government contracts and your intellectual property

GOVERNMENT CONTRACTS AND YOUR INTELLECTUAL PROPERTY

SPACE CITY CHAPTER

DAVID A. BOLTON

ASSOCIATE GENERAL COUNSEL

UNITED SPACE ALLIANCE, LLC

NCMA MEMBER

[email protected]

February 18, 2010

Agenda

What is intellectual property?

Types of intellectual property

52.227-14 Rights in Data—General

Data and Clauses

Software License Agreement Considerations

Indemnification and infringement

Proprietary Information Exchange Agreements

The prime contract?

Questions?

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What is Intellectual Property (IP)?

Intellectual property refers to creations of the mind: inventions, literary and

artistic works, and symbols, names, images, and designs used in commerce

Intellectual property is divided into two categories:

Industrial property, which includes inventions (patents), trademarks, and

industrial designs

Copyright, which includes literary and artistic works such as novels, poems

and plays, films, musical works, artistic works such as

drawings, paintings, photographs and sculptures, and architectural designs

Types of Intellectual Property

Patent - A grant of a property right by the Government to an inventor which allows the inventor ―to exclude others from making, using, or selling the invention.‖

Trademarks - Anything used in the marketplace to distinguish goods or services of one source from those of other sources. Typically, it is a word or symbol

Copyright - A form of protection provided by U.S. law giving exclusive rights to authors of ―original works or authorship‖ fixed in any tangible medium of expression

Trade Secrets - A formula, a device, or other information that is secret and gives a commercial advantage over competitors who do not know or use it

Patents

Provisional patent:

A provisional patent application lasts one year and allows filing without any

formal patent claims, oath or declaration, or any information disclosure

(prior art) statement

It provides the means to establish an early effective filing date in a non-

provisional patent application

It also allows the term "Patent Pending" to be applied

Utility patent:

Patent applications filed after June 8, 1995—20 years from effective filing

date

Patent owner given the right to prevent others from making, using, offering

for sale, selling, or importing the claimed invention within the U.S.

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Patent Process

Engage Outside Counsel

Counsel Interviews Inventor

Counsel Opinion

Invention Patentable $2K - $4K

Direct Charge

Invention Conceived Or Reduced

To Practice

Decision To Seek Patent

Seek NASA Waiver Of Invention

Rights

Waiver Received

Notify NASA of Invention NTR

IRAD

Invention Conceived Or Reduced

To Practice

Decision - Seek Patent Protection

Provisional Patent

Utility Patent

Patent Process

Utility Patent

Twenty Year Protection

Inventor/Counsel Prepare Patent $10K -

$20K

File Patent $1.5K

Office Actions Received From Examiner

Patent Issued $1K

Pay Maintenance Fees

Abandon Utility Patent 3.5 Years $1K

7.5 Years $2.3K

11.5 Years $3.8K

Counsel Confers With Inventor Filing

Amendments $2K - $4K Per Action

Provisional Patent

One Year Protection

Inventor/Counsel Prepare

Patent $4K - $8K

File Patent $1K

File Utility Patent?

Patent Issued

Yes

No

Abandon Provisional Patent

No Yes

Defensive Publication

A defensive publication, or defensive disclosure, is an intellectual property

strategy used to prevent another party from obtaining a patent on a product,

apparatus or method for instance.

The strategy consists in disclosing an enabling description and/or drawing of the

product, apparatus or method so that it enters the public domain and becomes

prior art.

Therefore, the defensive publication of perhaps otherwise patentable information

may work to defeat the novelty of a subsequent patent application.

One reason why companies decide to use defensive publication over patents is

cost.

Patent Clauses

52.227-1 Authorization and Consent (Alt I for R&D)

52.227-2 Notice and Assistance Regarding Patent and Copyright Infringement

52.227-3 Patent Indemnity

52.227-11 Patent Rights - Retention by the Contractor

1852.227-70 New Technology

1852.227-72 Designation of New Technology Representative and Patent

Representative

1852.227-71 Requests for Waiver of Rights to Inventions

1852.227-84 Patent Rights Clauses

Copyright

Copyright protection

Occurs upon creation

Lasts for the life of the author plus 70 years

For ―works for hire,‖ lasts 95 years from publication or 120 years from creation, whichever expires first

Copyright registration

Not required

Copyright ownership resides with:

Author

Employer when work for hire

Can you put a Dilbert cartoon on a slide presentation?

Copyright

FAR 52.227-14, as modified by NFS 1852.227-14, allows NASA to control copyright in work created under a NASA contract

Prior written permission of Contracting Officer is required to assert copyright

data means recorded information, regardless of form or the media on which it may be recorded

includes information of a scientific or technical nature

Work For Hire

A work made for hire is an exception to the general rule that the person who actually creates a work is the legally recognized author of that work

According to copyright law in the United States if a work is "made for hire", the employer—not the employee—is considered the legal author

The incorporated entity serving as an employer may be a corporation, an organization, or an individual

Trademark

Provide protection for words or symbols or combination used by manufacturer or merchant to identify source of goods

Become effective when used on goods in commerce

Protection lasts indefinitely

If properly used

If renewed

Trade Secret

A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers

is the subject of reasonable efforts to maintain its secrecy

The formula for Coca-Cola® is a famous trade secret


(b) Allocation of rights.

(1) Except as provided in paragraph (c) of this clause, the Government shall

have unlimited rights in—

(i) Data first produced in the performance of this contract;

(ii) Form, fit, and function data delivered under this contract;

(iii) Data delivered under this contract (except for restricted computer

software) that constitute manuals or instructional and training material for

installation, operation, or routine maintenance and repair of

items, components, or processes delivered or furnished for use under this

contract; and

(iv) All other data delivered under this contract unless provided otherwise

for limited rights data or restricted computer software in accordance with

paragraph (g) of this clause.


(h) Subcontracting. The Contractor shall obtain from its subcontractors all

data and rights therein necessary to fulfill the Contractor‘s obligations to the

Government under this contract.

If a subcontractor refuses to accept terms affording the Government those

rights, the Contractor shall promptly notify the Contracting Officer of the refusal

and shall not proceed with the subcontract award without authorization in

writing from the Contracting Officer.

Without Alternates II and III in the contract, the Government should only

receive unlimited rights data

With Alternates II and/or III in the contract, the Government gets limited rights

data and/or restricted computer software


Alternate I (Dec 2007). As prescribed in 27.409(b)(2), substitute the following definition for ―limited rights data‖ in paragraph (a) of the basic clause: ―Limited rights data‖ means data, other than computer software, developed at private expense that embody trade secrets or are commercial or financial and confidential or privileged.


Alternate II (Dec 2007). As prescribed in 27.409(b)(3), insert the following paragraph (g)(3) in the basic clause:

(g)(3) Notwithstanding paragraph (g)(1) of this clause, the contract may identify and specify the delivery of limited rights data, or the Contracting Officer may require by written request the delivery of limited rights data that has been withheld or would otherwise be entitled to be withheld. If delivery of that data is required, the Contractor shall affix the following ―Limited Rights Notice‖ to the data and the Government will treat the data, subject to the provisions of paragraphs (e) and (f) of this clause, in accordance with the notice:


Alternate III (Dec 2007). As prescribed in 27.409(b)(4), insert the following paragraph (g)(4) in the basic clause:

(g)(4)(i) Notwithstanding paragraph (g)(1) of this clause, the contract may identify and specify the delivery of restricted computer software, or the Contracting Officer may require by written request the delivery of restricted computer software that has been withheld or would otherwise be entitled to be withheld. If delivery of that computer software is required, the Contractor shall affix the following ―Restricted Rights Notice‖ to the computer software and the Government will treat the computer software, subject to paragraphs (e) and (f) of this clause, in accordance with the notice:


Contractor has right to:

use, release to others, reproduce, distribute, or publish data first produced or specifically used by contractor in performance of a contract except computer software and as otherwise specified

contractor may not copyright, publish or release to others any computer software first produced in performance of contract without CO‘s prior written permission

contractor is allowed to publish and copyright scientific and technical articles based on data first produced in performance of a contract not subject to other restrictions

52.227-14 (d) (3) If the Contractor receives or is given access to data necessary for the performance of this contract that contain restrictive markings, the Contractor shall treat the data in accordance with such markings unless specifically authorized otherwise in writing by the Contracting Officer.


Government Purpose License – Copyrighted Work

For material other than software: can reproduce, prepare derivative works, distribute to the public, perform or display publicly, by or on behalf of the Government

Release the work outside the Government for governmental purposes

• May provide data to another contractor for performance of a government contract

Software: can reproduce, prepare derivative works, perform or display publicly, but not distribute to the public


52.227-14 (h) Subcontracting. The Contractor shall obtain from its

subcontractors all data and rights therein necessary to fulfill the Contractor‘s

obligations to the Government under this contract. If a subcontractor refuses to

accept terms affording the Government such rights, the Contractor shall

promptly notify the Contracting Officer of the refusal and shall not proceed with

the subcontract award without authorization in writing from the Contracting

Officer.

Does the subcontractor grant the prime rights to its IP?

Substitute Contractor for the Government?

Or the right to pass the rights to the Government

Any right to the prime should extinguish

Data

Definition

Recorded information, regardless of form or the media on which it may be

recorded

The term includes technical data and computer software

Does not include information incidental to contract administration, such as

financial, administrative, cost or pricing, or management information

Data

Representation of Limited Rights Data and Restricted Computer software

(52.227-15)

REPRESENTATION CONCERNING DATA RIGHTS

Offeror has reviewed the requirements for the delivery of data or software

and states (offeror check appropriate block)--

[] None of the data proposed for fulfilling such requirements qualifies as

limited rights data or restricted computer software.

[] Data proposed for fulfilling such requirements qualify as limited rights data

or restricted computer software and are identified as follows:

Data Clauses

52.227-14 Rights in Data-General

52.227-15 Representation of Limited Rights Data and Restricted Computer Software

52.227-16 Additional Data Requirements

52.227-17 Rights in Data-Special Works

52.227-19 Commercial Computer Software-Restricted Rights

52.227-20 Rights in Data - Program Small Business Innovation Research

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Data Clauses

52.227-21 Technical Data Declaration, Revision, and Withholding of Payment-Major Systems

52.227-23 Rights to Proposal Data (Technical)

1852.227-86 Commercial Computer Software-Licensing

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Rights Granted Under the License

Exclusive vs. non-exclusive

• primarily an issue for custom-made software

Revocable vs. irrevocable

Right to use the user manual and related documentation

Term of License

Perpetual or defined time period

Renewal rights and terms

In-house vs. hosted (ASP) model

Data security concerns

ITAR concerns

Data Center security concerns


Scope of License

License internal operations only?

Number of users – named users/concurrent users and variations

Number of sites/number of computers

Copying rights/backup

Use by subsidiaries and affiliates

Right to modify and combine with other products/who owns modifications?

Prohibited uses

Transferability and Sublicensing Restrictions

Typically, license may not be assigned, transferred, sublicensed or pledged

Typically, licensees may not use the software for third party training, commercial time sharing, rental, or service bureau use

Restrictions on the use at a particular location?

Ability to transfer to the Government?


Right to Source Code

Does licensee need to obtain or have access to source code?

How practical even if obtained?

Stability of licensor

Source code escrow and alternatives

Limitations on when source code could be accessed or used

Updating the source code available to the licensee

Ownership of the Software

Express statement that licensor owns and retains all title, copyright, and other proprietary rights in the software and documentation

Limiting access of employees, consultants, or third party

Representation of licensor as to ownership of the software

Ownership issues with respect to licensee modifications


Maintenance

Term

Fee - cap

Implementation

Technical assistance – Call Center

Updates – left and right of the decimal point (version.update)

Bug fixes

Payment Provisions

Schedule of payments

Discounts

Payments linked to licensee accepting test of the software

Late fees

Shipping charges

Indemnification

An indemnity is a promise by one party to take financial responsibility for damages that the other may suffer as a result of the first party‘s breach

Often related to infringement of intellectual property rights of a third party and breach of warranty

Such indemnities often give the indemnifying party the right to control the defense of a litigation by a third party against one or both parties to the agreement

The indemnified party will be required to cooperate with the indemnifying party in defending the action

Methods of indemnity include:

Payment of cash

Repairs

Replacement

Infringement Indemnification

The Clause: Infringement Indemnity: Seller hereby indemnifies Buyer, its successors, assigns, agents, customers, and users of any work product and/or Articles against loss, damage, or liability, including costs and expenses and attorneys’ fees, which may be incurred on account of any suit, claim, judgment, or demand involving infringement or alleged infringement of any intellectual property rights in the manufacture, use, or disposition of any Work Product hereunder, provided Buyer shall notify Seller of any suit instituted against it, and to the full extent of its ability to do so, shall permit Seller to participate in the defense of same or to make settlement in respect thereto. Buyer does not grant indemnity to Seller for infringement of any intellectual property rights, including patent, trademark, copyright, trade secret, trade mark, mask works, or data rights.

Claim?

Proprietary Information Exchange Agreements (PIEA)

A PIEA, also called a non-disclosure agreement (NDA), a confidential disclosure agreement (CDA), confidentiality agreement or secrecy agreement, is a legal contract between at least two parties that outlines confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict from generalized use

PIEAs are commonly signed when two companies are considering doing business together and need to understand the processes or intellectual property used in one another's businesses solely for the purpose of evaluating the potential business relationship

NDAs can be mutual, meaning both parties are restricted in their use of the materials provided, or they can only restrict a single party


Suggestion - Reject a seller‘s request to make the confidentiality mutual and ask the seller to describe the types of confidential or proprietary information they anticipate providing

Suggestion - Supersede the PIEA by the Purchase Order/Subcontract

• cut and paste the agreed to language and necessary clauses from the PIEA

Note that technical data/computer software developed at private expense should be handled as Limited Rights Data/Restricted Computer Software under FAR 52.227-14, Rights in Data – General, and not under a separate confidentiality provision


Residuals - Residuals are provisions inserted into PIAs that exclude from the definition of ‗confidential information‘, information which the employee of the receiving party has retained in his or her unaided memory

The clause was first introduced by IBM

The Clause - The Recipient may disclose and use the ideas, concepts, know-how and techniques related to Recipient‘s business activities which are contained in the Discloser‘s Information and retained in the memories of Recipient‘s employees who have had access to the Information pursuant to this Agreement

Acceptable? - In practice this type of provision diminishes the contractual obligations of the receiving party to maintain confidentiality and should therefore be resisted


Alternative - The originating party accepts that the employees of the receiving party during the exchange of information may develop their knowledge, skill and experience as it relates to information technology. The subsequent use by such employees of such knowledge, skill and experience in the ordinary course of business with the receiving party does not constitute a breach of this Agreement.

The right to use such knowledge, skill and experience, as described in the above sentence, does not include the right to disclose: (i) the source of such knowledge, skill and experience, (ii) any financial, statistical, business or personnel information or data, (iii) any product, service, technique or process information or data related to the manner in which or how the originating party conducts its business, or (iv) business plans of the originating party.


Equitable Remedies - Equitable remedies are distinguished from "legal" remedies (which are available to a successful claimant as of right) by the discretion of the court to grant them

The Clause - The Parties acknowledge that money damages would not be sufficient remedy for any breach of this Agreement by either Party and that the non-breaching Party shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed exclusive remedies for breach, but shall be in addition to all other remedies available at law or equity to the non-breaching Party.

Proprietary Information Exchange Agreements

Acceptable?

An injunction is an order of a court requiring a person, corporation, or government entity to stop doing something and refrain from doing something in the future

Injunctions are issued, only "when the remedy at law is inadequate."

The party seeking the relief must show that they will suffer irreparable harm and the award of money damages would be inadequate

• This clause relieves the party from having to show these two elements

They must still show a breach of the agreement however

Proprietary Information

The Clause: Confidential or Proprietary Information: Seller shall keep confidential and otherwise protect from disclosure all information obtained from Buyer in connection with this Order and identified as confidential or proprietary. Unless otherwise expressly authorized herein or by Buyer, Seller shall use such information, and any other information provided by Buyer thereunder, only in the performance of and for the purpose of this Order. (a) Upon Buyer‘s request, and in any event upon the completion, or cancellation of this Order, Seller shall return all such information to Buyer or make such other disposition thereof as directed by Buyer. In all subcontracts and purchase orders issued by Seller for performance of work related to this Order, Seller shall, with the prior written approval of Buyer, be permitted to disclose Buyer information under the same obligations as are contained in this clause. (b) Seller shall be liable to Buyer for any loss of the information. (c) Any information which Seller may disclose to Buyer with respect to the design, manufacture, sale, or use of the articles covered by this Order shall be deemed to have been disclosed as part of the consideration for this Order, and Seller shall not assert any claim against Buyer by reason of Buyer‘s use thereof. (d) The ownership of any information disclosed by a party hereunder shall remain in that party.

The Prime Contract?

Know what‘s in the prime contract

Responsibilities

Obligations

Requirements

Flow-downs

Data rights

Questions?

“To be sure, all market economies require a rule of law to function--laws of

contracts…Even today, much of business is transacted on parties'

undocumented verbal agreements. We take this for granted and rarely

pause to ponder how unusual this practice is.”

Remarks by Chairman Alan Greenspan – Commencement address to the

Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania

May 15, 2005

government contracts and your intellectual property

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