Intellectual Property and Government Contracts

What is intellectual property? Creations of the human mind Physical manifestations of original thought Products of the intellect that has

commercial value Intangible personal property interests

IP in Procurement Contracts Statutory Coverage

Patents – Bayh-Dole Act Regulatory Coverage

Patents Commerce Department regulations in the Code of Federal Regulations Federal Acquisition Regulations

Technical Data Federal Acquisition Regulations for civilian agencies DFARS for DoD agencies

Computer Software Federal Acquisition Regulations for civilian agencies DFARS for DoD agencies

Bayh-Dole Act Codified at 35 U.S.C. §200 et seq. Applies to procurement contracts, grants and cooperative

agreements Does not apply to Non-FAR instruments (OT for

Prototypes) Passed in 1980 in an effort by Congress to encourage

entities doing work under Government contracts to commercialize their inventions

Prior to 1980, the Government would take ownership of inventions and make them public Few U.S. contractors were commercializing these inventions and

foreigners were reaping the benefit of many of these inventions.

Bayh-Dole Act Universities and non-profits lobbied to retain

more rights in the inventions so they could have commercial exclusivity to exploit the inventions in the marketplace

Statutory language applies only to non-profits, including universities, and small businesses

President Reagan issued an Executive Order in 1983 stating that the same allowances should be extended to large businesses as well.

Bayh-Dole Act 35 U.S.C. §200

States the general policy of the Government Promote utilization of inventions arising under Federally

supported research projects Encourage maximum participation of small business firms in

federal research Promote collaboration between commercial industry and non-

profits Promote commercialization and public availability of inventions Ensures the Government obtains sufficient rights in the

invention for its needs and purposes Protect the public from nonuse or unreasonable use of

inventions

Bayh-Dole Act 35 U.S.C. § 201 – Definitions

“Funding agreement”- contract, grant or cooperative agreement

“Invention” – any invention or discovery which is or may be patentable

“Subject Invention” – any invention conceived or first actually reduced to practice in performance of work under a funding agreement

“Practical Application” – to manufacture, practice, operate to establish that the invention is being utilized and the benefits are available to the public

Bayh-Dole Act 35 U.S.C. §202

Allows contractor to retain title to the subject invention, except in unusual circumstances

Before the Government takes title, it must make a determination and file with the Department of Commerce for approval

The contractor must disclose the subject invention, elect to retain title and file a patent within a certain period of time

Must state in patent application that invention was made with Government support

Bayh-Dole Act 35 U.S.C. §202

The Federal Agency receives a license in the invention that is: Nonexclusive Nontransferrable Irrevocable Paid-up

License allows the Government To practice the invention itself To have practiced for or on behalf of the Government Throughout the world

Bayh-Dole Act 35 U.S.C. §203 – March-in Rights

Allows the Agency that funded the instrument to require the inventor to grant a license to someone else under certain circumstances

If the contractor refuses, the Government can grant the license itself if it determines that The contractor has not taken effective steps to achieve

practical application within a reasonable time, To alleviate health or safety needs To meet requirements for public use specified by regulations

or Because the agreement to required in §204 was not obtained.

Bayh-Dole Act 35 U.S.C. §204 – Preference for U.S. industry

Prohibits the granting of an exclusive right to sell or use the invention outside U.S. unless the potential licensee agrees to manufacture substantially in the U.S.

Can be waived if the contractor shows that it has made reasonable but unsuccessful efforts to find an appropriate licensee or domestic manufacture is not commercially feasible.

Department of Commerce Regulations

Contained in the Code of Federal Regulations (CFR) at Title 37, Part 18, Sections 401.1-401.17

Issued and administered by the Department of Commerce

Applies to any instrument for experimental, developmental or research work

Work can funded in whole or in part by the Government

Federal Acquisition Regulations

Applies to procurement contracts only Patents

Policy – Subparts 27.2 and 27.3 FAR 52.227-11 (Short Form)

To be used with small businesses and non-profits

Clauses – FAR 52.227-12 (Long Form) Large Businesses

US Patent Rights in Government Contractswith other than small business concerns and non-profit organizations

Patentable Invention

Conceived or first actually reduced to practice in the performance of work under the contract?

N Y

Invention disclosed to government within two months after inventor discloses it to contractor

Contractor Retains Title

Y

Elect within 8 months of disclosure to government whether or not to retain title

fail to elect

N

Government may obtain title within 60 days

NY

Y

Filed within one year of election to retain title

Y Government may acquire title Patent Prosecution denied

Patent deniedor or

Patentgranted

GovernmentLicense

N

Government may retain title

Data Provisions Under the FAR and DFARS

Regulatory Coverage for Procurement Contracts

FAR Subpart 27.4 Applies to all agencies except those that have

supplemental regulations particularly NASA and DOD

DFARS Subpart 227 Applies to DOD services and agencies only

FAR Subpart 27 Important definitions

Data Recorded information, regardless of form or media Includes technical data and computer software Does not include financial, administrative, cost or pricing or

management information Technical Data

Scientific or technical data Does not include computer software

Computer Software Computer programs, computer databases and documentation

FAR Subpart 27 Important definitions

Form, fit and function data Data relating to items, components, or processes that are

sufficient to enable physical and functional interchangeability

Data identifying source, size and configuration characteristics

Functional characteristics and performance requirements For software

It includes source, functional characteristics and performance requirements

Excludes the source code, algorithms, process, formulae and flow charts of the software

FAR Subpart 27 Important Definitions

Unlimited Rights Right of the Government to use, disclose,

reproduce, prepare derivative works, distribute copies and perform and display publicly

In any manner, for any purpose and permit others to do so

Most unrestricted type of license right

FAR Subpart 27 Important Definitions

Limited Rights Data Excludes computer software Data that includes trade secrets or Data that is commercial, financial, confidential or privileged Data pertaining to items developed at private expense

Restricted Rights Computer Software Software developed at private expense and is a trade secret Software that is commercial, financial, confidential or

privileged Software that is published and copyrighted

FAR 52.227-14 Rights in Data-General

Government receives unlimited rights in: Data first produced in performance of the contract Form, fit and function data delivered under the

contract Data delivered in the form of manuals,

instructional and training materials

Contractor has the right to use the data subject to the rights given to the Government

FAR 52.227-14 Copyright

The contractor is free to establish a copyright on data first produced in performance of the contract and used in articles, symposia or similar works.

The copyright notice shall acknowledge the Government sponsorship

The Government receives a paid-up, nonexclusive, irrevocable worldwide license

The Government shall not remove the copyright notices

FAR 52.227-14 Limited Rights Data

If the contractor officer determines that limited rights data is needed, then he/she should include Alternate II

Such data will not be used for manufacture or disclosed outside the Government

Cannot be used for a future competitive procurement

FAR 52.227-14 Restricted Rights Computer Software

If the contracting officer determines that restricted rights software is needed, then he/she should include Alternate III

The software may only be Used or copied for use in the computer with which it was

acquired Used or copies in a backup computer Reproduced for archival or backup purposes Used by support contractors

FAR 52.227-14 Alternate V copyright clause should be

used in contracts for basic or applied research performed solely by universities

FAR 52.227-15 Representation of Limited Rights Data and

Restricted Computer Software Should be used if the contracting officer

wishes to have offerors state in response whether limited right data or restricted rights software will be used

This clause is included in solicitations

FAR 52.227-16 Additional Data Requirements

Should be included in solicitations and contracts Applicable to experimental, developmental, research

or demonstration work (not including basic or applied research by a university)

Used in contracts where additional data may be required but is unknown at the outset of the contract

Small Business Innovative Research Contracts

SBIR program is a Government program to encourage small businesses to enter into research contracts

Program is broken into two phases Phase I - $99,000 Phase II – up to $750,000 Phase III – contractor is expected to find commercial funding

Clause allows the contractor to limit the Government’s use of data for 4 years after acceptance Government purposes only (not procurement) Shall not disclose outside the Government Can release to support contractors After 4 years, Government get Government Purpose Rights

Data under the DFARS Clauses are broken down into technical data and

computer software What’s technical data?

Includes recorded information regardless of form or method of recording

Includes information of a technical nature Includes software documentation Does not include

Computer software Data incidental to contract administration, such as financial

and/or management information

Who paid? Important distinction in the DFARS clause is who

paid for the development Developed at private expense

Developed entirely with costs charged to indirect cost pools or not allocated to a Government contract (i.e. IR&D)

Developed exclusively with government funds Developed with mixed funding

Developed partially with contractor private funds and Government funds

Rights in Noncommercial Computer Softwareand Technical Data

Rights Category Applicability: Technical Data or Computer Software?

Permitted UsesWithin Government

Permitted UsesOutside Government

Unlimited Rights Both

Government Purpose Rights

Both Unlimited—no restrictions

Only for government purposes—no commercial use

Limited Rights Technical data only

Unlimited except cannot be used for manufacture

Emergency repair or overhaul, evaluation by foreign government

Restricted Rights Computer software only

Only one computer at a time, minimum backup copies, modification

Emergency repair or overhaul, certain service or maintenance contracts

Prior Government Rights

Both

Specifically Negotiated License Rights

Both

Unlimited—no restrictions

Same as under previous contract

As negotiated by the parties but must not be less thanlimited rights in technical data, and must not be less

than restricted rights in computer software

Required Lists Both 252.227-7013 and 7014 require a list to be

added to the contract that describes the intellectual property to be provided, who paid for the development and what rights are given to the Government

Before additional items are added to the list and used in the program, the parties should negotiate and come to agreement about the rights to be given to the Government.

Small Business Innovative Research Program

DFARS 252.227-7018 Special clause for use in contracts under the

SBIR programs Government is given limited rights in the

SBIR data for five years After five years, the rights revert to unlimited

rights

Intellectual Property Developed by Government employees

The key consideration is the connection of the invention or data to the employees official duties

Patents Government employees can get patents on inventions

they create and receive royalties on licenses to industry

Consult your counsel for the procedures for patenting and receiving royalties in such a situation

Intellectual Property Developed by Government Employees

Copyrights Generally government employees do not get a

copyright on anything created in the course of their official duties

Prior law prevented government employees from getting a copyright or licensing their copyright on any creation even if it was made during their private time

Current law now restrictions only creations made during Government time or as a course of official duty

Common Misconceptions The Government owns the intellectual

property developed under the contract Wrong – rarely does the Government take

title. The Government gets a license for use When rights are given to the Government,

they are given to the agency signing the contract Wrong – “Government” means the entire

Federal Government

Conclusion As intellectual property becomes more important

to industry, it will be a more hotly negotiated issue in government contracts

There are several current task groups underway to look into updating the current IP laws and regulations

Both Government and contractors will have to take more time to consider and plan their IP positions than ever in the past

Back-up Slides

Trade Secrets What is it?

Protects secret business information against unauthorized use or disclosure

Recognition of this type of protection began in the early 1800’s and has become a popular way to protect information

Defined as information that Derives independent economic value from not being

generally known or generally ascertainable by others who could use the information and

Is the subject of efforts that are reasonable under the circumstances to maintain secrecy

Trade Secrets How do you get one?

Information must be: Eligible for protection

Any concrete information qualifies (something more than an idea, theory or possibility)

Can be non-technical information, customer lists or a combination of otherwise unprotectable information

Secret To be judged in light of the circumstances

Have commercial value

Based on state law

Trade Secrets How long does a trade secret last?

A trade secret can last as long as the owner successfully prevents it from becoming widely known

If secrecy is destroyed, the protection is lost. Insufficient precautions Marketing of a product the discloses the secret Compliance with patent laws Disclosure in judicial proceedings or to government agencies.

Generally, confidential disclosure on a “need to know” basis to employees, joint venturers, and suppliers will be deemed sufficient for secrecy