Intellectual Property and Technical Data in DOD Acquisitions

Intellectual Property and Technical Data in DOD Acquisitions

April 22, 2022
Intellectual Property and Technical Data in DOD Acquisitions
The Department of Defense (DOD) relies extensively on
IP and Technical Data
the organizations that comprise the defense industrial base
A subset of IP issues with particular importance for DOD
(DIB). These entities provide the products and services that
are data rights, an umbrella term for DOD’s rights to the
enable DOD’s business operations and warfighting
technical data, computer software, and computer software
capabilities. In some situations, DOD must also consider
documentation developed under DOD contract. Technical
the need to obtain intellectual property (IP) and technical
data, as defined by 10 U.S.C. §3013, includes “information
data rights in order to operate and maintain the capabilities
... of a scientific or technical nature (including computer
it acquires. IP rights have grown in importance to DOD as
software documentation) relating to supplies procured by an
U.S. defense research and development (R&D) spending as
agency ... and does not include computer software or
a share of global R&D spending has declined—and IP
financial, administrative, cost or pricing, or management
rights are also increasingly important to DIB entities who
data or other information incidental to contract
rely on their portfolios of developed IP to generate profits
administration.” For DOD applications, technical data is
from their R&D investments. Observers such as the
considered to be information describing or related to a
Government Accountability Office (GAO) have said that
contractor-built item needed in order to be able to install,
DOD has not always been consistent in its acquisition and
operate, maintain, repair, or replace that item at a later date.
licensing of IP developed at private expense in the past,
resulting in “reduced mission readiness and surging
A right to use information is separate from ownership of
sustainment costs” in some instances. In recognition of
that information. In federal contracting, companies
these trends, Congress has directed DOD to take a number
generally retain ownership, or title, to technical data and
of actions to improve policies and processes for how DOD
convey a license to use that data to the federal government.
acquires IP.
IP rights with respect to technical data generally refers to
authorization granted by the contractor for DOD to engage
Intellectual Property
in activities that require accessing or modifying the
IP is described broadly as a work or invention that (1) is the
underlying IP. During the contracting process, DOD
product of the human intellect and (2) is protected from
program managers must assess a program’s future IP-
certain unauthorized use. Four types of IP protected by
related activities. If IP such as technical data is deemed
federal law are patents, copyrights, trademarks, and trade
necessary for the future acquisition, modification, upgrade,
secrets. These federal laws (and, in some cases, state laws)
or sustainment of the program, DOD must often make
seek to encourage innovation by providing legal protections
trade-offs amongst factors such as negotiating for access to
for the creation or invention of unique ideas or products. A
those deliverables and associated licenses, or contracting
patent, for example, is a written instrument issued by the
with the IP holder to perform required work at a later date.
U.S. Patent and Trademark Office (see Title 35 of the U.S.
10 U.S.C. §3771 specifies how technical data license rights
Code) that describes an invention and grants the inventor(s)
are established in the DOD contracting process. With some
the exclusive right to make, use, import, and sell the
exceptions, those rights depend on who paid for the
invention within the United States for a period of up to 20
development of the item in question – the federal
years.
government or private entities:
Within the context of defense acquisitions, the Bayh-Dole
 Where an item or process was developed by a contractor
Act of 1980 (P.L. 96-517) governs patent rights for
or subcontractor exclusively through federal funding,
inventions made with federal support. Congress passed the
the United States is granted unlimited rights to “use
Bayh-Dole Act in part to address concerns about the
technical data pertaining to the item or process” or
commercialization of technology developed with public
“release or disclose the technical data to persons outside
funds. Under Bayh-Dole, a federal contractor may elect to
the government or permit the use of the technical data
retain the patent rights for a federally funded invention,
by such persons.” Under the Small Business Act (P.L.
giving the contractor exclusive rights in the invention
85-536), small businesses retain technical data rights for
during the patent’s term. In exchange, the contractor must
contracts awarded under the Small Business Innovation
provide the federal agency with a free government-use
Research (SBIR) and Small Business Technology
license. Although the Bayh-Dole Act only applies to federal
Transfer Research (STTR) programs “for a period of not
contractors that are nonprofit organizations or small
less than 4 years.”
businesses, procurement regulations have applied Bayh-
 Where an item or process was developed by a contractor
Dole’s allocation of patent rights to all federal contractors,
exclusively through private funding, the contractor may
regardless of size.
restrict DOD from releasing or disclosing associated
technical data. Exceptions to this rule are set forth in 10
U.S.C. §3771, and include technical data related to form,
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Intellectual Property and Technical Data in DOD Acquisitions
fit, or function, referencing the identifying
with the sole contractor who can provide or repair a specific
characteristics of a particular system component, and
part or piece of equipment. Some analysts argue that when
technical data that is necessary for operation,
DOD does not have IP rights, entities have minimal
maintenance, installation, or training (known as OMIT)
incentives to respond to government requirements for
of a government procured item.
delivery and performance, and may not be willing to
 Where an item or process was developed by a contractor negotiate a fair and reasonable price for affected items.
through a combination of federal and private funding,
Further implications include issues associated with program
technical data rights are to be established “as early in the
upgrades and sustainment costs over the lengthening
acquisition process as practicable” with the United
lifespans of some DOD weapon systems.
States granted government purpose rights for the use of
technical data pertaining to the item or process by
DOD has taken some steps to address aspects of these
default. Government purpose rights refers to the right to
issues, such as reverse-engineering efforts and calling for
use, duplicate, or disclose technical data for DOD
the creation of government-developed technical data for
purposes only, and to have or permit others to do so for
some types of parts in order to ensure future availability of
DOD purposes only. DOD purposes may include
these components on a cost-effective basis. Other analysts
competitive procurement, but do not include the right to
contend that some DIB entities do not work with DOD due
permit others to use the data for commercial purposes.
to concerns that their IP rights will not be adequately
protected, and argue that DOD should prioritize buying or
10 U.S.C. §3771 also authorizes the Secretary of Defense to
negotiating for access to such IP rights.
determine that “negotiation of different rights ... would be
in the best interest” of DOD. Factors for consideration
Congress, acting in part on the recommendations of the 813
include “increasing competition and lowering costs by
Panel, has mandated changes to DOD’s acquisition and use
developing and locating alternative sources of supply and
of IP in recent years, including:
manufacture.” Requiring a contractor or subcontractor to
“sell or otherwise relinquish” technical data rights to the
 creating a preference for specially-negotiated licenses
United States is generally prohibited. Current DOD IP
for technical data in major weapon systems or
policy emphasizes the need for “early and effective
subsystems of a major weapon system;
understanding, planning, and communications between the
 requiring DOD to establish an IP policy that, in part,
U.S. Government and industry.” DOD has also required
encourages customized IP strategies for each system
each program to have a “robust IP strategy ... throughout
based on factors such as the unique characteristics of the
the entire product life cycle.”
system and its components, and the commercial market;
 establishing an IP Cadre to provide DOD with expert,
Considerations for Congress
consistent guidance on acquiring and licensing IP ; and
In the FY2016 National Defense Authorization Act
 creating a pilot program to allow DOD to investigate
(NDAA), Congress established the Section 813 Panel, a
various mechanisms for IP evaluation and valuation.
special advisory group of government and industry experts
tasked with reviewing technical data rights, restrictions, and
A 2021 GAO report suggested that while DOD had
regulations. This advisory group published its final report in
implemented these changes, some elements, such as the IP
November 2018. The report identified persistent “tension
Cadre, had not yet been institutionalized. GAO found that
points of disagreement” between the government and
DOD funding and staffing levels for the IP Cadre remain
private industry. Each “tension point” is unique, but each
uncertain, and noted that DOD has not yet detailed elements
generally arises from private entities and DOD approaching
of how the IP Cadre will carry out its responsibilities. GAO
IP from diametrically opposite perspectives. A private
also found that DOD currently does not have centralized
entity usually sees IP as a capital asset representing
oversight of acquired or licensed IP and data rights, creating
significant investments of company time and resources, and
the potential for duplicative purchases; DOD officials have
a source of its ability to retain market competitiveness and
indicated that initial steps have been taken to resolve this
generate future income. IBM, for example, reports earning
capability gap.
over $27 billion in income generated by its IP since 1996.
As such, private entities generally want to protect their IP to
Additional Resources
preserve the future monetary value of this asset. This
protection can include control over matters such as who has
Final Report of the Section 813 Panel, https://tinyurl.com/
the right to use the associated technical data. DIB entities
Section813Report
may be particularly sensitive to situations where
GAO Report Defense Acquisitions: DOD Should Take Additional
competitors could potentially access their IP.
Actions to Improve How It Approaches Intellectual Property,

https://www.gao.gov/products/gao-22-104752
To aid in incentivizing investment and development of
CRS In Focus IF10986, Intellectual Property Law: A Brief
warfighting solutions by the DIB, Congress could direct
Introduction
DOD to increase its protections of private sector IP rights.
However, such protection could potentially limit DOD’s

rights to the IP and technical data associated with weapon
systems developed in whole or in part by private industry.
Some implications include “vendor lock,” a situation where
Heidi M. Peters, Analyst in U.S. Defense Acquisition
the government is effectively forced to continue working
Policy
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Intellectual Property and Technical Data in DOD Acquisitions

IF12083

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