Panel: David Burns – McCarter & English, LLP Dan Kelly – McCarter & English, LLP PROTECTING YOUR INTELLECTUAL PROPERTY WHEN DOING BUSINESS WITH THE GOVERNMENT

Panel:David Burns – McCarter & English, LLPDan Kelly – McCarter & English, LLP

PROTECTING YOUR INTELLECTUAL PROPERTY WHEN DOING BUSINESS WITH THE GOVERNMENTMarch 10, 2010

2

Up

AVATAAVATARR

A Serious Man

Precious

Inglourious Basterds

District Nine

The Hurt Locker

An Education

Up in the AirUp in the Air

The Blind Side

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An Education

4

A Serious ManAn Education

by

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A Serious ManAn Education Up in the AirUp in the AirSo you are not

by

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A Serious Man

Precious

An Education Up in the AirUp in the AirSo you are not

To protect what is

by

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A Serious Man

PreciousInglourious

Basterds


To protect what is

by

from the

8

A Serious Man

PreciousInglourious

Basterds


To protect what is

by

from the

So you don’t wind Up

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A Serious Man

PreciousInglourious

BasterdsThe Hurt Locker


To protect what is

by

from the

So you don’t wind Up in

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The Most Common Types of Intellectual Property Protection Patents Trade Secrets Copyrights Trademarks and Service Marks

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Patents

Type of IP Protection

Protectable Subject Matter

Nature of Protection/Rights Granted to the IP Owner

Patents Processes, machines, articles of manufacture, and compositions of matter.

Right to exclude others from making, using, selling, or importing the invention; sometimes referred to as the right to exclude others from “practicing” the invention.

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Trade Secrets




Trade Secrets

Any information having commercial value by being kept secret (e.g., technical, business, or financial information.

Right to control the disclosure and use of the information through contracts or nondisclosure agreements; protection against theft or misappropriation of that information, but not from independent creation or discovery by another party.

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Copyrights




Copyrights Original, creative works fixed in a tangible medium of expression (e.g., literary, musical, or audiovisual works; computer programs).

Exclusive rights to:(1) copy;(2) modify;(3) perform;(4) display; and(5) distribute copies of the copyrighted work. No protection against independent creation of similar works, or against certain “fair uses.”

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Trademarks & Service Marks




Trademarks and Service Marks

Distinctive words, phrases, or symbols that identify the source of goods or services.

Protection from confusingly similar marks, deception, and unfair competition in the marketing of goods and services.

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Preserving Technology Action Items Know the ground rules!

– What kind of contract is it? Who is the agency? What are you being asked to do? What are

you delivering to the government? Of the “Precious” you are delivering, how

much was done before the contract award? What inventions have already been

conceived or reduced to practice?– Are they documented?

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Preserving Technology Action Items What trade secrets have already been

developed and paid for?– Are they documented?

Are the deliverables commercial items or data associated with commercial items?

Disclose! Negotiate!

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Patents

Governed by Title 35 of U.S. Code and Part 27 of FAR and 227 of DFARS

Operative Clauses for Subject Inventions

FAR 52.227-11- (Ownership by the Contractor)DFARS 252.227-7038 (Ownership by the Contractor–Large

Business)FAR 52.227-13 (Ownership by the Government)

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First Level of Inquiry – Patents

Is the Contract a Research, Experimental and Developmental Contract?

Clauses should not be used for Non-Developmental Work

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Second Level of Inquiry: Background Invention or Subject Invention?

Subject Inventions are any Contractor Invention Conceived or First Actually Reduced to Practice in the Performance of the Contract

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“Conception” generally defined as “the complete performance of the mental part of the inventive act”

Must be contemporaneous recognition and appreciation of the invention

Must be a complete and operative invention

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“Reduction to practice” can be an actual or constructive reduction to practice

Constructive reduction to practice requires written description sufficient to allow one skilled in the art to make and use the invention (e.g., a patent application)

In some cases (materials, chemicals) conception and reduction to practice may occur at the same time

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Note that provisions apply if conception occurs pre-contract but reduction to practice occurs during performance under contract

No equitable considerations regarding time or effort spent by contractor prior to contract

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Patent RightsTwo Mandatory Provisions

1. Government receives right “to practice or have practiced for on behalf of the United States the subject invention throughout the world.” Known as Government Use Rights.

2. Government entitled to March-In Rights. If Contractor has not made reasonable progress in bringing it to the commercial market, agency has right to require contractor to grant licenses to third parties.

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How a Contractor Retains Patent Rights

1. Disclose invention to Government (Two Months)

2. Elect to retain title (2 Years – Civilian Agencies and Small Business under DOD, DOE and NASA Contracts; - 8 Months – Large Business under DOD, DOE and NASA Contracts)

3. Diligently prosecute patent application

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Diligent Prosecution

Must file an initial patent application within one year after election of title (sooner if required by statutory period)

Foreign filings must be made within 10 months of initial filing

Shorter time period for foreign filings than generally permitted under Patent Cooperation Treaty

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Patent Rights and Subcontracts

Mandatory Flow Down Provisions for Subcontractors which require Developmental Work

Prime Contractor not free to negotiate away Subcontractor’s Rights - Flow Directly to Government

Recent FAR changes Prohibit Mindless Flow Down

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Note Alternative Clause Giving Government Title – 52.227-13 (Large For Profit Business or Foreign Business Performing Outside U.S./DOE and NASA Contracts)

If FAR 52.227-13 applies, Government always retains title and contractor has a royalty free license to use in any country for any purpose.

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Patent RightsOpportunities to Negotiate

1. Conceived vs. Reduced to Practice2. Extensions to File Patent Applications Before

“Statutory Bar” Period (One Year after Publication, Public Use or Public Sale)

3. Negotiating Non-Election of Title by Contractor or Government Preserving Patentable Subject Invention as Trade Secret

4. Extension of Time for March-In Rights

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Background Inventions

– Inventions conceived and reduced to practice prior to contract

– Government does not have any special rights to invention; Government may negotiate license and Contractor may obtain royalties

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Authorization and Consent

If the patented invention is used “by or for the United States,”

Then a patent owner-plaintiff is limited to:– (1) Who it can sue (only the Government)– (2) What court it can sue in (COFC)– (3) Remedy for infringement (damages)

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Authorization and Consent

Two forms:– (1) Implied (direction of contracting officer,

knowledge of government, specifications or drawings)

– (2) Express through clause: FAR 52.227-1 (Limited) and Alternate I (Broad) (R&D Contracts)

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Patent Indemnity

FAR 52.227-3 / FAR 52.212-4(h)– Government has the right to be

indemnified (upon proper notice) in instances where the contract results in the delivery of commercial items.

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Trade Secrets - Key Concepts

Technical Data and Computer SoftwareTD: Recorded information of a scientific or technical

nature. Both FAR and DFARS now include in definition: computer software documentation, including owner’s manuals, training and instruction manuals operating instructions and computer data bases.

CS: Programs, source code, source code listings, object code listings, algorithms, etc. and related material that enables software to be reproduced, recreated or recompiled

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Commercial Items FAR Part 2.101 Product or service developed or regularly

used for non-governmental purposes which– Has been sold or licensed to the public; or– Has been offered for sale or license to the public

May be modified as long as there is no significant change in the “function” or “purpose”

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Commercial Computer SoftwareUntil December 7, 2007 – No Operative Definition in FAR

FAR 2.101 Revised: Defined as “any computer software that is a commercial item”

FAR and DOD both mandate that when an agency is requiring commercial computer software, the software is to be acquired “under licenses customarily provided to the public to the extent the license is consistent with federal laws and otherwise satisfies government needs.”

Rights Category2 Applicable to TDor CS?

Criteria for Applying Rights Category Permitted Uses within Government

Permitted Uses outside Government3

Unlimited Rights (UR)

Both TD and CS Development exclusively at Government expense;4 also any deliverable of certain types – regardless of funding.5

Unlimited; no restrictions.

Government Purpose Rights (GPR)

Both TD and CS Development with mixed funding.4 Unlimited; no restrictions.

Only for “Government purposes”; no commercial use. (5 year window)

Limited Rights (LR) TD only Development exclusively at private expense.4 Unlimited, except may not be used for manufacture

Emergency repair/ overhaul; evaluation by foreign government.

Restricted Rights (RR)

CS only Development1 exclusively at private expense.4

Only one computer at a time; minimum backup copies; modification.

Emergency repair/ overhaul; certain service/maintenance contracts.

Prior Government Rights

Both TD and CS Whenever Government has previously acquired rights in the deliverable TD/CS.

Same as under the previous contract.

Specifically Negotiated License Rights (SNLR)

Both TD and CS Mutual agreement of the parties; use whenever the standard rights categories do not meet both parties’ needs.

As negotiated by the parties; however,must not be less than LR in TD, and

must not be less than RR in CS.6

Notes:

1. Critical Need to Specify Deliverables. The standard clauses address rights but do not include delivery requirements. The contract must explicitly specify the content, format, and delivery medium for all IP deliverables that are necessary to meet DoD’s needs. For TD, it is necessary to specify the level of detail and requirements for delivery in preferred electronic/digital formats. For CS, it is critical to specify requirements for both the executable code and the source code.

2. Mandatory Listing Requirements. All TD and CS to be delivered with less than UR must be identified in a list attached to the contract. Pre-award listing requirements are specified at DFARS 252.227-7017; post-award requirements are at DFARS 252.227-7013(e) and -7014(e).

3. Release Procedures/Restrictions. All authorized third-party recipients of TD/CS with other than UR must either sign the standard NDA from DFARS 227-7103-7 or receive the TD/CS under a contract containing DFARS 252.227-7025. Additional notice requirements exist for releases of LR data or RR software.

4. Source of Development Funding-at the “Lowest Practicable Level.” For TD, the determination is based on the funding for the development of the item, component, or process (ICP) to which that data pertains (vice the development of the technical data itself). For CS, the determination is based on the source of funding for that software. If the ICP or software is developed with mixed funding, the default GPR license may be inequitable if the Government has funded only a small portion of the overall development costs. This imbalance is resolved by determining the source of funding at “lowest practicable level”: the deliverable ICP or software is divided into segregable components (e.g., sub-elements of ICPs, or sub-routines of CS), and the funding determination is made for each of the components individually. For TD, see DFARS 227.7103-4(b) and 252.227-7013(a)(6)-(9); for CS, see DFARS 227.7203-4(b) and 252.227-7014(a)(6)-(9).

5. Unlimited Rights-Regardless of Funding Source. Paragraph (b)(1) of the DFARS 252.227-7013 and -7014 clauses establish numerous categories for which the Government is entitled to receive UR, regardless of which party funded the development of the underlying technology. For example, “form, fit, and function” data; or data/software that is publicly available without restrictions. See 10 U.S.C. 2320(a)(2)(C).

6. Minimum Rights. For TD, the minimum rights are established by statute (10 U.S.C. 2320) and are non-negotiable. For CS, the minimum rights are based solely on the DFARS, for which the parties could seek a deviation in circumstances in which DoD’s requirements can be satisfied with less than RR.

Rights1 in Noncommercial Computer Software (CS) and Technical Data (TD) Covering Noncommercial Items

SOURCE: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, Intellectual Property: Navigating Through Commercial Waters (Oct. 15, 2001), available at www.acq.osd.mil/dpap/Docs/intelprop.pdf.


Rights Category2

Applicable to TD

or CS?

Criteria for Applying Rights Category

Permitted Uses within

Government

Permitted Uses outside

Government3


Both TD and CS

Development exclusively at Government expense;4 also any deliverable of certain types – regardless of funding.5


Notes:





5. Unlimited Rights-Regardless of Funding Source. Paragraph (b)(1) of the DFARS 252.227-7013 and -7014 clauses establish numerous categories for which the Government is entitled to receive UR, regardless of which party funded the development of the underlying technology. For example, “form, fit, and function” data; or data/software that is publicly available without restrictions. See 10 U.S.C. 2320(a)(2)(C).



Rights Category2

Applicable to TD

or CS?



Government


Government3

Government Purpose Rights (GPR)

Both TD and CS

Development with mixed funding.4


Only for “Government purposes”; no commercial use. (5- year window)

Notes:







Rights Category2

Applicable to TD

or CS?



Government


Government3

Limited Rights (LR)

TD only Development exclusively at private expense.4

Unlimited, except may not be used for manufacture

Emergency repair/ overhaul; evaluation by foreign government.

Notes:







Rights Category2

Applicable to TD

or CS?



Government


Government3

Restricted Rights (RR)

CS only Development1 exclusively at private expense.4

Only one computer at a time; minimum backup copies; modification.

Emergency repair/ overhaul; certain service/maintenance contracts.

Notes:







Rights Category2

Applicable to TD

or CS?



Government


Government3

Prior Government Rights

Both TD and CS

Whenever Government has previously acquired rights in the deliverable TD/CS.

Same as under the previous contract.

Notes:






Rights Category2

Applicable to TD

or CS?



Government


Government3


Both TD and CS

Mutual agreement of the parties; use whenever the standard rights categories do not meet both parties’ needs.

As negotiated by the parties; however,

must not be less than LR in TD, andmust not be less than RR in CS.6

Notes:




6. Minimum Rights. For TD, the minimum rights are established by statute (10 U.S.C. 2320) and are non-negotiable. For CS, the minimum rights are based solely on the DFARS, for which the parties could seek a deviation in circumstances in which DoD’s requirements can be satisfied with less than RR.


Rights1,2 in Commercial Computer Software3,4 (CS) and Technical Data (TD) Covering Commercial Items3,4

Rights Category5 Applicable to TDor CS?

Criteria for Applying Rights Category Permitted Uses within Government

Permitted Uses outside Government3


TD only Any TD of certain specified types or classes, regardless of commercial status.6


Standard DFARS “7015” Rights

TD only Default rights category for all TD covering commercial items except those qualifying for UR as stated above.

Unlimited, except may not be used for manufacture.

Only for emergency repair overhaul.

Standard Commercial License

CS only Default rights category for all commercial CS. As specified in the license customarily offered to the public, DoD must negotiate for any specialized needs.


Both TD and CS Mutual agreement of the parties; should be used whenever the standard rights do not meet both parties’ needs.

As negotiated by the parties; however, by statute, the Government cannot accept less than the minimum standard 7015 rights in TD.7

Notes:

1. Critical Impact on IP Delivery Requirements. DoD policy is to acquire, in addition to lesser rights, only those IP deliverables that are customarily offered to the public. In many cases this will be substantially different (e.g., less detailed TD; no source doe for CS) than the deliverables DoD typically receives for noncommercial TD or CS. DoD must specifically negotiate for any additional IP deliverables that it requires.

2. Key: Early Identification of Commercial Technologies. Because both the IP deliverables and the license rights are significantly affected when acquiring commercial technologies, it is critical to identify how these issues affect the acquisition strategy early in the acquisition process.

3. Definitions. “Commercial item” is defined at FAR 2.101 (and 52.202-1), and “commercial computer software” is defined in FAR 2.101 and DFARS 252.227-7014(a)(1).

4. Adapting/Modifying Commercial Items. Commercial items may be modified to meet DoD’s requirements without losing their commercial status, as long as the adaptations qualify as “minor modifications” or modifications “of a type customarily available in the commercial marketplace.” See FAR 2.101(c), and DFARS 252.227-7014(a)(1) and (12).

5. DFARS Rights versus Standard Commercial Licenses. Rights in TD covering commercial items are specified at DFARS 252.227-7015; the default rights are similar to limited rights that apply to noncommercial TD. FAR 52.227-19 gives the Government “restricted rights” in commercial computer software and is to be used when “there is confusion as to whether the Government’s needs are satisfied or whether a customary commercial license is consistent with Federal Laws.” In the DFARS, there is no clause covering commercial CS; DoD takes the rights customarily offered to the public (often a “shrink-wrap” or “click-wrap” license) unless those rights do not meet DoD’s minimum needs or violate Federal procurement law. In all cases, a copy of the standard commercial license agreement or any SNLR must be attached to the contract.

6. Unlimited Rights-Regardless of Commercial Status. DFARS 252.227-7015(b)(1) lists numerous categories of TD for which the Government is entitled to receive UR – regardless of the commercial status or source of funding for the technology. For example, “form, fit, and function” data or data/software that is publicly available without restrictions. The categories are based on 10 U.S.C. 2320(a)(2)(C).

7. Minimum Rights. For TD, the minimum rights are established by statute (10 U.S.C. 2320) and are non-negotiable.



Rights Category5

Applicable to TD

or CS?



Government


Government3


TD only Any TD of certain specified types or classes, regardless of commercial status.6


Notes:






6. Unlimited Rights-Regardless of Commercial Status. DFARS 252.227-7015(b)(1) lists numerous categories of TD for which the Government is entitled to receive UR – regardless of the commercial status or source of funding for the technology. For example, “form, fit, and function” data or data/software that is publicly available without restrictions. The categories are based on 10 U.S.C. 2320(a)(2)(C).



Rights Category5

Applicable to TD

or CS?



Government


Government3

Standard DFARS “7015” Rights

TD only Default rights category for all TD covering commercial items except those qualifying for UR as stated above.

Unlimited, except may not be used for manufacture.

Only for emergency repair overhaul.

Notes:








Rights Category5

Applicable to TD

or CS?



Government


Government3

Standard Commercial License

CS only Default rights category for all commercial CS.

As specified in the license customarily offered to the public, DoD must negotiate for any specialized needs.

Notes:








Rights Category5

Applicable to TD

or CS?



Government


Government3


Both TD and CS

Mutual agreement of the parties; should be used whenever the standard rights do not meet both parties’ needs.

As negotiated by the parties; however, by statute, the Government cannot accept less than the minimum standard 7015 rights in TD.7

Notes:





5. DFARS Rights versus Standard Commercial Licenses. Rights in TD covering commercial items are specified at DFARS 252.227-7015; the default rights are similar to limited rights that apply to noncommercial TD. FAR 52.227-19 gives the Government “restricted rights” in commercial computer software and is to be used when “there is confusion as to whether the Government’s needs are satisfied or whether a customary commercial license is consistent with Federal Laws.” There is no clause covering commercial CS; DoD takes the rights customarily offered to the public (often a “shrink-wrap” or “click-wrap” license) unless those rights do not meet DoD’s minimum needs or violate Federal procurement law. In all cases, a copy of the standard commercial license agreement or any SNLR must be attached to the contract.

7. Minimum Rights. For TD, the minimum rights are established by statute (10 U.S.C. 2320) and are non-negotiable.


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Deliverables

What is Required to be Delivered under Contract

Data Rights clauses do not specifyAgency has discretion to draft content, record/storage format and delivery/storage medium

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Deliverables

→ Deliverables can be altered→ Life Cycle Maintenance/Support Agreements→ Deferred Ordering DFARS 252.227-7027 (3 year expiration date after acceptance of all items on termination of contract)→ Deferred Delivery Procedures (“Deferred Delivery” data or software) (2 year window)→ Third Party Escrow Arrangements

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Identification of Pre-Existing IP That will be Delivered

Precondition for government getting less than unlimited rights

Must identify technical data and computer software to be furnished with restrictions, the basis, and asserted rights category. Must be signed by someone with binding authority. – DFARS 252.227-7017, 252.227-7013(e), 252.227-7014(e)

List commercial computer software and commercial technical data even though not covered

Separately list background inventions – identify U.S. Patent or Patent Application covering invention and information regarding license rights.

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Identification of Pre-Existing IP That will be Delivered

Note: Assertions are binding on contractor; government has up to three years after final payment or termination to challenge assertions DFARS 252.227-7019 (software)DFARS 252.227-7037 (technical data)

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Use of Restrictive Markings and Control of Deliverables

ProposalsSolicited Proposals – DFARS 252.227-7016 Restricts Government’s Use pre-award in evaluation of proposal. Data Rights clauses kick in after award. Need appropriate restrictive legends.

Unsolicited Proposals – FAR 15.609 contains special legend which must be included

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DeliverablesLegend Menu for Non-Commercial Deliverables

1. Copyright Notice from 17 U.S.C.§§ 401-4022. Government Purpose Rights (for TD and CS)3. Special License Rights (for TD and CS)4. Limited Rights (For TD)5. Restricted Rights (For CS)See DFARS 252.227-7013 and 252.227-7014

EVERYTHING ELSE IS NON-CONFORMING

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Legend for Commercial TechnologiesFor Technical Data – DFARS 252.227-7015(d) requires a legend but there is no formatLegend should reference government use restrictions or separate license agreementFor computer software – follow standard commercial practices

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WHEN IN DOUBT, GET HELP

Get help from a lawyer Conduct intellectual property audits Develop form contracts Review solicitations, proposals and contract

awards Negotiate with primes and the government Resolve disputes Enforce rights Develop internal business policies Train administrative, legal, and engineering staff

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Panel Members

David BurnsMcCarter & English, LLP265 Franklin StreetBoston, MA [email protected]

Dan KellyMcCarter & English, LLP265 Franklin StreetBoston, MA [email protected]

Documents

Panel: David Burns – McCarter & English, LLP Dan Kelly – McCarter & English, LLP PROTECTING YOUR INTELLECTUAL PROPERTY WHEN DOING BUSINESS WITH THE GOVERNMENT