252.227-7017 and DFARS § 252.227-7013 which requires the identification of technical data to be delivered with less than unlimited rights and listed in the contract. </li></ul></ul><ul><ul><li>The successful bidder failed to identify any technical data subject to restrictions. After contract award, bidder internally identified such data and requested that the Army add a list of such technical data to the contract. </li></ul></ul><ul><ul><li>The Army refused to add the list to the contract </li></ul></ul>
  55. 55. Illustrative Scenarios (cont.) <ul><li>Scenario #3 - Government - Prime contractor (cont.) </li></ul><ul><ul><li>Army perspective </li></ul></ul><ul><ul><ul><li>Made it clear that the Army needed reprocurement package and associated rights </li></ul></ul></ul><ul><ul><ul><li>Ensure that spare parts and maintenance services can be competitively procured </li></ul></ul></ul><ul><ul><ul><li>Go to other contractors as the need arises </li></ul></ul></ul><ul><ul><li>Prime contractor’s perspective </li></ul></ul><ul><ul><ul><li>Protect its privately developed data </li></ul></ul></ul><ul><ul><ul><li>Be competitive in the future </li></ul></ul></ul>
  56. 56. Illustrative Scenarios (cont.) <ul><li>Scenario #3 - Government - Prime contractor (cont.) </li></ul><ul><ul><li>Solutions </li></ul></ul><ul><ul><ul><li>DFARS § 252.227-7013(e)(3) states that “other assertions may be identified after award when based on new information or inadvertent omissions unless the inadvertent omissions would have materially affected the source selection decision.” </li></ul></ul></ul><ul><ul><ul><li>Assert that subparagraph (e)(3) is inapplicable. </li></ul></ul></ul><ul><ul><ul><li>Negotiate when the government acquires the reprocurement data and associated rights. </li></ul></ul></ul><ul><ul><ul><li>Offer to license subsequent contractor directly </li></ul></ul></ul>
  57. 57. Illustrative Scenarios (cont.) <ul><li>Scenario #4 - Prime contractor - Subcontractor </li></ul><ul><ul><li>Prime contractor and subcontractor enter a contract for interactive displays for Navy training modules. Later, the prime contractor solicits bids from the subcontractor and other bidders for a follow-on subcontract to provide next generation displays. </li></ul></ul><ul><ul><li>Prime contractor distributes to all of the bidders the subcontractor’s data submitted under the subcontract. The subcontractor has submitted its data without any restrictive legends. </li></ul></ul>
  58. 58. Illustrative Scenarios (cont.) <ul><li>Scenario #4 - Prime contractor - Subcontractor (cont.) </li></ul><ul><ul><li>Prime contractor’s perspective </li></ul></ul><ul><ul><ul><li>Achieve the lowest price by ensuring that all bidders have access to as much information as is possible so that no one reinvents the wheel </li></ul></ul></ul><ul><ul><li>Subcontractor’s perspective </li></ul></ul><ul><ul><ul><li>Protect its competitive advantage resulting from its current experience </li></ul></ul></ul><ul><ul><ul><li>Protect its confidential data and trade secrets </li></ul></ul></ul>
  59. 59. Illustrative Scenarios (cont.) <ul><li>Scenario #4 - Prime contractor - Subcontractor (cont.) </li></ul><ul><ul><li>Solutions </li></ul></ul><ul><ul><ul><li>Using DFARS § 252.227-7013(e)(2) contract clause, negotiate to submit data with restrictive legends to protect its data from disclosure to third-parties. See Plainville Elec. Prod. Co. v. Bechtel Bettis, Inc. , No. 3:06cv920 (SRU), 2009 WL 801639 (D. Conn. Mar. 26, 2009) </li></ul></ul></ul><ul><ul><ul><li>Prime contractor cannot use its ability to award subcontracts to leverage data rights from the subcontractor - DFARS § 252.227-7013(k)(4)-(5) </li></ul></ul></ul>
  60. 60. Illustrative Scenarios (cont.) <ul><li>Scenario #4 - Prime contractor - Subcontractor (cont.) </li></ul><ul><ul><li>Solutions </li></ul></ul><ul><ul><ul><li>FAR somewhat different from DFARS policy. </li></ul></ul></ul><ul><ul><ul><ul><li>“ [C]ontractors shall not use their ability to award subcontracts as economic leverage to acquire rights for themselves in inventions resulting from subcontracts” - FAR § 27.304-3 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>“ The Contractor shall obtain from its subcontractors all data and rights therein necessary to fulfill the Contractor’s obligations to the Government under this contract. If a subcontractor refuses to accept terms affording the Government those rights, the Contractor shall promptly notify the Contracting Officer of the refusal and shall not proceed with the subcontract award without authorization in writing from the Contracting Officer.” - FAR § 52.227-14(h) </li></ul></ul></ul></ul>
  61. 61. Illustrative Scenarios (cont.) <ul><li>Scenario #5 - Government - Prime contractor - Subcontractor </li></ul><ul><ul><li>Prime contract includes Alternate II permitting the delivery of limited rights data under FAR § 52.227-14, which the prime contractor flowed-through to the subcontractor </li></ul></ul><ul><ul><li>Subcontractor submitted data restrictively marked as limited rights data </li></ul></ul><ul><ul><li>Government now disagrees with the subcontractor’s assertion that the data qualifies as limited rights data because it wants to use the data in a new procurement </li></ul></ul><ul><ul><ul><li>Sends letter to prime contractor disputing the restrictive legends </li></ul></ul></ul><ul><ul><ul><li>Prime contractor is stuck in middle </li></ul></ul></ul><ul><ul><ul><li>Goverment removes marks, see FAR § 52.227-14(f), and issues decision to both prime & subcontractor asserting unlimited rights </li></ul></ul></ul>
  62. 62. Illustrative Scenarios (cont.) <ul><li>Scenario #5 - Government - Prime contractor - Subcontractor (cont.) </li></ul><ul><ul><li>Government’s perspective </li></ul></ul><ul><ul><ul><li>Wants to use the subcontractor’s data for new procurement </li></ul></ul></ul><ul><ul><li>Prime contractor’s perspective </li></ul></ul><ul><ul><ul><li>Wants to protect its relationship with its subcontractor and with the government </li></ul></ul></ul><ul><ul><ul><li>Wants to protect its competitive advantage for the new procurement via its relationship with its existing subcontractor </li></ul></ul></ul><ul><ul><li>Subcontractor’s perspective </li></ul></ul><ul><ul><ul><li>Just wants to protect its technical data from disclosure to keep its competitive edge </li></ul></ul></ul>
  63. 63. Illustrative Scenarios (cont.) <ul><li>Scenario #5 - Government - Prime contractor - Subcontractor (cont.) </li></ul><ul><ul><li>Solutions </li></ul></ul><ul><ul><ul><li>Prime can attempt to sponsor subcontractor’s claim to contest the government’s decision removing the restrictive marks </li></ul></ul></ul><ul><ul><ul><li>Subcontractor may seek relief directly under Contract Disputes Act pursuant to 41 U.S.C. § 253d(e) </li></ul></ul></ul><ul><ul><ul><ul><li>See also 10 U.S.C. § 2321(h) </li></ul></ul></ul></ul>
  64. 64. Conclusion <ul><li>Government contracts provide a good source of development funding which can be used to accelerate commercialization of technology </li></ul><ul><li>Special care required to manage IP under pertinent statutes/regulations </li></ul><ul><ul><li>Significantly different than commercial licensing </li></ul></ul><ul><ul><li>Due diligence necessary to avoid disputes, compliance issues and/or improper impairment of IP rights </li></ul></ul>
  65. 65. Contact Information William C. Anderson United Launch Alliance, LLC 9100 East Mineral Circle, MS: U6003 Centennial, CO 80112 303-269-5120 [email_address] Steven M. Masiello McKenna Long & Aldridge LLP 1400 Wewatta Street, Suite 700 Denver, CO 80202 303-634-4355 [email_address] DN 32168417