Summary
Recipients of U.S. Department of Defense (DoD) Small Business Innovation Research (SBIR) grants agree to give the U.S. government rights to non-commercial computer software1 and "technical data"2 (e.g., recorded information other than software) generated under the SBIR contract. Previously, the U.S. government's rights to use the generated software and technical data were quite limited, but those limitations would disappear after five years. However, effective March 17, 2020, the DoD extended the protective period for its SBIR contracts to 20 years and limited the government's rights in the generated software and technical data even after the 20-year protective period. This significant change to the treatment of technology developed by small businesses under the SBIR program could encourage more small business innovators to seek government funding as a part of their early growth strategy by relieving concerns that their core intellectual property might be shared with its competitors.
Background
DoD SBIR awards are granted pursuant to government contracts that include Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) provisions. Importantly, DFARS clause 252.227-7018 (Rights in Noncommercial Technical Data and Computer Software—Small Business Innovation Research (SBIR) Program) (the SBIR Data Rights Provision) describes the rights that the U.S. government receives to computer software and technical data that a grant awardee delivers under the contract, both during and after the contract.
The Old Rules
Prior to March 17, 2020, the SBIR Data Rights Provision granted the government (SBIR Data Rights) to technical data or computer software generated under the SBIR contract during the five-year period following completion of the project from which the technical data or computer software was generated. SBIR Data Rights consisted of:
- "Limited Rights"3 in technical data—broad rights to exploit technical data within the government, but with rights to use outside of the government only in limited circumstances in connection with government activities;
- "Restricted Rights"4 in software—rights to use software on one computer at a time and to modify the software, subject to the one-computer-at-a-time limitation, with limited rights to give access to contractors supporting the government.
After the five-year protective period, the U.S. government received "Unlimited Rights"5 in technical data and computer software—the rights to exploit the technical data and computer software in any manner without restriction, and to permit others to do so.
The New Rules
On March 17, 2020, the DoD issued Class Deviation 2020-O0007, requiring contracting officers to use an updated version of the SBIR Data Rights Provision whenever technical data or computer software will be generated during contract performance. The class deviation implements the Small Business Administration's (SBA) Policy Directive issued in April 2019, which extends the period of time the government is required to protect technical and computer software generated under SBIR contracts.
This updated clause:
- Extends the length of the SBIR Data Rights period—the period during which the government's rights are substantially constrained—from five years following completion of the work to 20 years following grant of the award;
- Narrows the government's rights after expiration of the 20-year protective period from "Unlimited Rights" to "Government Purpose"6 rights—which are broad rights to exploit the technical data and computer software for governmental purposes, but no rights to exploit technical data or computer software for commercial purposes.
Companies are permitted to negotiate rights that differ from the above with the awarding agency, and such license must be made a part of the SBIR contract.
The new clause applies to all new DoD SBIR awards but not to already awarded contracts. Note also that the SBA's policy directive regarding the extension of protections applies government wide, but non-DoD agencies approach data rights differently from the DoD. As always, it is critically important that government contractors clearly and properly assert their rights with the government under either regime. Please contact a member of Wilson Sonsini's technology transactions practice (James Clessuras or Barath Chari) or government contracts group (Mark Fitzgerald, Mark Bass, or Seth Cowell) if you have any questions about this alert or any other government contracts intellectual property issues.
[1] The DFARS defines non-commercial computer software as “computer software developed or regularly used for nongovernmental purposes which (i) Has been sold, leased, or licensed to the public; (ii) Has been offered for sale, lease, or license to the public; (iii) Has not been offered, sold, leased, or licensed to the public but will be available for commercial sale, lease, or license in time to satisfy the delivery requirements of this contract; or (iv) Satisfies a criterion expressed in paragraph (a)(1)(i), (ii), or (iii) of this clause and would require only minor modification to meet the requirements of this contract.” In turn, “computer software” is defined as “computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, formulae, and related material that would enable the software to be reproduced, recreated, or recompiled. Computer software does not include computer databases or computer software documentation.”.
[2] The DFARS defines “Technical Data” as “recorded information, regardless of the form or method of the recording, of a scientific or technical nature (including computer software documentation).” The term does not include computer software or information incidental to contract administration, such as financial and/or management information.
[3] The DFARS defines “Limited Rights” as follows: “The rights to use, modify, reproduce, release, perform, display, or disclose technical data, in whole or in part, within the Government. The Government may not, without the written permission of the party asserting limited rights, release or disclose the technical data outside the Government, use the technical data for manufacture, or authorize the technical data to be used by another party, except that the Government may reproduce, release, or disclose such data or authorize the use or reproduction of the data by persons outside the Government if (i) The reproduction, release, disclosure, or use is (A) Necessary for emergency repair and overhaul; or (B) A release or disclosure to (1) A covered Government support contractor in performance of its covered Government support contracts for use, modification, reproduction, performance, display, or release or disclosure to a person authorized to receive limited rights technical data; or (2) A foreign government, of technical data other than detailed manufacturing or process data, when use of such data by the foreign government is in the interest of the Government and is required for evaluational or informational purposes; (ii) The recipient of the technical data is subject to a prohibition on the further reproduction, release, disclosure, or use of the technical data; and (iii) The contractor or subcontractor asserting the restriction is notified of such reproduction, release, disclosure, or use.”
[4] The DFARS defines “Restricted Rights” as follows: “the Government's rights to (i) Use a computer program with one computer at one time. The program may not be accessed by more than one terminal or central processing unit or time shared unless otherwise permitted by this contract; (ii) Transfer a computer program to another Government agency without the further permission of the Contractor if the transferor destroys all copies of the program and related computer software documentation in its possession and notifies the licensor of the transfer. Transferred programs remain subject to the provisions of this clause; (iii) Make the minimum number of copies of the computer software required for safekeeping (archive), backup, or modification purposes; (iv) Modify computer software provided that the Government may (A) Use the modified software only as provided in [parts (i) and (iii) of this definition; and (B) Not release or disclose the modified software except as provided in [parts (ii), (v), (vi), and (vii) of this definition]; (v) Permit contractors or subcontractors performing service contracts (see 37.101 of the Federal Acquisition Regulation) in support of this or a related contract to use computer software to diagnose and correct deficiencies in a computer program, to modify computer software to enable a computer program to be combined with, adapted to, or merged with other computer programs or when necessary to respond to urgent tactical situations, provided that (A) The Government notifies the party which has granted restricted rights that a release or disclosure to particular contractors or subcontractors was made; (B) Such contractors or subcontractors are subject to the non-disclosure agreement at 227.7103-7 of the Defense Federal Acquisition Regulation Supplement or are Government contractors receiving access to the software for performance of a Government contract that contains the clause at 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends; (C) The Government shall not permit the recipient to decompile, disassemble, or reverse engineer the software, or use software decompiled, disassembled, or reverse engineered by the Government pursuant to paragraph (a)(18)(iv) of this clause, for any other purpose; and (D) Such use is subject to the limitations in paragraphs (a)(18)(i) through (iii) of this clause; (vi) Permit contractors or subcontractors performing emergency repairs or overhaul of items or components of items procured under this or a related contract to use the computer software when necessary to perform the repairs or overhaul, or to modify the computer software to reflect the repairs or overhaul made, provided that (A) The intended recipient is subject to the non-disclosure agreement at 227.7103-7 or is a Government contractor receiving access to the software for performance of a Government contract that contains the clause at 252.227-7025, Limitations on the Use or Disclosure of Government Furnished Information Marked with Restrictive Legends; (B) The Government shall not permit the recipient to decompile, disassemble, or reverse engineer the software, or use software decompiled, disassembled, or reverse engineered by the Government pursuant to paragraph (a)(18)(iv) of this clause, for any other purpose; and (C) Such use is subject to the limitations in paragraphs (a)(18)(i) through (iii) of this clause; and (vii) Permit covered Government support contractors in the performance of Government contracts that contain the clause at 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends, to use, modify, reproduce, perform, display, or release or disclose the computer software to a person authorized to receive restricted rights computer software, provided that (A) The Government shall not permit the covered Government support contractor to decompile, disassemble, or reverse engineer the software, or use software decompiled, disassembled, or reverse engineered by the Government pursuant to paragraph (a)(18)(iv) of this clause, for any other purpose; and (B) Such use is subject to the limitations in paragraphs (a)(18)(i) through (iv) of this clause.”
[5] The DFARS defines “Unlimited Rights” as the right “to use, modify, reproduce, release, perform, display, or disclose, technical data or computer software in whole or in part, in any manner and for any purpose whatsoever, and to have or authorize others to do so.”
[6] The DFARS defines a “Government Purpose Rights” are “the rights to (i) use, modify, reproduce, release, perform, display or disclose technical data or computer software within the Government without restriction; and (ii) release or disclose technical data or computer software outside the Government and authorize persons to whom release or disclosure has been made to use, modify, reproduce, release, perform, display, or disclose that data for United States Government purposes.” “Government purposes” are in turn defined as “any activity in which the United States Government is a party, including cooperative agreements with international or multi-national defense organizations or sales or transfers by the United States Government to foreign governments or international organizations. Government purposes include competitive procurement, but do not include the rights to use, modify, reproduce, release, perform, display, or disclose technical data or computer software for commercial purposes or authorize others to do so.”