Contextual evidence- Congress has authority to direct the DoD to increase IPR protections for contractors in its negotiations

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.

Tyler Evans and Anna Menzel in August 31, 2023

Tyler Evans is a partner and Anna Menzel is an associate at Steptoe & Johnson LLP.; The Pros And Cons Of The Senate's DOD Data Rights Plan; Law360; https://www.law360.com/articles/1713486/the-pros-and-cons-of-the-senate-s-dod-data-rights-plan

The U.S. Senate's version of the annual National Defense Authorization Act includes a provision that large businesses will likely celebrate and small businesses will come to hate. After over three decades of regulations stating the contrary, the Senate is finally proposing to clarify that the U.S. government should not automatically obtain unlimited rights in government contractor data that is necessary for operation, maintenance, installation or training — or OMIT data — purposes. At the same time, however, the Senate is proposing to expand the U.S. government's rights in detailed manufacturing or process data when a contractor — likely a small business — is deemed unable to meet the U.S. government's needs.[1] New Protections for OMIT Data The current framework for OMIT data was established through a series of events beginning in 1986 when Congress passed a statute allowing contractors to prohibit the U.S. Department of Defense from disclosing privately funded data to third parties, including other contractors.[2] The statute excluded OMIT data from this prohibition to the extent it did not also constitute detailed manufacturing or process data, which could occur, for example, when a maintenance manual includes instructions on assembly. When establishing and implementing regulations, the DOD had the option of requiring contractors to provide to the government purpose rights in OMIT data, which would have generally only permitted the data to be used within the U.S. government and by third parties in performing government contracts. However, the DOD ultimately went further and provided the U.S. government with "unlimited" rights in OMIT data, which permitted it to be publicly disclosed and used by third parties in commercial business.[3] The DOD first envisioned that these rights would have a limited impact because they initially only applied to manuals and instructional materials that were specifically required to be delivered or prepared under a contract.[4] However, in 1994, the DOD established the current framework by extending these rights to any OMIT data, regardless of whether it was prepared in commercial business completely independent of a government contract.[5] This change had a significant impact on federal contractors because the U.S. government could now obtain unlimited rights in a contractor's commercial operational, maintenance, installation and training materials simply because a contractor agreed to sell a product or service to the DOD.

For example, under the current framework, a company that maintains a commercial business servicing aircraft engines or computer software needs to provide the U.S. government with unlimited rights in maintenance manuals for those engines or operating instructions for that software simply because the contractor agreed to provide similar services to the DOD. This result can occur even when the U.S. government is otherwise required to receive reduced data rights, such as when a contractor provides a commercial item or performs work under the Small Business Innovation Research program.[6] Moreover, the U.S. government does not need to exercise its unlimited rights to trigger negative consequences for a contractor. The sheer act of granting another party like the U.S. government unlimited rights to use and disclose data for any purpose is inconsistent with an intent to keep the data confidential and likely destroys trade secret protections.[7] Thus, if a competitor receives proprietary OMIT data in which the U.S. government has unlimited rights, the competitor would likely be able to use the data for its commercial business without worrying about misappropriating trade secrets.[8] The DOD has also taken steps to limit a contractor's ability to rely on other forms of intellectual property to prevent competitors from using OMIT data in their commercial business. For example, the DOD has successfully maintained that a contractor cannot place a copyright notice on OMIT data in which the U.S. government has unlimited rights.[9] As a result, competitors can potentially claim innocent infringement if sued for violating a contractor's copyright.[10] The DOD's position would also likely extend to patents, trademarks, mask works and vessel hull designs, with a similar effect of limiting a contractor's ability to protect its intellectual property.[11] Accordingly, although the DOD is expressly prohibited from impairing a contractor's intellectual property, its insistence on receiving unlimited rights in OMIT data has long had this effect and directly harmed the commercial business of its contractors.[12] Fortunately, the Senate is now proposing to change this result by revising the statute that initially led to the current framework. Specifically, the Senate is proposing to clarify that the U.S. government by default can only obtain government purpose rights in OMIT data, which would prevent the DOD from continuing to insist on receiving unlimited rights.[13] The DOD would presumably still be able to insist on having rights in OMIT data produced completely independent of a government contract — which is itself a questionable interpretation of the applicable statute and inconsistent with how civilian agencies handle this issue.[14] However, the Senate's proposal would at least establish a sensical framework under which OMIT data could be used within the U.S. government and by third parties in performing government contracts without destroying or limiting the value of the data for a contractor's commercial business.