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Government IP Rights

Government IP Rights. Perspective Of A “High Tech” Start-Up Jerome S. Gabig General Counsel Time Domain Corporation. Time Domain Corporation Industry Leader In Pulsed UWB.

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Government IP Rights

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  1. Government IP Rights Perspective Of A “High Tech” Start-Up Jerome S. Gabig General Counsel Time Domain Corporation

  2. Time Domain CorporationIndustry Leader In Pulsed UWB • Pulsed Ultrawide Band is a “radical” technology that will enable entirely new products and industries in communications, positioning, and radar sensing. • Pulsed UWB “might be as important as the transistor or electric light bulb.” U.S.A.Today, April 9, 1999

  3. Time Domain CorporationA “High Tech” Start-Up • TDC’s Chief Scientist figuratively invented pulsed UWB technology “in his garage” • From 1996-2001, the CEO, COO, and CTO were sons of Von Braun’s R&D Chief • In 2000, TDC was selected as Red Herring’s Best Of Venture Market South • TDC has raised approximately $90 million through “angel investors” and venture capitalists

  4. Patent Protection Is Vital To TDC USA Foreign Total Awarded 70 28 42 Allowed 5 3 8 Pending 108 65 173 Total 141 110 251 TDC’s patents are “as important as a farmer’s interest in protecting his or her seed corn.”

  5. “High Tech” Start-Ups Have A Legacy Of Innovation “Studies show that small businesses introduce roughly 2.5 times as many technological innovations per employee as large businesses, and also a disproportionately large share of the ‘breakthrough’ innovations forming the foundation of U.S. military and economic strength.” Tim Foreman, June 17, 1999 Deputy Director, DOD OSDBU

  6. Start-Ups Are The Most Likely Source For “Radically New Technologies” “There is a general rule of thumb that radically new technologies are usually developed, marketed and matured by new companies.” Executive Summary to RAND Study DRR-2274-A February 2000

  7. Even though the industry is dominated by Mega-Primes, there are many large multi-industry companies in the sector… Multi-Industrial Firms with Defense Sales Dedicated Multi-Platform Primes Non aerospace/defense revenues for GE total $119 Billion $ (millions) Smaller Defense Firms Source: Defense News Top 100; Flight International Top 100; company annual reports

  8. “High Tech” Start-Ups Have A Legacy Of Avoiding DOD Contracts “The Government is having difficulty in attracting truly commercial business to research Government problems, whether in research programs or in weapons systems development. This is largely due to the use of traditional IP clauses and procurement methods.” Under Secretary of Defense (AT& L) IP White Paper, Version 1.1, Oct. 15, 2001

  9. “High Tech” Start-Ups Have A Legacy Of Avoiding DOD Contracts “[M]uch of the commercial technology sector remains skeptical of the government’s commitment to reform, do not need the government’s R&D business and distrusts government contracting in general.” Executive Summary to RAND Study DRR-2274-A February 2000

  10. FAR Part 12 – Assuaging The Distrust Much has been done to assuage the distrust: • FAR Part 12 • OSD(AT&L) letter, Sept. 5, 2000: Where industry has performed a substantial amount of research and development (sometimes over decades), we must create contract relationships in commercially friendly terms. Because the intellectual property rights of these companies represent their lifeline to future success, we must make every effort to abide by their protection and secrecy concerns.

  11. FAR Part 12 – Topics of Discussion • Patents • Trade Secrets • Computer Software • Suggested Improvement

  12. FAR Part 12 -- Patents • In light of the Christian Doctrine, the Commercial Sector should be cautious of the Bayh-Dole Act even though FAR Part 12 does not require the solicitation to include a patent rights clause. • If there is a large potential commercial market for inventions that are likely to be “conceived or actually reduced to practice in the performance of work under” a government contract, allowing the Government to pay for the development could be prudent for the vendor. • Using FAR Part 12 or a GSA Schedule, if a C.O. were to acquire a commercial item which contains a subject invention, it is unlikely that the Government’s royalty-free license to the patent would impact the price paid by the C.O.

  13. FAR Part 12 – Patents (continued) According to FAR 2.101, commercial items include: “Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item…. Dollar values and percentages may be used as guideposts, but are not conclusive evidence that a modification is minor.”

  14. FAR Part 12 – Patents (continued) If the commercial vendor can persuade the contracting officer to determine that the government’s requirements can be accomplished by a “minor modification” to a commercial item, arguably the vendor can avoid the Bayh Dole Act: • Arguably FASA trumps the Bayh-Dole Act • Honeywell, ASBCA 39974, 92-2 BCA 24,966 (C.O. determination that product fell under commercial product exception for TINA binding on gov’t.)

  15. FAR Part 12 – Patents (continued) “Actually Reduced To Practice” • Whether an invention was actually reduced to practice prior to contract award can be a matter of contention. Technical Development Corp. v. U.S., 597 F.2d. 733 • Practically speaking, if a contracting officer has made a judgment that he or she is acquiring a “minor modification” to a commercial item, the C.O. is less likely to assert that the Government is entitled to a royalty-free license to inventions “actually reduced to practice in the performance of” the minor modification.

  16. FAR Part 12 – Patents (continued) Tip #1 To Vendors • A contracting officer is only required to insert a patent rights clause in solicitations for “experimental, developmental, or research work.” FAR 27.303. • To the maximum extent possible, influence the drafting of the statement of work to avoid terms such as “develop, experiment, and research.” • Similarly, contractor reports to the government should avoid using “developed, experimented or researched.” • Alternative terms might include: improve, modify, optimize, upgrade, maximize, evolve, extend, augment or advance.

  17. FAR Part 12 – Patents (continued) Tip # 2 To Vendors • “The parties should carefully craft the statement of work to preclude the actual reduction of previously conceived inventions from occurring under, and being charge to, the Government contract.” Intellectual Property: Navigating Through Commercial Waters, USD(AT&L), Oct. 15, 2001 at 4-7. • However, see Mayman v. Martin Marietta Corp, 894 F. Suppl. 218 (D. Md. 1995) where this approach did not withstand judicial scrutiny during a qui tam law suit.

  18. FAR Part 12 – Technical Data • To state the obvious -- the best way to protect against a trade secret from being compromised by the government is not to provide it to the Government. • Ostensibly, FAR 12.211 allows the commercial vendor to limit what technical data it will provide the Government: “Except as provided by agency-specific statutes, the Government shall acquire only the technical data … customarily provided to the public with a commercial item or process.”

  19. FAR Part 12 – Technical Data • “Except as provided by agency-specific statutes, the Government shall acquire only the … rights in that data customarily provided to the public with a commercial item or process.” FAR 12.211 • “The contracting officer shall presume that data delivered under a contract for commercial items was developed exclusively at private expense.” FAR 12.211 • DFARS 252.227-7015 Technical Data—Commercial Items is a fair allocation of rights. • There is no prescribed legend for commercial technical data.

  20. FAR Part 12 – Computer Software • “Commercial computer software or commercial computer software documentation shall be acquired under licenses customarily provided to the public to the extent such licenses are consistent with Federal law and otherwise satisfy the Government needs.” FAR 12.212(a). • “[T]he Government shall only have those rights specified in the license contained in any addendum to this contract.” FAR 12.212(d). • C.O. should consider inserting FAR 52.227-19 Commercial Computer Software – Restricted Rights. • Except for FAR 52.227-19, there is no prescribed restrictive legend for commercial computer software.

  21. FAR Part 12 – Suggested Improvement • FAR 12.207 only allows “firm fixed-priced contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items.” • FAR 12.207 is not mandated by statute. • Delete FAR 12.207. It is an impediment to the FAR Guiding Principle of “the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best product or service to meet the customer’s needs.” See FAR 1.102(d).

  22. ConcludingComments • For commercial companies, the economy benefit of having DOD pay for a large portion of the costs for developing new technologies typically outweighs the disadvantages of contracting with the government. • Time Domain’s corporate experience has been that it is better to “accept the King’s shilling” (at the cost of providing a royalty-free license to some patents) than to deal with “vulture capitalists.” • Unfortunately, commercial companies generally continue to distrust gov’t contracts because many of these companies remain unaware of how to astutely use FAR Part 12 and the recent USD/AT&L guidance.

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