Intellectual Property in Government Contracts Commercial data and software

Transcription

1 Intellectual Property in Government Contracts Commercial data and software Michael J. McGuinn Jeremiah J. McIntyre III Joel M. Pratt McKenna Government Contracts, continuing excellence

2 Agenda Review of non-commercial data and software rights Commercial context: Better buying power and Silicon Valley initiatives Commercial item qualifications Rights acquired in commercial data Rights acquired in commercial software Subcontracts Practical pointers 2

3 Review of non-commercial data and software rights Definitions Technical data is: Any recorded information of a scientific or technical nature Includes computer databases and computer software documentation Computer software is: Computer programs that comprise a series of instructions, rules, routines, or statements, regardless of the media in which recorded, that allow or cause a computer to perform a specific operation or series of operations Recorded information comprising source code listings, design details, algorithms, processes, flow charts, formulas, and related material that would enable the computer program to be produced, created, or compiled 3

4 Review of non-commercial data and software rights Overview of rights allocation scheme Contractor retains title Government receives a license General categories of government license rights: Unlimited rights Limited rights (technical data) / Restricted rights (computer software) Government purpose rights Specifically negotiated rights 4

5 Review of non-commercial data and software rights Government rights received Scope of government rights defined by the contract Principal levers for contractors to protect data under civilian contracts: Negotiation of deliverables to exclude certain sensitive data Disclosure only disclose what is necessary Marking data as required Difference in scope of government license between DOD and civilian agencies Civilian agencies (FAR): scope depends on what the contract requires DOD (DFARS): scope depends on extent to which USG funded development 5

6 Rights allocation for technical data and computer software Overview of government license rights Least restrictive Unlimited Rights Government Funded Government Purpose Rights Mixed Funding Limited/ Restricted/SBIR Rights Privately Funded Most restrictive 6

7 Commercial context Better Buying Power DOD acquisition program to improve procurements Focus areas: Affordable programs Cost control throughout product lifecycle Incentivize productivity and innovation Eliminate unproductive bureaucracy Promote effective competition Improve tradecraft in acquisition of services Improve the professionalism of the total acquisition workforce 7

8 Commercial context Better Buying Power IP-related initiatives Open systems architecture and modularity of design Goal: Allow DOD to substitute components so that DOD need not acquire unlimited rights in all data and to increase competition See H.R. 4909; Acquisition of alternative data rights Form, fit, function, operation, maintenance, installation, training. Unlimited rights in interface data Limits unclear concerning interface rights: where would unlimited rights apply for lower-level subcomponents? E.g., microchips, integrated hardware systems, etc. 8

9 Commercial context Silicon Valley initiatives Increased desire to partner with commercial companies Desire that commercial technology cannot be used by non-us interests against DOD Additional push to move employees in high-tech field through DOD E.g., Defense Digital Service, which brings innovators from large companies to DODfunded startups, often on a short-term basis Defense Innovation Unit Experimental (DIUx) Seminars and funding pipeline for connecting commercial technology companies with DOD opportunities Expansion to Boston Use of OTAs and prototyping contracts to spur R&D outside of traditional procurement process 9

10 Commercial context Silicon Valley initiatives DOD funding of innovation IR&D funding Proposed changes to IR&D threaten to reduce contractor investments: 81 Fed. Reg (Feb. 8, 2016): Proposed rule that would penalize contractors for IR&D costs at the proposal phase. See comments provided by Dentons and the ABA. 81 Fed. Reg (Feb. 16, 2016): Proposed requirement that would require that proposed new IR&D efforts be communicated to appropriate DoD personnel prior to the initiation of these investments, and that results from these investments should also be shared with appropriate DoD personnel. 10

11 Commercial item qualifications FAR Part 12 Prescribes policies and procedures unique to the acquisition of commercial items as defined in FAR Implements the federal government s preference for the acquisition of commercial items contained in Title VIII of the Federal Acquisition Streamlining Act of 1994 (FASA) Requires agencies to: Conduct market research to determine whether commercial items are available to meet agency needs; Acquire commercial items when they are available; and Require contractors to incorporate, to the maximum extent practicable, commercial items as components of items NDAA 851: Presumption that previous DOD agency commerciality determinations are valid Tends to discredit GSA schedule determinations 11

12 Commercial Item Qualifications FAR Part 12 Key policy problem: Commercial contract terms may be incompatible with federal law 78 Fed. Reg. 80,382 (Dec. 31, 2013): DOD Final Rule regarding open-ended indemnification clauses in commercial computer software license agreements (see next two slides) 80 Fed. Reg. 79,615 (Dec. 22, 2015): OMB Memorandum regarding commercial software acquisition that proposes standard terms to replace commercial terms 81 Fed. Reg. 34,302 (May 31, 2016): GSA proposed rule replacing Commercial Supplier Agreement terms with ones consistent with federal law, and invalidating inconsistent terms. Comments due 08/01/2016. Undermines certain of the benefits of commerciality: If commercial suppliers do not agree, they may decide not to do business with the government 12

13 Commercial item qualifications FAR Part 12 Standard clauses often deemed inconsistent with federal law: Disputes clauses May use state courts or arbitration as opposed to a board of contract appeals or COFC Automatic renewal clauses May result in violation of Anti-Deficiency Act Payment clauses May conflict with Prompt Payment Act Indemnity clauses May result in violation of Anti-Deficiency Act 13

14 Commercial item qualifications FAR Part 12 Indemnity clauses and the Anti-Deficiency Act FAR provisions make license agreements with indemnification clauses that could create a violation of the Anti-Deficiency Act unenforceable against the government Does not apply to indemnification expressly authorized by statute and agency regulations and procedures Anti-Deficiency Act prevents commitments that exceed appropriated amounts, including open-ended indemnity clauses The government cannot agree to such clauses by inclusion in a license agreement Any such clauses will be considered stricken from license agreements 14

15 Commercial item qualifications What is a commercial item? (FAR 2.101) 15

16 Commercial item qualifications What is a commercial item? (FAR 2.101) 16

17 Commercial item qualifications What is a commercial item? (FAR 2.101) 17

18 Commercial item qualifications What is a commercial item? (FAR 2.101) Risks associated with relying on item being a commercial nondevelopmental item: Requires procuring agency determination of commerciality: Developed exclusively at private expense, AND Sold in substantial quantities, on a competitive basis, to multiple State and local government Procuring agency may determine that software or technical data is not a commercial nondevelopmental item Contractor risks losing software or technical data protections if it proceeds with contract under incorrect assumption of commerciality 18

19 Commercial item qualifications Commercial technical data (FAR and DFARS) Technical data pertaining to a commercial item, component, or process OR Technical data that is a commercial item 19

20 Commercial item qualifications Commercial computer software FAR (2.101) Any computer software that is a commercial item DFARS ( (a)(1)) Software developed or regularly used for nongovernment purposes which: Has been sold, leased, or licensed to the public; Has been offered for sale, lease, or license to the public; Has not been offered, sold, leased, or licensed to the public but will be available in time to satisfy delivery requirements of the contract; or Satisfies one of the above criteria and would require only minor modification to meet requirements of the contract. 20

21 Rights acquired in commercial technical data FAR Government shall acquire only the technical data and the rights in that data customarily provided to the public with a commercial item or process. Presumption that data delivered under contract for commercial items was developed exclusively at private expense When contract for commercial items requires delivery of technical data, CO shall include appropriate provisions and clauses delineating the rights in the technical data. In addenda to solicitation and contract 21

22 Rights acquired in commercial technical data DFARS Policy: DOD shall acquire only the technical data customarily provided to the public with a commercial item or process Compare to policy for non-commercial technical data: to acquire only the technical data, and the rights in that data, necessary to satisfy agency needs Exceptions: Form, fit, or function data Data required for repair or maintenance of commercial items or processes, or handling of commercial item when such data customarily provided to public is not sufficient for military purposes Data describing modifications made at government s expense to a commercial item or process in order to meet requirements of solicitation 22

23 Rights acquired in commercial technical data DFARS DFARS governs technical data for any portion of commercial item developed exclusively at private expense DFARS , Rights in technical data non-commercial items, governs if government pays for any portion of development costs Both clauses must be included in all contracts for commercial items where any portion was developed at government s expense Presumption of development exclusively at private expense Exception: non-cots major systems or subsystems or components thereof: CO shall sustain challenge to asserted technical data restriction unless information provided by the contractor or subcontractor demonstrates that the item was developed at private expense DOD Proposed Rule (81 Fed. Reg. 28,812, 05/10/16): Would narrow major systems exception to major weapons systems, thereby expanding applicability of presumption that item was developed exclusively at private expense 23

24 Rights acquired in commercial technical data DFARS Government receives essentially a limited rights license in commercial technical data Government may use, modify, reproduce, release, perform, display, or disclose technical data within the Government only. Cannot use technical data to manufacture additional quantities Cannot disclose outside of government without contractor s written permission Unless for emergency repair or overhaul or for performance of work by covered support contractors Contractor may require support contractors to sign NDA A restrictive legend (no specific format) required Otherwise government shall have no liability for any release or disclosure of unmarked technical data 24

25 Rights acquired in commercial computer software FAR ; DFARS Government acquires rights under license customarily provided to the public, to the extent such licenses are consistent with federal law and satisfy the government s needs Contractor generally not required to provide to government information not generally provided to the public Government gets only the rights stated in the license If government needs additional rights it must negotiate (FAR ) But see 81 Fed. Reg. 34,302 (May 31, 2016); 80 Fed. Reg. 79,615 (Dec. 22, 2015) (proposing standard terms) Government still must agree to commercial terms; delivery of software along with a license agreement does not constitute agreement. GlobeRanger Corp. v. Software AG, 27 F. Supp. 3d 723, 752 (N.D. Tex. 2014) 25

26 Rights acquired in commercial computer software FAR FAR , Commercial Computer Software License Certain rights to duplicate software for backup computers or newly acquired computers Defers to the commercial clause Data Enterprises of the NW., GSBCA No , 04-1 BCA 32,539 (Feb. 4, 2004) Improper disclosure and use of contractor s computer software led the government to be required to pay damages for its improper use No parallel DFARS clause 26

27 Subcontracts Technical data DFARS must be flowed down, so same requirements will apply Only true since See 76 Fed. Reg. 58,144 (Sept. 20, 2011) Software FAR contains no flow-down requirement; no DFARS commercial software clause Typical arrangement: Commercial developer sells to distributor or contractor, who then sells to government, who is then bound through the prime to the developer s agreement. As government creates standard terms and voids inconsistent ones, there may be a gap between the prime s obligation to the subcontractor (based on the subcontractor s license agreement) and the prime s obligation to the government. 27

28 Practical pointers Identify commercial items and get government to agree on identification, if possible Especially if relying on commercial nondevelopmental item determination Carefully review the license rights provided in standard commercial license agreements If possible, negotiate FAR , Commercial Computer Software License out of contracts Provides government with restricted rights license, including modification rights not typical in standard commercial licenses If included, ensure subcontractors supplying commercial software are willing and able to provide necessary rights in software Mark commercial technical data and computer software 28

29 Practical pointers Ensure that standard commercial license provided to government is consistent with federal law Disputes clauses Automatic renewal clauses Payment clauses Indemnity clauses Should consider tailoring indemnity provisions to apply to government subject to the availability of funds 29

30 Questions? Michael J. McGuinn Counsel Government Contracts Jeremiah J. McIntyre III Associate Government Contracts Joel M. Pratt Associate Government Contracts

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