The DoD should allow defense contractors to maintain exclusive ownership of core IP- it creates the incentive needed to solve innovation and grow the defense industrial base

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.