Intellectual Property Issues in Federal Contracts Derek Maughan Office of General Counsel Intellectual Property Legal Services Battelle Memorial Institute Pacific Northwest National Laboratory

What is Intellectual Property? WIPO definition Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. - Inventions protected by patents - Aesthetic works protected by copyright - Marks protected by trademark law - Secrets protected by trade secret law

US Constitution Article I Section 8 Clause 8 Congress shall have the power. . . To promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries “The patent system added the fuel of interest to the fire of genius”

Patent Negotiated exclusionary right granted by Government in exchange for disclosure of the invention to be protected that enables the holder of rights under the patent to prevent others from making, using, selling, offering for sale or importing the invention defined in the patent claims. Patents are not affirmative licenses, not required to put products into market. Quid Pro Quo Article 1 section 8 To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries Full disclosure of invention in sufficient detail to enable another party of skill in the art to practice your invention in exchange for period of exclusivity 20 years from date of filing.

What is patentable ? Useful - process, machine, manufacture, or composition of matter, or any new and useful improvement thereof Novel - not known or used by others in this country or described in a printed publication prior to invention or not patented, printed, in public use or on sale in this country more than one year prior to filing of patent application, not abandoned, not somebody else’s invention Non-obvious - of known existing technologies (prior art) Technical solutions to technical problems “the problem of X is solved by Y”

Securing Patent Rights for Government Funded Inventions Patent Class Waiver Report Inventions Elect Title to Inventions File Patents Prosecute Patents Maintain Patent Rights US Government retains rights to use free of charge for government purposes Licensing subject to US preference, competitiveness and in some cases mfg. requirements

12 mo. 6 mo. 0-6 mo. Docket Draft Patent Application File Application In USPTO File PCT Publication (U.S.) 1st Office Action 12 mo. 6 mo. 0-6 mo. (PCT) File National Application(s) File Regional National Patent(s) Issue Regional Patent(s) Foreign Prosecution (optional) File Response U.S. Patent Issues Final Office 13 mo. 3 mo. 6-9 mo. 6-9 mo. 18 mo.

Patent Infringement Party must make, use, sell, import or practice the patented subject matter without permission. All elements of the claims must be performed by the infringing party. Co-inventors have separate full rights to practice the invention unless agreement to the contrary exists. US Government cannot be subject to an injunction for patent infringement. However a “reasonable royalty” may be obtained. 48 CFR 970.5227-4 - Authorization and consent

Myths and Misconceptions My invention is worth lots of money because it is patented.

Myths and Misconceptions I am not infringing another patent because I changed it more than ten percent. I cannot infringe his patent because I didn’t know about it. My invention is patented so I have to keep it a secret or I will lose it. Even though I assigned my patent to someone else, I cannot infringe this patent because I am the inventor. Co-inventors share a patent fifty-fifty and have a duty to account to each other for its use

Copyrights Protects original expressive works in a fixed medium of expression from which they can be perceived, reproduced or otherwise communicated either directly or with the aid of a device. Does not protect any underlying idea, procedure, process, system, method of operation, concept, principle or discovery regardless of the form in which it is described. Does not protect short terms, phrases or slogans. Provides the copyright holder the exclusive rights to reproduce, make derivative works, distribute copies, perform publicly, display publicly, digitally transmit copyrighted subject matter. No copyright exists in US government works unless authority is given to the contractor/sub to assert. If copyright is asserted in a US government work, government retains free rights to use for US government purposes. Government cannot assert copyrights but can obtain copyrights asserted by others.

Protecting IP - Copyrights Common law copyrights exist on creation but enforcement requires copyright registration with Copyright Office in the Library of Congress. Protection lasts for 70 years after life of author or the shorter of 95 years from date of copyright or 120 years from creation. Author has exclusive right to reproduce, make derivative works, distribute copies, perform publicly, display publicly, digitally transmit copyrighted subject matter. Securing a copyright in a US government funded work requires permission from a government agency.

Copyright Infringement Reproduce, make derivative works, distribute copies, perform publicly, display publicly, digitally transmit copyrighted subject matter Direct proof of acts or access and substantial similarity Defenses: fair use, independent creation Registration of copyright after infringement waives statutory damages and attorneys’ fee recovery (unless done within 90 days) 48 CFR 970.5227-4 - Authorization and consent must have approval

Myths and Misconceptions Everything that is on the Internet is in the public domain and copyright regulations do not apply. Open Source Software is a low risk way to help my small software business get off the ground. House plans/blueprints are not copyrightable. I am employed as an artist for X Co., but I own the copyright on everything that I do because I am an artist. I hired Independent Contractor Y to create this (web page, catalog, etc.) for me; therefore I automatically own the copyright. If I own the painting I own the copyright. I have a copyright in a conglomeration of facts because I worked really hard to put it together.

Trademarks 15 USC, Chapter 22, State and Common Law Rights Arise upon Use Federal trademark registration system allows for reservation of marks, and provides notice for nationwide use. Trademark examination conducted before the USPTO Use ® only when trademark application is granted by USPTO Use ™ before application is granted by USPTO Trademark protection lasts as long as mark is in use in interstate commerce and registration lasts as long as required certifications are made to the USPTO Trademarks can be used against cyber squatters in ICANN proceedings http://www.uspto.gov/main/trademarks.htm

Trademark Infringement Engage in activity that will cause or is likely to cause confusion as to the source origin or sponsorship of the goods or services associated with that mark. Labs and government facilities have names and government marks. Contracts require non-endorsement of products or services.

Protecting IP – Trade Secrets Trade secrets are information that is not known in industry, gives the owner a competitive advantage, and is subject to reasonable protective measures. Trade secrets can be protected as long as information is not generally known, and reasonable precautionary measures are in place. In a government context only privately funded information can be marked as “proprietary,” unless other terms apply. Trade secrets last as long as they are secrets. Once secrecy is blown the protection is also gone. Violations for knowingly receiving or obtaining misappropriated trade secret information can include criminal charges in some cases. NDA language cannot be overlooked for convenience, in addition to breach of contract claims, theft of trade secret law (civil and criminal) may also be indicated.

Reasonable Precautionary Measure

Reasonable Protective Measures

Reasonable Protective Measures

IP Clauses in Typical Contracts and Subcontracts Government position Government Pays/Government Owns Exceptions: Bayh-Dole 35 USC 200 et seq. Grant of patent class waiver 48 CFR 970.5227-10, 11,12, 13 Rights in Data FAR 52.227-14 Prime cannot require rights in the subs inventions or data as a condition for granting the award Appropriate flow down clause typically provided in prime contract

Data and Rights in Data Data means recorded information, regardless of form or the media on which it may be recorded. The term includes technical data and computer software. The term does not include information incidental to contract administration, such as financial, administrative, cost or pricing, or management information. FAR 52.227-14(a) Default position: Government has unlimited rights; rights for contractor to assert copyright may require permission unless advance permission given in funding document or contract (i.e. scientific publications).

Gaylord v. United States No. 2009-5044 (Fed. Cir. , Feb. 25, 2010) Gaylord v. United States No. 2009-5044 (Fed. Cir., Feb. 25, 2010) (Fed. Cir, May 14, 2012)

Quick and Dirty Facts Department of the Army contracts with Cooper-Leckey Architects $5M; rights in data clause included Cooper-Leckey Architects subs to Mr. Gaylord $775k (sculptor); rights in data clause not flowed down Gaylord builds monument, files copyright Alli takes photo, USPS pays Alli $1,500 for license in photo to make stamp USPS sells $17 million dollars in stamps Gaylord sues US government; loses at district court, wins on appeal Case remanded for damages $ 5.4 million dollars in actual damages (collector sales) plus costs and attorneys fees for Gaylord Statutory damages 14,594, 594 X ($750-$30,000)= at $1000 per infringement $14.5 B (plus costs and attorneys fees)

The Gaylord Effect Government opinion from Outside Counsel Cooper-Lecky in breach of prime contract with Army and therefore liable for all damages arising for failure to include appropriate clause in subcontract (open question at the time). Christian Doctrine insufficient to address this lapse (although Pauline Newman dissent argues otherwise).

Case Remanded for Damages District court awards $5K “rule of reasonableness.” Mr. Gaylord appeals, again. Appeals Court again remands to recalculate damages. Cooper-Leaky could still on the hook for damages for failing to include appropriate IP clause.

When do subcontracts need to include IP clauses? I-93 DEAR 970.5227-2 Rights in Data Technology Transfer (g) “unless otherwise directed by the contracting officer, the Contractor agrees to use in subcontracts in which technical data or computer software is expected to be produced or delivered or in contracts in which supplies that contain a requirement for the delivery of data” . . . . .

When do subcontracts need to include IP clauses? I-99 DEAR 970.5227-10 Patent Rights - Management and Operating Contracts Non-Profit Organization or Small Business Firm Contractor (g)(2) “contractor shall include the patent rights clause at 48 CFR 952.227-11 . . . . In all subcontracts at any tier for experimental, developmental, demonstration or research work to be performed by a small business or a domestic non-profit organization . . . (g)(3) Except for contracts described in subparagraph (g)(2) of this clause, the contractor shall include the patent rights clause at 48 CFR 952.227-13 . . . in any contract for experimental, developmental, demonstration or research work

Is there a potential for data or inventions to be produced? What are we paying the sub to do? Are we going to get a deliverable? Is it technical or scientific information? Is it computer software ? Is it data? Are they going to solve a problem or show that something works? Demonstrate, develop, engineer, modify, create, consult, provide insight, conduct research, investigate Creating a technical solution to a technical problem When in doubt, put clauses in.

Definitions Related to Rights in Data Data - recorded information, regardless of form or media on which it may be recorded. The term includes technical data and computer software, the term data does not include data incidental to the administration of the contract such as financial, administrative cost and pricing or management information. Technical Data - recorded information, regardless of form or characteristic that is of a scientific or technical nature. Technical data does not include computer software, but does include manuals and instructional materials and technical data formatted as a computer database. Computer Software - computer programs which are data comprising a series of instructions, rules, routines or statements, regardless of the media in which it is recorded that allow or cause a computer to perform a specific operation or series of operations and data comprising source code listings, design details, algorithms, processes, flow charts, formulae, and related material that would enable a computer programs to be produced, created or compiled.

Should Rights in Data Clause Apply? Contractor employees will investigate efficacy of existing methodologies for performing tasks aligned with clean up mission including cost/price analysis for each of the various methodologies reviewed. A report will be created and delivered.

Should Rights in Data/Patent Clauses Apply?

Rights in Data/Patent Rights Prime Contractor cannot take an interest in the IP of a subcontractor as a condition for entering into a subcontract. DOE permission is required to approve the alternates II or III related to limited rights or restricted rights data. Only DOE can approve modifications to these standard terms.

Limited Rights Data Definition - data other than computer software developed at private expense that embody trade secrets or are commercial or financial and confidential or privileged. FAR 52.227.15 - provides representation and identification of this material Government gets rights to … Use (except for manufacture) by other contractors Evaluation by non-government evaluators Use (except for manufacturing) by other contractors participating in the government’s program of which the specific contract is a part, for information and use in connection with work performed under each contract Emergency repair or overhaul work Release for a foreign government or instrumentality thereof, as the interests of the United States Government may require for information or evaluation or for emergency repair or overhaul work by such government

Restricted Computer Software Definition - computer software developed at private expense and that is a trade secret; is commercial or financial and is confidential or privileged; or is copyrighted computer software, including minor modifications of any such computer software. FAR 52.227-15 - provides language for the listing of this information as a part of the reps and certs.

ASBCA Case March 26, 2013 Alenia North America, Inc. (ASBCA No.57935) Approximately 18 months after the delivery of the first technical data, the government objected to Alenia’s restrictive markings and asserted government-purpose rights in the data.  Alenia objected based upon the contract’s lack of FAR and DFARS data rights terms. Relevant contracting officer issued a final decision determining that the government actually held unlimited rights in the data under the Christian Doctrine. Alenia sought dismissal on the ground that Christian Doctrine could not provide overcome lack of subject matter jurisdiction. Alenia lost on appeal. ASBCA determined Christian Doctrine can provide jurisdictional and substantive law protections.

Questions? Derek Maughan Patent Attorney 375-2981 Derek.Maughan@pnnl.gov