Copyright 1996, Council on Governmental Relations. This document was prepared by the Council on Governmental Relations, primarily for the information of and use by its members. However, COGR encourages the use of its material by other members of the higher education community, by inviting electronic linkage to the COGR homepage. Direct reproduction or display of the material for purposes of sale or profit is prohibited without the written consent of COGR.

RIGHTS IN TECHNICAL DATA

AND COMPUTER SOFTWARE:

A FACULTY GUIDE

September 1, 1996

Introduction

Rights in technical data and computer software have gained significance, commensurate with growing university-industry interaction. This subject matter is burdened with contractual and legal detail, which requires close cooperation between faculty and their administrative staff. The Council on Governmental Relations (COGR) has prepared a detailed guide on the topic, intended to assist research administrators and technology transfer officers. The brief guide in front of you is an abstract, intended for the use of faculty, department chairs, deans and other senior university administrators.

For decades, federal funding has been the principal source of support for university research. Acceptance of federal funds, in form of grants, contracts or cooperative agreements, requires the university recipient to be responsible to the government for data either used or generated in the performance of the sponsored project. As universities look increasingly for industry support, the network of individual rights, claims and responsibilities becomes more intricate. Government-industry-university partnerships are likely to lead to disappointments unless faculty understand their obligations and take care to protect their rights.

"Data" resulting from scientific research are considered intellectual property and tend to be measured as a financial commodity by both government and industry. This is especially true in the case of "technical data" a term not clearly distinct from "data" and variously defined by different federal agencies. Technical data and computer software are important to government and industry for purposes of reprocurement and production. To faculty, such use of their research data may not appear to be of prime interest. However, lack of attention by universities will allow the government to acquire unlimited rights by default, in turn inhibiting the faculty from future use of data for purposes of commercialization.

Recent regulatory changes on the subject hold promise for university contractors. In the interest of preserving maximum rights for themselves, faculty should know what terms and conditions apply; make sure that university negotiations strive to improve the terms originally offered; and protect their data by marking them appropriately.

Understanding the Terminology

There is no uniform, government-wide definition for "data" or "technical data". Agencies like DHHS and NSF, which predominantly use the grant mechanism, refer to "data" as scientific accomplishments to be shared freely, in order to encourage open scientific communication. The term "data" itself is not defined.

For contracts, the Federal Acquisition Regulations (FAR) provide a basic definition of "data" as "recorded information, regardless of form or the media on which it may be recorded. The term includes technical data and computer software, but does not include information incidental to contract administration, i.e. financial, administrative, cost or pricing management information." (45 CFR Subpart 27.401) Most federal agencies have further expanded their definition of data, under their prerogative to protect their agencies' mission. Individual verification of each agency's definition of "data" is advised.

Most agencies treat "technical data" as a subset of the broader term data, and mean by that "scientific" or "technical" data. The definition of computer software differs between agencies. It is defined simply as "computer programs, computer data bases and documentation thereof" by the civilian agencies, such as DHHS, NSF, DOE, NASA and EPA. In their June 1995 revision of agency rules, the defense agencies departed from this functional concept, and asserted that anything executable in a computer constitutes computer software. Defense agencies also consider computer software documentation to be a part of technical data.

"Data Rights" refer to the license the government obtains in technical data which grantees and contractors deliver to the government after completion of the project. All rights not granted specifically to the government, are retained by the university. What makes contracts so complex are the gradations in scope of the non-exclusive license rights which the government obtains. Those license rights range from limited rights which restrict disclosure of data and software by the government, to unlimited rights which authorize the government to use and share university data with any outside party, for any purpose.

Rights in Technical Data Under DOD Funding

Given its focus on procurement, the DOD has traditionally claimed unlimited rights in commercial items. These include: a) form, fit and function data; b) data necessary for maintenance and repair; and c) data describing modifications to meet government specifications. Universities usually worry about clauses covering commercial items only if they are subcontractors to industry prime contractors.

For non-commercial items and processes that generate technical data, DOD applies the source of funds test, to determine the allocation of rights. If an item was developed exclusively at government expense, the government is entitled to unlimited rights. These are rights to use, modify, reproduce, perform, display, release or disclose technical data in whole or in part, in any manner or for any purpose whatsoever, and to have, or to authorize others to do so.

Under unlimited rights, DOD gains significant influence over university research data. Although these rights are not exclusive - i.e. DOD cannot deprive the university from its own use -they may weaken the university's competitive position. Universities may argue that because of cost sharing, a university project is almost never funded exclusively with government dollars. Universities also derive a benefit from the June 1995 revision of the DOD rules which narrows the earlier definition of exclusive government funding. It no longer includes any and all items necessary for the performance of the contract, including items produced at private expense prior to the beginning date of the contract. Now, only direct charges to the federal contract engender unlimited rights; work funded from indirect cost sources is recognized as having been developed at private expense.

Data developed exclusively at private expense entitle the defense agencies only to limited rights. This means that DOD may use, modify, reproduce, release, perform, display or disclose technical data internally. There are only few exceptions: for instance DOD may invoke educational purpose needs, emergency repairs or international commitments and may try to compel the university to grant the agency greater rights. It is very important that the university mark limited rights data clearly. Failure to do this carefully and in prescribed format will result in the government gaining unlimited rights by default.

When data were developed with mixed funding, DOD may claim "government purpose rights". This enables the agency to use the technical data internally, and to disclose them to outside parties except for commercial purposes. Again, it is very important for universities to mark their data to indicate restrictions on the use of the data. It is equally important to remember that the government purpose right restriction entitles the university to a respite period limited to five years, during which it may enjoy exclusive commercial license rights. After that time, DOD regains unlimited rights. Universities should try to negotiate a longer period with the DOD, if possible.

Rights in Technical Data Under Civilian Agency Funding

Civilian agencies do not use the source of funds test to determine allocation of rights. FAR Section 52.227-14 contains the general rights in data provisions, plus four alternate clauses which describe substitutions to the general clause. FAR identifies four categories of data, described below.

Any data "first produced or delivered in the performance of a contract" entitle the civilian agencies to unlimited rights in technical data developed by universities. "First Produced" means not previously existing in any form, i.e. written text or machine readable software. Faculty may protect their data by establishing copyright without prior approval under the basic clause when technical data, first produced in the performance of a contract are published in academic, technical or professional journals, symposia proceedings or similar works. Another option for protection is use of the FAR with Alternate IV, designed specifically for basic and applied research with universities. If an industry partner is involved in the project, the clause may need to be specially negotiated.

Data not first produced in the performance of a contract is the second category. Such data may require protection also. They may be data created by an industry partner; obtained independently by the faculty researcher; or created by a student as part of a course. In addition to protecting their own rights, faculty should be mindful of not violating third party rights. Industry interests may make it impossible for the university to deliver to the government the unlimited rights under FAR 52.227-14(b)(1). When this is the case, the university must negotiate with the agency to obtain its agreement to accept less than unlimited rights, or obtain from the third party an assurance that unlimited government rights are acceptable to them.

"Limited Rights" apply to technical data that embody trade secrets or commercial financial information that is privileged. Although such types of data may be considered "deliverables", the civilian agencies' rights are restricted to internal use and preclude distribution outside the government. Universities will usually encounter these clauses through cooperation with industry. Use of confidential industry data, developed at private expense by industry, and a contract clause mandating the delivery of data to the government will require universities to protect such data under the FAR limited rights clause. This must be remembered in reviewing and negotiating contracts. "Restricted Rights Data", the fourth category, are similar to limited rights, but apply only to software.

Computer Software

For decades, regulations on technical data and computer software were so similar that they were published in the same procurement clauses. This is still the case for the civilian agencies. However, in the June 1995 revisions, the defense agencies separated rules applicable to technical data from those pertaining to software, and made several other important changes. While the civilian agencies' rules on computer software should be clear from the above discussion on technical data and need not be repeated, the defense agency changes are discussed below.

One significant change occurred in the new definition of computer software, when DOD decided to afford comparable rights to object code and source code. Under the new definition: "Computer software means computer programs, source code, source code listings, design details, algorithms, processes, flow charts, formulae and related material that would enable the software to be reproduced, recreated or recompiled."

Consistent with DOD regulations on technical data, the scope of the government's license rights in noncommercial software depends on the source of funds test. The scope of unlimited rights (resulting from exclusive government funding) and government purpose rights (resulting from mixed funding) clearly parallel those for technical data. However, when computer software is developed with private funds, DOD obtains more restricted rights than it does for technical data.

Under a restricted rights license, DOD may copy software but only the minimum number of copies necessary for safekeeping, backup, or modification purposes. Intra-governmental transfer of the software is subject to university notification and the licensor may insist on the destruction of copies if necessary. Equally significant to universities are restrictions regarding third parties, which subject industry recipients of the software to specific non-disclosure agreements. However, as with government purpose rights, these restrictions become invalid unless the university identifies the respective software in advance and marks the software with prescribed legends.

Protection by Use of Copyright

Data, regardless of an agency's definition, are generally protectible under the U.S. Constitution through the Copyright Act of 1976 and its amendments. It is important that copyright provisions and the rights granted to the federal government under contracts and grants, be read jointly with the university's own copyright policy. Under many university policies, faculty rather than the university retain default ownership of copyrightable data and material they create. However, a federal award may require the university, as the official award recipient, to transfer to the government rights in, or in certain circumstances ownership of, copyrightable data created or used during the project.

Faculty need to be cognizant of the eight works of authorship that can be copyrighted. In research programs, a university will be concerned primarily with literary works "i.e., words, numbers, or other verbal or numerical symbols (including computer software)." While copyright protection automatically exists when reports and data or computer software have been fixed in a tangible or machine readable written form, copyright protection does not extend to any of the "ideas, procedures, processes, systems, methods of operation, concepts, principles or discoveries, that are the domain of patent protection.

The bundle of exclusive rights that the copyright statute protects are: (1) the right to reproduce the copyrighted work; (2) the right to prepare derivative works of the copyrighted work; (3) the right to distribute copies of the copyrighted work to the public by sale or other transfer of ownership; (4) the right to perform the copyrighted work publicly; and (5) the right to publicly display the copyrighted work. (Copyright Act of 1976, Section 106)

As consideration for funding research, the government is usually entitled automatically to a paid-up, non-exclusive, irrevocable, worldwide license to reproduce, prepare derivative works, distribute copies to the public and perform and display publicly the copyrighted data. Universities need to be mindful of these sweeping rights of the government, when entering into research or license agreements with non-federal third parties that cover the same data. The non-federal licensee as well as the investigator should understand how the future use of federally sponsored data is impacted by the government's retained rights.

Protection by Marking

Federal contract requirements, especially those of the defense agencies, rigorously require that technical data or computer software be marked with a proper legend identifying all sections where the government has limited rights. Careful attention must be given to individual agency requirements regarding marking procedures. If data (including software) is delivered without either the limited or restricted rights or copyright notice where appropriate, the agencies presume that the university provided the government with unlimited rights. Faculty must educate themselves and their research teams to identify deliverables and protect their rights. When work with industry subcontractors is involved, there may be already existing copyrighted data or software to consider.

In addition to correct marking of data and software, the defense agencies require that universities maintain written records, sufficient to justify the validity of any restrictive markings on the items delivered. Universities may need to develop procedures to advise all their employees of these requirements. Since the defense agency rules are the most complex, they might serve as the baseline for university policy. Most grant guidelines are silent on how to mark

restricted data delivered to the government; however most guidelines also clearly state that the government will obtain an unlimited license for any use, if the delivered data are not marked.

In Conclusion

To use and exchange research data freely, faculty need to become aware of the changing environment, which requires careful protection of data in order to ensure that the government doe snot receive more rights than those to which it is entitled. Unlike loss of title to inventions, the forfeiting of rights to technical data and computer software does not inhibit continued research use, but may inhibit commercialization and may complicate collaboration with industry.