License required: technical data and computer software in public procurement | Whitcomb Selinsky, PC

As government procurement of goods and services becomes larger and more complicated, particularly in support of major Department of Defense (DoD) programs, the delivery of Technical Data (TD) and computer software (CS) to government and the allocation of rights between the government and the contractor often comprise critical aspects of public procurement. Today we will be discussing TD regarding Non-Commercial Items, Components and Processes (ICP) and with Non-Commercial CS. Commercial CS and TD relating to commercial items that are sold or available for sale to the public are subject to different rules and are dealt with separately in “Categories of Rights in Technical Data and Computer Software in Department of Defense Contracts”.

Technical data is defined as recorded information of a scientific or technical nature, regardless of the form or method of recording. It is important to note that the data is not identical to the item (example: a machine) that the data describes. For example, when a buyer buys the machine, he does not necessarily buy the data relating to the machine (such as design or manufacturing data) or the rights to the data by the mere fact of buying the machine. All rights to use the data would be in a license agreement. A similar statement can be made regarding software. Mere possession of a copy of software does not necessarily mean that the possessor has the right to use it. The user must also have a license to use the software. It is no different when the user is the government. The government must obtain licenses to use contractors’ technical data and software.

Many large government programs, such as the acquisition of new weapons systems and the maintenance of existing systems, involve a large amount of technology and technical data and/or software. Some technologies may be developed within the contract and others outside the contract, but they may all be required by the government. The rights in TD/CS, the levels of those rights, and when and how the government can exercise them are of particularly high importance when considering the lifecycle of systems, as some of them may be used by the government for years, even decades. During these periods, the Government will have to maintain the systems in working order (spare parts, services, improvements, etc.); therefore, it will require the TD/CS and the rights to use them to perform the necessary maintenance and upkeep, whether in-house or through contracts. Without sufficient rights, the government may not be able to engage in competitive procurement for the required parts or services and may be forced to acquire them only from the rights holder or its licensees, placing the holder rights to a competitive advantage over other potential contractors. Thus, the rights in TD/CS represent a potential source of significant revenue for the contractor owning the data. Depending on the nature and extent of the data and the needs of the government, this can sometimes involve millions of dollars. Even if a contractor is not involved in weapons system acquisitions or other major programs, there are myriad other government contracts under which TD/CS and related rights are of paramount importance. An example is the ever-growing field of research and development (R&D), where small contractor companies play an important role. R&D contracts, by their very nature, generate new technologies and a lot of TDs that relate to technology and the development of new CS or improvements.

The rules and regulations regarding government rights in non-commercial TD/CS are numerous and complex. In DoD contracts, regulations governing these rights can be found in the Federal Defense Acquisition Regulations Supplement (DFARS). The DFARS outlines various categories of rights in TD and CS where determining which category the government’s rights belong to for a particular element of TD or CS depends largely on the source of funding for the development of the underlying element or the particular CS. . There are, of course, exceptions to this reliance on funding sources where the government acquires rights to certain types of TDs regardless of who (i.e. the government or the contractor) provided the funding. Below is a list of categories of rights under a DoD contract that requires delivery of TD/CS to the government.

These categories consist of three default categories, with DFARS listing the specific rights the government is entitled to in each category; that is, the contractor and the government can verify what rights are granted to the government by reading the relevant DFARS provisions included in the contract.

Default categories for TD – Unlimited Rights, Rights for Government Purposes (GPR) and Limited Rights

Default categories for CS – Unlimited rights, rights for government purposes (GPR) and restricted rights

Specially Negotiated License Fees (SNLR) for TD and CS – To be negotiated between the Government and the Contractor for individual contractual action. This is the fourth category of rights where the government’s rights depend on what the parties specifically negotiate. Unlike the default categories, there is no specific provision in DFARS that dictates what the government-negotiated rights must be, other than that they must not be less than the limited rights for TD and the restricted rights for CS.

In most cases, what the government acquires are license rights, not title to the rights. All rights not granted to the Government shall be retained by the Contractor, including title, unless the contract expressly provides for Government ownership.