IP protection is key to encouraging defense companies to develop and compete in an innovative market- allows them to hold onto their most valuable assets

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

Intellectual Property Problems Abound “DoD [struggles to understand] what a commercial sales model looks like, including private company IP rights.” -Survey Respondent Vague intellectual property rights language causes confusion between the Defense Department and companies, slowing award time and limiting the overall vendor pool. Survey responses suggest that most companies would be willing to give up their intellectual property rights to the federal government. However, write-in responses add a degree of nuance, as most companies are deeply protective of their intellectual property and are wary of handing over their rights. This disconnect occurs because companies do not understand government intellectual property rights. Among all respondents, 67 percent indicated they would accept language corresponding to government purpose rights on their contract, while just 24 percent would require restricted rights. Meanwhile, 27 percent of respondents are open to accepting unlimited rights on their contracts. Among venture capital-backed companies, 68 percent are open to either government-purpose or restricted rights, while only 15 percent are willing to accept unlimited rights. Companies do not understand the government’s intellectual property rights framework. Accepting general purpose rights can seem harmless but can deeply impact a company’s ability to profit within the defense market. On the other hand, the government either does not understand, or care about, company concerns about the need to protect their intellectual property. Companies develop products, and get funding for expansion, based on intellectual property and the defensibility of that intellectual property. However, the government requires access to the data to operate the system. Both parties — the company and the government — have an interest in reaching a mutually beneficial agreement on intellectual property rights. Respondents highlighted that intellectual property rights negotiations are a common source of friction between companies and the government. One company representative explained that the “DoD [struggles to understand] what a commercial sales model looks like, including private company intellectual property rights.” Another added that “the [U.S. government] must do better at protecting our proprietary and SBIR rights.” Others pointed to the disconnect between rights negotiated in SBIR awards, and those granted in follow-on contracts: “Getting SBIR data rights on contracts that extend from SBIR Phase I and II contracts [is a challenge].” Another explained that a contracting officer “has attempted to remove our existing data rights.” A respondent summarized the difficult tradeoff that companies face: “The company either incurs significant fees to understand what they’re agreeing to and negotiate with the government, or takes the risk, and neither is ideal.” Negotiating intellectual property rights can be a daunting task for companies entering or growing within the federal market. The government often wants unnecessarily stringent intellectual property rights, either to minimize their perceived risk in the contract or due to differing perceptions of what they think they are buying versus what companies believe they are selling. Companies unfamiliar with the intellectual property rights process often struggle to weigh the costs of prolonged negotiations against the risk of accepting terms they fear they may come to regret. Such confusion results in companies either leaving the defense market with their technology or spending precious time and resources hiring an intellectual property lawyer. In both cases, the Defense Department loses because the underlying requirement remains unmet.