With the current state of the US economy, many commercial businesses are looking for new buyers of technology or products. The US government (hereinafter referred to as the “government”) happens to be one of the largest buyers of technology and products. Therefore, it is a very attractive market to pursue, especially to those businesses that have seen a significant drop in commercial sales.

Businesses looking to sell their technology or products to the government, however, need to be aware of the unique issues related to the protection of intellectual property rights. This article provides a summary of those issues related to patents, copyrights, and technical data and computer software.

Patents

A policy and objective of the government is to use the patent system to promote the use of patented inventions arising from federally supported research or development, encourage maximum participation of industry in federally supported research and development efforts, and promote the commercialization and public availability of the patented inventions made in the United States. Generally, a contractor may elect to retain ownership of any invention the contractor invents during the performance of work under a government contract (“subject invention”), provided that the contractor makes the required disclosure to the government.

Notwithstanding this right to retain ownership of the patented invention, the government would retain certain rights including a license and march-in rights. In particular, the government would receive, at a minimum, a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on behalf of the United States, the patented invention throughout the world. The government would also retain certain march-in rights that require the contractor, as an assignee or exclusive licensee of the subject invention, to grant a nonexclusive, partially exclusive or exclusive license in any field of use to responsible applicants, upon terms that are reasonable under the circumstance. If the contractor refuses to grant such a license, the government can grant the license itself.

Nevertheless, allowing the contractor to retain the patent rights of the subject invention comes with certain strings attached. In particular, unless the government grants a waiver, the contractor receiving ownership to any subject invention may not grant to any person the exclusive right to use or sell any patented invention in the United States, unless that person agrees that any products embodying the patented invention will be manufactured substantially in the United States. The contractor needs to be mindful of such a condition when licensing the subject invention. Otherwise, the contractor may lose its rights to retain the subject invention.

Accordingly, if a contractor does not elect to retain patent rights or fails to elect to retain rights to the invention to the government agency within the time specified in the particular clause in the government contract, then the government has the right to receive ownership of the patented invention. Therefore, it is very important to read the contract carefully and ensure that procedures are in place to comply with the election and timeframes in the contract.

Copyrights

Under the terms of a government contract, a contractor may establish a claim to a copyright of data first produced under a contract to be published in professional journals and other academic works. With respect to other uses to claim a copyright, the contractor must obtain permission from the government to copyright the data first produced under a contract. Even if the contractor is granted the copyright, the contractor must still grant to the government a paid-up, nonexclusive, irrevocable, worldwide license to, among things, use, modify, reproduce and release the copyrighted data. As it relates specifically to computer software, the copyright license to the US government does not grant the government the right to publicly distribute the computer software rights.

If the contractor claims a copyright, then it must affix a legend with the applicable notices to the data when it is delivered to the government or otherwise published in order to protect the copyright.

Technical Data and Computer Software

If a contractor is planning to deliver pre-existing privately developed technical data or computer software under a US government contract, then the contractor needs to take steps to ensure that its rights are protected. The contractor needs to set forth in its proposal to the government that certain identified privately developed technical data or software is being sold under the contract and, per the requirements of Federal Acquisition Regulation (or US federal agency supplement), appropriately mark such privately developed technical data or software prior to delivery to the government.

If, for example, the government acquisition is for a contractor’s commercial computer software, then the contractor only needs to license to the government such software pursuant to its standard commercial software license provided to the public. The contractor is not required to relinquish to, or otherwise provide, the government rights to use, modify, reproduce, release, display or disclose such commercial software unless mutually agreed to by the parties. In order to protect such commercial software, the contractor needs to identify its commercial software to the government and affix the appropriate legend indicating that such software is privately developed software and provide its commercial software license agreement.

If a contractor will be developing technical data or computer software paid for by the government under a contract, then the contractor is required to grant the government certain rights typically (but not always) in the form of an unlimited license to such data or software. As such, the contractor could not, for example, license the software for a fee to another agency within the government because the government already paid for the software under the previous government contract.

Closing Thoughts

There are abundant opportunities to sell technology and products to the government. Provided contractors keep in mind the issues discussed above before executing or delivering technology or products under a government contract, they will be able to retain certain rights and even gain new rights.