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The Defense Department will continue to work closely across agencies and with industry partners as it implements its strategy for strengthening the defense industrial base to meet the future needs of the warfighter, the Pentagon's top industrial base policy official said.¶ Laura D. Taylor-Kale, assistant secretary of defense for industrial base policy, said DOD's National Defense Industrial Strategy represents a bold vision that will require close and sustained collaboration across the full defense industrial ecosystem. ¶ "While we say that it will guide use for the next three to five years, we're also very much talking about having a generational change," Taylor-Kale said of the newly released strategy during a discussion hosted by the Center for Strategic and International Studies in Washington, D.C., July 11, 2024. ¶ "We understand that there's a lot that is part of the current state of the industrial base," she said. "You can't make those changes over one or two years. It's going to take concerted effort over time, not just within the Department of Defense." ¶ Taylor-Kale offered her vision just hours after releasing the NDIS, the first comprehensive strategy document produced by DOD to plot the course for creating a modern, resilient defense industrial ecosystem to deter U.S. adversaries and meet the production demands posed by evolving threats. ¶ In unveiling the strategy, she underscored the urgent need to shore up the defense industrial base as U.S. adversaries build up their military power to levels not seen since World War II. She noted China's increasing threat to upend the existing international order. She also highlighted the United States' continued support for Ukraine as it defends itself from Russian aggression and for Israel in its fight against Hamas. ¶ Despite the task at hand, Taylor-Kale said there is broad enthusiasm across government and industry partners and among key global allies. ¶ The defense industrial base must continue to meet present demands, while remaining capable of adapting to future conflicts. ¶ The strategy focuses on four key areas critical to building a modernized defense industrial ecosystem over the next three to five years. Those areas include resilient supply chains, workforce readiness, flexible acquisition and economic deterrence. ¶ The NDIS is the product of months of engagement from stakeholders from across industry and government, which began at the direction of Deputy Defense Secretary Kathleen Hicks in March 2023. ¶ The document also reflects President Joe Biden's broader efforts to shore up domestic manufacturing and critical supply chains in the U.S. ¶ Officials said the final strategy incorporates more than a thousand comments received from stakeholders. ¶ Taylor-Kale said the strategy was far more than an "aspirational document," noting that the department is finalizing an implementation plan that will detail measurable actions and metrics to gauge progress on the goals. ¶ "I want to emphasize that the DOD can't do it alone," she said. "It will need the interagency. It will need our industry partners. It will need our global allies and partners, as well as our people on [Capitol Hill]." ¶ She added that the strategy was worked extensively with elected leaders, and there is a broad, bipartisan consensus around improving the industrial base and meeting the needs of the warfighter. ¶ "In my view, we can't afford to wait," Taylor-Kale said. "We have seen over the past few years the importance of why we need resilient supply chains – the importance [is] not just to us domestically, but also for our close allies and partners. ¶ "We think that the time for action is now," she said. "We're starting with this strategy and setting this vision. We're wanting everyone to join with us so we can move forward, implement and meet the needs of warfighters today as well as for the future."

Congressional Research Service; Intellectual Property and Technical Data in DOD Acquisitions; https://crsreports.congress.gov/product/pdf/IF/IF12083

10 U.S.C. §3771 also authorizes the Secretary of Defense to determine that “negotiation of different rights ... would be in the best interest” of DOD. Factors for consideration include “increasing competition and lowering costs by developing and locating alternative sources of supply and manufacture.” Requiring a contractor or subcontractor to “sell or otherwise relinquish” technical data rights to the United States is generally prohibited. Current DOD IP policy emphasizes the need for “early and effective understanding, planning, and communications between the U.S. Government and industry.” DOD has also required each program to have a “robust IP strategy ... throughout the entire product life cycle.” Considerations for Congress In the FY2016 National Defense Authorization Act (NDAA), Congress established the Section 813 Panel, a special advisory group of government and industry experts tasked with reviewing technical data rights, restrictions, and regulations. This advisory group published its final report in November 2018. The report identified persistent “tension points of disagreement” between the government and private industry. Each “tension point” is unique, but each generally arises from private entities and DOD approaching IP from diametrically opposite perspectives. A private entity usually sees IP as a capital asset representing significant investments of company time and resources, and a source of its ability to retain market competitiveness and generate future income. IBM, for example, reports earning over $27 billion in income generated by its IP since 1996. As such, private entities generally want to protect their IP to preserve the future monetary value of this asset. This protection can include control over matters such as who has the right to use the associated technical data. DIB entities may be particularly sensitive to situations where competitors could potentially access their IP. To aid in incentivizing investment and development of warfighting solutions by the DIB, Congress could direct DOD to increase its protections of private sector IP rights. However, such protection could potentially limit DOD’s rights to the IP and technical data associated with weapon systems developed in whole or in part by private industry. Some implications include “vendor lock,” a situation where the government is effectively forced to continue working with the sole contractor who can provide or repair a specific part or piece of equipment. Some analysts argue that when DOD does not have IP rights, entities have minimal incentives to respond to government requirements for delivery and performance, and may not be willing to negotiate a fair and reasonable price for affected items. Further implications include issues associated with program upgrades and sustainment costs over the lengthening lifespans of some DOD weapon systems.

Royce Kneece Michael Lippitz Christina Patterson; Department of Defense Access to Intellectual Property for Weapon Systems Sustainment; Institute For Defense Analysis

Before 1984, data rights pertaining to DOD contracts were not explicitly stated in statute, but mandated in regulation. That changed in 1984 with the Defense Procurement Reform Act, which included specific rights in technical data and procedures to validate the rights claimed by contractors. Those provisions became §2320 and §2321 of 10 U.S.C. and DOD was mandated to develop regulations to implement them.10 These regulations and subsequent statutes have changed frequently in attempts to achieve an appropriate balance between private rights in IP and the government’s needs to operate and maintain its weapons systems. With the vast advances in technology, particularly the expanded use of commercial components and technology in DOD systems, stimulated by the “dual use” policies of the early 1990s, IP issues have become much more hotly contested because of the high value of technology-related data and software. Thus, industry has put pressure on DOD and Congress to limit the appetite for rights to IP data and software generated or used in DOD contracts. Sections 2320 and 2321 of 10 U.S.C. that are most relevant to IP and technical data rights are discussed below and presented more fully in Appendix E. They address rights to technical data and prescribe a process for restricting and challenging restrictions on technical data rights. In addition, four sections of Title 10, §2460, §2464, §2466 and §2474, also summarized in Appendix E, are focused on requirements for certain organic core maintenance and repair capabilities to be maintained by the government through its depots, the percentage of depot-level maintenance and repair that can be performed by non-government personnel, and a categorization of depots that enable, among other things, public private partnerships that do not count against restrictions on the percentage of depot-level maintenance and repair that can be performed by non-government personnel. These latter sections have relevance to the focus of Chapter 3, which is a review of “Department of Defense practices related to the procurement, management, and use of IP rights to facilitate competition in sustainment of weapon systems throughout their life-cycle,” as called for by Subsection (a)(1)(B) of §875 of the FY 2016 NDAA.11 From the perspective of the sustainment of defense weapon systems, the IP of greatest interest is in two areas: (1) technical data and (2) computer software. In turn, “technical data (TD)” is defined (DFARS 222.227(a)(15) ) as … recorded information, regardless of the form or method of the recording, of a scientific or technical nature (including computer software documentation). The term does not include computer software or data incidental to contract administration, such as financial and/or management information.12 Technical data generally falls in the IP category of “trade secrets,” while computer software is covered under “copyright.”13 Title 10 U.S.C. §2320 addresses “Rights in Technical Data” and §2321 addresses “Validation of Proprietary Data Restrictions,” both of which are translated into the Federal Acquisition Regulations (FAR) and the Defense Federal Acquisition Regulations Supplement (DFARS).14 DOD requires IP data on the systems acquired for two basic reasons: (1) sustainment of systems, including maintenance, procurement of repair parts and components, and software updates, and (2) reprocurement. The demands for technical data and software and associated rights for these two purposes differ substantially. Sustaining maintenance requires maintenance manuals, drawings, parts lists and suppliers, software test equipment and standards, etc. On the other hand, if DOD wants reprocurements to be competitive, complete technical data packages (TDPs) that allow equipment to be manufactured from specifications is required. In fact, some maintenance activities may require design and manufacturing data in order to fabricate or reengineer parts that cannot be obtained from a supplier (or if it is more economical to do so). In recognition of these needs, §2320 defines DOD’s data rights based on the following principles:15  Only the minimum necessary data and rights should be obtained.  The government has licensing rights to all IP data and software developed with government funds or delivered under a government-funded contract. The type of license granted to the government depends on the circumstances under which the data were developed or provided.  Government rights are “limited” (data) or “restricted” (software) for commercial items and for technologies developed exclusively at private expense; however, even in those cases, the government has unlimited rights to data needed for operation and maintenance of the equipment, and data related to “form, fit and function (FFF)” of components. “Limited” or “restricted” means that the data or software may be used only by the government itself.  When a component or technology used in a government contract was developed partially at private expense and partially at government expense, less-than unlimited rights are granted. These are called “government purpose rights.”  For commercial items, the government’s rights are generally the same as those granted to commercial customers (with some exceptions).

Shyam Sankar is the Chief Technology Officer of Palantir Technologies. Caitlin Dohrman is the Chief Executive Officer of Tangram Flex. Madeline Zimmerman is a Department of Defense Deployment Strategist at Palantir Technologies. THE MILITARY’S INSISTENCE ON OWNING COMMERCIAL INTELLECTUAL PROPERTY IS LIMITING INNOVATION; War On The Rocks;

While the battle for intellectual property ownership is perceived as existential by both the Department of Defense and commercial providers, a closer look at the origins of each actor’s preferences reveals greater compatibility. Industry wants to ensure a return on its investment, which doesn’t require promoting vendor lock or undermining interoperability. The military wants to limit vendor lock and promote interoperability, regardless of whether commercial firms earn a return on investment. The key question then is: Does department ownership of commercial intellectual property actually support its stated interests, justifying the harm it causes to commercial actors? The answer, in short, is no. First, intellectual property ownership is not actually necessary to combat vendor lock and interoperability. For example, even if the department does not own a vendor’s baseline intellectual property, a legal precedent already exists so that no vendor can preclude the government from cloning the application programming interfaces of the function it wants and then re-competing the capability to the market. Additionally, the issue driving vendor lock and high switching costs is proprietary interfaces, not proprietary code or intellectual property. As the current special advisor to the secretary of the Air Force, Tim Grayson, said about software solutions from traditional defense contractors: “When we have worked interoperability at the data level what we have found is the biggest problem is legacy programs and their vendors don’t know their own systems. We might have to have them spend three to six months effectively reverse engineering their systems and documenting what their interfaces are.” Ironically, the complexity and bespoke nature of many custom government off-the-shelf solutions drives outcomes that the government is trying to avoid: increased technical debt and vendor lock to the developer. Second, regardless of who owns the intellectual property, the military can mandate application programming interfaces and interoperability with relevant government reference architectures. The department can also write into contracts mandatory data export or “burn down” requirements for key deliverables, which lowers the switching costs of changing vendors. This should be sufficient to meet most interoperability standards, and the department can always insist on a re-compete for any capability it feels does not pass muster. Third, the Department of Defense has already authorized new approaches to maximize interoperability and avoid vendor lock. For example, in 2017, U.S. law mandated that all major defense acquisition programs must be designed and developed using a modular open systems approach, and a 2019 tri-service memo reinforced this approach. The modular open systems approach is a technical and business strategy designed in part to lower the switching costs of moving from one vendor to another by mandating open standards and interoperable systems. Unfortunately, when the Department of Defense encourages unlimited rights or government purpose rights in the name of interoperability or a modular open systems approach, they box out commercial companies, who, ironically, are the entities most likely to be compliant with this approach. By definition, dual-use commercial capabilities are trying to capture a large segment of the total addressable market, and thus commercial providers build their products to be as open and modular as possible to satisfy the widest possible set of requirements. Fourth, we have heard officials express fears that during wartime conditions — where urgent changes and modifications must be made — the government will be unable to make system changes because it doesn’t own the source code and thus becomes reliant upon commercial actors. However, the ease with which a program can use and modify a technology is almost entirely divorced from “owning the source code.” To use a non-defense example, Windows users cannot modify their operating system source code, but there are limitless configurations and customizations they can build on top of this commercial baseline. Additionally, even if the U.S. government owned the source code, it likely would need a more upskilled workforce to modify, test, and deploy changes to the source code of a company’s commercial baseline under acute stress.

Shyam Sankar is the Chief Technology Officer of Palantir Technologies. Caitlin Dohrman is the Chief Executive Officer of Tangram Flex. Madeline Zimmerman is a Department of Defense Deployment Strategist at Palantir Technologies. THE MILITARY’S INSISTENCE ON OWNING COMMERCIAL INTELLECTUAL PROPERTY IS LIMITING INNOVATION; War On The Rocks;

As senior leaders at Palantir Technologies and Tangram Flex, software companies that do a great deal of business with the Defense Department, we have a direct interest in contracting outcomes. But we also bring a unique perspective that is formed by a cumulative 40 years of expertise working through the barriers of commercial software adoption by the U.S. government. Based on our experience, we believe that for the Department of Defense to vastly improve the speed and scale with which it acquires and fields emerging technology, it should rethink its current approach to intellectual property ownership. Specifically, the government should stop conflating intellectual property rights with vendor lock and interoperability. One does not solve for the other, and thus commercial companies should not have to forfeit their core intellectual property — namely patents, copyrights, trademarks, and trade secrets — in the name of interoperability. This approach can serve as a win-win for defense and industry by effectively addressing the root cause of interoperability and vendor lock issues, incentivizing commercial companies to provide their most innovative solutions to the government and boosting the expansion and health of America’s budding defense tech start-up ecosystem.

[Jared, Jared Jared Serbu is deputy editor of Federal News Network and reports on the Defense Department’s contracting, legislative, workforce and IT issues.; February 10, 2023; “Defense Industrial Base loses thousands more firms, mainly because DoD is a tough customer”; Federal News Network; https://federalnewsnetwork.com/defense-industry/2023/02/defense-industrial-base-loses-thousands-more-firms-mainly-because-dod-is-a-tough-customer/

The latest edition of an annual report by the National Defense Industrial Association suggests that even though thousands of new companies are winning their first-ever DoD contracts each year, those new entrants aren’t nearly enough to offset the number of firms who are leaving the Defense market. The latest figures NDIA compiled show the Defense market suffered a net loss of 3,300 companies in fiscal year 2021, the latest statistics available. Although more than 8,300 firms sold goods and services to DoD customers for the first time in 2021, even more left the Defense space. The industrial base has been declining every year since 2017, from 76,700 companies in that year to just under 60,000 in 2021. David Norquist, NDIA’s president, said the latest declines don’t appear to be driven by industry consolidation, but by companies simply deciding not to do business with DoD.

The Department of Defense recently introduced its first-of-a-kind industrial strategy, raising the point that the United States is no longer the arsenal of democracy, and our adversaries know it. Not only has our industrial base eroded over the past decades but our most important long-range missiles (Harpoons, Tomahawks, JDAMs, JRAMs and others) cannot be made without dozens of Chinese suppliers. This comes on the heels of the PPBE Commission, the Atlantic Council’s report on defense innovation adoption and new organizations like the Defense Innovation Unit that have been created in part to augment our industrial base. More important than any new strategy is the market signal to suppliers through meaningful contracts. According to data from Govini, $406 billion of defense contracts were awarded to traditional defense companies while only $4 billion was awarded to venture-backed companies last year. Contracts are the capitalist signal to current and future suppliers that we need more production and more production capacity. Non-traditional suppliers like venture-backed companies can be an important part of the solution but not if they must wait years for an antiquated Pentagon process to develop requirements and assign contracting responsibility followed by a multi-year budgeting process. The U.S. Army, Navy and Air Force—who do most of the buying at DoD—must issue large-scale and multi-year contracts to a larger base of suppliers if we want to grow the defense industrial base. The new strategy acknowledges the increasing risk to national security from a shrinking supplier base of six vendors who receive two-thirds of all procurement dollars, down from 50 vendors in 1990. A key part of the strategy is to “expand relationships with companies and technologies not traditionally in the defense industrial base.” I would go farther in saying that the practical way to expand these relationships is with production contracts to new entrants, leveraging how capitalism works in private industry. While we still need to improve capacity for more traditional defense items like munitions and weapons platforms, increasingly we must prepare for the digital transformation on the battleground that parallels what’s happening across our economy. In fact, 11 of the 14 technologies critical to U.S. national security, outlined by the Pentagon’s CTO, are being developed first by commercial companies rather than defense contractors. This includes AI, cyber tools, synthetic biology, autonomy and microelectronics where commercial demand far outstrips military needs. Break The Uniqueness Paradigm In buying more commercial technology, we break the paradigm that the military can only use specialized gear produced in low volumes at high prices. Much of what the military does—short of kinetic effects—can be done with commercial technology. Additionally, commercial technology enables our allies to field the same solutions as the U.S., making solutions interoperable and creating export markets for U.S. suppliers. Buying commercial solutions means getting the latest technology which potentially gives our warfighters an advantage over adversaries because commercial products iterate rapidly to improve performance, cost and functionality—especially in software. The reverse is also true, if we field lagging tech, we give our adversaries the advantage. DIU, which I led for four years until 2022, focuses on integrating commercial technology for defense applications, most often from new vendors, and often fielding capability in less than 24 months. DIU has helped the DoD add more than 100 new vendors but there are not enough follow-on production contracts to significantly grow the defense supply base. Buying more from non-traditional vendors is one of the fastest ways to expand warfighter capabilities and expand our industrial base. With this simple change, we provide the market-based demand signal that allows suppliers to invest in more production capacity and investors to provide more capital. We also make defense markets more competitive, supply chains more resilient, stimulate expanded capacity and encourage more companies and more investment in solutions enhancing national security. We influence capital markets to provide more solutions for our warfighters instead of more dating apps or better ad-targeting.

IP and data rights are crucial to the companies that design, manufacture, apply, and maintain the cutting-edge technologies, systems, and platforms our armed forces rely upon to deter aggression and defend our nation and its interests. Protection of these rights is also essential to the Department’s ability to incentivize investment in innovation, to gain access to new suppliers at the prime and subcontractor levels, and to maintain access to the information and technical data necessary to support military equipment throughout its lifecycle. Simply put, respecting the private sector’s IP rights protects the long-term interests of the Department. Over the last eight years, the legal and regulatory landscape related to the allocation of IP rights and to the Department’s approach toward managing IP has been carefully reformed52 in the pursuit of balancing the legitimate needs of both DoD and industry. The importance of this balance is reflected in the core principles of DoD’s IP policy, which directs the Department to “negotiate specialized provisions…whenever doing so will more effectively balance DoD and industry interests” and “respect and protect IP resulting from technology development investments.”53 Recently, the Department has been working to implement the statutory changes to IP rights contained in the FY2017 and FY2018 NDAAs.54 However, more work is needed, including promulgating these statutes in regulation,55 staffing and resourcing the Department’s IP cadres to support the acquisition workforce, and training and educating the workforce on new approaches and best practices for IP. This work will continue to be supported by a growing body of study examining IP issues and exploring new models and techniques for managing IP. This includes the Section 813 Panel,56 various studies by the Acquisition Innovation Research Center (AIRC),57 and several congressionally directed pilot programs.58 The Department has also outlined goals to increase access to IP and data rights within the flexible acquisition59 pillar of the 2023 NDIS.60 The Department seeks to implement its goals by fully integrating IP planning into acquisition strategies that will protect core DoD interests over the entire lifecycle of the acquisition.61 The means by which the Department seeks to implement these actions is through the use of modular open systems approaches (MOSA)62 and mitigating IP restrictions on proprietary components by negotiating specialized license agreements.63 The Department is also focusing on modernizing IP acquisition regulations and related guidance, updating and approving the delivery of IP training for the acquisition workforce, and expanding the IP knowledge base of the acquisition workforce.64 The Department also intends to augment the recent creation of the IP Cadre offices in the Office of the Secretary of Defense (OSD) and the Military Services.65Furthermore, Congress remains actively engaged on IP rights and deliverables for a range of issues, including maintaining equipment in conflict zones and austere operating environments,66 ensuring the proper return on investments in federal R&D, retaining the ability to re-compete sustainment of programs to control costs or improve quality, exercising better control over program sustainment costs, and helping DoD better leverage industry’s faster pace of innovation.67 As the discussions around IP and data rights continue and the Department moves towards implementation of the 2023 NDIS, it is essential to maintain the balance of serving the needs of the DoD without unduly harming and driving away industry. NDIA is diligently working through public rulemaking68 and legislative engagement69 to ensure the delicate balance that serves the needs of both government and industry is maintained while adapting to changes in technology and industry best practices. Failure to fairly protect and secure the IP of small and large organizations will almost certainly limit the Department’s access to game-changing innovation. For example, many small businesses develop and provide cutting-edge technology through the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), or other programs, which in turn feed into larger procurements and operations and maintenance (O&M) efforts. The SBIR program has specific rights that protect IP, and small businesses can usually commercialize and/ or adapt these solutions for large government programs of record, creating real value for the Department and small businesses. However, without acceptable protections, small businesses—whose participation in the DIB has declined by over 40% in the last decade70—will be disincentivized to develop new ideas and/or will simply decline to do business with the federal government altogether, depriving DoD from accessing innovative capabilities and technologies. Inadequate IP and data rights protections can also have unintended consequences for the Department’s ability to utilize innovative commercial products. Companies that supply products with both military and commercial applications often develop and rely upon the same detailed manufacturing and process data to manufacture both military and commercial products. Policies that compel commercial companies to disclose sensitive IP data increase the risk of IP leaking to competitors and disincentivize participation in the federal market. Commercial companies and nontraditional contractors at all tiers of the supply chain prioritize protecting their sensitive trade secrets against disclosure. Faced with the choice of disclosing IP and putting future revenue streams at risk or walking away from certain government contracts, many of these companies will choose to protect their IP and commercial business. For example, at a recent government-industry forum, one small business succinctly explained the challenge. First, the company representative made it clear small businesses take pride in and do want to meet the unique requirements of U.S. warfighters. At the same time, the company representative explained it is difficult for small commercial businesses to offer cutting-edge technology when its IP, developed with private funds, could end up in the hands of competitors due to government regulation. In addition, if the small business accepted private investment, the small business would expect its investors to reduce the value of the product or technology in which they are investing because they would assess the value of the company’s IP had been diluted. For companies with this business context, the company may decide to develop two different versions of a product: one for the government and one for the commercial sectors. This could result in a better product going into a commercial offering or to another commercial entity that may or may not be willing to sell to the government, depending on outside investor decisions. Under these circumstances, the company strongly encouraged other participating companies and the government to focus on developing IP policies and regulations comparable to those in the U.S. commercial sector. The most effective way for DoD to maximize its access to IP is to ensure the Department is a fair, collaborative partner with industry in the shared mission to provide our servicemembers the most advanced, best-maintained equipment possible. The more companies seek to work with the DoD, the more access the Department will have to capabilities that are innovative, cutting-edge, and driven by IP. Without consistent policies that proportionally protect the IP and data rights of industry, companies are driven away from their ability to partner with the DoD, further shrinking the U.S. DIB and the Department’s capabilities. Given the profound importance of this issue, NDIA tracked industry views on IP in the Vital Signs 2024 Survey. Even considering the changes in statute and DoD policy intended to balance the interests of DoD and industry over the last eight years, the results of the Vital Signs 2024 Survey demonstrate companies within the DIB still fear significant risks to their IP when contracting with the DoD. Nearly a quarter (21%) of private sector respondents chose not to bid on certain DoD contracts out of fear DoD requirements for IP would put a company’s rights at risk (see Q55 and Q56 Charts). In addition, in the follow-up question asking if there were instances in which companies did not include certain technologies in bids due to concerns over IP protection, 28% of private sector respondents said their company decided not to include certain technologies in bids because of IP concerns. Most alarming, 61% of the private sector respondents in the Vital Signs 2024 Survey who choose not to bid on certain DoD contracts out of fear that DoD requirements for IP will put their company’s rights at risk identified as small businesses.

Jeff Decker, Ph.D. is managing director of Tech Transfer for Defense at Stanford University’s Doerr School of Sustainability and is a co-instructor of the graduate-level Hacking for Defense course. Follow his work at Stanford’s Hacking for Defense blog.; Noah Sheinbaum is the founder of Frontdoor Defense, a platform to simplify the defense industry for mission-aligned builders and operators. He also co-founded Defense Tech Jobs, a jobs board for defense technology companies, and consults for various purpose-driven companies.

Shining a Light on the Defense Department’s Industrial Base Problems; The Strategist Vol 7, Iss 1 Winter 2023/2024 | 75-88 Stable URL: https://doi.org/10.26153/tsw/50673

writer on defense, strategy, the profession of arms, and aerospace.; The Growing Importance Of Data Rights In Defense Acquisition; Forbes; https://www.forbes.com/sites/davedeptula/2018/10/16/the-growing-importance-of-data-rights-in-defense-acquisition/

September marked a big month for the U.S. Air Force and the aerospace sector. The service awarded contracts for the replacement of its 1960s-era T-38 advanced jet trainers and UH-1 utility helicopters. These selections culminated years’ worth of effort to replace aircraft that have been stalwarts in the Air Force inventory since the Vietnam War. The programs also mark a new acquisition emphasis concerning data rights—the government’s licensing rights to both technical data and computer software. While this topic may seem arcane to some, it will increasingly stand a key factor determining success or failure for those competing to gain future defense business. It all comes down to a balance between the government’s need for increased technical insight to avoid sustainment and modernization vendor lock, while also acknowledging that innovation and sustainable business models demand protecting proprietary intellectual property (IP). Striking this balance is far easier said than done. In the information age, intellectual property stands as a critical aspect of any successful acquisition or modernization effort. Lt Gen Lee Levy, the head of the Air Force Sustainment Center, remarked that “… in the 21st century, the intellectual property and the data will be probably be more valuable than the hardware.” Without data rights, the services have their hands tied when it comes to keeping military capabilities leading-edge. No longer is an airplane just a collection of rivets, sheet metal, and control cables; indeed, today the utility of defense hardware is beholden to its software, and data rights hold the key to life-cycle affordability. Furthermore, the prolonged service life of weapon systems today—now extending to over fifty years in the Air Force—means that capability upgrades are an especially important part of the sustainment lifecycle. In order to compete or organically support sustainment and modernization, the services need to avoid vendor lock, where proprietary rights are restricted to the original system vendor. The growing appetite that the services have for the data rights to their weapon systems is not at all surprising: the military must make the most out of finite budgets, and owning all the data rights and associated intellectual property is one way to create a cost competition. However, the services’ burgeoning demand for greater content and data rights may actually pose a risk to companies that seek to do business with the Department of Defense (DOD). The same intellectual property that makes the technology and software in weapon systems so valuable to a service is also the life-blood of the manufacturer, providing for their long-term viability. Uncertain of what data rights are “necessary,” the services’ appetite for data rights may be imposing unintended, but harmful, effects on the very defense industry that it relies upon for technological superiority. The government has growing needs for procuring and using data, but it also has an interest in meeting those needs in ways that encourage private investment, reward innovation, and facilitate competition—the foundation of a healthy industrial base. Examination of acquisition strategies indicate that the military may be seeking more rights than they need without considering the holistic nature of data requirements and the unintended negative effects that this all-encompassing approach yields. The recently awarded T-X and UH-1 Utility Helicopter replacement programs, for example, imposed drastic and ill-defined data rights requirements that even include the IP of suppliers and sub-tier vendors. While these demands did not fully deter competitors from submitting proposals, the DOD should be aware of potential long-term unintended consequences on the very supply base they depend upon. Ceding vital proprietary information may well place a company’s long-term innovation, competitiveness, and viability at risk. Said another way, it does the government no good to claim victory by driving an exceedingly hard bargain in one program, but in so doing, drive key players out of the marketplace because the new terms of business are not sustainable. Make no mistake—it is the defense industry that develops the advanced capabilities the military requires. The IP contained in technical data and software constitute a competitive value and it is therefore directly related to a company’s financial health. The entire point behind IP is that it is unique, a competitive edge that rewards the innovator. If IP is treated as a commodity, available to the lowest bidder, then there is no incentive to innovate. A company that does not have a strong balance sheet cannot continue to develop the next set of advanced capabilities. Industry must protect their technical data, software, and IP, or they will go out of business. And it won’t be just the defense industry that pays. It will be our warfighters who don’t have the real competitive edge.

Shyam Sankar is the Chief Technology Officer of Palantir Technologies. Caitlin Dohrman is the Chief Executive Officer of Tangram Flex. Madeline Zimmerman is a Department of Defense Deployment Strategist at Palantir Technologies. THE MILITARY’S INSISTENCE ON OWNING COMMERCIAL INTELLECTUAL PROPERTY IS LIMITING INNOVATION; War On The Rocks;

Finally, the requirement of unlimited data rights or government purpose rights for commercial software is resulting in the U.S. military missing out on innovation. When faced with such requirements, commercial companies are either forced to opt out completely, or they create a special-purpose version of their software with the desired rights — this version, or branch, of software is frozen in time from that point on. Companies will then release new features and innovations only in newer versions of their commercial software, a necessity for them to remain competitive in the marketplace and protect their product development investment. The Department of Defense misses out on the key benefit of buying commercial software — frequent new releases with additional features driven by feedback from a large customer base. Over the past several years, the U.S. government has begun to wield new authorities, like the modular open systems approach, to avoid vendor lock and improve interoperability (perhaps an implicit acknowledgment that aggressive data rights are not yielding desired outcomes). Yet even with these new tools, the military persists on unnecessary claims to unlimited rights. The result is the worst of all worlds — interoperability issues persist, and commercial firms become disincentivized from pursuing the defense tech market altogether. Recommendations Given that the military can maximize interoperability without claiming maximum intellectual property rights, how can the Department of Defense and industry work together to ensure American warfighters have access to the best capabilities American industry has to offer? First, and foremost, we recommend that procurements allow commercial software vendors to retain intellectual property rights to their commercial baseline. Second, to procure solutions that are configurable, flexible, and responsive — especially in wartime — the military should shift its evaluation criteria for software procurement from a heavy focus on intellectual property ownership to the outcomes of interoperability and responsiveness. The F-35 program is a clear case where focusing on data rights — as opposed to interoperability directly — lead to worse outcomes for the military. In this case, the government is on the hook to pay $500 million for Lockheed Martin to export data from the F-35, with the F-35 program executive admitting, “It’s not a matter of data rights, it’s matter of data delivery.” Despite the U.S. government having its desired data rights, it still has a dependency on Lockheed Martin for the data delivery needed to sustain the aircraft. Third, to ensure vendors and capabilities will be sufficiently responsive in crisis situations, programs should include parameters and inputs that the program must be able to tune autonomously to be responsive to emergent needs, as well as service-level agreement requirements for modifications and new features. Programs can then hold a competition and see if commercial software companies, or government off-the-shelf providers, can ship features faster during operational exercises. Commercial providers also have a responsibility to create a conducive environment for policy change. First, as there is still a strong cultural conflation between commercial intellectual property and government data ownership, industry should proactively demonstrate the ability for government customers to access and export their data outside of a company’s product, as well as be willing to be held to contractual obligations to the same effect. Second, companies should spend more time building trust with their Department of Defense customers by explicitly demonstrating how commercial companies build their product to be as open and interoperable as possible, for example with application programming interfaces, micro-services, and the use of open source components. The benefits of acting on these recommendations will be clear. In addition to improving interoperability for military programs, allowing commercial software providers to own their intellectual property will help keep America’s industrial base strong, providing the best capabilities available to national security community. As a recent George Mason University report argued, “if DoD wants the best commercial firms solving military problems, it will have to respect their primary asset — intellectual property.” Furthermore, as a 2022 National Defense Industrial Association report asserts, “Intellectual Property (IP) rights are essential to the health of the [defense industrial base]. The perception of risks to IP rights shapes investor’s willingness to invest in research and development and commercialization activities.” This matters because the private sector invests in research and development at 3.5 times the rate of the U.S. government, and commercial software has a large customer base that helps drive innovation and new functionality. Conclusion The U.S. government has won a Pyrrhic victory with its current posture on data rights. It gets the intellectual property it wants but not the interoperability and innovation it needs. Commercial companies are put in an untenable position and boxed out from providing their best capabilities to the nation’s hardest problems. If the U.S. government mandates interoperability requirements and protects the baseline intellectual property of commercial software, there is a win-win for all parties involved. Importantly, this creates opportunities for the next generation of defense tech innovators who are keen to break into the defense domain. Unnecessarily onerous intellectual property requirements have been stifling an entire generation of budding defense tech firms eager to support the Department of Defense. By allowing these young firms to keep their intellectual property, it improves their ability to stay competitive, earn return, and most importantly contribute their innovative solutions to America’s warfighters.

President of Etherton and Associates, a consulting and lobbying firm specializing in defense acquisition, industrial base, and cybersecurity policy; Communications Manager at the Acquisition Research Program at the Naval Postgraduate School (NPS); The Slow Destruction of the Defense Industrial Base; Acquisition Research Program Department of Defense Management Naval Postgraduate School; Excerpt from the Proceedings of the Nineteenth Annual Acquisition Research Symposium; Acquisition Research: Creating Synergy for Informed Change May 11–12, 2022

Too often, the DoD pursues policies that seek to save money in the short term at the expense of driving companies out of the marketplace, with the long-term ramifications of disincentivizing industry. Another example is the way the DoD misunderstands the value of intellectual property (IP) rights. Intellectual Property and Data Rights Nothing is going to drive a company away from the DoD faster than fear of losing control over its IP. Chapter 275 of Title 10, Proprietary Contractor Data and Rights in Technical Data, opens with a simple principle, written as a requirement for the secretary of defense, that recognizes this simple truism: “The Secretary of Defense shall prescribe regulations to define the legitimate interest of the United States and of a contractor or subcontractor in technical data pertaining to an item or process.” The interests of the United States in proprietary and technical data are straightforward—the more the DoD owns and has access to such data, the easier it is for the DoD to ensure technology can be sustained over its life cycle, either in-house or by a contractor who competes for and gains access to these rights from the DoD. What seems to be less recognized is that it is in the long-term interest of the DoD to protect industry’s rights in proprietary and technical data. The most recent NDIA report on the health of the industrial base stated, “Intellectual Property rights are essential to the health of the DIB. The perception of risks to IP rights shapes investor’s willingness to invest in research and development and commercialization activities” (NDIA, 2022, p. 36). IP rights represent the crown jewels of industry and the lifeblood of company competitive advantages. The DoD seems to fail to recognize this, too often seeking broader IP and technical data rights, and not wanting to pay for such rights. The Regulatory Morass Companies seeking to enter the NSIB must contend with a multitude of laws and regulations that are cost- and time-prohibitive, disrupt established supply chains, and require implementation of new systems, processes, and procedures. And in return for this effort, the promise is sometimes profit margins lower than those available in the private sector, plus threats to maintaining control over IP. Just to give some examples, companies operating in the private sector who wish to work for the DoD as a traditional contractor must • Prepare for cybersecurity standards on Cybersecurity Maturity Model Certification (CMMC); • Abide by Section 889 requirements that prohibit the federal government from entering into or extending or renewing contracts with any entity that “uses any equipment, system, or service that uses covered telecommunication equipment or services as a substantial or essential component of any system, or as critical technology as part of any system;” • Adhere to Buy American requirements that can disrupt supply chains and hurt cost competitiveness in the commercial market; • Install costly IT and Cost Accounting Systems; and • Build out a compliance capability to deal with government-unique requirements and potential government audits or congressional investigations and hearings. These are but some of the challenges facing companies who consider joining the NSIB. And the reward for overcoming these hurtles can be profit margins below those offered by commercial markets. Margins That Do Not Compete With Commercial Markets Under the Truthful Cost or Pricing Data Act (formerly known as the Truth in Negotiations Act, or TINA), government contractors and subcontractors must submit certified cost or pricing data (TCoPD) for negotiated contracts, subcontracts, or modifications above the threshold, if the government contract is awarded without “adequate price competition.” The contractor must provide “accurate, complete, and current data” about costs to ensure that the negotiated price is “fair and reasonable.” Contracting officers can also request a “price adjustment remedy” if a contractor did not previously provide sufficient data (FAR 15.4). This requirement often delays the contracting process (Adjei & Hendricks, 2021, p. 24). It also is sometimes used to squeeze margins from contractors, making the DoD a less lucrative—and therefore unappealing—customer. The recent case of TransDigm demonstrates a tendency to object to what is considered excess profit in the case of sole-source contracts. The DoD Office of the Inspector General (2021) considered any profit over 15% to be excessive and suggested the contractor voluntarily refund profits above that range. Coca-Cola, by contrast, reported gross profit margins of 60.3% in 2021, up from 59.3% in 2020 (The Coca-Cola Company, 2022). And as mentioned above, Pfizer’s commitment to protecting the health of global populations—a mission comparable to defense contractors supporting national security—resulted in a 27% profit margin in 2021. Conclusion The DoD recently issued the report, State of Competition Within the Defense Industrial Base. We believe that the DoD got it backwards. The question is not, what are companies doing to compete for the DoD’s business? It should be, what is the DoD (and Congress) doing to compete with commercial market buyers to induce industry to work with the DoD? Until the federal government looks inward and matches policies to the realization that it cannot dictate to industry the terms of contracts, the DoD will often get what it pays for: less innovation, less access to leading commercial companies, fewer commercial capabilities incorporated into national security capabilities, and a loss of ground in the race for technology overmatch.

Shyam Sankar is the Chief Technology Officer of Palantir Technologies. Caitlin Dohrman is the Chief Executive Officer of Tangram Flex. Madeline Zimmerman is a Department of Defense Deployment Strategist at Palantir Technologies. THE MILITARY’S INSISTENCE ON OWNING COMMERCIAL INTELLECTUAL PROPERTY IS LIMITING INNOVATION; War On The Rocks;

Data rights is a broad category that refers to both a company’s intellectual property and ownership of government data. While ownership of government data is self-explanatory, for software firms, intellectual property refers to the proprietary source code needed to recreate the software. Enterprise software-as-a-service companies are not advocating to own customer data, believing that the U.S. government should always exclusively own its data. Instead, disagreements between government and industry tend to revolve around rights to commercially financed and owned intellectual property. It is critical that the Department of Defense be able to own and access its data for many reasons, including preparedness and the execution of war, the sustainment and improvement of existing capability, senior leader decision support, and more. As the 2020 Department of Defense Data Strategy explains, “DoD data is a high interest commodity,” and it “must be made available for use by all authorized individuals and non-person entities through appropriate mechanisms.” While the department’s requirement to exclusively own its data is both reasonable and necessary, the claim to commercial intellectual property is more complex and controversial. Within the department, there is a general view that owning, not renting, a new capability or system — through requiring unlimited rights and government purpose rights requirements — will help avoid vendor lock with specific software providers and improve the interoperability of software-based systems. This term refers both to the government being locked into using a specific vendor (and therefore being susceptible to price extortion), as well as being locked in to a given vendor’s architecture that is not interoperable with the government’s current or future investments. For example, the Department of Defense’s 2022 State of Competition in the Industrial Base concluded, “If a component or subsystem becomes vendor-locked, the process for acquiring, supporting, and upgrading the overarching system or subsystem can be subject to the pressure of that vendor lock, because the overall support for that system depends on the exclusive IP rights governing a critical subsystem or component.” While the department’s fear of vendor-lock tends to focus on software providers (versus hardware providers), the concern is universal. After all, the production of a plane, tank, or ship can include substantial vendor-lock as the government does not have the opportunity to switch providers until there is a new class of that platform. Simply put, vendor-lock is the opposite of interoperability: It limits competition for government contracts, increasing costs; it undermines the government’s ability to engage in flexible modification and sustainment when software updates are needed, or during times of rapid change in requirements; and it ultimately prevents the government from acquiring the best new technologies. What Does Industry Want Out of Data Rights? While commercial software companies do not seek ownership over government data, the request by government buyers for unlimited rights and government purpose rights requirements on core commercial intellectual property is a difficult proposition. However, this preference is not related to commercial providers seeking to create vendor lock-in or undermine interoperability. In fact, we advocate that industry consent to unlimited rights or government purpose rights on non-core intellectual property, including all derivative logic, models, analysis, interface control documents, application programming interfaces to other government systems, and computer software configuration items. Commercial software companies object to the sweeping terms stipulated in unlimited rights and government purpose rights because protection of core intellectual property — typically built with independent research and development dollars or outside funding like venture capital — is central to their ability to remain a viable company. If companies had to give up their intellectual property every time they sold to a customer, whether government or commercial, they would struggle to remain in business as it would be too easy for competitors to copy their product for free. American tech companies don’t want their intellectual property stolen by China, and they also don’t want to turn it over to the U.S. government as the price of entry to provide national security capabilities.

Military readiness is vital because declines in America's military readiness signal to the rest of the world that the United States is not prepared to defend its interests. Therefore, potentially hostile nations will be more likely to lash out against American allies and interests, inevitably leading to U.S. involvement in combat. A high state of military readiness is more likely to deter potentially hostile nations from acting aggressively in regions of vital national interest, thereby preserving peace.

Continual warfare in the Middle East, a nuclear Iran, electromagnetic-pulse weapons, emerging pathogens, and terrorism involving weapons of mass destruction variously threaten the United States, some with catastrophe on a scale we have not experienced since the Civil War. Nevertheless, these are phenomena that bloom and fade, and that, with redirection and augmentation of resources we possess, we are equipped to face, given the wit and will to do so. But underlying the surface chaos that dominates the news cycle are the currents that lead to world war. In governance by tweet, these are insufficiently addressed for being insufficiently immediate. And yet, more than anything else, how we approach the strength of the American military, the nuclear calculus, China, and Russia will determine the security, prosperity, honor, and at long range even the sovereignty and existence of this country. THE AMERICAN WAY OF WAR Upon our will to provide for defense, all else rests. Without it, even the most brilliant innovations and trenchant strategies will not suffice. In one form or another, the American way of war and of the deterrence of war has always been reliance on surplus. Even as we barely survived the winter of Valley Forge, we enjoyed immense and forgiving strategic depth, the 3,000-mile barrier of the Atlantic, and the great forests that would later give birth to the Navy. In the Civil War, the North’s burgeoning industrial and demographic powers meshed with the infancy of America’s technological ascendance to presage superiority in mass industrial — and then scientific — 20th-century warfare. The way we fight is that we do not stint. Subtract the monumental preparations, cripple the defense industrial base, and we will fail to deter wars that we will then go on to lose.

During the Cold War, a Soviet “bolt from the blue” – a massive nuclear first strike aimed at destroying the bulk of U.S. strategic forces before they could launch – was a major driver of U.S. nuclear force planning. Today, the most likely scenario for a U.S. nuclear conflict with Russia (or China) begins with a regional conventional war. The fewer fighters, warships and tanks that the U.S. military has, the weaker its ability to deter that conventional conflict from breaking out.  

Once conventional war with a nuclear-armed adversary begins, nuclear arms can come into play in two ways. In the first scenario, U.S. and allied forces begin to lose, and the president must face the agonizing choice of using nuclear weapons first. U.S. first use of nuclear arms would open a Pandora’s box of unpredictable and catastrophic consequences. The other side could well retaliate at the nuclear level, raising the possibility of an escalatory cycle leading to disaster.

The geopolitical consequences of Russia’s full-scale war in Ukraine are coming into focus as the invasion enters its second year.

The war is an existential threat for Ukraine, but its impacts go well beyond the immediate devastation that it’s causing, particularly with regard to the climate.

The bombings of Hiroshima and Nagasaki demonstrated the unprecedented destructive power of nuclear weapons. However, even in an all-out nuclear war between the United States and Russia, despite horrific casualties, neither country’s population is likely to be completely destroyed by the direct effects of the blast, fire, and radiation.8 The aftermath could be much worse: the burning of flammable materials could send massive amounts of smoke into the atmosphere, which would absorb sunlight and cause sustained global cooling, severe ozone loss, and agricultural disruption — a nuclear winter.

According to one model 9 , an all-out exchange of 4,000 weapons10 could lead to a drop in global temperatures of around 8°C, making it impossible to grow food for 4 to 5 years. This could leave some survivors in parts of Australia and New Zealand, but they would be in a very precarious situation and the threat of extinction from other sources would be great. An exchange on this scale is only possible between the US and Russia who have more than 90% of the world’s nuclear weapons, with stockpiles of around 4,500 warheads each, although many are not operationally deployed.11 Some models suggest that even a small regional nuclear war involving 100 nuclear weapons would produce a nuclear winter serious enough to put two billion people at risk of starvation,12 though this estimate might be pessimistic.13 Wars on this scale are unlikely to lead to outright human extinction, but this does suggest that conflicts which are around an order of magnitude larger may be likely to threaten civilisation. It should be emphasised that there is very large uncertainty about the effects of a large nuclear war on global climate. This remains an area where increased academic research work, including more detailed climate modelling and a better understanding of how survivors might be able to cope and adapt, would have high returns.

The Russia-Ukraine War is not only a struggle for Ukrainian independence against resurgent Russian imperialism. As Vladimir Putin himself frequently states, it is also a war to destroy the existing world order.

By now, it should be apparent to any objective observer that unless Putin’s invasion ends in defeat, Russian international aggression will not be limited to Ukraine. Since February 2022, the Kremlin dictator has placed the entire Russian economy on a war footing and begun actively preparing Russian society for a long war. He has created an anti-Western alliance of fellow autocrats, and routinely portrays his invasion as a fight against the collective West.

Ukraine’s president, Volodymyr Zelensky, has said it many times: If Western military support were to falter, the Ukrainians would continue to fight. They would do it alone if need be, their backs to the wall, at a terrifying human cost. They would be in largely the same situation they were in during the first phase of Russia’s full-scale invasion. After all, the Ukrainians had to wait months to more than a year for the United States to provide the weapons they needed. During those long months, the courage of the Ukrainians and the talent of their commanders were enough to hold off a Russian military whose troops still were fresh, motivated and sure of themselves. In a worst-case scenario in which Congress continues to refuse to approve the funds requested by President Biden and Europe follows suit in withdrawing support, the conflict would revert to those early stages. And the Ukrainian forces, which I’ve observed for two years while making three documentaries from the front lines, would shift to a long and grueling war of resistance. But they would not lay down their arms. This war is existential. Of this I am sure. So here’s the question: Given that the war will go on, are we going to prolong the fighting or shorten it? Are we going to allow civilian deaths to pile up or try to minimize them? Will the United States, for vile political reasons, let the conflict fester and encourage authoritarian and anti-American forces throughout Europe? Or will it decide to come to the aid of its natural and reliable allies in Ukraine? What message will the country choose to send to imperial China, neo-Ottoman Turkey and an Iran racing toward the nuclear threshold? Will America welcome a multipolar world in which unchecked dictatorships once again lay down the law? Or, having abandoned its allies in Kabul, Aleppo, Erbil and Yerevan, will the country pull itself together behind Kyiv because it’s never too late to correct a series of mistakes? If it’s the latter – if enough Republicans reconnect with the spirit of Reagan and enough Democrats remain faithful to that of Kennedy; if they want the world’s people to know they are right to rebel and to dream of liberal democracy – then American and allied aid must urgently flow to Ukraine. European Storm Shadow cruise missiles must be delivered to the Zaporizhzhia region to enable the men and women of the 47th Separate Mechanized Brigade – which took the village of Robotyne last summer in bold commando operations – to push south past Russian fortifications toward occupied Verbove, Tokmak, Berdyansk and the Azov Sea. Ukrainian drone pilots – who have demonstrated since the early days of the war that no Russian ammunition depot, naval base or ship in Crimea is out of their reach – must receive the long-range U.S. Army Tactical Missile Systems, known as ATACMS, promised since September, which they need to fully open the Black Sea. F-16s, whose arrival near Donbas is equally overdue, are an essential complement to the artillery and infantry units working to liberate the Bakhmut and Avdiivka zones and the routes in and out of Donetsk and Luhansk. To the south, in the Kherson zone, which was liberated more than a year ago by unassisted Ukrainian forces, the need is for river-crossing gear, amphibious equipment and light Bradley tanks. That would enable the Ukrainian commandos under the command of Maj. Gen. Andriy Kovalchuk to expand the operations I watched them conducting on far too small a scale to the eastern side of the Dnipro River, near the villages of Krynky, Kozachi Laheri and Korsunka. Additionally, Ukraine needs an “iron dome” worthy of the name to replace the mobile antiaircraft units I accompanied in makeshift pickup trucks as they chased drones headed for major Ukrainian cities, trying to shoot them down with bazookas. I have been saying since Day 1 that helping the Ukrainians close the sky is essential. For the most part, these weapons are readily available in American and European stockpiles. They come at a cost, of course. But that cost is far lower than that of a defeated Ukraine, which could well embolden Russia to go after a NATO country and force a full-scale U.S. and European intervention. Our defense budgets today are half what they were during the Cold War – and of what they will have to be if we allow Russia to become an offensive threat again. While we hesitate to pay our respects to international law in dollars, the Ukrainians are paying in blood.