Categories  Contracts Merging & Acquisition Naval Systems Policy

IPR and Design Property: DoD ask for Full Ownership

As the Defense Department focuses on cost savings, it is putting new pressure on contractors to sell the design specifications and intellectual property associated with programs.

Owning the data associated with a program helps the government open it up for competition in the future, which should help drive down prices.

But industry groups are pushing back, seeking to protect contractors’ rights to processes and information they developed at their own expense and pointing to the limitations of simply owning data packages.

“The government’s becoming much more aggressive in terms of getting” technical data packages, or the set of information that would allow someone else to build the same system, said Richard Sylvester, vice president for acquisition policy at the Aerospace Industries Association. “The government is saying, ‘Well, in the long run, we want to be able to compete that.’ “

Take Wisconsin-based Oshkosh, a military vehicle builder that beat out incumbent BAE Systems for a contract to build medium tactical trucks, a program whose technical data were Army-owned. Now, Oshkosh is warning that it’s under pressure to sell some of its own vehicle designs — which could hurt its business.

In a November filing with the Securities and Exchange Commission, the company reported the Army has requested to buy the design rights for Oshkosh’s heavy tactical vehicles, while the Marine Corps wants to purchase those rights for a medium tactical vehicle program.

“Competition for these and other DOD programs we currently have could result in future contracts being awarded to another manufacturer or the contracts being awarded to us at a lower price and operating margins than the current contracts,” the company said.

In its recent, high-profile award of contracts to Lockheed Martin and Austal USA to each build up to 10 littoral combat ships, the Navy made clear that the contracts include buying the associated technical data packages.

The shipbuilders must deliver the information to allow “the government a wide range of viable alternatives for effective future competition,” according to the Navy’s announcement.

Industry groups are moving to stop the government from overstepping. Determining what the government owns and what it does not — even when it buys the technical data — can be tricky, according to Sylvester. For instance, the government might own a particular piece of technology but not the process used to build it, if the method, not specific to the particular program, was developed at the contractor’s own expense.

Alan Chvotkin, executive vice president and counsel at the Professional Services Council, an industry association, said the group is concerned that the government is prioritizing ownership of the data over innovation. Data packages can only be used to recreate the same system, not to make it better, he said.

“The more [the government] owns, the better its capability, but that comes with a risk . . . of obsolescence,” Chvotkin said.

Marjorie Censer Capital Business

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