On Monday, September 27, 2010, the Department of Defense (DoD) issued a much-awaited proposed rule, published in 75 Fed. Reg. 59412, which would amend Defense Federal Acquisition Regulation Supplement (DFARS) Part 227 and associated clauses to update the regulations related to patents, data and copyrights. According to the summary and preamble, the proposed rule is intended to "simplify and clarify" the regulations by:

  • Removing text and clauses that are obsolete or unnecessary;
  • Relocating and integrating the coverage for computer software and computer software documentation with the coverage for technical data to eliminate redundant coverage for these subjects while retaining the necessary distinctions;
  • Eliminating or combining the clauses associated with technical data and computer software, consistent with the revised and streamlined regulatory coverage;
  • Relocating, reorganizing and clarifying the coverage for rights in works; and
  • Relocating to the DFARS companion resource, Procedures, Guidance and Information (PGI), text that is not regulatory in nature and does not affect the public.

Although we are still evaluating the proposed changes, the proposed rule includes a number of notable changes, including the following:

  • Reinforcing that the contractor retains all rights in technical data and computer software that are not expressly granted to the Government, including ownership;
  • Adding "access" as a licensed activity for noncommercial technical data and computer software in recognition of the growing practice of contractors permitting the Government to remotely access contractor-maintained technical data and computer software via the Internet;
  • Requiring prime contractors to "flow down" the relevant clauses to subcontractors, in light of the direct legal relationship created between the Government and subcontractors at all tiers with respect to Government license rights in a contractor's intellectual property;
  • Combining the current clauses related to noncommercial technical data and computer software into a single clause, given the nearly identical licensing treatment between the two types of deliverables;
  • Revising the current clause related to commercial technical data to also cover commercial computer software, which is currently absent from the DFARS (which instead instructs agencies and contractors to use the contractor's standard commercial license);
  • For commercial computer software, incorporating a "severability" provision that would operate to automatically strike any provisions from the contractor's standard commercial license terms that are inconsistent with Federal law;
  • Amending the definitions to clarify that "commercial computer software documentation," which is not "computer software," includes "computer software design documentation, such as design details, algorithms, processes, flow charts, formals, and related information that describe the design, organization, or structure of computer software," even though this change departs from FAR 52.227-14, which expressly includes this data in the definition of "computer software";
  • Confirming DoD's policy to acquire only the minimum rights necessary to accomplish its needs and emphasizes that the "Government should take the standard commercial terms and conditions except when Government-unique requirements. . . require specialized treatment," instructing agencies to tailor standard commercial terms and conditions "only as necessary to meet the Government's needs";
  • Confirming existing regulations regarding the parties' ability to negotiate specific license rights when the standard rights clauses are deemed unsatisfactory, expressly noting that "if either party desires to negotiate specialized license rights in technical data or computer software, the other party agrees to promptly enter into good faith negotiations to determine whether there are acceptable terms for transferring such rights";
  • Reinforcing the "doctrine of segregability," which allocates license rights at the lowest segregable level, meaning that different license terms could apply to various technical data or computer software deliverables called for under a single contract;
  • Establishing a new unlimited rights legend that is optional whenever unlimited rights are applicable, and required when unlimited rights apply but the contractor also uses the permitted copyright notice, which helps resolve any ambiguities regarding the Government's rights;
  • Adding a new provision releasing the Government from liability for any unauthorized use of technical data or computer software delivered to the Government and requiring the contractor to seek relief "solely from the party who has improperly" used or accessed the technical data or computer software; and
  • Removing the mandatory chart format currently included in DFARS 252.227-7017 for the identification of technical data or computer software to be delivered with restrictions, and instead, permits the contractor to subcontractor make its data rights assertions in "any understandable format, so long as the required information is presented and understandable."

DoD also has specifically requested comments on several additional issues, including:

  • Whether to combine all of the definitions into a single clause;
  • Whether to combine all of the contract clause prescriptions into a single, all-encompassing section;
  • How to renumber the revised and new clauses; and
  • Whether a new "scope" section should be added to the primary rights-allocation clauses, which might help with the application of the "doctrine of segregability."

Comments on the proposed rule, identified by DFARS Case 2010-D-001, should be submitted on or before November 26, 2010.