The U.S. government allocates billions of dollars each year on grants and contracts with private sector contractors who perform boundless amounts of tasks to keep the nation functioning. During these interactions contractors may purposefully or inadvertently create protectable intellectual property, usually: patentable subject matter or technical data and computer software. Although done while performing a government contract, the contractor may have created highly valuable rights in that property and should seek to protect those rights. This short post is not to examine the steps for protecting such material, such as securing a patent which can be found elsewhere on this site, but rather “how” to ensure protection when agreeing on terms and executing a contract with the government. There are two main questions for contractors to consider: First being the nature of the contract, otherwise stated as what is the purpose for the intellectual property’s creation; and Second, determining the type of intellectual property involved and the default rules set forth by government regulations.
Unlike the private sector where entities can negotiate a variety of specific agreements concerning intellectual property, the FAR and DFARS created a set of default rules for allocating IP rights. The FAR distinguishes patent rights owned by the contractor, (FAR) 52.227-11 and patent rights owned by the government, (FAR) 52.227-13. These clauses further distinguish between material which is either a “background” or “subject” invention; contractors should quickly determine which type of invention they are dealing with lest a battle for ownership opens up with a government entity. See, Advanced Aerospace Technologies, Inc. v. United States, 129 Fed. Cl. 525 (2016); and, Campbell Plastics Engineering & Mfg., Inc. v. Brownlee, 389 F.3d 1243 (Fed. Cir. 2004). Background inventions are those created independently to the government contract, owned or licensed by the contractor, which is merely utilized in the performance of the contract. Therefore, although the government is inherently given a restricted license to use the patented material, the contractor never loses title. In contrast, a Subject invention is one which was developed or reduced to practice while performing the government contract. Contractors should specify exactly who retains title to the during negotiations but will generally retain title to the invention but allow the government to use the technology for any purpose whatsoever. The government then still may have the ability to require the contractor license the patented material to third parties if it deems the contractor hasn’t made adequate progress in bringing the technology to market—these are referred to as “march-in-rights.”
Next, technical data is generally found in (FAR) 52.227-14 and (DFARS) 252.227-7013/7014. Technical data is defined as—recorded information, databases, and computer software documentation; and computer software—the actual computer program, code, and other necessary information necessary to create and run the software. Generally, the contractor retains ownership of the technical data and software created, however, the government is given a level of use rights. These rights are specified in three FAR and DFARS categories: 1) unlimited rights 2) limited rights and 3) government purpose rights. Unlimited rights, as the names suggests, means that the government can do whatever it wants with the data or software, including giving rights in the material to third parties. Unlimited rights are the result of technical data or software created only as part of the contract performance with government funds. Slightly narrower, government purpose rights allow the government to use the data and software for its use only or may authorize others to use the data and software in furtherance of the government’s use. Finally, the limited rights the government is restricted in its use and may not share the data or software with third parties, and occasionally is restricted to sharing it within other bodies within the government. Similar to patents discussed above, ensuring that both the contractor and the government are aware of the proprietary nature of the technical data from the outset will prevent unnecessary legal battles. Further, this will prevent the government from releasing technical data to third-parties who request such information for their own government work. See, KSD, Inc. v. U.S., 72 Fed. Cl. 236 (2006).
If your company is looking to begin working with the government, make sure that you keep any and all intellectual property rights you may have in your newly created technology. Have an attorney in the field assist in the negotiations and conduct a final review of the contract to ensure your rights are well protected.