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Tech America Part 227 Rewrite

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The document discusses trends in how the US government acquires commercial information and licenses to technical data from private companies. Specifically, it notes that over the past two decades the government liberalized these policies but more recently proposed more restrictive conditions. It analyzes these proposed changes, including expanding the rights the government receives in commercial information and increasing burdens on companies. The document advises companies to stay informed on policy changes, carefully negotiate license rights, and mark commercial information before providing it to government contractors.

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The Changing Environment of Licensing Commercial Information to the Federal Government William (Bill) C. Anderson Chief Intellectual Property Counsel United Launch Alliance, LLC Steven M. Masiello Partner McKenna Long & Aldridge, LLP 1
Overview Over the past two decades, the Government significantly liberalized how it acquires commercial software and technical data (commercial information) Recently, the Government proposed new, far more restrictive, conditions for the acquisition of commercial information This presentation: discusses these new conditions identifies trends in Government information acquisition regulations discusses how companies can protect their interests despite these trends 2
Information Procurements Prior to 1995 DoD procurement system designed primarily for the acquisition of military-unique products Government typically needed significant information and expansive rights in information pertaining to those products Under DFARS contract clauses the Government is granted license rights in all information that is either created under the contract or delivered to the Government (Limited/Restricted, Specifically Negotiated, Government Purpose, Unlimited) 3
Information Procurements Prior to 1995 (cont.) Some commercial organizations were reluctant to do business with the Government due to: Administrative burdens (e.g., added accounting regulations, unique restrictive legends, flowdown requirements, other non- value added requirements, etc.) Concerns that the Government would receive expansive non- standard rights in commercial information Requirement to prove exclusive development of ICP/software Concerns particularly acute in software industry At end of Cold War the Government desired cost savings achievable through commercial procurements Result: Clinton-era restructuring of acquisition system to be more friendly to commercial-item acquisitions 4
The Commercial Item Revolution The 1994 Federal Acquisition Streamlining Act Created preference in favor of commercial item purchases Defined Commercial Item Defined Commercial Item subcontractor Waived certain DoD technical data rights-related statutory requirements, but only for commercial item subcontracts Regulatory changes Implemented on both the federal level and within the DoD Separate structure created for commercial items more consistent with standard commercial terms and reduced administrative burdens 5
The Commercial Item Revolution (cont.) Result for commercial information procurements: Government policy to acquire only those rights in commercial information provided to commercial customers DoD minimum requirements potentially greater Parallel contractual system for acquisition of licenses in commercial information Commercial software acquired using standard commercial license as long as the license terms are not inconsistent with Federal law Commercial item subcontractor licenses flowed up to Government DoD technical data statute amended - commercial items presumed to be developed wholly at private expense Today some major tech companies only do business with the Government on commercial terms 6
Government Reaction to Commercial Item Revolution Government now seeking to expand rights received in commercial information possibly due to: Commercial item abuses with contracting officers buying noncommercial items under commercial acquisition procedures Concern over paying for information previously funded by Government Desire to have all information necessary to achieve reprocurement and logistics goals Claims that the DoD failed to acquire such information during last fifteen years Efforts to avoid subsequent sole-source procurements Concerns over interoperability Normal swing in the data rights pendulum 7
Government Reaction to Commercial Item Revolution (cont.) Commercial items and major weapon systems Only Secretary of Defense may determine a major weapon system is a commercial item Barriers created to determining that subsystems, components, and spare parts are commercial items Elimination of presumption that items identified as commercial are developed exclusively at private expense in context of major weapon system 8
Government Reaction to Commercial Item Revolution (cont.) Proposed DFARS Part 227 Rewrite Published on September 27, 2010 (75 Fed. Reg. 59,412) Re-establishes applicability of DoD-related data rights statutes to commercial item subcontractors Creates a special contractual clause for commercial information acquisitions similar to the prior commercial technical data clause New clause must be flowed down to subcontractors All terms contrary to Federal procurement law are struck from commercial license DoD receives predetermined rights in commercial technical data (including commercial software documentation) and modifications to commercial software 9
Government Reaction to Commercial Item Revolution (cont.) Proposed DFARS Part 227 Rewrite (cont.) Requires commercial information, including software, to be marked DoD relieved of liability for improper use of unmarked commercial information Challenge procedures for information marked as commercial permit government use during challenge if urgent and compelling circumstances Applies deferred ordering clause to commercial information Special contractual clause for commercial information acquisitions inapplicable if the Government pays for either further development or modification Non-commercial information clauses apply in such case 10
Government Reaction to Commercial Item Revolution (cont.) If made final, the proposed Part 227 Rewrite will: Make the licensing of commercial software and associated documentation almost the same as the DoDs scheme for acquiring non-commercial information Increase risk to commercial item suppliers that sell to the Government at the prime or subcontract level Allow the Government to demand unrestricted rights in computer software documentation, form, fit, function data (source code?) and data necessary for operation, installation, repair, maintenance and training Increase administrative burdens for commercial item suppliers Interested parties may submit comments until December 27, 2010 11
Larger Trends in Government Information Procurements Where DoD goes, other agencies follow Further narrowing of categories of commercial information Further expansion of the categories of rights Government receives in commercial information Less flexibility on the part of the Government to acquire commercial information on terms similar to those used in the commercial marketplace Increased complexity of selling commercial items to the Government Special treatment for commercial items except when licensing commercial information 12
Coping With Recent Trends Stay current If Government prime contractor: Ensure that commercial information licenses are consistent with Federal procurement law Require subcontractors to accept commercial item contract clauses Flowdown non-commercial contract clauses when paying for further development/modification of the commercial item If subcontractor, pay attention to how prime uses and incorporates your commercial information Be careful before accepting Federal funds for further development and/or modification of your commercial item 13
Coping With Recent Trends Keep records concerning the exclusive private development of your commercial item Stand ready to respond to challenges from the Government Negotiate/clarify license rights (if possible) Try to pre-determine the Governments license rights Restrictively mark your commercial information prior to delivery to prime contractor or the Government Negotiate how to mark your commercial information with the prime contractor 14
Thank You! Bill Anderson: william.c.anderson@ulalaunch.com Steve M. Masiello: smasiello@mckennalong.com

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Tech America Part 227 Rewrite

  • 1. The Changing Environment of Licensing Commercial Information to the Federal Government William (Bill) C. Anderson Chief Intellectual Property Counsel United Launch Alliance, LLC Steven M. Masiello Partner McKenna Long & Aldridge, LLP 1
  • 2. Overview Over the past two decades, the Government significantly liberalized how it acquires commercial software and technical data (commercial information) Recently, the Government proposed new, far more restrictive, conditions for the acquisition of commercial information This presentation: discusses these new conditions identifies trends in Government information acquisition regulations discusses how companies can protect their interests despite these trends 2
  • 3. Information Procurements Prior to 1995 DoD procurement system designed primarily for the acquisition of military-unique products Government typically needed significant information and expansive rights in information pertaining to those products Under DFARS contract clauses the Government is granted license rights in all information that is either created under the contract or delivered to the Government (Limited/Restricted, Specifically Negotiated, Government Purpose, Unlimited) 3
  • 4. Information Procurements Prior to 1995 (cont.) Some commercial organizations were reluctant to do business with the Government due to: Administrative burdens (e.g., added accounting regulations, unique restrictive legends, flowdown requirements, other non- value added requirements, etc.) Concerns that the Government would receive expansive non- standard rights in commercial information Requirement to prove exclusive development of ICP/software Concerns particularly acute in software industry At end of Cold War the Government desired cost savings achievable through commercial procurements Result: Clinton-era restructuring of acquisition system to be more friendly to commercial-item acquisitions 4
  • 5. The Commercial Item Revolution The 1994 Federal Acquisition Streamlining Act Created preference in favor of commercial item purchases Defined Commercial Item Defined Commercial Item subcontractor Waived certain DoD technical data rights-related statutory requirements, but only for commercial item subcontracts Regulatory changes Implemented on both the federal level and within the DoD Separate structure created for commercial items more consistent with standard commercial terms and reduced administrative burdens 5
  • 6. The Commercial Item Revolution (cont.) Result for commercial information procurements: Government policy to acquire only those rights in commercial information provided to commercial customers DoD minimum requirements potentially greater Parallel contractual system for acquisition of licenses in commercial information Commercial software acquired using standard commercial license as long as the license terms are not inconsistent with Federal law Commercial item subcontractor licenses flowed up to Government DoD technical data statute amended - commercial items presumed to be developed wholly at private expense Today some major tech companies only do business with the Government on commercial terms 6
  • 7. Government Reaction to Commercial Item Revolution Government now seeking to expand rights received in commercial information possibly due to: Commercial item abuses with contracting officers buying noncommercial items under commercial acquisition procedures Concern over paying for information previously funded by Government Desire to have all information necessary to achieve reprocurement and logistics goals Claims that the DoD failed to acquire such information during last fifteen years Efforts to avoid subsequent sole-source procurements Concerns over interoperability Normal swing in the data rights pendulum 7
  • 8. Government Reaction to Commercial Item Revolution (cont.) Commercial items and major weapon systems Only Secretary of Defense may determine a major weapon system is a commercial item Barriers created to determining that subsystems, components, and spare parts are commercial items Elimination of presumption that items identified as commercial are developed exclusively at private expense in context of major weapon system 8
  • 9. Government Reaction to Commercial Item Revolution (cont.) Proposed DFARS Part 227 Rewrite Published on September 27, 2010 (75 Fed. Reg. 59,412) Re-establishes applicability of DoD-related data rights statutes to commercial item subcontractors Creates a special contractual clause for commercial information acquisitions similar to the prior commercial technical data clause New clause must be flowed down to subcontractors All terms contrary to Federal procurement law are struck from commercial license DoD receives predetermined rights in commercial technical data (including commercial software documentation) and modifications to commercial software 9
  • 10. Government Reaction to Commercial Item Revolution (cont.) Proposed DFARS Part 227 Rewrite (cont.) Requires commercial information, including software, to be marked DoD relieved of liability for improper use of unmarked commercial information Challenge procedures for information marked as commercial permit government use during challenge if urgent and compelling circumstances Applies deferred ordering clause to commercial information Special contractual clause for commercial information acquisitions inapplicable if the Government pays for either further development or modification Non-commercial information clauses apply in such case 10
  • 11. Government Reaction to Commercial Item Revolution (cont.) If made final, the proposed Part 227 Rewrite will: Make the licensing of commercial software and associated documentation almost the same as the DoDs scheme for acquiring non-commercial information Increase risk to commercial item suppliers that sell to the Government at the prime or subcontract level Allow the Government to demand unrestricted rights in computer software documentation, form, fit, function data (source code?) and data necessary for operation, installation, repair, maintenance and training Increase administrative burdens for commercial item suppliers Interested parties may submit comments until December 27, 2010 11
  • 12. Larger Trends in Government Information Procurements Where DoD goes, other agencies follow Further narrowing of categories of commercial information Further expansion of the categories of rights Government receives in commercial information Less flexibility on the part of the Government to acquire commercial information on terms similar to those used in the commercial marketplace Increased complexity of selling commercial items to the Government Special treatment for commercial items except when licensing commercial information 12
  • 13. Coping With Recent Trends Stay current If Government prime contractor: Ensure that commercial information licenses are consistent with Federal procurement law Require subcontractors to accept commercial item contract clauses Flowdown non-commercial contract clauses when paying for further development/modification of the commercial item If subcontractor, pay attention to how prime uses and incorporates your commercial information Be careful before accepting Federal funds for further development and/or modification of your commercial item 13
  • 14. Coping With Recent Trends Keep records concerning the exclusive private development of your commercial item Stand ready to respond to challenges from the Government Negotiate/clarify license rights (if possible) Try to pre-determine the Governments license rights Restrictively mark your commercial information prior to delivery to prime contractor or the Government Negotiate how to mark your commercial information with the prime contractor 14
  • 15. Thank You! Bill Anderson: william.c.anderson@ulalaunch.com Steve M. Masiello: smasiello@mckennalong.com