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Intellectual Property Issues William C. Anderson Chief Intellectual Property Counsel United Launch Alliance, LLC.

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Presentation on theme: "Intellectual Property Issues William C. Anderson Chief Intellectual Property Counsel United Launch Alliance, LLC."— Presentation transcript:

1 Intellectual Property Issues William C. Anderson Chief Intellectual Property Counsel United Launch Alliance, LLC

2 Commercial Item Revolutionaries Boston Tea Party President Reagan Defense Buildup during 1980s Drive to have the best of everything drove up prices for weapons systems Mid- to late-1980s well-publicized procurement scandals $600 toilet seats $1,000 coffee pots and hammers Great pressure to get out of the news

3 Initial DoD response was to seek reprocurement data with reprocurement rights Secretary of Defense Weinberger deviation approvals Sansone Clause Orr Clause Government study showed that data rights not the root cause to the problem of high cost spare parts Industry coalesced around business interests Large & small OEM business revolt Replicator contractors supported Government position

4 Series of DoD data rights statutes Defense Procurement Reform Act of 1984, Pub. L. No. 98-525, 1201-1252, 98 Stat. 2588 Defense 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)

5 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)

6 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

7 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 customers Administrative Burdens Segregation of data to preserve rights Record keeping relating to previous license grants and private expense developments Unique restrictive legends for data deliverables

8 Pre-1995 Commercial Item Procurement Impediments: to acquiring commercial data (continued) Mandatory flowdown to subcontractors Re-opening pre-existing subcontracts to include unique Government requirements Data 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

9 Impediment Removed? Pre- 1995 DFARS PrimeSubcontractor Data AcquisitionNO Allocation of Rights NO Administrative Burdens NO Flowdown to Subcontractor NO Interdivisional Transfers NO Data rights challenges NO NegotiationNO

10 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

11 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

12 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 OEMs and Replicators Private Expense Test Acquisition of reprocurement data Data repositories Committee met between July 1992 until December 1993 Proposed rules published for comment in June 1994 60 Fed. Reg. at 33,464 (1995) (effective June 30, 1995, but only applied to solicitations issued on or after September 29, 1995)

13 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 Budgets Defense Industry consolidation Persian (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

14 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)

15 While pending in Congress, the Federal Acquisition Streamlining Act influenced data rules being drafted by Section 807 Panel Special 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 item FAR Part 12/DFARS Part 227 Regulatory text FAR Part 12/DFARS Part 212 statutory waivers for commercial item subcontractors

16 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

17 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))

18 Certain laws made inapplicable to commercial item subcontracts (see DFARS 212.504) 10 U.S.C. 2320, Rights in Technical Data 10 U.S.C. 2321, Validation of Proprietary Data Restrictions Waivers 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 costs In 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))

19 Impediment Removed? 1995 DFARS PrimeSubcontractor Data AcquisitionNO Allocation of Rights NOYES Administrative Burdens NOYES Flowdown to Subcontractor YES Interdivisional Transfers YES Data rights challenges MAYBEYES NegotiationMAYBEYES

20 Commercial items and major weapons systems; see DFARS SUBPART 234.70 Secretary of Defense must make determination that the major weapon system is a commercial item Congressional defense committees are notified Determination may not be delegated below the level of Deputy Secretary of Defense Subsystem 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

21 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)

22 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.)

23 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 Data 10 U.S.C. 2321, Validation of Proprietary Data Restrictions Based on novel rationale Special relationship between Government and subcontractors Re-interpretation of applicability of DoD data rights statutes

24 Regulatory text changes Revised 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)

25 New negotiated license rights limitations No 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 data Technical data necessary for installation, operation, maintenance, or training purposes (other than detailed manufacturing or process data) See DFARS 227.7104-3 (b)(1)

26 Commercial computer software clause mandated. See DFARS 252.227-7015 Valuable 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 252.227-7015 But, 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

27 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

28 Administrative burdens will increase Unique restrictive legends if DFARS 252.227-7013 applies Segregation required Record keeping and system for proving exclusive private development Interdivisional transfers subject to proposed rules Government less likely to negotiate data rights licenses Commercial item procurement reforms will be effectively overturned

29 Impediment Removed? Proposed DFARS PrimeSubcontractor Data AcquisitionNO Allocation of Rights NO Administrative Burdens NO Flowdown to Subcontractor NO Interdivisional Transfers NO Data rights challenges NO NegotiationNO


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