Type: Law Bulletins
Date: 09/05/2014

Department of Defense Attempts to Increase Competition; The Impact on Your IP

In August 2014, the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics issued its “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense.” According to an introductory memorandum, the guidelines are “intended to provoke thought about the various approaches that may be used to competitively fulfill DoD requirements.” Issuance of these guidelines is a reaction to the DoD not having met its competition goals in the previous four years.

A recurring theme of the guidelines is that contracting officials should plan ahead and conduct thorough market research. Among other things, the guidelines emphasize the need for an intellectual property (“IP”) strategy1 as “a critical mechanism to remove barriers to competition.” The failure of the government to properly negotiate its rights in IP, including technical data or computer software, has resulted in significant frustration on the part of the government and/or the contractor when the parties disagree on exactly who owns what.    

Although the guidelines make no changes to the DFARS IP clauses, the guidelines emphasize that contracting officers should understand the effect that acquired data rights will have on future procurements. The discussion of IP strategy is broken down into nine points:

  1. IP strategy should consider the level of government’s rights acquired because it impacts the entire life cycle of a system, including reprocurement or spares, operation and training, maintenance and repair, modifications and upgrades.
  2. The solicitation and resulting contract should address both the rights in the data and the deliverable requirements.
  3. The guidelines suggest adding contract options for data rights into solicitations and resulting contracts when forecasting the need for specific data rights/deliverable requirements is difficult because future needs are unknown. This way the IP rights become part of the competition, to be evaluated and exercised if and when needed rather than the government having to negotiate them non-competitively, after award, when the government decides what it wants.
  4. Technical data or computer software developed with DoD funds should be segregated from that developed at private expense. According to the guidelines, this may help avoid “vendor lock” resulting from mixing of proprietary data (in which the government receives only limited rights) and government-funded development (in which the government receives unlimited rights).   
  5. In DoD-funded development, the government should be sure to require delivery of the technical data or computer software developed, in a usable format.
  6. For commercial or proprietary data developed at private expense, the government should recognize that it has to pay for all data deliverables or data rights associated with the technology. The government should “carefully weigh[ ] the costs and benefits of acquiring such detailed [technical data or computer software].” The guidelines caution that the government “should not make an unnecessary ‘grab’ for proprietary rights.” 
  7. The government should consider alternatives to requiring full tech data or computer software data packages, such as requiring delivery of “form, fit, and function” data when such data would provide enough data to allow a competitor to propose its own solution.
  8. Use appropriate factors and subfactors to evaluate the technical data and computer software deliverables, which will be unique to each procurement. This section includes a paragraph that begins, “A caution on coercing greater rights to IP than necessary.” 
  9. The contracting officer should continually monitor data deliverables for restrictive markings, particularly as part of the inspection and acceptance process.

The importance of the DoD developing an IP strategy, as emphasized in these guidelines, seems obvious, but it always has. It remains to be seen what impact these new guidelines will have on the DoD’s acquisition strategy. It also remains unclear whether, despite warnings not to do so, contracting officers will attempt to buy more rights than they need or whether they will use the competitive procurement process to extract IP rights anyway. 

Contractors should beware of these guidelines to better understand any efforts by the DoD to obtain greater IP rights in the near future. 

1Other sections include discussions of use of Open Systems Architecture, Competition in Developmental Programs, Competition for Weapon System Production, Competition in Acquisition for Services, Competition for Commodities and Indirect Competition.

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