2. Negotiation and Administration of Intellectual Property Rights and Software Licenses 2 2 Breakout Session # E09 Laura A. Ryan Alliant Techsystems Inc. Steven M. Masiello McKenna Long & Aldridge LLP Tuesday July 31, 2012 2:30 – 3:45 pm 2

3. Agenda Background – Types of IP – Legal / regulatory environment Negotiating IP Rights and Licenses – IP negotiations – Common issues Administration of IP and IP Licenses – Administration of IP – Common issues 3 3

4. IP in Government Contracting The first step to effectively negotiating IP rights is to understand the legal and regulatory structure governing IP – Understand what type of information is at stake – Know what can and can not be negotiated Key Types of government contract IP: – Patents – Technical Data – Computer Software 4 4

5. IP in Government Contracting Government Rights in Patents: – Ownership typically retained by contractor, but varies by agency – Government obtains license rights in inventions conceived or first actually reduced to practice during performance of Government contracts Employee Inventions: Bd. of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 131 S.Ct. 2188 (2011) – Government authorizes and consents to use of patented inventions or products if necessary for contract performance Scope: Zoltek Corp. v. United States, 672 F.3d 1309 (Fed. Cir. 2012) 5 5

6. IP in Government Contracting Government Rights in Technical Data (TD) : – Contractor typically keeps ownership – Government receives license – Scope of license generally depends on extent to which the Government funds development Unlimited (CS/TD) Government-Purpose (CS/TD) Restricted (CS) / Limited (TD) – Even with limited rights, Government can disclose TD in some situations – Government always gets unlimited rights in certain TD 6 6

7. IP in Government Contracting DOD v. Civilian Technical Data rules – “Inchoate rights” v. rights in deliverables – Delivery v. withholding of data – Scope of data subject to licenses – Deferred ordering/delivery v. additional data requirements provisions – Availability of specifically negotiated rights v. “deviations/waivers” 7 7

8. IP in Government Contracting Government Rights in Commercial TD: – Defined rights for prime contractors License rights embodied in prime-only commercial technical data clause – Statutes waived for subcontractors – Government rights seek to reflect commercial practices DoD has minimal data needs – No mandatory flowdown clauses Unless further development needed Subcontractors “flow up” commercial licenses to Government 8 8

9. IP in Government Contracting Non-Commercial Computer Software: – Civilian (non-military) agencies: Treated as “data” – DOD: Separate clause, but generally follows TD provision Commercial Computer Software: – Purchased under commercial-like agreements No mandatory flowdown clauses Primes/subcontractors “flow up” normal commercial licenses to Government “[U]nless such licenses are inconsistent with Federal procurement law” – Source code only provided when Government/Prime negotiates for it 9 9

10. IP Negotiations Government contracting system is designed to operate without IP negotiations – Contract terms establish default allocation of rights – Commercial license terms sometimes used for commercial IP Prudent contractors and contracting officers go beyond contract clauses and: – Ensure the Government obtains all necessary rights – Protect valuable contractor IP – Clarify status of pre-existing IP 10

11. IP Negotiations Negotiation of IP rights can take many forms – Direct license negotiations Most relevant to commercial software / TD May be impaired by statutory Government rights Specifically negotiated rights available in DOD procurements – Beware 2012 NDAA – Negotiation of contract scope / SOW Potentially impacts whether IP is developed / delivered under a contract – Clarification of status of IP Ensure contractor can demonstrate development at private expense Clarify what is lowest segregable level 11

12. IP Negotiations: Common Issues Issue #1: Technical Data Needs of Contractors and COs – The concept of TD is unique to Government contracts – Commercial companies tend to focus on familiar IP – The Government, however, is keenly interested in TD – Because of standard clauses, contractors and contracting officers may not be able to negotiate TD rights, but they can: Negotiate SOWs Carefully craft CDRLs and TD deliverables 12

13. IP Negotiations: Common Issues Issue #1a: Government Identification of TD Needs – Government procures TD for a variety of reasons Repairs / Maintenance Reprocurements Integration – Identification of TD needs is a critical part of procurement planning – Exact TD needs may be difficult to identify at the time of procurement Deferred ordering and delivery clauses provide some relief Identifying relevant TD up front will assist contractors in tracking and gathering that information and, ultimately will result in higher quality TD 13

14. IP Negotiations: Common Issues Issue #1b: TD Deliverables/CDRLs Under FAR Procurements – Under FAR scheme, Government civilian agencies only receive TD that is delivered – Thus, negotiating contract deliverables may be an effective tool to manage TD But see FAR 52.227-16 (additional data requirements/delivery) – Both parties should: Determine what TD is needed by the Government and what TD can be withheld by the contractor Negotiate contract terms to include only TD deliverables that are necessary and/or beneficial to the Government 14

15. IP Negotiations: Common Issues Issue #1c: TD Under DOD Procurements – Funding and contract scope determine Government rights DOD receives rights in certain TD regardless of delivery Scope of these rights depends on government funding of TD development Contractors should identify TD that needs clarification and reach agreement on the status of that TD, if possible – Be sure to identify TD with less than unlimited rights in standard DFARS clause Failure to do so may impact contractor ability to assert restrictions 15

16. IP Negotiations: Common Issues Issue #2: IP Associated with IR&D Programs – 2012 NDAA clarified that IR&D funding is not “Government funds” – A difficulty exists determining where an IR&D program ends and contract performance begins Contract terms, SOWs and other information are relevant Document and segregate contract versus IR&D development work – Make sure all IR&D projects and scope are well-documented and reported to the DOD (see DFARS 231.205-18) 16

17. IP Negotiations: Common Issues Issue #3: Use of Commercial Licenses – DFARS permits use of commercial licenses when acquiring commercial computer software – “[U]nless such licenses are inconsistent with Federal procurement law” – If DOD needs more rights, it must negotiate for them – Generally commercial licenses offer a fast and cost-effective way to purchase commercial software, BUT: Don’t forget about modification necessary for government use Other Government-specific support may require additional IP language 17

18. Administration of IP Rights and Licenses Largely dependant on statutory, regulatory, and contract/license terms Contractors: – Make sure contract managers know and understand terms of licenses and continuing obligations to the Government – If Government contracting is not your primary business, train contract managers regarding unique IP requirements – MARK YOUR INFORMATION Government: Interact with contractors to ensure that IP negotiated for is provided 18

19. IP Administration: Common Issues Issue #1: User/Device Restrictions on Software – Many software licenses are limited to a specific number of users or devices – Verification may be more difficult with Government agencies – Make sure that a method is established to audit and/or verify number of users or devices accessing software – Emerging Issue: What is one “device” Does your license address remote access to computers? Is it up to date? Broad definitions of remote access can facilitate use of programs on smart phones and tablets What about cloud computing? 19

20. IP Administration: Common Issues Issue #2: On-Going Obligations to the Government – Contractors have certain on-going obligations to the Government Reporting “subject inventions” Protecting government rights in inventions Notifying the government of patent infringement claims Securing IP rights from employees and subcontractors – Employees must be trained to recognize these issues and comply with obligations – Failure to do so has serious consequences, including loss of rights in resulting patents 20

21. IP Administration: Common Issues Issue #3: Government Challenges to Contractor Rights – The Government can challenge restrictive markings on IP – Typically contractors must prove marking is appropriate, if challenged – For most commercial IP, however, Government must produce some information in support of challenge Issue #4: Deferred Ordering Under DOD Contracts – DOD can order delivery of certain IP relating to contract performance for up to 3 years after completion of contract – 2012 NDAA expands these rights for certain IP relating to major systems 21

22. Questions? 22 Laura A. Ryan Senior Counsel Alliant Techsystems Inc. Minneapolis, Minnesota laura.ryan@atk.com Steven M. Masiello Partner McKenna Long & Aldridge LLP Denver, Colorado smasiello@mckennalong.com 22