1. placeholder UNCLASSIFIED

2. Panel Members Ralph C. Nash, Jr. Professor Emeritus of Law George Washington University William (Bill) V. Adams Associate Deputy General Counsel Dept. of the Army, Office of General Counsel George O. Winborne* Intellectual Property Counsel Army Materiel Command, Office of Command Counsel *Panel Coordinator, responsible for these slides. 2

3. “Those who fail to learn from history are doomed to repeat it.” “The Army and the Air Force have encountered limitations in their sustainment plans for some fielded weapon systems because they lacked needed technical data rights.… Although the circumstances surrounding each case were unique, earlier decisions made on technical data rights during system acquisition were cited as a primary reason for the limitations subsequently encountered.” (GAO Report 06-839 at 6) 3

4. “Insanity: Doing the same thing over and over again and expecting different results.” “Most of the contracting and program officials at DOD that we spoke with pointed to the lack of access to technical data as one of the main barriers to competition. Some contracting officers described this condition as essentially being “stuck” with a certain contractor. … Some contracting and program officials have inquired about the cost of obtaining the technical data, only to discover that the package is not for sale or purchase of it would be cost-prohibitive, especially the systems and equipment that have been contracted out for decades.” (GAO Report 10-833 at 19) 4

5. Paths to Vendor-Lock or the “Pit of Despair” and “Land of Prosperity” Lack of long term planning for technical data and rights and up front acquisition when the USG has more leverage Misguided notion that it was unnecessary to secure the USG’s rights in complex technical solutions because initial requirements were performance based Excessive fear of the 800 lb. gorilla (10 U.S.C. § 2320(a)(2)(F)) 5

6. 6 The 800 lb. Gorilla 10 U.S.C. 2320(a)(2)(F): A [prospective] contractor or subcontractor... may not be required, as a condition of being responsive to a solicitation or as a condition for the award of a contract— ◦ (i) to sell or otherwise relinquish to the United States any rights in technical data except—  (I) rights in technical data described in subparagraph (A) for which a use or release restriction has been erroneously asserted... ;  (II) rights in technical data described in subparagraph (C); or  (III) under the conditions described in subparagraph (D); or ◦ (ii) to refrain from offering to use, or from using, an item or process to which the contractor is entitled to restrict rights in data under subparagraph (B). DFARS: 227.7103-1(c) & (d), 227.7203-1(c) & (d)

7. Many responses from Congress and DoD, recently: Better Buying Power 2.0 (http://bbp.dau.mil/) ◦ DoD Open Systems Architecture Contract Guidebook for Program Managers 1.1 (“Guide”)  https://acc.dau.mil/OSAGuidebook ◦ BBP 2.0 Preliminary Introduction Memo ◦ BBP 2.0 Implementing Directive ◦ DoDI 5000.02 Update (in process) ◦ IP Strategy Guidance (in process) ◦ DoD 5010.12-M Update (in process) FY 2012 Nat. Def. Auth. Act, § 815 ◦ DFARS implementation (in process) 7

8. From the Guide, pg. vii “Background: An open architecture is a technical architecture that adopts open standards supporting a modular, loosely coupled and highly cohesive system structure that includes publishing of key interfaces within the system and full design disclosure. A key enabler for open architecture is the adoption of an open business model, which requires doing business transparently to leverage the collaborative innovation of numerous participants across the enterprise permitting shared risk, maximize asset reuse and reduce total ownership costs. The combination of open architecture and an open business model permits the acquisition of Open Systems Architectures that yield modular, interoperable systems allowing components to be added, modified, replaced, removed and/or supported by different vendors throughout the life cycle in order to drive opportunities for enhanced competition and innovation.” 8

9. Modular, loosely coupled, highly cohesive what? 9 Fruit System High cohesion – apple functions are together; orange functions are together, etc.

10. Loose coupling means that internal apple functions don’t depend directly on internal pear functions. Cross module communication is by bus/central controller. Modular, loosely coupled, highly cohesive what? 10 Fruit System

11. From the Guide, pg. vii “Background: An open architecture is a technical architecture that adopts open standards supporting a modular, loosely coupled and highly cohesive system structure that includes publishing of key interfaces within the system and full design disclosure. A key enabler for open architecture is the adoption of an open business model, which requires doing business transparently to leverage the collaborative innovation of numerous participants across the enterprise permitting shared risk, maximize asset reuse and reduce total ownership costs. The combination of open architecture and an open business model permits the acquisition of Open Systems Architectures that yield modular, interoperable systems allowing components to be added, modified, replaced, removed and/or supported by different vendors throughout the life cycle in order to drive opportunities for enhanced competition and innovation.” 11

12. “Open” Systems: Old and New 12 System Subsys 1 2.12.22.33.13.2 Unlimited Rights GPR Limited/ Restricted Rights Legend: Data Rights for System Components & Interfaces Subsys 3 Subsys 2 Interfaces All Interface information is sought as Unlimited Rights due to the form, fit, function nature of the data This system as a whole cannot be competed because of Limited /Restricted Rights components

13. “Open” Systems: Old and New 13 System Subsys 1 2.12.22.33.13.2 Unlimited Rights GPR Limited/ Restricted Rights Legend: Data Rights for System Components & Interfaces Subsys 3 Subsys 2 Interfaces All Interface information is sought as Unlimited Rights due to the “FFF” nature of the data “Old School” This subsystem as a whole can be competitively procured

14. “Open” Systems: Old and New 14 System Subsys 1 2.12.22.33.13.2 Unlimited Rights GPR Limited/ Restricted Rights Legend: Data Rights for System Components & Interfaces Subsys 3 Subsys 2 Interfaces All Interface information is sought as Unlimited Rights due to the “FFF” nature of the data “Old School” This subsystem as a whole or any component can be competitively procured

15. “Open” Systems: Old and New 15 System Subsys 1 2.12.22.33.13.2 Unlimited Rights GPR Limited/ Restricted Rights Legend: Data Rights for System Components & Interfaces Subsys 3 Subsys 2 Interfaces All Interface information is sought as Unlimited Rights due to the “FFF” nature of the data “New School” This subsystem as a whole can not be competitively procured, but it can be replaced competitively with a functional equivalent

16. “Open” Systems: Old and New 16 System Subsys 1 2.12.22.33.13.2 Unlimited Rights GPR Limited/ Restricted Rights Legend: Data Rights for System Components & Interfaces Subsys 3 Subsys 2 Interfaces All Interface information is sought as Unlimited Rights due to the “FFF” nature of the data “New School” This component can be competitively procured

17. “New School” Competitive functional replacement possible “New School” Competitive functional replacement possible “Open” Systems: Old and New 17 System Subsys 1 2.12.22.33.13.2 Unlimited Rights GPR Limited/ Restricted Rights Legend: Data Rights for System Components & Interfaces Subsys 3 Subsys 2 Interfaces All Interface information is sought as Unlimited Rights due to the “FFF” nature of the data

18. From the Guide, pg. vii-viii “The U.S. Government’s (“Government”) ability to obtain suitable technical data and computer software deliverables, along with rights sufficient for competitive use of that data and software is often critical to this effort. The laws applicable to DoD provide a spectrum of possible data rights licenses allowing more or less competitive use with concomitantly less or more administrative burden to the Government in the handling and protection of the technical data or software.” 18

19. From the Guide, pg. viii “For example, the standard DFARS Government Purpose Rights (GPR) may often provide an optimal level of rights, allowing competitive use by the Government for Government purposes, while affording a level of exclusive rights for the vendor to non-Government commercial sales. In addition, the DFARS authorizes specially negotiated license rights whenever the parties mutually agree that such a specially tailored agreement is a better balance of the parties (sic) interests than the standard or pre- defined data rights licenses, or the otherwise applicable commercial licenses.” 19

20. From the Guide, pg. viii “Data and design artifacts related to the interfaces between modules are particularly important. One way of measuring the “openness” of a system is how readily a system component can be replaced with one developed by a different vendor with no loss in overall system effectiveness.” 20

21. From the Guide, pg. viii “OSA is composed of five fundamental principles: 1. Modular designs based on standards, with loose coupling and high cohesion, that allow for independent acquisition of system components; 2. Enterprise investment strategies, based on collaboration and trust, that maximize reuse of proven system designs and ensure we spend the least to get the best; 3. Aggressively transform our life-cycle sustainment strategies for software intensive systems through proven technology insertion and product upgrade techniques; …” 21

22. From the Guide, pg. viii (cont.) (OSA is composed of five fundamental principles:) “… 4. Dramatically lower development risk through transparency of system designs, continuous design disclosure, and Government, academia, and industry peer reviews; 5. Strategic use of data rights to ensure a level competitive playing field and access to alternative solutions and sources, across the life cycle.” 22

23. From the Guide, pg. viii “Achievement of these five principles requires an affirmative answer to a fundamental question: Can one or more qualified third parties add, modify, replace, remove, or provide support for a component of a system, based on open standards and published interfaces for the component of that system?” 23

24. From Prof. Nash: “In January 2012, we noted that there seems to be a steady effort to induce contractors to give up their rights to proprietary data and software. The new Guidebook is another step in that direction. [W]e noted that if these policies induce contractors and subcontractors to stop providing proprietary solutions to military problems, the Government may be the loser in the long run. Particularly at risk is the commercial technology that the DOD has stated that it needs.” Nash & Cibinic Report, Intellectual Property, October 2013 (27 No. 10 Nash & Cibinic Rep. NL ¶ 50) 24

25. Propositions 1.Private contractors have valid concerns in protecting the results of their private investments. 2.The Government has valid concerns in protecting the results of tax payer investments. 25

26. The Swiss Cheese Problem: Segregability “Contractors may assert limited rights in a segregable sub-item, sub-component, or portion of a process which otherwise qualifies for limited rights under the [252.227-7013 clause].” 227.7103-4(b), but “[p]rivate expense determinations should be made at the lowest practicable level.” 252.227.7013(a)(8) 26 This can lead to Swiss cheese data, or cherry picking. Control of the cherries can mean control of the whole cheese.

27. Congress has expressed concerns about paying too much for data “Such guidance* shall be designed to ensure that the United States— (1) preserves the option of competition for contracts for the production and sustainment of systems or subsystems that are developed exclusively with Federal funds as defined in accordance with the amendments made by this section; and (2) is not required to pay more than once for the same technical data.” 2011 NDAA, § 824 27 *Guidance implementing 10 U.S.C. § 2320(e), the Data Management Strategy, then Technical Data Rights Strategy, now Intellectual Property Strategy

28. From Prof. Nash: “What is needed is a forthright statement that program managers and COs need to assess the benefits of using proprietary technology (lower development costs and higher performance) against the benefits of achieving lower life-cycle costs through competition—and that there is nothing wrong with deciding that the use of proprietary technology has the greater benefit. That would get around the impression the Guidebook leaves that the correct solution is always to go for lower life-cycle costs.” Nash & Cibinic Report, Intellectual Property, October 2013 (27 No. 10 Nash & Cibinic Rep. NL ¶ 50) 28

29. Discussion 1.What are the objectives of evolving DoD data rights policy? 2.Where is there agreement (or room for agreement) between the Government and potential Offerors? 3.Are there unintended consequences of evolving DoD data rights policy? 29

30. Further Investigation of Investments IR&D* and SBIR** 1.Current DFARS 252.227-7018 clause grants SBIR Data Rights in data generated under contract to small businesses = Limited Rights or Restricted Rights for SBIR data protection period (“five years after completion of the project from which such data were generated”) 30 *IR&D = Independent Research and Development **SBIR = Small Business Innovation Research

31. Further Investigation of Investments IR&D* and SBIR** (cont.) 2.For businesses that can afford to invest $ and then get reimbursed (see DFARS 231.205-18), the data rights funding rules treat even the reimbursed IR&D as exclusive private funding meaning that such businesses can obtain Limited and Restricted Rights of perpetual duration in such data 31

32. Tentative Congressional Efforts at IR&D Changes – Portents? 2011 NDAA § 824(b)(2) would have treated such IR&D $s as private or USG $s depending on nature of other funding Repealed by 2012 NDAA § 815 32

33. Tentative Congressional Efforts at IR&D Changes - Portents? 2011 NDAA § 866 - Pilot Program for Acquisition of Military-Purpose Nondevelopmental Items (DFARS 212.71) Ends 2016; limited to nontraditional Ktrs “An item shall not be considered to be developed at private expense if development of the item was paid for in whole or in part through [reimbursed IR&D or foreign Gov’t funds]” 33

34. Segregation/Reintegration Data FY12 NDAA – Section 815 Exception to the prohibition against disclosure outside USG of proprietary data (i.e., data related to technology developed 100% at private expense) ◦ Along with “emergency repair & overhaul”... ◦ Purpose of Release: only for segregation/reintegration ◦ Implied Data Type: necessary for segregation/reintegration ◦ Procedural: notice to data owner & NDA for recipient Included in the expanded Deferred Ordering (DO) scheme ◦ The ONLY DO data type for which development funding is irrelevant ◦ No change to applicable license rights (e.g., Limited Rights) ◦ Compensation only for converting & delivering in required form 34

35. Deferred Ordering “Plus” FY12 NDAA – Section 815 Para. (b)(9) added to 10 U.S.C. § 2320 ‘‘(9) providing that, in addition to technical data that is already subject to a contract delivery requirement, the United States may require at any time the delivery of technical data that has been generated or utilized in the performance of a contract, and compensate the contractor only for reasonable costs incurred for having converted and delivered the data in the required form, upon a determination that— ‘‘(A) the technical data is needed for the purpose of reprocurement, sustainment, modification, or upgrade (including through competitive means) of a major system or subsystem thereof, a weapon system or subsystem thereof, or any noncommercial item or process; AND ‘‘(B) the technical data— ‘‘(i) pertains to an item or process developed in whole or in part with Federal funds; OR ‘‘(ii) is necessary for the segregation of an item or process from, or the reintegration of that item or process (or a physically or functionally equivalent item or process) with, other items or processes;” 35

36. Deferred Ordering – Plus! Prescription: mandatory, or optional? ◦ “Regulations … shall require that, whenever practicable, a contract …” (pre- existing language at 2320(b)) ◦ Current DFARS 252.227-7027: entirely optional No time limit – “at any time” ◦ Current -7027 clause: limit is 3yrs after contract Data generated “or utilized” under the contract ◦ Current -7027 clause  only if “generated” under the contract DoD must determine that the data meets BOTH of the following: ◦ necessary for reprocurement, sustainment, modification, or upgrade of a major/weapon/noncommercial system, AND ◦ Is either:  Development funded in whole or in part by the Government –OR–  Necessary for segregation or reintegration 36