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