Diane M. SidebottomStrategic Analysis, Inc.

Intellectual Property in Government SBIR Contracts

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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

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Basic Protection Methods

Intellectual property (IP) is covered by four basic protection categories1. Patents

2. Trade Secrets

3. Trademarks

4. 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

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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)

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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.

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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

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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

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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 52.227-11 is used most of the time

– FAR Subpart 52.227-13 (Ownership by the Government) is rarely used and only after the Government completes the appeal process

– DoD will use DFARS Subpart 252.227-7038 when contracting with a large business

All clauses flow down to subcontractors

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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

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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

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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

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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

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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

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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

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Technical Data and Computer Software

Four basic levels of license rights1. 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

2. Government Purpose Rights Right to use within the Government or have it practiced for or on behalf of the

Government throughout the world

3. 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

4. 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

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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 252.227-7018

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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

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Specifics of DFARS 252.227-7018

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

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Specifics of DFARS 252.227-7018

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

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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

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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

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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

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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