McCarter & English hosts a seminar series for the New Jersey Tech Council on the legal and business ground rules every technology company needs to know to grow and protect its business: Government and International Contracting, Protecting Intellectual Property, Export Control and Immigration.

1. Protecting Patents & Data in the
Commercial & Government
Market Place
February 26, 2015
Daniel J. Kelly ● Maria Laccotripe Zacharakis, Ph. D.

2. INTRODUCTION TO
INTELLECTUAL PROPERTY
2

3. What is Intellectual Property?
Intellectual property is a blanket term covering
areas of the law dealing with the protection of
property which “springs from the mind.”
3
Patents
™Trademarks
©Copyrights
Trade Secrets

4. Types of Intellectual Property
Patents
– Market exclusivity in exchange for public disclosure
Copyrights
– Protect the expression of your ideas
Trademarks
– Protect your goodwill and identity in the marketplace
Trade Secrets
– Keep commercially valuable information from
competitors (if you can do so effectively)
4

5. Why is Intellectual Property
Important?
Recover the costs of research and
development
Protect new products from market
competition
– Without protection, new products may be reverse
engineered or knocked-off freely
Patents are valuable assets
– Licensing
– Raising capital
5

6. What is a patent?
A patent gives its holder the right to exclude
others from:
– making,
– selling, or
– using the invention.
6

7. Types of patents
Utility patents
– cover anything having an actual use – e.g.,
machines, processes, compositions of matter
Design patents
– cover ornamental product designs
Plant patents
– for distinct and new varieties of plants that have
been invented or discovered and asexually
reproduced.
7

8. Types of patents
First Generation patents
– Protect first generation products and platform
technology
Second Generation patents
– Protect where you and your competitors will go
once your product hits the market
Others
– Offensive patents
– FDA Label patents, etc.
8

9. 9
The
Journey
of a
Patent

10. Step 1
10
Discovery!

11. Step 2
Document discovery in lab notebook
11

12. Step 3
File Invention Disclosure Form with patent committee
12

13. Step 4
Patent Committee Discussion
Can invention be commercialized?
Search for prior art
Proceed with patent application filing
13

14. Step 5
Preparation of Patent Application
Meet with patent attorney Draft application Review and edit application
14

15. Step 6
File application with patent office
15

16. Step 7
Review of application by patent examiner
16

17. Step 8
Rebut the position of the examiner
This process goes back and
forth several times
17

18. Step 9
Patent is granted!
18

19. Requirements for patentability
Utility
Novelty
Non-obviousness/inventive step
Written description
Enablement
19

20. Requirements for patentability:
Utility
Invention must have some useful purpose.
20
Chin putter

21. Requirements for patentability:
Novelty
Under the America Invents Act, to be eligible for
a patent, before the date of filing, the invention
cannot have been:
– patented
– described in a publication
– in public use
– on sale or otherwise available to the public
21

22. Requirements for patentability:
Novelty
There is a 1-year grace period prior to the
application filing date for public disclosures:
– made by an inventor or by a third party who obtained
the subject matter from the inventor
– made by a third party after the inventor disclosed the
subject matter
22

23. 1-Year Grace Period
23
1 year
before filing
Inventor A files
patent application
Inventor A
publishes invention
Third party
publishes invention
This publication is not prior art
against Inventor A

24. Requirements for patentability:
Non-obviousness/Inventive Step
Invention must not have been obvious to one of
ordinary skill in the art to which the invention
pertains
TIP: Don’t rely on arguments, plan to obtain data
demonstrating unexpected results over the cited
art
24

25. Requirements for patentability:
Enablement/Written Description
Enable any person skilled in the art to make and
use the invention
– Examples are the best defense against enablement
issues
The specification must describe the claimed
invention
• No new matter can be added after filing
• Problems typically arise when amending the claims
25

26. Patentable Subject Matter
Appropriate subject matter includes:
– Drugs and Biologics (e.g., new compounds, prodrugs)
– Formulations (e.g., new forms, carriers)
– Medical Devices (e.g., catheters, bone screws)
– Methods of Treatment (e.g., new regimens or profiles)
– Diagnostics (e.g., urine tests)
– New Designs (e.g., product or packaging design)
Non-patentable subject matter includes:
– Laws of nature
– Abstract ideas (e.g., mathematical equations)
– Natural phenomena
26

27. What is an “Invention”?
An invention exists when…
– Conception is complete, and
– The invention is reduced to practice
• Both can happen at the same time
27

28. What is an Invention:
Conception
Conception has been held to be complete only
when the idea is so clearly defined in the
inventor’s mind that only ordinary skill would be
necessary to reduce the invention to practice,
without extensive research or experimentation
28

29. What is an Invention:
Reduction to practice
An invention has been reduced to practice
when…
– It has been built or practiced sufficiently to show that it
would work as claimed, or
– An enabling patent application has been filed
29

30. Inventorship
Only contributors to the conception of the
“claimed” invention may be named as inventors.
Collaborators who merely conduct experiments
at the direction of another are not inventors even
if the task performed requires skill and creativity.
However, if a collaborator aids in developing the
idea itself or significantly refines the original
idea, he should be named as an inventor.
30

31. Documenting the Invention
Under the AIA, the US is no longer a “first to
invent” system. However, it is still important to
– File invention disclosures
– Maintain a laboratory notebook…
• Documents the inventive process
• Serves as the source of experimental
data for patent claims, patent examples,
proof of concept, etc.
31

32. Note Keeping
Recording conception
– Clearly record facts surrounding invention
Recording continuity
– Clearly note any intervals in research
Witnessing
– Each page of lab notebook should be:
• signed and dated information was recorded
• signed and dated by a witness on the date information
was recorded
32

33. Note Keeping
Recording disclosures to others
Speculation
– Speculation regarding other embodiments of the
invention, possible other uses, etc. should be
recorded as this will assist in sizing up and fleshing
out the invention (speculation could lead to other
inventions!)
33

34. When to File a Patent Application
The general rule is that one must file a patent
application before a non-confidential disclosure
is made or before the product is offered for sale.
A disclosure to a third party without a
confidentiality agreement could prevent patent
protection in many jurisdictions
– Some jurisdictions have limited grace periods, but the
circumstances are very narrow – don’t count on it!
34

35. When to File a Patent Application
While the US has a limited grace period, don’t
count on it
– It does not prevent a competitor from filing a patent
application
– You may not be able to get priority in most
jurisdictions, and possibly not even in the US,
depending on what was disclosed
Confidentiality/Material Transfer agreements are
great, but only get you a breach of contract claim
35

36. 36
When to File a Patent Application
Be careful about what is disclosed at/in:
– Conferences:
• Disclosure during an oral presentation can be a bar to
patenting in some countries
• Abstracts (often published or available online) and poster
session presentations may be deemed written disclosures
– Grant proposals:
• Once funded, government organizations may publish their
abstracts even if you tell them not to

37. 37
Due Diligence
Checklist

38. Due Diligence Checklist
I. Intellectual Property Portfolio
– Scope and Status
– Inventorship and Ownership
– Formalities
– Foreign Filing
– Priority Contests/Derivation v. First to Invent & First to File
– Other Related Applications in the Portfolio
II. Actual or Threatened Adverse Proceedings Involving 3rd Parties
III. Advice on Freedom-to-Operate
IV. Licensing or other Agreements with 3rd Parties
V. Key Personnel
VI. Data
38

39. Due Diligence:
Intellectual Property Portfolio
Scope and Status
– This includes…
• A list of all the intellectual property that the target
company owns, controls, or has access to that is
within the scope of the proposed transaction
• A list of any 3rd party intellectual property covering
the target company.
• Access to the complete file histories of all issued
patents and pending patent applications owned,
controlled, or licensed by the target
39

40. Due Diligence:
Intellectual Property Portfolio
Inventorship and Ownership
– Are you aware of…
• Any individual who believes that he or she was
incorrectly omitted from inventorship (consultants,
outside contractors, etc.)
• Any claim by a third party that believes it has a right of
ownership in an application or patent
• Any inventor who has an obligation to assign to a third
party
• Any funding arrangements which would give another
party an interest in the target company’s portfolio
40

41. Due Diligence:
Intellectual Property Portfolio
Formalities
– Account for all documents establishing title-
ownership/licensee rights for all the IP owned,
controlled or licensed by the target company and
establish whether or not…
• The IP documents remain in good standing
• All assignments were filed and recorded
• All filing receipts are in order
• Maintenance and other fees have been paid
• All relevant applications are pending (i.e., not
abandoned)
41

42. Due Diligence:
Intellectual Property Portfolio
Foreign Filing
– In what jurisdictions have steps been taken to
preserve foreign patent rights?
42

43. Due Diligence:
Intellectual Property Portfolio
Priority Contests
– Are you aware of existing or potential priority contests
involving the claims of the invention?
– In order to assess the outcome of likely priority
contests we need the following:
• Evidence of dates of conception and reduction to
practice of invention
• Any evidence you have of other parties’ dates of
conception and reduction to practice
43

44. Due Diligence:
Intellectual Property Portfolio
Priority Contests, cont.
– Questions to answer:
• What can you tell us about the prior art with respect to
the claims?
• What can you tell us about any interferences part or
presently pending?
• What can you tell us about any European oppositions
part or presently pending? Is validity of any of the
claims at issue?
44

45. Due Diligence:
Intellectual Property Portfolio
Other Related Applications in the Portfolio
– If any other applications have been filed which would
support the claims, it should be demanded that these
applications and their prosecution histories be viewed.
– In order to assess the patentability of the invention, the
following from other applications which disclose the
invention are needed:
• Priority documents
• Prosecution files
• All known prior art and copies of any prior art searches
• Summaries of any new data which might be used to
support the patentability of the claims
45

46. Due Diligence:
Actual / Threatened Adverse Proceedings
Actual or Threatened Adverse Proceedings
Involving 3rd Parties
– The following information is required:
• Information regarding any actual or threatened IP
lawsuits affecting the patent portfolio
• Information regarding the legal opinions by external
counsel regarding the validity of any 3rd party IP rights
that might affect the patent portfolio
• Information regarding legal opinions by external or
internal counsel regarding whether the activities of any
3rd party infringe or would infringe the subject matter of
the patent portfolio
46

47. Due Diligence:
Freedom-to-Operate
Advice on Freedom to Operate
– Provide information regarding…
• Any potentially dominating patents and, if any, search
results, legal opinions, memoranda, and/or
presentations to senior management regarding the
target company’s freedom to use/test/make their
product within the patent portfolio
• Any trademark clearance searches or survey results
47

48. Due Diligence:
Freedom to Operate
Advice on Freedom-to-Operate, cont.
– Questions to be answered:
• Have you been asked to provide a “freedom to use”
opinion with respect to the practice of the target
company’s product?
• Have you formed an opinion on whether the practice of
the target product would infringe a valid claim of a US
patent – can you say why?
• Have you ever sent a letter asserting infringement of a
claim of the portfolio?
• Are you aware of any related claims or a third party that
would prevent practicing steps of the invention?
48

49. Due Diligence:
License/Other Agreements with 3rd Parties
License or Other Agreements with 3rd Parties
– Identify all the products in the program – if any
products are not being considered for the deal,
discuss the relationship of these products
– Have any other third parties licensed and
subsequently decided not to pursue this technology;
explain why the program ended
49

50. Due Diligence:
License/Other Agreements with 3rd Parties
License or Other Agreements with Third Parties, cont.
– List licenses or other agreements related to the research,
development, manufacture, use or sale of the product, including:
• Exclusive and non-exclusive license agreements
• Joint development agreements or joint venture agreements
• Secrecy/confidentiality agreements
• Manufacturing or supply or other service (e.g. testing)
agreements
• Consulting agreements
• Sponsored research agreements
• Material transfer agreements
• Technical assistance agreements needed to provide for transfer
of “know-how” as to a product that affects the collaboration
• Distribution agreements
50

51. Due Diligence:
Key Personnel
Key Personnel
– Provide a list and contact information of all persons
involved in the prosecution of the IP portfolio and/or
R&D of the compounds within the portfolio with whom
we can discuss the proposed transaction.
– Provide documents that establish the obligations of
key personnel, including the inventors.
– Indicate whether persons are currently or formerly
retained by the target company.
51

52. Due Diligence:
Data
Data
– Provide the following:
• information, including a list and summary description, of all
data relating to completed or ongoing clinical trials,
preclinical studies, toxicology profiles, and proposed future
publications related to product or its use in any field.
• Any documents and/or information related to the status
and ownership of clinical trial data and materials identified
above.
– Have any clinical trials (or relevant IP) been funded
by 3rd parties, including grants (academic or
government)?
52

53. PATENT RIGHTS UNDER
GOVERNMENT CONTRACTS &
GRANTS
53

54. GOVERNMENT’S RIGHTS IN
INVENTIONS
54

55. The Bayh-Dole Act – 35 U.S.C.
Sections 200-212
Under Bayh-Dole, passed in 1980, small
businesses and nonprofit entities (including
universities and research institutions) given right
to retain title to inventions developed under
Government funding agreements.
55

56. Bayh-Dole extended by 1983 Presidential
Memorandum to large businesses and for-profit
organizations not subject to DOE, NASA and
NRC funding agreements.
DOE, NASA and NRC are given title by statute
to any inventions developed under funding
agreements between large for-profit businesses
and those agencies; patents issued to the United
States.
56

57. Applies to Government Contracts,
Grants, and Cooperative Agreements
A Contractor’s Patent Rights are Governed by
Part 27 of the Federal Acquisition Regulation
(Title 48 of the CFR) and the Patent Rights
Clause (52.227-11).
A Grantee’s or Funding Recipient’s Patent
Rights Are Governed by Title 37 of the Code of
Federal Regulations and the Patent Rights
clause (Section 401.14).
57

58. Nature of Government’s Right
Government gets a nonexclusive, irrevocable,
paid-up license to practice or have practiced on
its behalf such an invention throughout the
world.
58

59. Fund Recipient Must Act
Under Bayh-Dole – title can revert to the
Government if the grantee/contractor fails to
disclose the invention, fails to elect to retain title
or fails to file and prosecute a patent application
within certain prescribed time periods. Failure to
disclose means grantee/contractor loses all
rights. Failure to elect title – grantee/contractor
still gets license.
59

60. Definitions
“Invention” (FAR 27.301; 37 CFR 401.2(c))
– any invention or discovery that is or may be
patentable or otherwise protectable under the Patent
laws or any novel variety of plant that is or may be
protectable under the Plant Variety Protection Act
60

61. Definitions
“Subject Invention” (FAR 27.301; 37 CFR
401.2(d))
– any invention of the contractor conceived or first
actually reduced to practice in the performance of
work under a government contract or funding
arrangement
61

62. Funding Recipient’s Right to Elect Title
Narrow Exceptions to Recipient’s Right to Elect
to Retain Title
– Foreign companies
– Exceptional circumstances in furtherance of policy
objectives
– National security
– Contracts for government owned R&D or production
facilities
FAR 27.302(b)(1)-(4); 37 CFR 401.3(a)
62

63. Government’s Rights if Recipient Elects
Title
Government License Rights
– Minimum: Nonexclusive, nontransferable, irrevocable,
paid-up license to practice, or have practiced for, or
on behalf of, the U.S. Government throughout the
world
– May have additional rights to sublicense to any
foreign government or international organization to
effectuate treaties or international agreements
– March-In Rights
63

64. March-In Rights
Where contractor acquires title, government can
require contractor to license, or the government
may license to others itself:
– If Contractor has failed to take adequate steps for
practical application
– To alleviate health or safety concerns
– To meet requirements for public use
– To meet domestic production preference
35 U.S.C. 203; FAR 27.302(f); 37 CFR 401.6; 14(j)
64

65. Failed to Take Adequate Steps
Agencies Permitted to Request Utilization
Reports (FAR 27.302; 37 CFR 401(h)).
NIH requires 12 month reporting on stage of
development, date of first commercial sale or
use, number and type of licenses, gross income,
licensing to small business, status of U.S.
manufacturing and identification of any FDA-
approved product names.
65

66. Preference for United States Industry
A Recipient and Exclusive Assignee Must Agree
that Products Embodying Subject Invention be
Manufactured Substantially in the United States.
Waiver is Permitted On Showing of
Unsuccessful Attempts or Not Commercially
Feasible.
66

67. If Recipient Declines Title . . .
Minimum License Rights to Recipient if
Government Takes Title (FAR 27.301(i); 37 CFR
401.14(e))
– Revocable, nonexclusive, royalty-free license
– Extends to domestic subsidiaries and affiliates
– Includes right to sublicense
– Transferable only with agency approval
– May be revoked or modified by the government to
achieve expeditious practical application
67

68. Procedural Requirements -- Disclosure
Disclosure in writing (FAR 52.227-11(c); 37 CFR
401.14(a)(2))
– Within two months of disclosure by inventor to
recipient’s personnel responsible for patent matters
– Must identify inventor, funding vehicle, sufficient
technical detail and date of any public disclosure
Implications of Failure to Disclose
– Forfeiture of all rights
– Potential liability for Government infringement
68

69. Procedural Requirements – Election to
Retain Title
Recipient must elect in writing to retain title
within 2 years of initial disclosure. (FAR 52.227-
11(c)(2); 37 CFR 14.401-14(c)(2)).
Exception for When 35 U.S.C. Section 102(b) 1
Year Statutory Bar Kicks In – Period for Election
Can be Accelerated to No More Than 60 Days
Prior to End of Statutory Period.
AIA Changes Statutory Bar Conditions to On-
Sale or Public Use Anywhere in World.
69

70. Procedural Requirements – Filing the
Patent Application
Must File Provisional or Nonprovisional
Application within 1 Year of Election
(Nonprovisional must be within 10 months of
provisional).
If Statutory Bar Applies, Must File within
Statutory Bar.
Foreign filings within 10 months of first U.S.
application .
FAR 52.227-11(c)(3); 37 CFR 401.14(c)(3)
70

71. Effect of AIA “First to File” Rule
As a Practical Matter Collapses Grace Periods
Inherent in Bayh-Dole if Recipient Wants to
Avoid Risk of Intervening Prior Art.
71

72. Inventors and their Recipient
Employers
Recipient must obtain written agreement from its
employees to disclose promptly to patent personnel
subject inventions to comply with notice
requirements.
Recipient must require all inventors to execute
papers necessary to file patent applications and
establish the Government’s rights in the inventions.
NIH: This means an obligation to assign title to
federally supported inventions to the Recipient.
FAR 52.227-11(e)(2); 37 CFR 401.14(F)(2);
72

73. Special Rule for Non-Profits
No Assignments in the United States without
Approval of the Agency (except orgs with
primary function of managing inventions).
Must Share Royalties with Inventor, including
Federal Employee Co-Inventor.
AIA as of 9/16/12: Not required but should give
preference to small business firms as licensees
provided they are “equally as likely to bring the
invention to practical application” as large
businesses.
FAR 52.227-11(i); 37 CFR 401.14(k).73

74. Patent Usage on a Government
Contract
A patent holder’s sole remedy for Government
use of a patent or use by someone acting for the
Government is suit against the Government in
the Court of Federal Claims.
28 U.S.C. § 1498
74

75. Patent Usage on a Government
Contract
Not considered infringement.
No injunctions, treble damages, court costs, or
attorney fees.
Government may continue usage of the
invention.
Government only liable for “reasonable and
entire compensation,” i.e., a fair licensing fee.
75

76. Patent Usage on a Government
Contract
Generally contractors protected from
infringement claims if use authorized
– FAR 52.227-1, Authorization and Consent
Express authorization by Government not
always required to protect contractors from
infringement claims
– Authorization may be implied, e.g., the contract
requires the contractor to use the infringing method
76

77. Patent Usage on a Government
Contract
Indemnification
– The Government can require that the contractor
indemnify it for infringement (FAR 52.227-3)
– This clause is generally included in contracts for
commercial items but excluded from research and
development contracts
77

78. GOVERNMENT RIGHTS IN
DATA UNDER DoD
CONTRACTS
78

79. GOVERNMENT’S RIGHTS IN DATA
AND COMPUTER SOFTWARE
79

80. Government Contracts and Trade
Secrets Threshold Questions
1) What is being delivered?
2) Who is paying for development?
3) Is the product being delivered, sold, or offered
for sale in the commercial marketplace?
80

81. Underlying Principles Government Trade
Secrets in Government Contracts
1) Government never gets to own it
2) Prime contractor gets no rights
3) Commercial development, license, and sale
always an option
4) Prohibition of acquisition rights in IP developed
at private expense; presumption that
commercial products are developed at private
expense
81

82. In the Weeds: DoD World (Now)
Two Regimes of Trade Secrets
– Technical Data
• DFARS subpart 227.71
• DFARS 252.227-7013; 252.227-7015 (TD – Commercial Items)
– Computer Software
• DFARS subpart 227.72
• DFARS 252.227-7014
Regulations that Dictate Policies and Procedures
Contract Clauses that Dictate Rights
FAR Subpart 27.4 “Rights in Data and Copyrights” Does
Not Apply
82

83. Technical Data
Recorded information of a scientific or technical
nature (including computer software
documentation) relating to supplies procured by
an agency
Does not include computer software
10 U.S.C. § 2302(4);DFARS 252.227-7013
83

84. Policies and Procedures Governing
Technical Data
DoD to only acquire technical data and rights in
technical data necessary to satisfy agency
needs
– Deliverables: separate line items and minimum
necessary
– Disclosure of technical data with restrictions
– Alternative forms of delivery
– For commercial items, no rights in technical data not
customarily given to public
84

85. Government Rights to Non-Commercial
Technical Data
Rights: Royalty-free, world-wide, non-exclusive,
irrevocable license* (DFARS 252.227-7013)
*computer software documentation carve-out
– Standard: (1) unlimited rights; (2) government
purpose rights; (3) limited rights
Option: Specially negotiated license rights
– “Government can accept lesser rights in data in return
for other consideration” (DFARS 227.7103-5(d))
– Must be enumerated in a License Agreement made
part of contract
85

86. Unlimited Rights (License Right)
Right to use or disclose technical data
– In any manner
– And for any purpose whatsoever
– And to have others do so
86

87. Government Purpose Rights (License
Right)
Right to use technical data and computer software in any
activity in which the Government is a party, including:
– Competitive procurement but not use for commercial purposes
Limited in duration
– 5-year benchmark (negotiable)
• Begins on execution of contract
Disclosure to third party
– Must sign NDA (227.7103-7)
– Covered Government Support Contractor (subject to New
Clause 252.227-7025)
– Government gets release
87

88. Limited Rights (License Rights)
Right to use, modify, reproduce, release, perform,
display, or disclose technical data within the Government
Cannot be used for manufacture or used by another
party
EXCEPT:
– emergency repair and overhaul
– release to Covered Government support contractor (must adhere
to new clause 252.227-7025) NEW – definition is narrow:
advice/assistance to management of program – not maintenance
– release to foreign government (no detailed mfg data)
– need notice and agreement by third parties on restrictions on
further release
88

89. What Gets Limited Rights Treatment
Technical data pertaining to any item,
component, or process developed exclusively at
private expense with the legend
– Developed = workability (analyzed or tested
sufficiently to demonstrate to reasonable people
skilled in applicable art there is high probability that it
will operate as intended; need not be reduced to
practice)
– Exclusively = costs not directly allocated to a
government contract (including overruns)
– FY 2012 NDAA: IR&D and B&P costs “shall not be
considered Federal funds . . .”
89

90. What Gets Unlimited Rights Treatment
Technical data pertaining to an item,
component, or process developed exclusively
with Government funds
– PLUS:
• Form fit and function data
• Necessary for installation, operation, maintenance, or training
purposes (excludes detailed mfg data)
• Released in past without restrictions
• Technical data produced as an element of contract
performance or in connection with contract performance
90

91. What Gets Government Purpose
Rights Treatment
Technical data that pertains to items,
components, or processes developed with
mixed funding
– Private expense determinations are to be made at the
lowest practicable level (DFARS 227.7103-4(b))
91

92. Subcontractors (Noncommercial TD)
Prime instructed to use same clause in
subcontracts calling for delivery of TD to
Government (252.227-7013)
Subcontractor permitted to supply data directly
to Government
Prime cannot use power to award contacts as
“economic leverage” to obtain rights in TD from
subcontractors and or suppliers
92

93. Policies and Procedures Governing
Computer Software
DoD only to acquire computer software and
documentation and rights therein to satisfy
agency needs
– Deliverables: Minimum necessary (including number
of users)
– Disclosure of computer software with restrictions
– For commercial computer software, acquire under
licenses customarily given to public
93

94. Government Rights to Non-Commercial
Computer Software and CS Documentation
Rights: Royalty-free, world-wide, non-exclusive,
irrevocable license (DFARS 252.227-7014)
– Standard: (1) unlimited rights; (2) government
purpose rights; (3) restricted rights/limited rights (CS)
Option: Specially negotiated license rights
– To consider software maintenance philosophy, time
and user sharing requirements, and other factors
(DFARS 227.7203-5(d))
94

95. Unlimited Rights in Non-Commercial
Software and Documentation
Software developed exclusively with
Government funds
Documentation required to be delivered under
the Contract
Released in past without restrictions
Software when limitations expire (e.g.,
government purpose rights)
95

96. What Gets Restricted Rights in
Noncommercial Computer Software
Developed exclusively at private expense
– A computer program is developed if it is successfully
operated in a computer and tested to demonstrate
that a reasonable person skilled in the art that it can
reasonably be expected to perform its intended
purpose;
– Computer software (other than programs) is
developed if it has been tested or analyzed to the
extent sufficient to demonstrate to PSKA that it can
reasonably be expected to perform its intended
purpose
96

97. Restricted Rights (License Rights)
Right to use a computer program with one computer at one time;
program cannot be accessed by more than one terminal or CPU
Right to transfer program to another agency if original user destroys
all copies of program and provides notice
Right to minimum number to maintain archives, backup or allow mod
Right to permit service contractors to use software to diagnose and
correct deficiencies, adapt or merge with other programs or respond
to “urgent tactical situations” (requires notice and 227.7103-7 NDA
or adherence to NEW clause 252.227-7025)
Right to permit contractors performing emergency repairs or
overhauls to use the software when necessary to their work (same
notice and NDA requirements)
Right to permit Covered Government support contractors to use
and/or disclose to authorized persons (must adhere to NEW clause
252.227-7025). NEW
97

98. What Gets Government Purpose
Rights Treatment
Computer software developed with mixed
funding
Source of funds determination
– DFARS 227.7203-4(b)
To be made at the lowest practicable segregable
portion of the software or documentation
Look to see what subcomponents or subroutines
are discreetly identifiable
98

99. Subcontractors and Non-Commercial
Computer Software and Documentation
Prime contractor instructed to use 252.227-7014
in subcontracts.
No other clause may be used to enlarge or
diminish rights
Prime expressly instructed not to use “economic
leverage” to obtain rights from subs or suppliers
Primes instructed to disclose and protect subs
rights (through id, assertion and delivery
processes)
99

100. The SBIR Data Rights Clause:
DFARS 252.227-7018
Covers both non-commercial technical data and
computer software
Rights: Royalty-free license for Government and
support service contractors to use or disclose
technical data or computer software generated
or developed under contract for any U.S.
Government purpose
– Extends from contract award until 5 years after
completion of project, then unlimited rights
– Despite broad definition of Government purpose,
disclosure to third parties is limited
100

101. Commercial Computer Software and
Documentation
Commercial items (FAR 2.101) and Commercial Item
Acquisition (FAR Part 12)
Commercial computer software (FAR 2.101 vs. DFARS
252.227-7014(a)(1))
– Developed or regularly used for non-government purposes
– Sold or offered for sale or license to public
– Minor modifications to meet contract requirements permitted
Commercial computer software (NO CLAUSE)
– To be acquired under licenses customarily provided to the public
unless inconsistent with Federal procurement law or do not
otherwise satisfy user needs. DFAR 227.7202 (Different from
FAR 52.227-19 governing commercial computer software)
101

102. Technical Data Pertaining to
Commercial Items
10 U.S.C. 2320(b)(1) Presumption that
commercial items are developed at private
expense whether or not a justification is made in
response to a challenge notice (NEW -- except
major systems, subsystems or components
thereof)
DoD to get technical data customarily provided
to the public with the commercial item EXCEPT:
– Form, fit and function data
– Required for repair or maintenance, installation or
handling
102

103. Rights to Technical Data Pertaining to
Commercial Items – Clause
DFAR 252.227-7015 – Gives Government
specific license rights – DoD may use, modify,
reproduce, release, perform, display or disclose
data only within the Government.
May not be used to manufacture additional
quantities of commercial items.
May not be released without Contractor’s written
permission
Additional rights to be negotiated
Not a mandatory flow-down for subs
103

104. Identification of TD and Computer Software
(Non-Commercial TD and Computer Software)
Solicitation provision 252.227-7017
Requires offerors to identify any technical data
for which restrictions, other than copyright, on
use, release, or disclosure are asserted and to
attach the identifications and assertions in the
offer.
Contract clauses 7013/7014 permits Contractor
to make additional assertions if new or
inadvertent (before delivery and no material
affect on source selection)
104

105. Marking Requirements (Upon Delivery) –
Noncommercial Technical Data and Computer
Software
Deliverables must be marked by prime and
subcontractors in order to obtain protection
May only use legends prescribed in 7013/7014
(Limited Rights, Restricted Rights, GPR Rights,
Special License Rights) and Copyright notice
Computer software transmitted directly from one
computer to another shall contain a notice of
asserted restrictions
105

106. Marking – Unjustified and
Nonconforming
Unjustified Markings can be challenged under
validation procedures 252.227-7019 (computer
software) and 252.227-7037 (TD)
252.227-7037 (TD) must be flowed down to all
subcontractors
Nonconforming markings require a 60 day notice
to remove or correct – then Government may
ignore or remove or correct at Contractor’s
expense
106

107. Maintaining Records
DFARS Requirement -- Contractor must
maintain records sufficient to justify the validity
of any markings that assert restrictions and be
prepared to furnish to the Contracting Officer a
written justification for such restrictive markings
in response to a request for information.
107

108. Identification and Marking of Commercial Computer
Software and TD pertaining to Commercial Item
No clause governing early identification of
commercial item TD or computer software
If a deliverable under solicitation, disclose and
append license agreement to proposal
Mark TD, computer software and computer
software documentation with restrictive legends
(New clause 227-7025 addresses “commercial
restrictive legends”
252.227-7019 and 252.227-7037 Validation
Process Available (but Presumptions stand)
108

109. Rights vs. Deliverables
Data rights clauses establish Government’s license
rights – not deliverables
Government has no right to require TD or computer
software unless a deliverable unless the contract has
Deferred Ordering (252.227-7027) (3 year window after
acceptance) or Deferred Delivery (252.227-7026) (2 year
window for pre-designated data) clauses
FY 2012 NDAA Makes Deferred Ordering Mandatory
with a Twist – Technical Data Generated or Utilized in
Performance of Contract
Changes clause is not available
109

110. Copyright Protection
Technical data and computer software in object
code and source code is subject to copyright
protection
Contractor is copyright owner (includes works by
employees)
Prime gets no copyright interest in works created
by subs
Government under DFARS gets a license
coextensive with whatever data rights it obtains
110

111. Copyright Protection – Unlimited Rights
Government’s copyright license is coextensive
with author’s rights
DoD IP Guidance instructs COs to not
automatically pursue unlimited copyright
licenses (GPR should be rule)
Third party rights up in the air – limited to “use”?
Contractor can and should “mark” with copyright
notice (252.227-7013(f) and 7014(f).
111

112. Changing Terrain: Proposed DFARS
Rewrite
Federal Register Vol. 75, No. 186 (September
27, 2010) (Case No. 2010-D001)
60 pages of text
Comment period over
Major groups concerned including Aerospace
Industry Association and ABA, Public Contract
Law Section
Status: In Limbo
112

113. Thank You!
Daniel J. Kelly
dkelly@mccarter.com
617.449.6526
Maria Laccotripe Zacharakis, Ph.D.
mzacharakis@mccarter.com
617.449.6512
113

114. Source Material
Office of the Under Secretary of Defense for Acquisition,
Technology, and Logistics, Intellectual Property:
Navigating Through Commercial Waters (Oct. 15, 2001),
available at www.acq.osd.mil/dpap/Docs/intelprop.pdf
114