A company’s intellectual property is often its most valuable asset. Companies that are not vigilant may unknowingly lose rights in their intellectual property when entering into a contract with an agency of the U.S. Government. What intellectual property rights are granted to the Government will depend upon various factors, including whether the item qualifies as a “commercial item”, was developed at Government or private expense, which regulations apply to the procurement and whether the company complied with those regulations to limit the Government’s rights to the intellectual property. Depending upon the circumstances, the Government’s rights to a company’s intellectual property will be subject to the company’s standard commercial license, Limited Rights (Restricted Rights for software), Government Purpose Rights, or Unlimited Rights.

Commercial item procurements by the Government are streamlined and allow the contractor to use its standard commercial license when granting intellectual property rights to the Government. It is therefore in a company’s best interest to have an item qualify as a commercial item, as defined in FAR 2.101. In general, to qualify an item must (i) have been sold, leased, or licensed to the general public or offered for sale, lease, or license to the general public; and (ii) have been developed at private expense.

A company may retain greater rights in an item that is developed solely at private expense. If no Government funds are used in the development of an item, the item may qualify as a commercial item or, at minimum, the Government will only obtain Limited Rights (Restricted Rights for software), as defined in FAR 52.227-14 and applicable agency supplements, in the underlying intellectual property. If an item was developed at private expense and a Government contract requires that it be customized or modified, the company should be careful to evaluate whether such changes will provide the Government with greater rights in the item than expected.

The Government will obtain either Government Purpose Rights or Unlimited Rights, as defined in FAR 52.227-14 and applicable agency supplements, in items that are not developed solely at private expense. In general, the Government will obtain Government Purpose Rights in items developed with a mixture of company funds and Government funds. The Government will obtain Unlimited Rights in items developed solely with Government funds.

It is imperative that companies act diligently prior to entering into a contract with the Government and undertake ongoing steps to maximize their intellectual property rights. These steps include –

• Claim commercial item treatment when applicable.
• Develop items at private expense when they have commercial application and may result in a competitive advantage.
• Properly mark all data and software with the appropriate protective legend before delivering to the Government.
• Provide written notice to the Government of all items that will be delivered with less than Unlimited Rights, and obtain agreement from the Government that such items may be delivered with less than Unlimited Rights.
• If you are acting as a subcontractor, ensure that you understand what intellectual property rights the Government requires in your item and that the prime contractor has adequately limited the Government’s rights to the rights you granted.