From a contractor’s perspective, intellectual property (IP) is a valuable corporate asset that can be used to generate revenue, create a competitive advantage, create barriers to entry by competitors, and act as a deterrent to litigation. The Government also needs to consider IP issues during the acquisition planning process to help promote competition, reduce lifecycle/O&M costs, and reduce reprocurement costs. Importantly, rights in technical data and computer software is not a separate area of intellectual property. Rather, it is a merger of copyright law, trade secret law, and contract law. In order to protect your company’s IP it is important to understand the definitions, types of rights, and the importance of marking technical data and software as required in the FAR and DFARS for defense contracts. Planning is required to maximize your company’s rights in technical data and computer software by complying with the Government’s requirements.
Definition. For Department of Defense contracts “Technical data” is recorded information, regardless of the form or method of the recording, of a scientific or technical nature. “Technical data” includes computer software documentation and computer databases (but not computer software). “Technical data” does not include data incidental to contract information, such as financial or management information (e.g., cost and pricing data). Nor does it include unrecorded information (e.g., general “know how” or “show how”).
Government Licenses. The technical data rights system in government contracts calls for the Contractor to get title and the Government to get a license. There are three general categories of government license rights in technical data and computer software:
- Unlimited rights;
- Limited rights (technical data)/Restricted rights (computer software); and
- Government purpose rights.
For defense contracts, each of these license rights is detailed in DFARS 252.227-7013.
Unlimited rights are the rights to use, modify, reproduce, perform, display, release, or disclose technical data in whole or in part, in any manner, and for any purpose whatsoever, and to have or authorize others to do the same. This is the broadest of the standard licenses, and, though the contractor retains ownership of the technical data, the contractor has likely lost any trade secret protection and may have difficulty commercializing the technical data. The rule under the DFARS is that unlimited rights are gained when the technical data is developed exclusively with Government funds.
Limited rights provide the Government with unlimited in house rights but restrict the Government from releasing or disclosing the technical data outside the Government except in limited circumstances. The two most common circumstances where outside disclosures are permitted are disclosures necessary for emergency repair and overhaul, and disclosures to covered government support contractors. At the discretion of the owner of the technical data being disclosed to the covered government support contractor, the covered government support contractor can be required to enter into a non disclosure agreement directly with the technical data owner (consistent with DFARS 252.227-7025). The Government must notify the technical data owner of any disclosures to covered government support contractors. These rights spring from technical data being developed at the contractor’s expense.
Government purpose rights (GPR) provide the Government with unlimited in-house rights and allow the Government to release or disclose the technical data outside the Government, and authorize third parties to use, modify, reproduce, release, perform, display, or disclose the technical data for government purposes. “Government purposes” means any activity in which the Government is a party. It includes competitive procurement, but excludes commercial purposes. GPR technical data pertains to items, components, or processes developed with mixed funding between the Government and the contractor.
Computer Software. The Government’s rights in non-commercial computer software generally parallel its rights in non-commercial technical data, and are covered in DFARS 252.227-7014. “Computer software” means computer programs, source code, source code listings, object code listings, design details, algorithms, and the like that would enable the software to be reproduced, recreated, or recompiled. “Computer software” excludes computer software documentation and computer databases, which are technical data instead. The standard licenses are Unlimited Rights (generally the same as unlimited rights in technical data), Government Purpose Rights (generally the same as government purpose rights in technical data), and Restricted Rights (the Government shall have restricted rights in computer software developed exclusively at private expense).
Markings and Records. Contractors’ restrictions on the Government’s rights in their technical data and/or computer software are not self-executing and depend upon proper pre- and post-award identification and the application of prescribed markings. In other words, the Government receives unlimited rights in technical data and computer software unless the contractor takes affirmative steps to limit such rights. Contractors may only assert restrictions by marking the deliverable technical data or computer software with an appropriate legend. The only “appropriate” legends are those set forth in the rights allocation clauses themselves: FAR 52.227-14(g)(3) (Alt. II); FAR 52.227-14(g)(4)(i) (Alt. III); DFARS 252.227-7013(f); and DFARS 252.227-7014(f). Moreover, companies must keep detailed records. Records should include tracking of contract requirements, internal research and development requirements, technical development achievements, and who paid for what development. Again, upfront planning required to maximize Company’s rights in technical data and computer software.
Commercial Items. For commercial items, the FAR and DFARS license requirements are generally not applicable, including the labeling requirements. Governments rights are generally the rights set forth in the standard commercial license.
Final Thoughts. Contractors would be well advised to maintain separate accounting and charge time and expenses accordingly to technical data and computer software development. Based on the rules discussed above, it is critical to maintain traceability between such separate accounting and the technical documentation. Finally, contractors should retain the technical and accounting records so that the contractor can defend its claim to the technical data and computer software against Government challenges that may arise in the future.
