When trade secrets and other intellectual property disputes arise involving federal government contractors, defendants often assert that the alleged trade secret or intellectual property belongs to the government as part of their defense. Indeed, much can be made in civil litigation about the legal impact of the contractor's creation of an alleged trade secret for and its delivery of the alleged trade secret to the government. The Federal Acquisition Regulations (FAR) and the Defense FAR Supplement (DFARS) set forth the "data rights" regulations covering various software, technical data and similar deliverables developed by contractors for the government. These items are either commercial or noncommercial items, and may be either fully or partially funded by the government or developed by the contractor with private funding. Under the FAR and DFARS, the government receives license right commensurate with the funding and accordingly has either unlimited rights, government purpose rights, limited rights, restricted rights (in the case of noncommercial software) or specifically negotiated rights.1 The contractor that developed such items, however, usually retains ownership.2
Even in instances where the government pays for creation of a non-commercial item and obtains "unlimited rights" in the product, as the
Although the government is only a licensee in instances where the items were developed entirely at government expense, the government has "unlimited rights" in the product delivered, "which means that the government has the right to 'use, modify, reproduce, perform, display, release, or disclose [the] technical data in whole or in part, in any manner, and for any purpose whatsoever, and to have or authorize others to do so.'" Id. at 1325 (citing DFARS 252.227-7013(a)(16)). When third parties, including other contractors, receive items in which the government has unlimited rights, they often argue that they are not liable for misappropriation of trade secrets with regard to their use and disclosure. The parties maintain that the contractor that developed the product, having conveyed it to the government with unlimited rights, cannot demonstrate that it has sufficiently safeguarded the product against disclosure and use.
A key counter to this "so what if I have it or took it" defense can depend practically in jury trials on, among other things, exactly how the defendants obtained the alleged trade secret. Did the defendant receive it from the government agency that had "unlimited [license] rights" to the data, or did it actually obtain it from non-government channels as in the classic case of the departing employee who has brought the software, data or other material to the defendant competing contractor?3
However, the question presented in
This ruling should be considered a win for protecting trade secrets in the often-complicated and litigated world of government license rights regulations when transacting with and delivering valuable intellectual property to the government. The ruling makes clear that contractors may properly apply restrictions on third-party use, which may enable them to protect their products from unauthorized use and disclosure by competitors and other non-governmental parties. Depending on the circumstances of a contractor's particular situation, this added measure provides a potential additional way of protecting the contractor's trade secrets. Boeing further suggests that contractors may be able to protect and enforce their rights even against competitor contractors who may have received the products from the government in the course of performing subsequent government contracts.
Footnotes
1 See, e.g., FAR 52.227-14 and DFARS 252.227-13 and 252.227-14; see also
2 See DFARS 252.227-7013(b) ("[a]ll rights not granted to the Government are retained by the Contractor.")
3 In such "unlimited rights" scenarios as presented in
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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