2. Intellectual Property in Government SBIR Contracts
Diane M. Sidebottom
Strategic Analysis, Inc.

3. Overview of Intellectual Property
What is it?
An intangible creation of the human mind, usually expressed or translated into a tangible form, that is assigned certain property rights
How is it protected in the U.S.?
Its protection is one of the few specific topics mentioned in the U.S. Constitution
Article I, Section 8, Clause 8, grants Congress the right to create the patent and copyright systems
The Patent and Trademark Office (PTO) and the Copyright Office in the Library of Congress are two of the oldest agencies in the Federal Government
A variety of federal and state laws have been created over the years
In Federal Government contracts, different regulations cover different aspects
The Federal Acquisition Regulation (FAR) cover patentable inventions for all agencies, as well as technical data and computer software for the civilian agencies
The Defense Acquisition Regulation Supplement (DFARS) covers technical data and computer software for the Department of Defense

4. Basic Protection Methods
Intellectual property (IP) is covered by four basic protection categories
Patents
Trade Secrets
Trademarks
Copyrights
With each method, except trade secrets, the author or inventor is given a limited monopoly in either scope or time to use the IP and prevent others from doing so without their permission
The condition of this limited monopoly is the author or inventor must make their IP public
Once the limited monopoly period expires, the IP becomes available to society at-large for any one to use without restriction

5. Patents in General To receive a patent, the invention must be:
Within the statutory subject matter
New, useful and novel
Must not be obvious from the prior art to a skilled person
Basic types of patents
Utility: covers processes, machines and methods of manufacturing
Design: covers visual, ornamental characteristics of an item
Plant and Animal: covers asexually reproduced plants and animals
Some things can’t be patented
Laws of nature or scientific principles (i.e. biology, chemistry, physics, mathematics)
Patent duration
Utility and plant/animal patents: 20 years from the filing date of the application (before 6/8/95 – 17 years from issue date or 20 years from the filing date)
Design patents: 15 years from issuance (before 12/18/13 – 14 years from issuance)

6. Patent Coverage under Federal Contracts
The Bayh-Dole Act is the major statutory framework governing ownership and use of patentable inventions conceived or first reduced to practice under a Federal Government contract
Passed in 1980 and codified at 35 U.S.C. 200, et seq.
The statutory language applies only to universities, non- profits and small business; however, it was extended by Executive Order in 1983 to all large businesses as well
Applicable to procurement contracts, grants and cooperative agreements
The Act promotes commercialization of Government-funded inventions while ensuring that the Government receives sufficient rights in the inventions for its own use.

7. Key aspects of the Bayh-Dole Act
Important terms
Invention: any invention or discovery that is PATENTABLE (not PATENTED)
Subject Invention: one conceived or first actually reduced to practice under a funding agreement
Key aspects of the Act
The inventor retains ownership and title to the subject invention, while the Government gets a license to use it
In order to take title, the Government must make a determination of need and file for approval with the Secretary of Commerce
The inventor must disclose the invention, elect to retain title and file for a patent with certain time periods
The patent itself must disclose that the invention was created with Government support
There is a provision that, in certain circumstances, allows the Government to require the contractor to license the invention to another or the Government can license the invention itself

8. Key aspects of the Bayh-Dole Act
Under the Act, the Government receives a government-wide license that is:
Non-exclusive
Non-transferrable
Irrevocable
Paid up
Terms of the license
Allows the Government to practice the invention itself or
Have it practices for or on behalf of the Government throughout the world
This license is commonly known as a Government Purpose License
The statute makes no special exemptions or allowances for the SBIR program or participants
These same provisions will be included in SBIR contracts and, since they are based in statute, are non-negotiable

9. Bayh-Dole Act coverage in the FAR
The provisions in Part 27 of the FAR are almost a verbatim recitation of the statutory language of the Bayh-Dole Act
The FAR/DFARS clauses
FAR Subpart is used most of the time
FAR Subpart (Ownership by the Government) is rarely used and only after the Government completes the appeal process
DoD will use DFARS Subpart when contracting with a large business
All clauses flow down to subcontractors

10. Trade Secrets
Popular in the private sector and often used instead of patents to protect sensitive business information from unauthorized disclosure
Covered by state law but not federal law
Allows the IP owner to protect the information forever as long as it can be kept secret
Trade secrets are not really covered in the regulations and, to some degree, conflict with the Bayh-Dole Act

11. Trademarks
A recognizable sign, design or expression the identifies and distinguishes products or services of a particular source from those of other sources
The purpose of trademarks is to prevent customer confusion in the marketplace
Can protect anything that would be a distinguisher (i.e. logos, designs, slogans)
Typically the Government doesn’t trademark much or take rights in trademarks because Government marks are often protected by statute and the Government doesn’t compete in the marketplace
There is very little specific coverage of trademarks in the regulations but they can be covered by specially negotiated license rights under the technical data clause

12. Copyrights What is covered under copyright?
Original works of authorship embodied in a tangible medium of expression
Copyright confers a bundle of rights
Reproduce the work
Make a derivative work
Distribute copies of the work
Publicly perform the work
Publicly display the work
The owner can confer one right in the bundle, any combination of rights, or the whole bundle
Unique aspects of copyright
You can only copyright your expression of an idea, not the idea itself
The work must be embodied in a tangible medium of expression
To be protected, the work must be original
It can be published or unpublished, marked or unmarked
The law allows for infringement called “fair use” in certain situations

13. Copyrights Duration of a copyright
For works created after July 1, 1978
Life of the author, plus 70 years
For joint works, the 70 year period begins with whoever dies last
For works for hire, anonymous works, and pseudonymous works
95 years from first publication or
120 years from creation, whichever expires first

14. Regulatory coverage
In the FAR and DFARS, copyrightable information is generally covered under the categories of “technical data” and “computer software”
Technical Data: Recorded information, regardless of the form or method of the recording, of a scientific or technical nature (including computer software documentation)
Computer Software: Computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, formulae, and related material that would enable the software to be reproduced, recreated, or recompiled. Does not include computer databases or computer documentation

15. Technical Data and Computer Software
This area is unique for DoD because coverage in Part 227 of the DFARS takes precedent over coverage in Part 27 of the FAR
DoD policy is to acquire only the technical data, and the rights in that data, necessary to satisfy the agency’s needs
The presumption is that the creator retains ownership and the Government receives a license right; however –
There is no statutory prohibition on negotiating ownership and
The Contracting Officer has the discretion to negotiate license rights
Typically, the type of license rights in the DFARS has a direct corollary to the amount of investment DoD has made in the creation of the data or software
SBIR contracts have special clauses with unique license limitations

16. Technical Data and Computer Software
Four basic levels of license rights
Unlimited Rights
Right to use, modify, reproduce, perform, display, release or disclose technical data in whole or in part, in any manner, and for any purpose whatsoever, and have or authorize others to do so
Government Purpose Rights
Right to use within the Government or have it practiced for or on behalf of the Government throughout the world
Limited Rights (applicable to technical data only)
Right to use, modify, reproduce, release, perform, display or disclose technical data, in whole or in part, within the Government
Has been expanded to Government support contractors as well
Restricted Rights (applicable to computer software only)
Basically the same rights as a commercial shrink-wrap license
There is the option to specially negotiate alternative license rights with the limitation that the Government cannot negotiate for itself less than limited rights in data and restricted rights in software

17. SBIR Data Clause
The Government will include a different data/software clause in SBIR contracts that allows for a different license
Instead of the standard DFARS data clause, SBIR contracts at all phases should include DFARS clause

18. Unique aspects of SBIR Data Clause
The clause creates a fifth level of license rights – SBIR Data Rights
The Government’s rights during the SBIR data protection period to use, modify, reproduce, release, perform, display or disclose technical data or computer software generated under an SBIR award are as follows:
Limited rights in technical data and
Restricted rights in computer software
After the SBIR data protection period, the Government gets an unlimited rights
Key terms
Generated – Technical Data and Computer Software first created in performance of this contract
SBIR data protection period – Commences with contract award and ends five years after completion of the project under which the data was generated

19. Specifics of DFARS
The Government still gets unlimited rights in technical data and software generated under the contract that are:
Form, fit and function data
Necessary for installation, operation, maintenance, or training purposes
Corrections or changes to Government-furnished technical data or software
Otherwise publicly available
Acquired with unlimited rights under another Government contract and
After the SBIR data retention period ends
The parties can still specially negotiate license rights but only bilaterally

20. Specifics of DFARS
The Government will still retain rights in the unchanged portions of any software delivered under the contract that is later included in a derivative work.
Written Contracting Officer approval is required before inclusion of third party copyrighted technical data or computer software unless
The contractor owns the copyright or
An acceptable license has been negotiated with the copyright holder
An assertions list must be created and updated if any technical data or computer software created at private expense will be used in the performance of the contract
The contractor is responsible for marking any information provided to the Government with the legends included in the clause
The Government has the responsibility to review the marks and identify any that it believes are incorrect and incomplete
Technical data and computer software provided to the Government without markings is presumed to have been delivered with unlimited rights
The contractor has six months to request the right to add or change markings later
The clause must flow down to subcontractors

21. SBIR Phase III projects
An SBIR Phase III project is one that derives from, extends, or completes an effort made under prior SBIR funding but is funded by sources other than the SBIR program, such as:
Commercial/Non-Federal sources
SBIR-derived products or services intended for use by the Federal Government or
Continuation of the research and development
SBIR Phase III is oriented toward commercialization of the SBIR research or technology
Phase III may be for products, production, services, R&D or any combination of these

22. Unique concerns of SBIR Phase III programs
Both agencies and prime contractors must include the SBIR data rights clause in a Phase III contract but they may not recognize that it is a Phase III effort
Because the Phase III effort is not conducted under an SBIR solicitation nor will it be funded by SBIR funding, agencies and primes may not recognize the effort is a Phase III project
The Phase III award can be any type of award instrument and can be awarded off of any type of competitive solicitation or sole source justification

23. Unique concerns of SBIR Phase III programs
The Small Business Administration (SBA) SBIR Policy Directive does not define the terms “derives from,” “extends,” or “completes” when describing the Phase III effort
Transitioning SBIR contractors should be specific and detailed in their submissions and discussions with Federal agencies and prime contractors how the effort fits within the above categories and why it should be considered an SBIR Phase III effort
Be sure to read the contract carefully before signing it to ensure that the proper SBIR data rights clause has been included
Make sure that the agency and/or the prime contractor is aware of the unique aspects of the clause and duration of the data protection period
Not all agencies or prime contractors are familiar with the unique aspects of the SBIR program, especially if they do not typically do research and development programs
If the SBIR Phase III effort is funding by commercial or non-federal sources, neither the regulations nor the SBA SBIR Policy Directive will apply to the commercial contract. The transitioning SBIR contractor will have to negotiate commercial terms and conditions, including IP terms, and the commercial partner is not bound to the data protection period

24. Conclusion
Intellectual property rights are complicated and must be thought through before crafting proposals or entering negotiations
SBIR participants are given special clauses but those clauses only cover certain aspects of their intellectual property position
Transitioning into Phase III can present difficulties as the SBIR contractor begins to interact with entities unfamiliar with the unique aspects of the SBIR program
It is prudent to plan ahead and have justifications and rationales pre-established before entering Phase III to ensure the process goes smoothly