Intellectual property is often a company’s most valuable asset. For companies with federal government customers, following the government’s rules can mean the difference between maximizing and losing value in newly developed IP.
This article addresses rights in technical data and computer software, as defined below. Future articles will address other forms of IP, such as patents.
When developed and/or used as part of a government contract, IP rights generally are determined by standard government contract clauses imposed by regulation. In certain circumstances, the government may impose IP terms unique to a given contract. Either way, government contract terms create a wide range of outcomes with respect to ownership and use of IP once delivered to the government.
As a result, contractors should place the highest priority on reviewing, understanding and, if possible, negotiating IP terms prior to signing any government contract. After the contract has been executed, the contractor should ensure that at least one member of its legal or management team understands the applicable IP rules and ensures strict compliance throughout contract performance.
Definitions and Authority
“Technical data” means recorded information, including databases and computer software documentation – not the component or item itself. “Computer software” includes computer programs and recorded information such as source code listings, design details, algorithms and related material that would enable the computer program to be produced.
Standard government contract clauses create a framework for IP ownership and use. Standard clauses vary depending on the contracting agency, as well as the agency’s expectation of how it will use the technical data and/or computer software developed under the contract. The most common are found in the Federal Acquisition Regulation (FAR) 52.227-14 and in the Defense Federal Acquisition Regulation Supplement (DFARS) 252.227-7013 and 252.227-7014.
Generally speaking, the FAR and DFARS rules allow the contractor to maintain ownership of the technical data or computer software that the contractor develops. The government receives use rights similar to a license. However, the government may include contract language that adds to or differs from its standard provisions.
The government’s standard use rights may be divided into three categories: unlimited rights, limited/restricted rights and government purpose rights.
As the name suggests, unlimited rights allow the government to use the technical data or computer software as it sees fit. This may include distributing the material beyond the government and giving rights in the material to third parties. As a rule, the government receives unlimited rights when the contractor develops the material only as part of contract performance (FAR) or when the material is developed exclusively with government funds (DFARS).
At the other end of the spectrum, the government receives limited rights in technical data and restricted rights in computer software where the material has been developed at private expense. Under the FAR, the material also must not have been developed in performance of the contract. With limited rights, the government may reproduce technical data and use the material only within the government. With restricted rights, the government may use computer software only on one computer at a time. Other permitted uses may be set forth in the contract.
When the technical data or computer software has been developed with mixed government and contractor funds, the government typically receives government purpose rights. With government purpose rights, the government itself may use the material, and it may authorize third parties to use the material for the government’s purposes.
If the provision of goods or services to the government is deemed “commercial,” the government generally accepts the same license as is available on the commercial market. Some provisions, such as choice of law and indemnification clauses, may be deemed invalid since the government is the contracting party. Even so, this provides a tremendous benefit for the vast majority of contractors who impose much more stringent use restrictions on their commercial customers than they can under the government’s standard data rights provisions.
In order to limit the government’s use of technical data or computer software, contractors must follow the marking requirements set forth in the FAR and DFARS. This means that contractors attach standard language to any newly developed material prior to government submission. Contractors further must maintain records to justify why the government should be limited in its use of technical data or computer software.
The government may require the production of technical data or computer software up to three years after contract performance. This means keeping detailed records (including accounting records to show who paid for development) is critical, even after the contract’s end. During performance, any and all material should be reviewed for possible marking before contractor delivery to the government.
Chris Nagel is a member of the McGuireWoods Defense and Government Contracting Industry Team, offering multidisciplinary capabilities to our clients operating in the defense, national security, and federal contracting sectors. For more information, please click here.