Federal Policies Encourage Flexibility in the Procurement of Intellectual Property Rights
 
February 4, 2002
 

The United States government is the world's largest purchaser of information technology products and services. Federal spending was projected to grow beyond the $45 billion budgeted for the last fiscal year before the September 11 terrorist attacks created even more demand for IT products and services. With the continued soft demand found in many sectors of the economy, the size and scope of the federal marketplace have attracted more attention from IT providers who have ignored the government contracts arena in the past.

This increased interest in the federal market comes at a time when the government is looking for ways to expand its pool of IT contractors in order to obtain increased competition, better prices and access to new technologies. Starting with the Federal Acquisition Streamlining Act of 1994, federal agencies have established acquisition policies that more closely resemble the commercial marketplace and that encourage the acquisition of commercial items and components. Of special interest to IT providers is the recognition by many federal agencies that they need not obtain the maximum license rights possible to all of the software and technical data developed or delivered under government contracts and grants.

The Department of Defense has taken a leading role in commercial acquisition reform. A recent memorandum from the Under Secretary of Defense (Acquisition, Technology and Logistics) set a goal that by FY 2005 half of all contract actions by DOD agencies should be commercial acquisitions. In moving toward that goal, the Department has taken a number of steps to make the government procurement process more in line with commercial practices and less onerous for commercial contractors.

As part of that process, DoD has established new guidelines for the acquisition of intellectual property rights from its contractors. The agency recognizes that while, in the past, DoD often led industry efforts in technology development, recent years have seen military R&D spending drop in real dollars terms. While private sector R&D spending has doubled since 1960 to approximately two-thirds of the total U.S. amount, the military's share has dropped from 53% to 16% of the total. DoD therefore has seen the need to encourage commercial industry to collaborate with the government in research efforts and "to acquire commercial products using commercially friendly terms."

The new policy emphasizes the need for flexibility in the negotiation of intellectual property rights and directs that the government should acquire only data and rights to such data that are truly needed for a given acquisition. That policy direction is reflected in a guidebook to assist government officials in negotiating intellectual property rights with potential contractors, and especially with "nontraditional commercial industry." The guide, "Intellectual Property: Navigating Through Commercial Waters: Issues and Solutions When Negotiating Intellectual Property with Commercial Companies" has been promulgated to government contracting officers, program managers, and other target audiences in the government and in industry. It can be found at http://www.acq.osd.mil/ar/index.html.

The guide provides a good overview of the laws and regulations affecting the government's acquisition of intellectual property, discussing patents, copyrights, trade secrets, trademarks, technical data and computer software. Of even more importance, however, is the guide's annunciation of the "core principles" when dealing with industry regarding intellectual property. The guide stresses the need to recognize the value of intellectual property to contractors, to identify the government's true needs for the intellectual property, and to maintain flexibility in the negotiation of intellectual property rights. The guide even lays out particular problem areas, presents the concerns of both the contractor and the government, and offers possible solutions.

The document is a guide, not a mandatory directive. However, it forms the basis for an ambitious DoD outreach and training program to incorporate the principles articulated in the guide into the federal procurement process. Contractors negotiating intellectual property rights with the government would be well advised to become familiar with the guide. The guide provides a basis for supporting a contractor's need and right to protect its intellectual property and gives alternative methods for safeguarding those rights. Some of the guide's contents may be open to question. However, in the hands of a person knowledgeable in the area of intellectual property rights, the guide provides a useful tool in the contract negotiation process.

For more information, contact Frank Peterson at 888-688-8500 or via e-mail at fpeterso@hklaw.com.