Unlimited rights agreements are a blunt tool used by the DoD – they deter new entrants and smaller companies from entering the defense market, undermining competition and innovation

general counsel at Anduril Industries; How Data Rights Stifle Innovation in the DoD (and How to Fix Them); https://future.com/data-rights-stifle-innovation-in-the-dod/

Government purpose rights and unlimited rights agreements are the most common rights in military software solicitation and, accordingly I’ll spend the most time on them. These rights are not well suited to modern software projects. In fact, it would be difficult to come up with a data rights framework that is more likely to scare away modern software talent, software investment dollars, and software companies than government purpose rights or unlimited rights. Government purpose rights afford the government – that is, the entire United States government, forevermore – the “rights to use, modify, reproduce, release, perform, display, or disclose technical data or computer software within the Government without restriction, to release or disclose technical data or computer software outside the Government, and to authorize persons to whom release has been made to use, modify, reproduce, perform, or display that technical data or computer software, provided that the recipient exercises such rights for Government purposes only.” (A “government purpose” is any activity where the U.S. government is a party. It is well established that the government can take software obtained with these rights from one contractor and simply give it to another contractor as part of a separate contract for similar work.) Upon expiration of the five-year period, the government gains unlimited rights. Unlimited rights are similar to government purpose rights, but allow the government to share the software for any purpose whatsoever – including, should it choose to, sharing it with the vendor’s commercial competitors for pure commercial use. Government purpose rights and unlimited rights come with the implicit threat that if the vendor underperforms or attempts to raise prices on their product, the government may hand the source code to another vendor to maintain, modify, and profit from. (A strange feature of data rights is that they are negotiated separately from deliverables, so that it is possible to have government purpose rights to software but no source code delivery, or vice versa. For this discussion I am assuming the government has requested source code with the rights, though there are some high-profile examples where it has failed to do so.) They also permit the government to take software provided for a specific use and a specific agency, and deploy it for a totally different use in a totally different government agency, and with a different vendor – without paying the original creator of the software any additional fees. The problems with government purpose rights and unlimited rights Understandably, acquisition officials use government purpose rights and unlimited rights as a blunt tool to prevent vendor lock-in and impose downward price pressure on software providers. However, these rights also have costs, encouraging gamesmanship and abuse by both vendors and the government – to the detriment of U.S. taxpayers and the American warfighter. Vendors, for their part, can manipulate these superficially broad data rights frameworks to lock the government into their proprietary systems even when the vendor contributed relatively little to the overall solution. Government purpose rights and unlimited rights are tied directly to government funding, meaning that a vendor can work around these rights by self-funding a critical aspect of a piece of software and asserting proprietary rights to it. In a typical example, a vendor self-funds the development of a small-but-critical component of a larger government-funded system, and secures proprietary rights to that component. The vendor has effectively “locked in” the Government into its system, even though the vendor did not bear the balance of the risk and did not contribute the balance of the value in developing and fielding the larger system. The government is left with what it calls “Swiss cheese data rights” for a system it largely funded. Just as common is the opposite scenario: The government, aware of the risk of lock-in, end-runs the “funding-focused” data rights regime and structures solicitations around expansive government purpose rights or unlimited rights from the get-go. While the government cannot legally require that a vendor provide government purpose rights to its self-funded proprietary systems, it can set up its solicitation so that vendors with proprietary systems simply fail to score well at the proposal stage of the solicitation – typically on scoring criteria such as vendor lock-in, which are then narrowly interpreted as a stand-in for the vendor’s willingness to provide government purpose or equivalent rights to the system. In doing so, the Government can effectively exclude vendors that offer proprietary solutions from ever winning such solicitations. The problem with this approach is that, while it avoids vendor lock in, it destroys competition – which is the opposite of the desired effect. By structuring software solicitations around broad data rights agreements, the government virtually guarantees that many of the best software providers will opt out of competing for DoD contracts. With a few idiosyncratic exceptions, modern software companies will simply not work under expansive data rights agreements without a clear path to production. The primary reason is simple economics: Modern software development is expensive. It requires fast and risky development cycles funded by internal research and development (IRAD) dollars. As a result, the software and computing industry spends a full order of magnitude more on IRAD than does the aerospace industry. Commercial software companies expect to recoup the significant sums of time and money associated with this IRAD through successful deployment of robust software across numerous customers. Profit margins for commercial software are higher than in other industries, which in turn supercharges IRAD, competition, and investment in the field of commercial software, generating a virtuous cycle that is responsible for much of the technology we take for granted today. The DoD should be aiming to recreate this virtuous cycle in its acquisitions. To be sure, government purpose rights and unlimited rights agreements do not bother traditional defense contractors, who are used to building bespoke systems off cost-plus contracts. Traditional defense contractors are unable to compete in the commercial software market, and therefore perform very little true IRAD. They are used to having their development costs covered by U.S. taxpayers through hourly labor contracts. They are the greatest beneficiaries from the government’s insistence on expansive data rights, which effectively clear the field of competition from companies with more innovative IRAD and software deployment models.