Government Contracts: Protecting Intellectual Property

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PRACTICE NOTE

byErin L. Toomey, Foley & Lardner LLP, and Micah T. Zomer, formerly of Foley & Lardner LLP, with Practical Law

CommercialTransactions

Status: Maintained | Jurisdiction: United States

This document is published by Practical Law and can be found at: us.practicallaw.tr.com/w-020-6321

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The US government invests more than $100 billion each

year on contracts, grants, and other types of agreements

with private companies, educational institutions, and

non-proﬁt entities for the research and development of

new technologies, products, and processes (see John F.

Sargent, J., Cong. Research Service reports, R44888,

Federal Research and Development Funding: FY2018, 3

(2018)). It is important for contractors to understand the

rights the US government acquires in the intellectual

property (IP) developed and delivered under and used in

performing these government-funded or government-

sponsored agreements.

The US government’s rights in IP differ depending on:

• The type of IP involved, which can be:

– patents, for example, protecting an invention; or

– copyright, for example, in technical data or computer

software.

• The type of agreement at issue (such as procurement

contracts, cooperative research and development

(R&D) agreements (CRADAs), cooperative agreements,

or grants). For more information on CRADAs, see

Practice Note, Cooperative Research and Development

Agreements (CRADAs).

• The government agency involved (for example,

Department of Defense (DOD) or Department of

Energy (DOE)).

This Note addresses only procurement contracts under the

Federal Acquisition Regulation (FAR) and brieﬂy discusses

some agency-speciﬁc FAR supplemental provisions that

deviate from the FAR. This Note does not replace the

contractor’s obligation to carefully read the applicable

statutes and regulations and the contract clauses in its

contracts with the US government.

Inventions

The rights of contractors and the US government in

inventions, including any related patent rights, are

governed by the Bayh-Dole Act of 1980, 35 U.S.C.

§§200-212 (Bayh-Dole). Bayh-Dole’s objectives are to:

• Encourage the use of inventions resulting from

federally-supported R&D.

• Promote the commercialization and availability of US-

made inventions.

• Enable the government to obtain sufﬁcient rights in

federally-supported inventions to meet its needs.

(35 U.S.C.§200; FAR 27.302(a).)

Bayh-Dole originally applied to individuals, small

businesses, and non-proﬁt organizations but was later

extended to all contractors regardless of size. (Executive

Order 12591 (1987).)

Bayh-Dole’s requirements are implemented in

procurement contracts for experimental, design, or

research work by:

• FAR 52.227-11, Patent Rights - Ownership by the

Contractor, for contractors located in the US.

A Practice Note discussing intellectual property issues in research and development contracts

between contractors and the federal government. This Note reviews the rights granted to the US

government by applicable laws and regulations in patents and inventions, software, and technical

data. It includes a discussion of regulations and contract clauses under the Federal Acquisition

Regulation (FAR), including allocation of rights, reporting requirements, and notiﬁcation and

marking requirements. It also discusses best practices for contractors to protect their rights in

intellectual property developed or delivered under a contract with the US government.

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Government Contracts: Protecting Intellectual Property

• FAR 52.227-13, Patent Rights - Ownership by the

Government, for contractors:

– located outside of the US;

– without a place of business in the US; or

– subject to a foreign government’s control.

Subject Inventions

An “invention” is deﬁned as “any invention or discovery

that is or may be patentable or otherwise protectable

under title 35 of the U.S. Code.” The government

obtains rights only in “subject inventions,” which are

the inventions a contractor conceives or ﬁrst actually

reduces to practice in the performance of work under a

government contract or subcontract. (FAR 52.227-11(a);

Pilleyv.U.S., 74 Fed.Cl. 489, 495 (Fed. Cl. 2006).)

An invention is “conceived” when a deﬁnite and

permanent idea of the complete and operative invention

as to be applied in practice is formed in the inventor’s

mind (Dawsonv.Dawson, 710 F.3d 1347, 1352 (Fed. Cir.

2013). To aid in determining if an invention was ﬁrst

conceived in the performance of work under a contract,

an inventor should maintain:

• Detailed laboratory notebooks. For more information,

see Practice Note, Laboratory Notebook Practice.

• Other pertinent engineering information.

• Dated documentation.

Conception of an invention must encompass all limitations

of the claimed invention (Singhv.Brake, 317 F.3d 1334,

1340 (Fed. Cir. 2003)). If the inventor conceives some

elements of an invention before contract performance,

but other elements during contract performance, the

invention may be deemed a subject invention, particularly

if the elements conceived during contract performance

are a signiﬁcant part of the invention (see Technitrol,

Inc.v.U.S., 440 F.2d 1362, 1374 (Fed. Cl., 1971)).

An invention that is not ﬁrst conceived during contract

performance may still be a subject invention, to which the

government receives license rights under FAR 52.227-

11, if it was ﬁrst reduced to practice during contract

performance. Reduction to practice of an invention

requires the inventor’s:

• Construction of an embodiment or performance of a

process that met all limitations of the claimed invention.

• Determination that the invention works for its intended

purpose.

(Barryv.Medtronic, 914 F.3d 1310, 1322 (Fed. Cir. 2019).)

The invention must also be related to the work performed

under the government contract or subcontract, which

requires a close connection between the invention and the

scope of work performed under the contract (Advanced

Aerospace Technologies, Inc.v.U.S., 129 Fed.Cl. 525, 534

(Fed. Cl. 2016)).

Contractor’s Rights in Subject Inventions

US Contractor May Retain Ownership

A contractor in the US subject to FAR 52.227-11 retains

ownership in subject inventions if it complies with strict

disclosure and reporting obligations. Speciﬁcally:

• The contractor must disclose each subject invention to

the “Contracting Ofﬁcer” (the person with authority to

enter into, administer, and terminate the relevant contract

on behalf of the US government) in writing within two

months after the inventor discloses the subject invention

in writing to the contractor personnel responsible for

patent matters. The contractor’s disclosure must:

– identify each inventor of the subject invention;

– identify the contract under which the subject

invention was made;

– describe the subject invention in sufﬁcient technical

detail; and

– identify any publication, sale, offer for sale, or public

use of the subject invention or whether a manuscript

describing the subject invention has been submitted,

and if so, accepted, for publication.

(FAR 52.227-11(c)(1).)

• Within two years after disclosing the subject invention,

the contractor must submit a written notiﬁcation to

the Contracting Ofﬁcer stating that the contractor has

elected to retain ownership of the subject invention.

The agency may shorten this period if the publication,

sale, offer for sale, or public use of the subject

invention has triggered the one-year statutory period

for obtaining patent protection. (35 U.S.C.§102(b)

(1); FAR 52.227-11(c)(2).) For more information,

see Practice Note, Prior Art: Public Use, on Sale,

Knowledge, and Availability.

• Within one year after the contractor submits this notice

of election to retain ownership (or before the end of

the one-year statutory period, if earlier), the contractor

must:

– ﬁle a US patent application; and

– within ten months after the ﬁrst ﬁled patent

applications, ﬁle patent applications in additional

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Government Contracts: Protecting Intellectual Property

countries in which the contractor has elected to

retain ownership.

(FAR 52.227-11(c)(3).)

When the Government Retains Ownership, the

Contractor Receives a License

A contractor outside the US or subject to a foreign

government’s control and therefore subject to FAR

52.227-13 must assign, throughout the world, each

subject invention to the US government.

When the government obtains ownership of a subject

invention under FAR 52.227-13 or under FAR 52.227-11

because the contractor does not elect to retain ownership

or the government revokes the contractor’s title, the

contractor automatically receives a license under each

patent application ﬁled in any country on the invention

and any resulting patent that:

• Is revocable, non-exclusive, and paid-up.

• Extends to the contractor’s domestic subsidiaries and

afﬁliates.

• Includes the right to grant sublicenses.

• Can be transferred only with the written approval of the

government agency, except to a successor of the part

of the contractor’s business that involves the subject

invention. (FAR 52.227-11(b)(2); FAR 52.227-13(d).)

• May be revoked or modiﬁed by the government if

necessary to promote the practical application of the

subject invention in a particular country. (FAR 52.227-

11(b)(2)(ii); FAR 52.227-13 (d)(3).)

• May be revoked by the government if the contractor fails

to timely disclose a subject invention to the government.

(FAR 52.227-11(b)(2)(i); FAR 52.227-13(d)(1).)

A contractor subject to FAR 52.227-13 can request greater

rights than the license described above, provided the request

is submitted at or within eight months after it ﬁrst discloses

the subject invention. If the government elects not to apply

for a patent in any foreign jurisdiction, the contractor retains

rights in that country and can apply for a patent. The FAR

does not require the government to notify the contactor

regarding the government’s election to apply for a foreign

patent. Therefore, the contractor must correspond with the

government regarding its election decision.

Agency-Speciﬁc Clauses

Contracts may contain agency-speciﬁc clauses with

different reporting requirements and different allocations

of rights, such as:

• DOD FAR Supplement (DFARS) 252.227-7038.

• DOE Acquisition Regulation (DEAR) 952.227-13.

For example, the DOE takes ownership of all subject

inventions developed by large businesses, unless the

contractor is subject to a class waiver or obtains an

advance waiver or speciﬁc waiver. These waivers allow

the contractor to retain title in subject inventions under

speciﬁed conditions.

Government’s Rights in Subject

Inventions

If the contractor owns a subject invention, the

government receives a nonexclusive, nontransferable,

irrevocable, paid-up license to practice, or have

practiced for or on its behalf, the subject invention

throughout the world (FAR 52.227-11(d)(2); FAR

52.227-13(c)(i)).

The government may also request (in which case,

the contractor must grant) ownership of any subject

invention:

• If the contractor fails to either disclose the subject

invention or elect to retain ownership, but the government

must make its request within 60 days of learning of this

failure to disclose or elect.

• In countries where the contractor fails to timely ﬁle a

patent application.

• In any country where the contractor decides not to:

– continue to prosecute a patent application;

– pay the maintenance fees on a patent; or

– defend a patent in a reexamination or opposition

proceeding.

(FAR 52.227-11(d)(1).)

A contractor may also be required to assign ownership in a

subject invention to the government:

• In exceptional circumstances, when an agency

determines that restricting or eliminating the

contractor’s right to retain ownership better promotes

Bayh-Dole’s objectives.

• When a government authority that conducts foreign

intelligence or counterintelligence activities determines

that restricting or eliminating the contractor’s right to

retain ownership is necessary to protect the security of

those activities.

(FAR 27.302(b)(2).)

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Government Contracts: Protecting Intellectual Property

Contractor Action to Protect

Government’s Interest

To protect the government’s interest in a subject invention,

the contractor must:

• Execute and deliver all instruments required to:

– conﬁrm the government’s rights in subject inventions

for which the contractor retains ownership; and

– assign ownership to the government of subject

inventions as the government requests.

• Require its employees to disclose subject inventions to

its personnel responsible for patent administration.

• Notify the Contracting Ofﬁcer of any decisions not to:

– ﬁle a patent application;

– continue the prosecution of any patent application;

– pay the patent’s maintenance fees;

– defend a patent in a reexamination or opposition

proceeding.

• Include the following statement in the speciﬁcation of a

US patent and any patent protection certiﬁcate:

”This invention was made with Government support

under [CONTRACT NUMBER] awarded by [AGENCY].

The Government has certain rights in the invention.”

(FAR 52.227-11(e).)

Ongoing Reporting Requirements

On the government’s request, but no more frequently than

annually, the contractor must submit reports on the use

or efforts to obtain use of any subject invention. These

reports must include:

• The development status of the subject invention.

• The date of ﬁrst commercial sale or use.

• Gross royalties the contractor received.

• The contractor must mark these reports as privileged

or conﬁdential so they are not disclosed outside the

government (FAR 52.227-11(f)).

Preference for US Industry

A contractor or its assignee may not grant any person

the exclusive right to use or sell a subject invention in

the US unless that person agrees that any products

embodying the subject invention will be manufactured

substantially in the US (FAR 52.227-11(g)). The FAR does

not deﬁne or provide guidance regarding what constitutes

“manufactured substantially.” The government may waive

this restriction if the contractor demonstrates that either:

• Domestic manufacture is not commercially feasible.

• It made reasonable but unsuccessful efforts to grant

similar licenses to potential licensees that are likely to

manufacture substantially in the US.

(FAR 52.227-11(g).)

March-In Rights

Under Bayh-Dole, the government has march-in rights

under which it can require a contractor, or its assignee

or exclusive licensee, to grant a nonexclusive, partially

exclusive, or exclusive license to a subject invention, in any

ﬁeld of use, to one or more responsible applicants if the

government determines that this license is necessary:

• Because the contractor, assignee, or exclusive licensee

has not taken effective steps to achieve practical

application in the ﬁeld of use and is not expected to do

so within a reasonable time.

• To alleviate health or safety needs.

• To meet the requirements of public use.

• Because the contractor has not agreed to or complied

with the requirement that the subject invention be

manufactured substantially in the US.

(35 U.S.C.§203(a).)

Since Bayh-Dole was enacted, there have been no reported

cases of the government exercising its march-in rights.

Technical Data and Computer

Software

The government is entitled to certain rights in technical

data and computer software delivered under procurement

contracts.

Under the FAR:

• Technical data:

– consists of recorded information of a scientiﬁc or

technical nature, regardless of the form or method of

recording;

– includes computer software documentation,

such as owner’s or user’s manuals that explain

the capabilities of computer software or provide

instructions on using the software; and

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Government Contracts: Protecting Intellectual Property

– does not include computer software or data

incidental to contract administration (such as

ﬁnancial or management information, or both).

• Computer software:

– includes a series of instructions, rules, routines, or

statements that allow or cause a computer to perform

a speciﬁc operation or series of operations;

– includes source code listings, design details,

algorithms, processes, ﬂow charts, formulas, and

related material that enables the computer program

to be produced, created, or compiled; and

– does not include computer software documentation.

(FAR 52.227-14(a).)

Allocation of Rights

Under the standard data rights clause that applies

to procurement contracts, FAR 52.227-14, Rights in

Data - General, the contractor retains ownership of

technical data and computer software it develops under a

government contract, and the government is entitled to a

license. The scope of this license depends on:

• The type of contract or subcontract (commercial or non-

commercial).

• Whether the technical data or computer software was

developed entirely at private expense or in any part at

government expense.

Under the “doctrine of segregability” the source of funds

is determined at the lowest practical sub-item or sub-

component level or segregable portion of the technical

data or computer software.

The government theoretically gets rights in all technical

data and computer software developed under a contract

at government expense, but it gets actual rights only

in technical data and computer software the contractor

actually delivers. Contractors must be aware of the

technical data and computer software deliverables

in its contracts. (See Deferred Delivery and Deferred

Ordering.)

Non-Commercial Technical Data and

Computer Software

Unlimited Rights

The government has “Unlimited Rights” in:

• Technical data and computer software ﬁrst produced in

the performance of the contract.

• Manuals or instructional and training material for

installation, operation, or routine maintenance and

repair of items delivered under the contract.

• Form, ﬁt and function data, which includes:

– data concerning items, components, or processes

that are sufﬁcient to enable physical and functional

interchangeability; and

– computer software data that identiﬁes source,

functional characteristics, and performance

requirements (not including the source code,

algorithms, processes, formulas and ﬂow charts of

the software).

• All other delivered data if not marked as “Limited Rights”

data or “Restricted Rights” computer software.

(FAR 52.227-14(b).)

Unlimited Rights means the government has the

unrestricted right to use, disclose, reproduce, prepare

derivative works, distribute copies to the public, and

publicly perform and display the technical data and

computer software, in any manner and for any purpose,

and to have or permit others to do the same. (FAR

52.227-14(a).)

If the government has Unlimited Rights in technical

data or computer software, the government may allow

a third party (including a contractor’s competitor) to use

the technical data or computer software for any reason,

including for commercial purposes.

Limited Rights and Restricted Rights

Under the FAR, contractors may withhold “limited rights

data” or “restricted computer software” developed at

private expense and that do not fall within the categories

to which the government receives Unlimited Rights (FAR

52.227-14(g)(1) and see Unlimited Rights).

To withhold this technical data or computer software, the

contractor must:

• Identify in its proposal the withheld technical data or

computer software.

• Furnish form, ﬁt, and function data instead.

Despite the contractor’s right to withhold this technical

data or computer software, the government may require

the contractor to deliver it under the contract. If delivery is

required, the contractor must mark it with the appropriate

legends.

• Limited Rights Notice for limited rights data, as set out

in FAR 52.227-14(g)(3) (Alternate II).

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Government Contracts: Protecting Intellectual Property

• Restricted Rights Notice for Restricted Rights computer

software, as set out at FAR 52.227-14(g)(4) (Alternate III).

Limited Rights License in Technical Data

Under a Limited Rights license in technical data, the

technical data:

• May be used and reproduced by the government.

• May not be used for manufacture without the

contractor’s written permission.

• May be disclosed outside the government with the

contractor’s permission or without that permission for

speciﬁc purposes identiﬁed in the contract, which may

include:

– use (except for manufacture) by support service

contractors;

– use (except for manufacture) by other contractors

participating in the government’s program of which

the speciﬁc contract is a part; or

– emergency repair or overhaul work.

(FAR 52.227-14(g)(3) (Alternate II); FAR 27.404-2(c)(1).)

Restricted Rights License in Computer Software

Under a Restricted Rights license, the government may:

• Use the software or copy it for use on the computers for

which it was acquired.

• Use it or copy it for use on a backup computer if any

computer for which it was acquired is not working.

• Reproduce it for safekeeping (archives) or backup

purposes

• Modify, adapt, or combine it with other computer

software, in which case the relevant portions of the

resulting software are subject to the same restricted

rights.

• Disclose it to service contractors.

• Use it or copy or transfer it for use in a replacement

computer.

(FAR 52.227-14(g)(4) (Alternate III).)

Commercial Technical Data and Computer

Software

Commercial Technical Data

Under FAR part 12, the government acquires the same

rights in technical data pertaining to a commercial item

or process that the contractor customarily provides to

the public with that commercial item or process. The

contractor must grant the government only its standard

commercial license. There is a presumption that technical

data delivered under a contract for commercial items was

developed exclusively at private expense (FAR 12.211).

For more information, see Practice Note, Government

Contracts: Reduced Risk through Commercial Item

Contracting.

Commercial Computer Software

The FAR deﬁnes commercial computer software as

computer software that is a commercial item, meaning it:

• Has been sold, leased, or licensed to the general public.

• Has been offered for sale, lease, or license to the

general public.

• Is to be available for commercial sale, lease, or license

to the general public in time to satisfy the contract’s

delivery requirements.

• Satisﬁes one of the above criteria and requires only minor

modiﬁcation to meet the contract’s requirements.

(FAR 2.101.)

Software developed at government expense but then

regularly used for nongovernmental purposes and sold

or offered for sale to the general public still qualiﬁes as

commercial computer software.

The government acquires commercial computer

software under licenses that the contractor customarily

provides to the public, to the extent these licenses are

consistent with federal law and otherwise satisfy the

government’s needs (FAR 12.212(a)). The contractor is

not required to provide the government with any other

rights in the computer software or documentation

unless mutually agreed between the contractor and the

government (FAR 12.212(a)(2)).

If there is a question about whether a contractor’s

commercial computer software license is consistent with

federal law or otherwise satisﬁes the government’s needs,

the government may include in the contract the clause at

FAR 52.227-19, Commercial Computer Software License,

under which the government effectively obtains the rights

of a Restricted Rights license (FAR 52.227-19(b)(2) and

see Restricted Rights License in Computer Software).

If a contractor’s commercial license agreement includes

a provision requiring the government to indemnify the

contractor in case of a violation of the license agreement,

the clause at FAR 52.232-39, Unenforceability of

Unauthorized Obligations, renders this provision

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Government Contracts: Protecting Intellectual Property

unenforceable if it creates a violation of the Anti-

Deﬁciency Act. (31 U.S.C.§§1341-1342, 1517.)

Marking Requirements

• There are no speciﬁc marking requirements in the FAR

for technical data pertaining to a commercial item or

commercial computer software. However, contractors

should include their standard proprietary markings or

and computer software delivered to the government.

Government Purpose Rights under the

DFARS

In addition to Limited Rights and Restricted Rights,

the DFARS, which applies only to DOD procurement

contracts, includes a separate, unique category of license

rights provided to the DOD, called “Government Purpose

Rights.” A Government Purpose Rights license allows the

government to:

• Use, modify, reproduce, release, perform, display, or

disclose technical data within the government without

restriction.

• Release or disclose technical data outside the

government.

• Authorize persons to whom it has released or disclosed

technical data to use, modify, reproduce, release, perform,

display, or disclose it for US government purposes.

(DFARS 252.227-7013(a)(13); DFARS 252.227-7014(a)(12).)

The government obtains a Government Purpose Rights

license in technical data and computer software developed

with mixed funding under a contract. A Government Purpose

Rights license in the technical data or computer software

has a speciﬁed duration (typically ﬁve years, but negotiable),

after which the government has an Unlimited Rights license.

(DFARS 252.227-7013(b)(2); DFARS 252.227-7014(b)(2).)

This allows the contractor to use the technical data and

computer software commercially before any other company

can do so.

Data Rights Under SBIR and STTR

Contracts

Research contracts issued to small business concerns

under the Small Business Innovation Research (SBIR) or

Small Business Technology Transfer (STTR) programs are

subject to FAR clause 52.227-20, “Rights in Data—SBIR

Program,” which creates another category of data called

“SBIR Data.” SBIR Data is technical data or computer

software that:

• Was ﬁrst produced by a small business concern in

performing a SBIR or STTR contract.

• Is not generally known.

• The contractor has not made available to others.

• Is not already available to the government.

(FAR 52.227-20(a).)

A contractor may assert SBIR rights in SBIR Data

delivered under the contract by marking the SBIR Data

with the SBIR Rights Notice set out in the FAR. The SBIR

Rights Notice provides that:

• For four years (unless extended) after the government

accepts all items to be delivered under the contract:

– the government uses the SBIR Data for government

purposes only; and

– the SBIR data cannot be disclosed outside the

government without the contractor’s permission

(except for use by support contractors).

• After the four-year protection period, the government

receives a paid-up license to use the SBIR Data and to

authorize others to use it on the government’s behalf for

government purposes, but is relieved of all disclosure

prohibitions.

(FAR 52.227-20(d).)

Protecting Technical Data and

Computer Software

Notice and Marking Requirements

A contractor delivering technical data or computer

software with less than Unlimited Rights must satisfy

strict notice and marking requirements. If it fails to do

so, it may inadvertently provide the government with

Unlimited Rights in the delivered technical data and

computer software.

When it submits a proposal for a contract that requires

the delivery of technical data or computer software,

the contractor should identify any technical data or

computer software that it anticipates it is likely to deliver

with less than Unlimited Rights, by submitting a data

rights assertion table along with the proposal (see FAR

52.227-15; DFARS 252.227-7017). The table under DFARS

252.227-7017 includes the following labeled columns:

• Technical Data or Computer Software to be Furnished

with Restrictions: List the deliverable and each item,

component, or process being furnished with restrictions.

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Government Contracts: Protecting Intellectual Property

• Basis for Assertion: Identify the basis for asserting

the restrictions (for example, developed exclusively or

partially at private expense).

• Asserted Rights Category: Identify the speciﬁc license

rights being provided:

– Government Purpose Rights;

– Limited Rights;

– Restricted Rights;

– SBIR Rights; or

– other rights (such as speciﬁcally negotiated license

rights (see DFARS 227.7103-5(d)) and commercial

item licenses).

• Name of Person Asserting Restrictions: The name of

the corporation or individual asserting the restriction. This

should include any actual or potential subcontractors or

suppliers.

The contractor must also mark the technical data or

computer software under the marking requirements

of the applicable FAR or DFARS clause included in the

contract. These marking requirements mandate speciﬁed

legends and the contractor may not deviate from the exact

language of the legends.

There is no speciﬁed legend for commercial technical

data or commercial computer software, so the contractor

should include its standard proprietary or copyright

legends on this delivered data or software.

Nonconforming Markings

The government has the right to challenge the

contractor’s legend. If challenged, the contractor must

justify the legend. If the contractor delivers technical

data or computer software with unauthorized restrictive

or limiting legends or other unauthorized markings, the

government may at any time either:

• Return the technical data or computer software to the

contractor.

• Cancel or ignore the markings.

(FAR 52.227-14(e).)

Before cancelling or ignoring the markings, however, the

government must follow these procedures:

• The Contracting Ofﬁcer must submit a written inquiry

to the contractor giving it the opportunity to provide

a written justiﬁcation for the markings within 60 days

after receiving the Contracting Ofﬁcer’s inquiry.

• If the contractor does not provide a timely written

justiﬁcation, the government can cancel or ignore the

markings and is no longer subject to the disclosure

prohibitions.

• If the contractor provides a timely written justiﬁcation,

the Contracting Ofﬁcer must consider the justiﬁcation

and determine whether the markings are:

– authorized, in which case the Contracting Ofﬁcer so

notiﬁes the contractor in writing and must comply

with the restrictions; or

– unauthorized, in which case the Contracting Ofﬁcer

provides the contractor a written determination that

is deemed the ﬁnal agency decision regarding the

propriety of the markings.

• If the contractor gets an adverse ﬁnal agency decision,

it may ﬁle a suit challenging the decision in a court of

competent jurisdiction. The suit must be ﬁled within

90days of the contractor’s receipt of the decision,

and the government must continue to abide by the

prohibitions of the challenged markings until ﬁnal

resolution of the matter.

(FAR 52.227-14(e).)

Omitted or Incorrect Markings

Omitted Markings

If technical data or computer software is delivered

without any restrictive markings, the government is

deemed to have Unlimited Rights and is not liable for

the disclosure, use, or reproduction of the technical

data or computer software. However, if the contractor

has not disclose the unmarked technical data or

computer software without restriction outside the

government, it may request permission to add the

applicable restrictive notice at its own expense. This

request must be made within six months after the

contractor delivers the technical data or computer

software to the government (or a longer time approved

by the Contracting Officer).

The Contracting Ofﬁcer may agree to allow the contractor

to add the notice if the contractor:

• Identiﬁes the technical data or computer software to

which the omitted notice is to be applied.

• Demonstrates that the omission of the notice was

inadvertent.

• Establishes that the use of the proposed notice is

authorized.

9 Practical Law

(static.legalsolutions.thomsonreuters.com/static/agreement/westlaw-additional-terms.pdf) and Privacy Policy (a.next.westlaw.com/Privacy).

Government Contracts: Protecting Intellectual Property

• Acknowledges that the government has no liability for

any disclosure, use, or reproduction of the technical

data or computer software made before the notice was

added or resulting from the omission of the notice.

(FAR 52.227-14(f).)

Incorrect Markings

If the contractor delivers technical data or computer

software with an incorrect notice, the Contracting

Ofﬁcer may:

• Allow the contractor to correct the notice at its own

expense, if the contractor:

– identiﬁes the technical data or computer software; and

– demonstrates that the correct notice is authorized.

• Correct any incorrect notices himself or herself.

(FAR 52.227-14(f).)

Deferred Delivery and Deferred

Ordering

The government’s greater rights in technical data and

computer software developed at government expense are

essentially theoretical and can be exercised only in technical

data and computer software actually delivered under a

contract. The contractor can control the government’s

rights by carefully deﬁning the technical data and computer

software deliverables. However, the contract may include

clauses that allow the government to require delivery of

technical data and computer software produced or used in

the performance of the contract, such as:

• FAR 52.227-16, Additional Data Requirements. This

clause allows the government to order any technical

data or computer software ﬁrst produced or speciﬁcally

used to perform the contract for up to three years

after it accepts all deliverables under the contract.

The government compensates the contractor only for

converting the technical data or computer software into

the prescribed form, reproduction, and delivery.

• DFARS 252.227-7026, Deferred Delivery. In DOD

procurement contracts, this clause allows the

government to require delivery of technical data or

computer software identiﬁed as “deferred delivery”

data or software:

– at any time during performance of the contract; or

– within two years after it has accepted all deliverables

or the contract has been terminated, whichever is later.

• DFARS 252.227-7027, Deferred Ordering. In DOD

procurement contracts, this clause provides that the

government can order any technical data or computer

software generated in the performance of the contract

or a subcontract:

– at any time during performance of the contract; or

– within three years after it has accepted all

deliverables or the contract has been terminated.

The government compensates the contractor only

for converting the data or computer software into the

prescribed form, reproduction, and delivery.

Best Practices

Several best practices can help contractors protect their

rights in IP developed or delivered under a government

contract.

Require Employees to Assign Inventions

The May 2018 NIST modiﬁcations to Bayh-Dole (see Box,

NIST Modiﬁcations to Bayh-Dole) require contractors to

have written agreements with their employees that require

the employees to assign to the contractor the entire right,

title, and interest in any subject invention.

Recent case law suggests that employment agreements

providing a promise to assign, for example, that the

employee ”will assign” inventions to the employer may

not comply with this requirement (see Bd. of Trs. of Leland

Stanford Junior Univ.v.Roche Molecular Sys. Inc., 583 F.3d

832, 841-42 (Fed. Cir. 2009), aff’d on other grounds, 563

U.S. 776 (2011); Advanced Video Techs. LLCv.HTC Corp.,

879 F.3d 1314 (Fed. Cir. 2018)). Instead, the contractor

should ensure that its employment agreements provide a

present assignment of future rights. This can be done by

providing that each employee ”hereby assigns” any and

all inventions to the contractor.

Maintain Adequate Records

The contractor should:

• Maintain records to track the source of funds for IP

development.

• Clearly document conception and ﬁrst reduction to

practice of an invention that occurs before or outside

of a government contract, so it can dispute any later

government assertions that the invention is a subject

invention.

Government Contracts: Protecting Intellectual Property

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Mark Intellectual Property

The contractor should:

• Ensure that it marks all technical data and computer

software delivered to the government under the

requirements of applicable FAR clauses.

• Strictly comply with the legends included in applicable

FAR clauses.

Implement Written Policies and

Procedures and Training

The contractor should:

• Develop written policies and procedures about IP

developed under government contracts, to ensure

compliance by employees involved in these projects.

• Provide training to employees to ensure compliance

with these policies and procedures.

NIST Modiﬁcations to

Bayh-Dole

The National Institute of Standards and Technology

(NIST) is the entity charged with implementing

Bayh-Dole regulations. NIST modiﬁcations to

the Bayh-Dole regulations went into effect on

May14, 2018. The modiﬁcations have not yet

been incorporated into the FAR, but contractors

should be aware of them and factor them into their

contract considerations. The NIST modiﬁcations

include:

• Removing the 60-day deadline for the

government to request ownership of a subject

invention if the contractor fails to disclose or

elect to retain ownership (see Government’s

Rights in Subject Inventions). Because of this

modiﬁcation, the government is given unlimited

time to request ownership.

• Clarifying the rights of the government and

the contractor in a subject invention when a

government employee is a co-inventor.

• Clarifying that, consistent with Executive Order

12591, Bayh-Dole applies to large business ﬁrms

as well as small business ﬁrms.

• Requiring contractors to have written

agreements with their employees that require

the employees to:

– disclose subject inventions to contractor

personnel responsible for patent

administration matters; and

– assign to the contractor the entire right, title,

and interest in any subject invention.