IP protection is key to innovative and competitive DIB- allows new entrants into market and increases investment

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.