Intellectual Property Issues William C. Anderson Chief Intellectual Property Counsel United Launch...
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Transcript of Intellectual Property Issues William C. Anderson Chief Intellectual Property Counsel United Launch...
Intellectual Property Issues
William C. Anderson
Chief Intellectual Property Counsel
United Launch Alliance, LLC
Commercial Item “Revolutionaries”“Boston Tea Party”
President Reagan Defense Buildup during 1980’sDrive to have the best of everything drove up
prices for weapons systemsMid- to late-1980‘s well-publicized
procurement scandals$600 toilet seats$1,000 coffee pots and hammers
Great pressure to “get out of the news”
Initial DoD response was to seek reprocurement data with reprocurement rights
Secretary of Defense Weinberger deviation approvalsSansone ClauseOrr Clause
Government study showed that data rights not the “root cause” to the problem of high cost spare parts
Industry coalesced around business interestsLarge & small OEM business “revolt”Replicator contractors supported Government position
Series of DoD data rights statutesDefense Procurement Reform Act of 1984, Pub. L.
No. 98-525, 1201-1252, 98 Stat. 2588Defense Acquisition Improvement Act of 1986 (Pub.
L. No. 99-661, 953, 100 Stat. 3910, 3949 (1986))National Defense Authorization Act for Fiscal Year
1988, Pub. L. No. 100-180, 807-808, 101 Stat. 1128, (1987)
Data rights allocations codified in 10 U.S.C. 2320 (41 U.S.C. 418a)
Validation statutes codified in 10 U.S.C. 2321 (41 U.S.C. 418b)
Plethora of proposed DoD data rules
50 Fed. Reg. 32,870 (1985) (proposed Aug. 15, 1985) 52 Fed. Reg. 2082 (1987) (proposed Jan. 16, 1987/effective
May 18, 1987 (see See 52 Fed. Reg. 12,390 (1987) ). 53 Fed. Reg. 10,780 (1988) (proposed April 1, 1988) 53 Fed. Reg. 51,557, 51,559 (1988) (rights in computer
software to be codified at DFARS 227.473-2) (proposed June 6, 1988).
53 Fed. Reg. 43,698 (1988) (to be codified at 48 C.F.R. pts. 227, 252) (proposed Oct. 28, 1988)
Interim from October 1988 until June 1995 55 Fed. Reg. 41,788 (1990) (Advance Notice of Proposed
Rulemaking; a joint effort of the DOD, the National Aeronautics and Space Administration ("NASA"), and the General Services Administration ("GSA") to create a single, government-wide regulation for data rights in computer software and technical data)
1985 Reagan impaneled Blue Ribbon Commission on Defense Management (the "Packard Commission") Commission highlighted the need for DoD to expand
its use of commercial products and processes and to eliminate barriers that discouraged application of innovative technology to DoD contracts
Section 800 Committee (See National Defense Authorization Act of 1990, Pub. L. No. 101-510, 800, 104 Stat. 1587 (1990))Recommended new exemptions to technical data
requirements in commercial item acquisitions
Pre-1995 Commercial Item Procurement Impediments to the acquisition of commercial data Data acquisition issues
Quantum/types of data required by Government generally greater than that furnished to commercial customers
Allocation of rights License “entitlements” greater than those granted
commercial customersAdministrative Burdens
Segregation of data to preserve rightsRecord keeping relating to previous license grants
and private expense developmentsUnique restrictive legends for data deliverables
Pre-1995 Commercial Item Procurement Impediments: to acquiring commercial data (continued)
Mandatory flowdown to subcontractorsRe-opening pre-existing subcontracts to
include unique Government requirementsData rights challenges
Potential loss of rights and competitive advantages for failing to prove “exclusive private development” of the commercial item
Government usually not willing to negotiate
Impediment Removed?
Pre- 1995 DFARS
Prime Subcontractor
Data Acquisition
NO NO
Allocation of Rights
NO NO
Administrative Burdens
NO NO
Flowdown to Subcontractor
NO NO
Interdivisional Transfers
NO NO
Data rights challenges
NO NO
Negotiation NO NO
Contract regulation infractions which were previously considered noncriminal were "criminalized" by enactment of new federal contracting statutes.
By the late 1980's, 440 statutes and regulations dealing with federal procurement contractor fraud were enacted by Congress and an outside study showed that more than 300,000 different federal regulations had been criminalized
“The number of inspections, oversight, and redundancy that are required by regulation and specification in the production of military equipment increase our overheads (sic) to the point that we are simply unable to match or beat the prices of the commercial environment. A case in point. A supplier called me last month and said he didn't want any more of our business. He said he'd made the decision to get out of defense because of the cost accounting procedures and other requirements are simply adding too much to his overheads (sic) and he was having difficulty competing elsewhere.“ (emphasis added)
June 1992 testimony to the U.S. Senate Small Business Committee by Mr. Stephen Rash of BMY-Combat Systems Division of Harsco Corporation
Section 807 Committee (See National Defense Authorization Act for Fiscal Years 1992 and 1993, Pub. L. No. 102-190, 807, 105 Stat. 1421 (1991))
Battle between “OEM’s” and “Replicators”“Private Expense Test”Acquisition of reprocurement dataData repositories
Committee met between July 1992 until December 1993Proposed rules published for comment in June 199460 Fed. Reg. at 33,464 (1995) (effective June
30, 1995, but only applied to solicitations issued on or after September 29, 1995)
Section 807 Committee mostly focused on non-commercial items and non-commercial computer software
At first, the Committee did not fully recognize emerging forces that would ultimately influence Federal procurement reforms:Decreasing Federal BudgetsDefense Industry consolidationPersian (First) Gulf War
Motorola reluctance to sell satellite telephones to U.S. Government Commercial sale to Japanese Government
Commercial technologies becoming of increasing great value to the Government
Federal Acquisition Streamlining Act of 1994 (Pub. L. No. 103-355, tit. VIII, § 8001(a), 108 Stat. 3243, 3384 (1994) (adding 41 U.S.C. § 403(12))). Defined “Commercial Item” (Id. tit. VIII, § 8102, 108
Stat. at 3390) Strong preference for commercial item acquisition
(Id. tit. VIII, § 8104, 108 Stat. at 3390 (adding 10 U.S.C. § 2377))
Defined “subcontract” to include a transfer of commercial items between divisions, subsidiaries, or affiliates of a contractor or subcontractor (Id. tit. VIII, § 8002, para. (b)(5), 108 Stat. at 3390)
Mandated waiver of Federal statutes inapplicable to commercial item subcontracts (Id. tit. VIII, § 8003, 108 Stat. at 3390)
While pending in Congress, the Federal Acquisition Streamlining Act influenced data rules being drafted by Section 807 PanelSpecial clause for commercial data: DFARS
252.227-7015, Rights in Technical Data – Commercial Items (1995)
Definition of “commercial computer software”No commercial computer software clause
prescribed for either prime contractor or subcontractor
FASA caused delay in implementing Section 807 Committee data rules:Definition of commercial itemFAR Part 12/DFARS Part 227 Regulatory textFAR Part 12/DFARS Part 212 statutory waivers for
commercial item subcontractors
The term `commercial item' means any of the following:(A) Any item, other than real property, that is of a type customarily used by
the general public or by nongovernmental entities for purposes other than governmental purposes, and that--`(i) has been sold, leased, or licensed to the general public; or (ii) has been offered for sale, lease, or license to the general public.
(B) Any item that evolved from an item described in subparagraph (A) through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Federal Government solicitation.
(C) Any item that, but for--(i) modifications of a type customarily available in the commercial marketplace, or (ii) minor modifications made to meet Federal Government requirements, would satisfy the criteria in subparagraph (A) or (B).
(D) Any combination of items meeting the requirements of subparagraph (A), (B), (C), or (E) that are of a type customarily combined and sold in combination to the general public., etc.
See FAR 2.101
Government policy to acquire only the technical data and the rights in that data customarily provided to the public with a commercial item or process (See FAR 12.211, Technical data)
DFARS policy similar, but Government should also acquire technical data that (i) are form, fit and function data, (ii) required for repair or maintenance of commercial items or processes, or for the proper installation, operating, or handling of a commercial item, and (iii) describe the modifications made at Government expense to a commercial item or process in order to meet the requirements of a Government solicitation (See DFARS 227.7102-1 )
Commercial item presumed to be developed exclusively at private expense (See P.L. No. 103-355 8106; 10 U.S.C. 2320(b)(1); 10 U.S.C. 2321(f) and DFARS 252.227-7037(b))
Certain laws made inapplicable to commercial item subcontracts (see DFARS 212.504)10 U.S.C. 2320, Rights in Technical Data10 U.S.C. 2321, Validation of Proprietary Data
RestrictionsWaivers drove changes to DFARS 227
DFARS 252.227-7015, Right in Technical Data – Commercial items made inapplicable to commercial item subcontractors unless Government pays for development costsIn such case use 252.227-7013, Rights in Technical Data--
Noncommercial Items See DFARS 227.7102-3, Contract clause, paragraphs (a)(1)
and (b)DFARS 252.227-7037, Validation of Restrictive
Markings on Technical Data made inapplicable to commercial item subcontractors (See DFARS 227.7102-3 (c))
Impediment Removed?
1995 DFARS
Prime Subcontractor
Data Acquisition
NO NO
Allocation of Rights
NO YES
Administrative Burdens
NO YES
Flowdown to Subcontractor
YES YES
Interdivisional Transfers
YES YES
Data rights challenges
MAYBE YES
Negotiation MAYBE YES
Commercial items and major weapons systems; see DFARS SUBPART 234.70Secretary of Defense must make determination that
the major weapon system is a commercial itemCongressional defense committees are notifiedDetermination may not be delegated below the level
of Deputy Secretary of DefenseSubsystem of a major weapon system (other than
COTS) treated as commercial item only if certain requirements are met
Components and spare parts (other than COTS) treated as commercial item only if certain factors are satisfied
See 71 FR 58537, 10/4/2006, effective 10/4/2006; Final rule, 72 FR 51189, 9/6/2007, effective 9/6/2007; Interim rule, 74 FR 34263, 7/15/2006, effective 7/15/2009
Presumption of exclusive private development of commercial item modified. See section 802(b) of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2007 (Pub. L. 109–364); modified 10 U.S.C. 2321(f) with regard to the presumption of development at private expense for major systems; and section 815(a)(2) of the NDAA for FY 2008 (Pub. L. 110–181) revised 10 U.S.C. 2321(f)(2) to exempt commercially available off-the-shelf items from the requirements that section 802(b) had established for major systems.
“(f) Presumption of Development Exclusively at Private Expense.— (1) Except as provided in paragraph (2), in the case of a challenge to a use or release restriction that is asserted with respect to technical data of a contractor or subcontractor under a contract for commercial items, the contracting officer shall presume that the contractor or subcontractor has justified the restriction on the basis that the item was developed exclusively at private expense, whether or not the contractor or subcontractor submits a justification in response to the notice provided pursuant to subsection (d)(3). In such a case, the challenge to the use or release restriction may be sustained only if information provided by the Department of Defense demonstrates that the item was not developed exclusively at private expense. (2) In the case of a challenge to a use or release restriction that is asserted with respect to technical data of a contractor or subcontractor (other than technical data for a commercially available off-the-shelf item as defined in section 35(c) of the Office of Federal Procurement Policy Act (41 U.S.C.431(c)) for a major system or a subsystem or component thereof on the basis that the major system, subsystem or component was developed exclusively at private expense, the challenge to the use or release restriction shall be sustained unless information provided by the contractor or subcontractor demonstrates that the item was developed exclusively at private expense.”(emphasis added)
DFARS Case 2007-D003, Presumption of Development Exclusively at Private Expense. Implements Section 802(b) of the National Defense Authorization
Act of Fiscal Year 2007 (Pub. L. 109-364) and section 815(a)(2) of the National Defense Authorization Act for Fiscal Year 2008 (Pub.L. 110-181)Section 802(b) addresses the presumption for commercial items
of development exclusively at private expense, with new provisions relating to technical data for a major system or a subsystem of component thereof
Section 815(a)(2) exempts COTS items from the requirements of section 802(b)
Eliminates statutes previously waived for commercial item subcontractors
Both ABA and Aerospace Industries Association objected to proposed rules
Status: Report Due 10/13/2010 (2nd Ext.)
DFARS Case 2010-D001, Proposed rewrite of DFARS Part 227, Patents Data, and Copyrights. Follow-on to the DFARS Transformation case 2003-D049.
See 75 Fed. Reg. 59,412 (2010) (proposed Sept. 27, 2010)
Elimination of statutory waivers for commercial item subcontractors
10 U.S.C. 2320, Rights in Technical Data10 U.S.C. 2321, Validation of Proprietary Data
RestrictionsBased on novel rationale“Special relationship” between Government and
subcontractorsRe-interpretation of applicability of DoD data rights
statutes
Regulatory text changesRevised DFARS 252-7015, Rights in Technical
Data and Computer Software – Commercial (Date)Made applicable to commercial item subcontractors
and lower tier subcontractors
Revised DFARS 252.227-7013, Rights in Technical Data and Computer Software – Non-Commercial,Made applicable to commercial item subcontractors
and lower tier subcontractors when Government pays for development (current) or modifications (new)
New “negotiated license rights” limitationsNo negotiation of rights in certain classes of
technical data even if the technical data pertains to item developed exclusively at private expense. For example, the Government must always obtain unlimited rights in:Form, fit and function dataTechnical data necessary for installation,
operation, maintenance, or training purposes (other than detailed manufacturing or process data)
See DFARS 227.7104-3 (b)(1)
Commercial computer software clause mandated. See DFARS 252.227-7015Valuable forms of computer software treated as technical
data If considered form, fit and function data, those elements
would be subject to unlimited rights
Off The Shelf commercial items enjoys modicum of special treatment; see DFARS 252.227-7015But, Contractor/Subcontractor at any tier probably will be
obligated to provide Government with unlimited rights in certain classes of commercial data Form, fit and function data Technical data necessary for installation, maintenance, etc.
Other technical data subject to “limited rights” which may be inconsistent with commercial licenses
Mandatory flow down to subcontractors and lower tier subcontractors
Data rights challenges still possible
Completely ignores Congressional desire to eliminate impediments to acquisition of commercial items urged in Federal Acquisition Streamlining Act and Federal Acquisition Reform Act of 1996 (Pub. L. 104-106)
If DFARS 252-227-7013 applies (likely if Government pays for “modifications”)Commercial item subcontractors will have to
segregate data Data not segregated will be subject to
Government purpose rights which expands to unlimited rights
Administrative burdens will increaseUnique restrictive legends if DFARS 252.227-
7013 appliesSegregation requiredRecord keeping and system for proving
exclusive private developmentInterdivisional transfers subject to proposed rulesGovernment less likely to negotiate data rights
licensesCommercial item procurement reforms will be
effectively overturned
Impediment Removed?
Proposed DFARS
Prime Subcontractor
Data Acquisition
NO NO
Allocation of Rights
NO NO
Administrative Burdens
NO NO
Flowdown to Subcontractor
NO NO
Interdivisional Transfers
NO NO
Data rights challenges
NO NO
Negotiation NO NO