By Brandon Basso
Every now and then a defense contractor will issue a copyright infringement letter to an entity that shares valuable information online without authorization to do so. Usually, the letter will consist of notices that the unauthorized disclosure violated United States copyright law 17 U.S.C. § 506. Additionally, the disclosing entity will be notified that the proprietary information was labeled with a restrictive copyright legend to prevent infringement from happening in the first place. Defense contractors do not want their proprietary information to fall into the wrong hands. Moreover, if rogue actors receive valuable information such as software codes, the rogue actor can exploit the company that made such software. Therefore, 17 U.S.C. § 506(a) was enacted to punish criminal infringement of intellectual property – the statute states:
(a) Criminal Infringement.—
(1)In general.—Any person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18, if the infringement was committed—
(A) for purposes of commercial advantage or private financial gain;
(B) by the reproduction or distribution, including by electronic means, during any 180– day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; or
(C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.
Yet, before any infringing occurs, defense contractors are quick to force a receiving party to sign a non-disclosure agreement (“NDA”) to ensure that the receiving party will not disclose any proprietary information without authorization to do so. An NDA will also limit the receiving party’s use rights of the disclosed information. For example, the language in a non-disclosure agreement will read as follows: “Proprietary Information received by the Recipient shall remain the property of the Discloser. The Recipient does not receive any right or license, express or implied, under any patents, copyrights, trade secrets, or the like of the Discloser under this Agreement except the limited rights to use the Proprietary Information to carry out the Purpose of this Agreement”.
Moreover, buyers and sellers must comply with Federal Acquisition Regulations in any defense transaction. Therefore, anytime a contract between parties involves the exchange of proprietary information, FAR 252.227-7013 “Rights in Technical Data,” is enforced. Although very descriptive, this clause enforces limited ownership rights against the receiving party by stating: “The Government may not, without the written permission of the party asserting limited rights, release or disclose the technical data outside the Government, use the technical data for manufacture, or authorize the technical data to be used by another party”. Ultimately, if a contractor plans to disclose their proprietary information, then the contractor will enforce regulations and statutory language against the recipient to make sure that the recipient does not disclose such information without written permission.
On the other hand, money talks in the defense industry. For example, if a contractor spends its time and money on developing new software, then the contractor owns the software. However, contractors will enter development contracts with each other intending to work together to build a new software product. Therefore, both parties express in the contract that their ownership rights are indicative on the amount of time and money each party spent towards developing certain codes or aspects of the software. Thus, the contractors do not have limited use rights if they both put forth the effort to develop the software product in the first place.
In addition to NDAs and FAR clauses, software license agreements are also an effective way to limit a recipient’s use rights. For example, software agreements place restrictions on the recipient by saying that duplication for purposes other than backup, installation on more than one computer, editing the code, or changing the program in any way is forbidden. Further, software licenses also restrict reverse engineering and “bypassing controls” intended to cut down on pirating. More importantly, these agreements contain statements that indemnify the disclosing party for any unforeseen circumstances that might arise as a consequence of using the software. This could refer to anything from a computer crash to loss of data, time or income. Therefore, software license agreements are very beneficial for a disclosing party because they restrict a recipient’s use rights and preclude the disclosing party from liability with indemnification clauses.
Ultimately, technical data should continue to be protected by FAR clauses, NDAs, and software license agreements. Without such enforcement tools, contractors would steal each other’s information and the integrity of the defense industry would be compromised. A defense contractor’s intellectual property enables it to build a niche product, and without a niche, a contractor will not have an effective product to sell. Moreover, an inability to sell a niche product will lead to lost business, which will eventually lead to lost jobs. Therefore, as expected, the first step taken between contracting parties before commencing contract performance should be to execute an NDA, software license agreement, and enforce FAR clauses to limit a recipient’s use rights and ownership rights.
Reference:
http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/dfars/dfars252_227.htm#P295_15658
Student Bio: Brandon Basso is a Staff Member on the Journal of High Technology Law. He is currently a 2L at Suffolk Law, and possesses a B.A. in Government from Georgetown University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
