Government IP Rights

1
Government IP Rights

• Perspective Of A High Tech Start-Up
• Jerome S. Gabig
• General Counsel
• Time Domain Corporation

2
Time Domain Corporation Industry Leader In Pulsed
UWB

• Pulsed Ultrawide Band is a radical technology
  that will enable entirely new products and
  industries in communications, positioning, and
  radar sensing.
• Pulsed UWB might be as important as the
  transistor or electric light bulb. U.S.A.Today,
  April 9, 1999

3
Time Domain Corporation A High Tech Start-Up

• TDCs Chief Scientist figuratively invented
  pulsed UWB technology in his garage
• From 1996-2001, the CEO, COO, and CTO were sons
  of Von Brauns RD Chief
• In 2000, TDC was selected as Red Herrings Best
  Of Venture Market South
• TDC has raised approximately 90 million through
  angel investors and venture capitalists

4
Patent Protection Is Vital To TDC
USA
Foreign
Total
Awarded
70
28
42
Allowed
5
3
8
Pending
108
65
173
Total
141
251
110
TDCs patents are as important as a farmers
interest in protecting his or her seed corn.
5
High Tech Start-Ups Have A Legacy Of Innovation

• Studies show that small businesses introduce
  roughly 2.5 times as many technological
  innovations per employee as large businesses, and
  also a disproportionately large share of the
  breakthrough innovations forming the foundation
  of U.S. military and economic strength.
• Tim Foreman, June 17, 1999
• Deputy Director, DOD OSDBU

6
Start-Ups Are The Most Likely Source For
Radically New Technologies

• There is a general rule of thumb that radically
  new technologies are usually developed, marketed
  and matured by new companies.
• Executive Summary to RAND Study
• DRR-2274-A February 2000

7

8
Even though the industry is dominated by
Mega-Primes, there are many large multi-industry
companies in the sector
Multi-Industrial Firms with Defense Sales
Dedicated Multi-Platform Primes
Non aerospace/defense revenues for GE total 119
Billion
(millions)
Smaller Defense Firms
Source Defense News Top 100 Flight
International Top 100 company annual reports
9
High Tech Start-Ups Have A Legacy Of Avoiding
DOD Contracts

• The Government is having difficulty in
  attracting truly commercial business to research
  Government problems, whether in research programs
  or in weapons systems development. This is
  largely due to the use of traditional IP clauses
  and procurement methods.
• Under Secretary of Defense (AT L)
• IP White Paper, Version 1.1, Oct. 15, 2001

10
High Tech Start-Ups Have A Legacy Of Avoiding
DOD Contracts

• Much of the commercial technology sector
  remains skeptical of the governments commitment
  to reform, do not need the governments RD
  business and distrusts government contracting in
  general.
• Executive Summary to RAND Study
• DRR-2274-A February 2000

11
FAR Part 12 Assuaging The Distrust

• Much has been done to assuage the distrust
• FAR Part 12
• OSD(ATL) letter, Sept. 5, 2000
• Where industry has performed a substantial
  amount of research and development (sometimes
  over decades), we must create contract
  relationships in commercially friendly terms.
  Because the intellectual property rights of these
  companies represent their lifeline to future
  success, we must make every effort to abide by
  their protection and secrecy concerns.

12
FAR Part 12 Topics of Discussion

• Patents
• Trade Secrets
• Computer Software
• Suggested Improvement

13
FAR Part 12 -- Patents

• In light of the Christian Doctrine, the
  Commercial Sector should be cautious of the
  Bayh-Dole Act even though FAR Part 12 does not
  require the solicitation to include a patent
  rights clause.
• If there is a large potential commercial market
  for inventions that are likely to be conceived
  or actually reduced to practice in the
  performance of work under a government contract,
  allowing the Government to pay for the
  development could be prudent for the vendor.
• Using FAR Part 12 or a GSA Schedule, if a C.O.
  were to acquire a commercial item which contains
  a subject invention, it is unlikely that the
  Governments royalty-free license to the patent
  would impact the price paid by the C.O.

14
FAR Part 12 Patents (continued)

• According to FAR 2.101, commercial items include
• Minor modifications of a type not customarily
  available in the commercial marketplace made to
  meet Federal Government requirements. Minor
  modifications means modifications that do not
  significantly alter the nongovernmental function
  or essential physical characteristics of an
  item. Dollar values and percentages may be used
  as guideposts, but are not conclusive evidence
  that a modification is minor.

15
FAR Part 12 Patents (continued)

• If the commercial vendor can persuade the
  contracting officer to determine that the
  governments requirements can be accomplished by
  a minor modification to a commercial item,
  arguably the vendor can avoid the Bayh Dole Act
• Arguably FASA trumps the Bayh-Dole Act
• Honeywell, ASBCA 39974, 92-2 BCA 24,966 (C.O.
  determination that product fell under commercial
  product exception for TINA binding on govt.)

16
FAR Part 12 Patents (continued)

• Actually Reduced To Practice
• Whether an invention was actually reduced to
  practice prior to contract award can be a matter
  of contention. Technical Development Corp. v.
  U.S., 597 F.2d. 733
• Practically speaking, if a contracting officer
  has made a judgment that he or she is acquiring a
  minor modification to a commercial item, the
  C.O. is less likely to assert that the Government
  is entitled to a royalty-free license to
  inventions actually reduced to practice in the
  performance of the minor modification.

17
FAR Part 12 Patents (continued)

• Tip 1 To Vendors
• A contracting officer is only required to insert
  a patent rights clause in solicitations for
  experimental, developmental, or research work.
  FAR 27.303.
• To the maximum extent possible, influence the
  drafting of the statement of work to avoid terms
  such as develop, experiment, and research.
• Similarly, contractor reports to the government
  should avoid using developed, experimented or
  researched.
• Alternative terms might include improve,
  modify, optimize, upgrade, maximize, evolve,
  extend, augment or advance.

18
FAR Part 12 Patents (continued)

• Tip 2 To Vendors
• The parties should carefully craft the statement
  of work to preclude the actual reduction of
  previously conceived inventions from occurring
  under, and being charge to, the Government
  contract. Intellectual Property Navigating
  Through Commercial Waters, USD(ATL), Oct. 15,
  2001 at 4-7.
• However, see Mayman v. Martin Marietta Corp, 894
  F. Suppl. 218 (D. Md. 1995) where this approach
  did not withstand judicial scrutiny during a qui
  tam law suit.

19
FAR Part 12 Technical Data

• To state the obvious -- the best way to protect
  against a trade secret from being compromised by
  the government is not to provide it to the
  Government.
• Ostensibly, FAR 12.211 allows the commercial
  vendor to limit what technical data it will
  provide the Government
• Except as provided by agency-specific statutes,
  the Government shall acquire only the technical
  data customarily provided to the public with a
  commercial item or process.

20
FAR Part 12 Technical Data

• Except as provided by agency-specific statutes,
  the Government shall acquire only the rights in
  that data customarily provided to the public with
  a commercial item or process. FAR 12.211
• The contracting officer shall presume that data
  delivered under a contract for commercial items
  was developed exclusively at private expense.
  FAR 12.211
• DFARS 252.227-7015 Technical DataCommercial
  Items is a fair allocation of rights.
• There is no prescribed legend for commercial
  technical data.

21
FAR Part 12 Computer Software

• Commercial computer software or commercial
  computer software documentation shall be acquired
  under licenses customarily provided to the public
  to the extent such licenses are consistent with
  Federal law and otherwise satisfy the Government
  needs. FAR 12.212(a).
• The Government shall only have those rights
  specified in the license contained in any
  addendum to this contract. FAR 12.212(d).
• C.O. should consider inserting FAR 52.227-19
  Commercial Computer Software Restricted Rights.
• Except for FAR 52.227-19, there is no prescribed
  restrictive legend for commercial computer
  software.

22
FAR Part 12 Suggested Improvement

• FAR 12.207 only allows firm fixed-priced
  contracts or fixed-price contracts with economic
  price adjustment for the acquisition of
  commercial items.
• FAR 12.207 is not mandated by statute.
• Delete FAR 12.207. It is an impediment to the
  FAR Guiding Principle of the Acquisition Team is
  to exercise personal initiative and sound
  business judgment in providing the best product
  or service to meet the customers needs. See
  FAR 1.102(d).

23
Concluding Comments

• For commercial companies, the economy benefit of
  having DOD pay for a large portion of the costs
  for developing new technologies typically
  outweighs the disadvantages of contracting with
  the government.
• Time Domains corporate experience has been that
  it is better to accept the Kings shilling (at
  the cost of providing a royalty-free license to
  some patents) than to deal with vulture
  capitalists.
• Unfortunately, commercial companies generally
  continue to distrust govt contracts because many
  of these companies remain unaware of how to
  astutely use FAR Part 12 and the recent USD/ATL
  guidance.