By
FARA FASAT on Tuesday, December 31,
2002 - 02:37 am:
This discussion should be winding down, but I can't
let it go without correcting some persistent misunderstandings
and mischaracterizations of what I have said.
First of all, quit putting the chicken before the egg, or the
cart before the horse, or something like that. I have never
argued that a contractor should deliver data expecting it to be
kept a trade secret. Any discussion based on that is simply
answering a question never asked. Similarly, arguing that the
contractor can't complain when the government decides to release
the data, is correct but not the point. I don't disagree with
any of those arguments, but they do not answer the original
scenario.
On the contrary, I am only asking what a contractor can do
when the government has chosen not to release the data. When
the government has not released the data, it has not exercised
its unlimited rights, the data has not been released publicly,
and no one else has a license to it.
Second, some of Anon19's argument seems to be that the
contractor does not own the data that was funded by government
money. While I am always willing to learn something new, I think
I am on firm ground when I say that this is simply wrong.
To both Vern and Anon19, are you saying that the whole world has
a right to the data, even if the government has chosen not to
release it? That seems to be the end result of your argument
(which, unless I am misunderstanding it, is that the contractor
has no right to protect it). If so, then why does the FAR call
it a license? Why is the contractor allowed to retain
ownership of it? In fact, what does the contractor own? Look at
it another way: if the government decides not to release the
data at all, then why shouldn't the owner of the data be able to
enforce its ownership rights against an unauthorized user that
misappropriated the data?
Of course, if you are arguing that, because the government has
the right to release it the contractor can never protect
it, whether the government exercises that right or not, then
I'll accept that point but not agree with it. I think there's a
chance that the way the government exercises its license may
well determine what the contractor can then do with it. Of
course, I'd like to hear a genuine IP attorney address this
point. I don't think a tax court case will do it. And while
analogies and parallels to trade secret law will be helpful, I
think there are some important distinctions between common law
trade secrets and data rights under government contracts.
Someone asked why the government would ever choose not to
release the data it has unlimited rights to. I can give one
answer to that: quality. That was the main reason for the
limited release in the XYZ/ABC case I mentioned.
So in summary, if you think there is no difference between the
potential to release data and the actual release, then I
won't try to convince you otherwise. I happen to think that
there is a difference, at least in the government context. And
given the XYZ/ABC case, there are some in the government that
agree.
An aside to Vern: yes, I did initially concede to you, because
you were very forceful in asserting that no other mark was
allowed. However, I have exercised my right to do a Gore. In
light of the XYZ/ABC example, the answer is not so clear, and
maybe the argument can be made that the word "proprietary"
without more is not a restriction on the government's unlimited
license.
By
Vern Edwards on Tuesday, December
31, 2002 - 10:17 am:
FARA:
It's normal in any conversation for there to be
misunderstandings about what has been said and intended. I have
enjoyed this dialogue and I have learned some things. Isn't that
what it's all about?
My understanding is that your original inquiry was about whether
a contractor could mark unlimited rights data delivered to the
government "XYZ Proprietary." You said: "[I]t seems that the
contractor needs to mark the data it delivers to the government,
or else it will lose its ability to claim it is a trade
secret." Italics added.
I think: (a) that such a marking is unauthorized under the terms
of the clause you cited, (b) that if the data are, in fact,
trade secrets, then it is not necessary to mark those data
delivered to the government in order claim trade secret
protection, and (c) that "XYZ Proprietary" is vague and not
particularly instructive.
As to whether the whole world has a right to unlimited rights
data, that depends on what kind of data it is. DOD 5400.7-R and
DODD 5230.25 say that DOD must release unclassified
unlimited rights data upon request, unless public release is
prohibited under export controls. So I guess that the whole
world does have the right to some unlimited rights data.
There are four kinds of intellectual property protections: trade
secret, patent, copyright, and trademark. I have been
speculating about whether trade secret protection would be
effective if the property owner has given the government the
right to use the property and to disclose the property to anyone
it chooses for any reason whatsoever and to give others the
right to do so. And I have been quite frank in saying that I do
not know the answer. I think it's an interesting question,
that's all, and I have enjoyed thinking about it.
I do not think that the government's unlimited rights give third
parties the right to engage in industrial espionage or to
traffic in or use intellectual property that has been stolen
from someone else's files. So, I think that if the owner of
intellectual property learns that a third party is in possession
of unlimited rights data from its files, and if that owner knows
that the government has not released those data to anyone, then
it should call its lawyer and notify the police. What will
happen next is anybody's guess, but I assume that the third
party will have some explaining to do.
As for "XYZ Proprietary," yesterday I asked Prof. Ralph C. Nash,
who is one of the leading experts on rights in data under
government contracts, and he opined that "XYZ Proprietary" is
(1) an unauthorized restrictive marking and (2) vague. I
understand that his opinion does not compel your agreement.
I agree that the discussion is winding down. I appreciate your
raising of the issue and have enjoyed our dialogue. Happy New
Year!
Vern
By
formerfed on Tuesday, December 31,
2002 - 10:31 am:
This discussion/debate has been extremely interesting
and informative for me. Just sitting here and reading the
various arguments taught me a lot. Thanks to all.
By
Lola Dickerman on Tuesday, December
31, 2002 - 10:32 am:
To All:
I just read this entire discussion and I was
greatly amused by it. I wish all of you a Happy and Healthy New
Year -- and a new topic for 2003!
By
Vern Edwards on Tuesday, December
31, 2002 - 11:25 am:
FARA and Anon19:
Lola's a well-known attorney.
So, Lola, are we idiots, or what?
Vern
By
Lola Dickerman on Tuesday, December
31, 2002 - 02:11 pm:
Vern:
It is my opinion that the Contractor has no property rights in
data which is developed at Government expense in which the
Government has unlimited rights. It follows, then, that the
proposed "Proprietary" marking is a breach of the contract terms
and a totally ineffective tool against a competitor.
Warm regards,
Lola
By
Anon19 on Tuesday, December 31,
2002 - 06:02 pm:
Yes, it has been interesting. On to Happy New Subjects
for 2003! Have a good one everyone!
By
FARA FASAT on Wednesday, January
01, 2003 - 04:07 pm:
Darn, everything was wrapping up really well, and I
didn't want this to be a battle of who gets the last word, but
then Lola threw me for a loop. She said that the contractor has
no property rights in data developed at government expense.
However, I have several texts in my office that say the
contractor owns the data and the government has a license. Even
DoD says it in the "Intellectual Property: Navigating Commercial
Waters" handbook. Since the rest of her opinion follows that
statement, what then?
Just throwing that in for thought. It doesn't mean that I don't
see the problems with the marking, as many have pointed them
out. We enter uncharted territory trying to protect something
that the government has unlimited rights in yet has decided not
to disclose. The XYZ/ABC case is a problem, and even the
government had an interest in seeing that ABC did not
manufacture the parts.
I have nothing else new, so have a Happy New Year everyone.
By
Anon19 on Wednesday, January 01,
2003 - 06:14 pm:
FARA, on ownership, note that in the Lockheed case the
tax court seems to consider the contractor to have sold the
rights.
The Tax Court in Ofria concluded that
the transfer to the government of unlimited rights to use and
disclose the data constituted a transfer of all substantial
rights to the data (and therefore a sale) when the
contractor did not retain the right to use or disclose the
data, and its ability to use the data depended on the
government's public disclosure of such data. Id. at 545 n.9.
I think we've beaten this to death with the
result that the contractor's ownership, rights, and control
(including any marking) is, in the Lockheed court's word,
"insubstantial." Nothing prevents a contractor from differing,
but based on the results of looking into this I have to conclude
you probably go into that gunfight with an empty six shooter.
By
John Ford on Thursday, January 02,
2003 - 12:29 pm:
Anon19, I do not want to prolong this any more than
necessary, but I believe you have misread the Lockheed decision.
The key to the Court's ruling is the fact that "the contractor
did not retain the right to use or disclose the data, and its
ability to use the data depended on the government's public
disclosure of such data." Thus, the Court based its decision on
the specific terms of Lockheed's contract, not a general
principle of IP law. Therefore, as contracting professionals, we
should adhere to the practice of reading the contract to find
out what specific rights and obligations the parties have. In
this regard, the standard FAR and DFARS clauses generally give
the Government only a license to use IP, they do not confer
actual ownership of the IP on the Government.
By
Vern Edwards on Thursday, January
02, 2003 - 01:12 pm:
All:
We have not beaten this subject to death. Don't be so
quick to declare the discussion at an end. There are still
intelligent thoughts to be had and things to be said.
I think that there is some confusion about the relationship
between the concepts of ownership and rights in
data. According to Black's Law Dictionary, "Ownership
implies the right to possess a thing, regardless of any actual
or constructive control." I can own something but not control
it, because I loaned it to someone else without any restriction
on its use. As John Ford pointed out on Dec. 20, the real issue
is control over the use and disclosure of the information
on the drawings:
"A developer of intellectual property is given the right to
protect its possible commercial interests in that property. In
other words, the developer is generally given an exclusive right
to control the commercial use that is made of its intellectual
property. However, when IP is provided to the Government with
unlimited rights, the developer loses the ability to control the
commercial use of the property."
In government contracting, it does not say much to say that the
government or a contractor "owns" some data. Drawings depict
data. If a contractor delivers drawings to the government, then
the government owns those drawings, not the contractor. The
issue is not who owns them, but what the government can do with
them.
If the government owns drawings to which it has unlimited
rights, which are the rights "to use, modify, reproduce,
perform, display, release, or disclose technical data in whole
or in part, in any manner, and for any purpose whatsoever, and
to have or authorize others to do so," then the contractor not
only does not own the drawings, but it has no control over their
use or disclosure. If the government owns the drawings, but has
only limited rights, then the contractor has some control over
their use and disclosure.
In this context it is important to understand that the
government can have rights in data which it does not possess.
The DFARS clause at § 252.227-7013, paragraph (b)(1), gives the
government unlimited rights in "data pertaining to an item,
component, or process which has been or will be developed
exclusively with government funds." The government gets those
rights whether the data are to be delivered to the government or
not. However, that clause does not require the delivery of those
data, and unlimited rights do not include the right to compel
delivery. If the government wants to possess, i.e., own, any
such data, then the contract schedule must identify and specify
its delivery; see: DOD 5010.12-M, Procedure for the
Acquisition and Management of Technical Data, May 1993, and
DFARS §§ 227.7103-1(b)(1) and (3) and 227.7103-2(a) and (b). DOD
usually specifies data delivery on DD Form 1423, Contract Data
Requirements List (CDRL).
If the contract does not identify and specify delivery of data
in which the government has rights, then the contractor does not
have to deliver the data and the government cannot contractually
compel the contractor to do so, unless the contract includes a
clause like DFARS 252.227-7027, Deferred Ordering of Technical
Data or Computer Software. Thus, the government can have rights
in data which it does not own. (In my discussion with Prof.
Nash, he emphasized the importance of this point.)
The government's rights in data are effective only with respect
to data which it possesses, i.e., owns. If a contract
does not specify delivery of data to which the government has
unlimited rights, then the government does not own any
data which it can use or give to others and has no effective
control over the data. When the government does not possess data
to which it is entitled to unlimited rights and cannot compel a
contractor to deliver it, it makes no sense to say that the
government "owns" the data.
So, I do not agree with Lola when she says that a contractor has
no property rights "in data which is developed at Government
expense in which the Government has unlimited rights." If the
government does not possess the data and thus cannot control its
use and disclosure, then I think that the data may be subject to
trade secret protection. However, I do not believe that a
contractor has property rights in data which it has delivered
to the government with unlimited rights.
Make sense?
By
Anon19 on Thursday, January 02,
2003 - 04:49 pm:
John, I do not believe I misread the decision. I
believe you have not caught the key point of the particular and
peculiar effect of an unlimited rights grant despite some of the
contract provisions in this case.
Note that following a quote from Black's Law Dictionary the
court discusses "General principles of property law regarding
the rights associated with property ownership provide guidance
as to the types of rights that may be deemed substantial" with a
key one being "the right to prevent unauthorized use or
disclosure is a substantial right which, if retained by the
transferor, will preclude the transfer from being deemed a
sale." Admittedly this tax case is not precisely one determining
contract issues and special circumstances do intrude; however,
it is telling in some key respects:
In this case, the government's
unlimited right to use and disclose plaintiff's technical data
considerably diminished, if not destroyed, the commercial
value of plaintiff's right to use the results of its research,
a right derived from the competitive advantage to the
researcher over others. Cf. Ruckelshaus v.
Monsanto Co., 467 U.S. 986, 1011 (1984) (economic
value of property right in trade secret lies in competitive
advantage over others, by virtue of its exclusive access to
the data; disclosure or use by others destroys that
competitive edge). The government's power to exercise an
unlimited right to use and disclose the technical data
destroys plaintiff's competitive advantage.
The potential destruction of plaintiff's
competitive advantage caused by the government's exercise of
its unlimited rights to technical data is demonstrated by the
government's disclosure of technical data to second sources,
which enabled plaintiff's competitors to compete successfully
under at least two programs: the Patriot Canister and the VLS
programs.
[bold italics added]
I believe those and similar parts of the discussion and decision
are not dependent on the peculiar "security classifications and
export restrictions" that are discussed in refuting one of the
plaintiff's arguments.
Of course the contract terms are the key. Only when the contract
requires unlimited rights transfer to the government do
these cases indicate the contractor retains nothing really
"substantial" as far as control and even ownership. In any case
where the government gets less than unlimited rights those other
issues obviously apply.
Vern, the "security classifications and export restrictions"
mentioned in the tax case are interesting in light of your point
about delivery and ownership. Let's take a classic example. The
corporations developing nuclear weapons might not have delivered
all the data. The government certainly has "security
classifications and export restrictions" on those data despite
that fact. The company is (We must hope!) not free to go off and
use that undelivered expertise wherever it can make a profit.
Your point about undelivered data that is not under such
extraordinary government control is interesting. I tend to
agree. It also touches on something mentioned in the tax case
("Therefore, plaintiff does not retain substantial rights in the
research solely by virtue of the experience gained as a result
of performing that research, even if the experience may be
useful or valuable in obtaining and performing other projects")
and of interest to me for further discussion as I propose at the
end.
I do think we've beaten to death this particular aspect of
corporate latitude when it has complied with an unlimited rights
requirement. Its rights and latitude are equivocal. In
particular, I think contractors should note your previous
observation that it is not just their contracting agency who can
do this to their supposedly secret commercial advantage. Relying
on that slim thread for an advantage is probably about as useful
as relying on not being misquoted somewhere and sometime after a
news interview!
Another possible and profitable discussion line are the factors
to be considered by both government and contractor in any
unlimited rights requirement.
For example, I've dealt with cases where the requirement is
unlimited rights, but the contractor offers cost savings by
including previously done work and techniques where
rights were retained by the company. We sat down and parsed our
requirements and their commercial needs to mutual satisfaction
and a classic win-win. Another program got terribly wrapped
around this axle with a long and costly dispute. In the first,
one of the key issues was delivery of maintenance techniques
without the company losing commercial advantage of its
experience and the unique techniques that gave it a
corporate advantage. That is but one example of the
possibilities.
By
John Ford on Friday, January 03,
2003 - 03:46 pm:
Vern and Anon19, I understand where you are coming
from, but I suggest that a company retains a property interest,
albeit diminished, in data it has delivered to the Government
with unlimited rights. While the Government has the right to do
what it wants with that data, as a general proposition so does
the company. Absent unusual circumstances such as classified
data or export restrictions,such as were present in the Lockheed
case and upon which the Court's decision seems to be based, the
contractor is free to commercially exploit that data. It has
this right not under a grant of right or a license from the
Government which merely has a license granted by the contractor
to use the data, but because it owns the data (i.e., has a
legally protectable property interest in the data) and can use
it for its own advantage. Further, I believe these rights are
legally protectable against unauthorized use by third parties.
If the Government does not release the data or authorize others
to release the data, but some party comes into possession of the
data and attempts to use it without authorization, either direct
or indirect, from the Government or the contractor, I believe
the contractor can take legal steps to prevent that unauthorized
use, particularly if the data is copyrighted by the contractor.
I doubt that the Government could take such steps as it is
merely a licensee and its license is not compromised by the
unauthorized use of the data. Whether we want to call the
contractor's property interest ownership or place some other
label upon it, I nevertheless belief the contractor retains a
legally protectable property interest in unlimited rights data
it has provided to the Government, in the absence of unusual
circumstances as mentioned above.
By
Anon19 on Friday, January 03, 2003
- 08:07 pm:
John, I understand your point and agree, with
reservations. The tax case is not the only place I've noted the
"potential" of government release as being a factor in diluting
a corporation's claim. I suspect you may be technically correct
in a purest sense. On a practical basis I believe a company
trying to enforce its diluted rights would have a tough course
to run.
Such data is not accountable. There is no definitive tracking
system that I know of for ordinary, unclassified, "unlimited
rights" data. Agency "A" obtains it under contract, passes it to
agencies "B" and "C" who then pass it to (??). Two years after
the delivery company "X" has and is using the data and I'm going
to court to protect my rights! (Remember, copyright has very
limited use here and does not keep anyone from reading and
applying the information.)
Unless I have some proof they obtained it by riffling my office
I'm probably lost at the start. Can I prove they did not get it
by some form of government release? Remember, a GS-13 over in
agency "Y" who got it from any agency up in the alphabet may
have given it to company "Z" authorizing further distribution as
needed. Company "X" will claim they got it from someone with
authority unless they are unusually honest and have a guilty
conscience.
Can I prove they did not? Will there be a transmittal document
trail still existing (Heh, heh, ha, ha!) that will allow my
investigators to trace through all those offices and get the
goods for the trial? Just because they didn't find one does that
mean that GS-12 over there didn't release the data? Will a judge
allow me to presume nefarious possession under these
circumstances? The mention of the potential release
aspect in some of these cases makes me think that is a fool's
hope. Really, do I spend the big bucks on a suit standing on
that ground?
All this is an interesting discussion. If I'm a company with
trade secrets to protect I'm going to gain the knowledge and
spend the time and effort to fully understand what I must
protect and what contract circumstances might jeopardize that.
I'm going to be sure that when an unlimited rights requirement
stares me in the face I'm going to know how to negotiate my way
through that hazard and protect my corporate gold.
I will, for example, know that proposed programmer "B" worked on
a very similar project done at my expense and I therefore have a
source code leakage risk between internal funded and government
funded projects. Once "B" somehow innocently mixes my secret
short cut into that unlimited deliverable code I'm probably
toast. There are ways to either keep that from happening or
protect the product with negotiated less than unlimited rights
if it is sure to happen. To put it plainly, any company
venturing into an unlimited rights deliverable without doing a
red team IP risk scrub is probably just naked and ready to be
skinned. I have little or no sympathy for whining after being
careless.
I think a further discussion of what can be done to recognize
and mitigate risks has merit. I'm not sure one about whether the
careless have very thin or just thin legal armor is profitable
now.
By
FARA FASAT on Saturday, January 04,
2003 - 03:06 am:
Who said anything about careless releases of
company-funded data? It's not a profitable discussion because
it's simply not the issue. Furthermore Anon, your list of all
the difficulties of proving a case is fine in the abstract but
is largely irrelevant. If the data is released there is no case,
and we're off issue again. In the XYZ/ABC case, the AF quite
willingly affirmed that they did not release the data, so the
proof was not difficult.
John, thanks for the return to sanity.
Vern, your last post threw me more than Lola's. Are you
seriously equating possession with ownership? You said it a
couple of times. That would kind of destroy the concept of
licenses, wouldn't it?
I'm trying to keep these short because I'm doing this over a
phone line, and it took over 90 seconds to open this thread.
Besides, I'm from Ohio and I have some celebrating to do.
By
Vern Edwards on Saturday, January
04, 2003 - 04:11 pm:
John and FARA:
John -- Yes, the contractor has the right to exploit the data
commercially. No question. The question is to what extent, if at
all, it can stop others from doing so. You say: "I believe [the
contractor's] rights are legally protectable against
unauthorized use by third parties." On what basis: Trade secret?
Copyright? Patent?
18 U.S.C. § 1839 and the Uniform Trade Secrets Act define "trade
secret." One of the criteria for trade secrecy is that the owner
thereof has taken reasonable measures to keep such information
secret. How can a contractor claim that data are secret if it
has given the data to the government and given the government
unlimited rights to disclose the data and to let others disclose
it?
I do not believe that a contractor can claim trade secret
protection for data that it has delivered to the government with
unlimited rights. I think that by giving the data to the
government and licensing the government to disclose the data to
anyone for any reason, and to authorize others to do so, the
contractor has surrendered any claim of secrecy, whether the
government has actually released the data or not.
Also, the DOD data rights clause cited by FARA, DFARS §
252.227-7013, includes the following paragraph:
"(c) Contractor rights in technical data. All rights not
granted to the Government are retained by the contractor."
I'm not sure what that means, but I think that one could argue
that it means the contractor has surrendered any claim to
secrecy, because it has granted to the government the unlimited
right to disclose and to allow others to do so.
The contractor may have copyright rights, or patent rights to
inventions described in technical data, but I don't think it has
trade secret rights in data which it has delivered to the
government with unlimited rights.
FARA--I think you rely entirely too much on the fact that the
DFARS descrobes unlimited rights as "license" rights. For one
thing, you seem to think that a licensee is not an "owner" of a
trade secret. Take a look at 18 U.S.C. § 1839(4), which provides
as follows:
"[T]he term 'owner', with respect to a trade secret, means the
person or entity in whom or in which rightful legal or equitable
title to or license in, the trade secret is reposed."
Underlining added.
What do you make of that?
My point it that the concept of "ownership" is not clear or
especially helpful to us in discussing the topic at hand. The
issue is what control the contractor can exercise over data
delivered to the government with unlimited rights. The question
is whether a contractor can successfully pursue a trade secret
infringement action with regard to data that have been delivered
to the government with unlimited rights. I don't know the
answer, but I believe that such an action is unlikely to
be successful, for the reasons I have given.
Vern
By
Vern Edwards on Saturday, January
04, 2003 - 04:16 pm:
John and FARA:
Keep in mind that copyright protection will enable the
contractor to prevent others only from making literal copies of
its data. It cannot be used to prevent others from using the
ideas or technology described in the data.
Vern
By
Anon19 on Sunday, January 05, 2003
- 01:35 pm:
I think Vern has pointed out the major weaknesses of
FARA's argument "In the XYZ/ABC case" [Pacific Sky]. I
must also point out that the Air Force was not defending one
contractor's claim against another. They were trying to avoid
their being forced into a FOIA release. Their particular
claim of these deliverables being someone else's "trade secrets"
was solely in aid of the Air Force's peculiar internal
interests. We can be almost certain an opposite argument would
have been made if Air Force had not been involved in a FOIA case
and had wanted to disseminate the drawings to its fellow
government agencies and contractors.
In addition, I believe some companies confuse dealing with a
particular agency as equivalent to dealing with another company.
I've personally dealt with and disposed of that argument in one
case. That may be a habitual mistake from a commercial
viewpoint, but it is a false assumption. The Air Force is not
the government in the sense of these rights.
I will grant this: It may not be the intention of the
unlimited rights clause to effectively place such data
effectively in the public domain, particularly with respect to
commercial entities not doing business with the government. What
I'm seeing in several court cases is that having delivered data
under such a clause seriously undermines any future claim that
it remains a "trade secret."
FARA, you asked, "Who said anything about careless releases of
company-funded data?" and my response is that discussions may
bring in topics you might not have introduced. That makes them
no less valid. I have introduced the issue of companies
misunderstanding or blundering into IP issues in these
contracts. I think you and yours might be on that road if you
keep relying on your interpretation of Pacific Sky.
Perhaps, if you exercise your freedom here, you will make clear
new case law for us.
I have a a little experience with companies dealing with the
issues of protecting trade secrets while meeting unlimited
rights deliverables. I've seen some do so elegantly (much to our
relief) and some blunder into a pitiful mess. It was partly my
job to see their accident didn't become our mess and that our
government rights were enforced. I am introducing what might be
a profitable continuation since, as far as I am concerned,
FARA's contentions have been covered and pretty firmly shot
down. The considerations and steps both government and industry
can take to minimize IP confusion are worth discussing further.
The following references are not strictly on FARA's topic, but
illustrate the need to know, understand, plan for and absolutely
follow the rules of this game. They most definitely do
involve marking requirements and hazards of not complying
absolutely.
One example of a company getting wrapped around the rights issue
is seen in
ASBCA No. 49196 in which a company did not strictly follow
the instructions. One showing just how detailed compliance must
be is seen in
United States Court of Appeals for the Federal Circuit, 01-5055,
Feb. 4, 2002 (Xerxe Group, Inc.). Picky? Yes, even to me.
That is just the way it is.
A discussion by Kimberly C. Welch (Protecting
the Crown Jewels) is on line and contains this advice:
Companies whose crown jewels are technical
data and software must understand the strings that come
attached to federal funding in the form of government rights
in that technical data and software. In seeking federal funds
to advance technology, companies must weigh the allure of
federal money against their ownership interests in their
intellectual property assets and strategize to minimize the
risk.
That is simply one of many such web sites. The
market for training in this area and the numerous legal web
sites discussing the subject do not exist due to corporate
America's fine understanding of the issues and avoidance of
problems.
By
Vern Edwards on Sunday, January 05,
2003 - 03:11 pm:
All:
It might be useful at this point to make sure that we're all
talking about the same thing.
As I understand it, we're discussing a contractor's ability to
prevent a third party from using data that the contractor had
delivered to the government with unlimited rights. The specific
issue is whether a contractor can go to court to get an
injunction prohibiting a third party from using data (a)
developed by the contractor entirely at government expense, (b)
to which the government has unlimited rights, and (c) which the
government did not disclose to that third party through official
channels.
Is everyone on the same wavelength or am I alone in left field?
If I'm on the right track, then I think the question boils down
to this: On what basis can the contractor seek injunctive relief
to prevent the third party from using the data? There are four
types of intellectual property protection: (1) trade secret, (2)
copyright, (3) trademark, and (4) patent. Each affords different
protections.
Under trade secret law, the contractor could obtain an
injunction to prevent the third party from using trade secrets
described in the data.
Under copyright law, the contractor can obtain an injunction to
prevent the third party from making literal copies of the data,
but not from using the ideas, technologies or inventions
described in the data.
Under trademark law, the contractor can obtain an injunction to
prevent the third party from using any trademark that appears in
the data.
And under patent law, the contractor can obtain an injunction to
prevent the third party from making, using or selling any
patented invention described in the data.
Based on the above, I think that the issue boils down to whether
or not the contractor can claim that the data are trade secrets
despite the fact that it has delivered the data to the
government with unlimited rights to use and disclose it and to
let others use and disclose it. I don't see any point in arguing
about who "owns" the data, since ownership, whatever it means,
does not necessarily include the right to control use and
disclosure.
Now, suppose that a third party has obtained unlimited rights
data from a government employee who did not go through proper
channels before releasing it, as prescribed, for instance, by
DODD 5230.9, Clearance of DOD Information for Public Release.
The data are not classified and are not subject to export
controls. The government employee was properly in possession of
the data and the third party did not engage in any criminal
behavior in order to obtain the data from the government
employee. The contractor considers the data to be trade secrets,
the data have never before been disclosed to the public, and
they are of economic value to the contractor. Pursuant to DODD
5230.25, Withholding of Unclassified Technical Data from
Public Disclosure, the government could have authorized
disclosure of the data upon request, since it had unlimited
rights, but, in fact, it did not.
Can the contractor get a trade secret injunction?
Vern
By
Anon19 on Sunday, January 05, 2003
- 05:11 pm:
Interesting way to spend a snowy post holiday Sunday
afternoon I suppose.
Vern, that is an excellent summary of the situation and the key
question. I think we can dispose of patent and trade mark
questions. There are also specific directions for deciding on
patent in these cases. I believe it roughly tracks the data
rights on funding source. I see no need to open that can now.
Copyright is also pretty much a non issue. We have stipulated
the contractor can add copyright notices and also know the
government has specific rights of reproduction and distribution
under the authorized notices. Copyright would only preclude a
third party, not having obtained the material under one of the
government rights, from sale and copying outside "fair use"
rules. Those might not preclude a company from making certain
extracts, not for sale, to enable it to better distribute ideas
contained in the material internally. That is another can of
worms we don't need to get into here.
What remains is the question of trade secret status as you have
described. I suggest we concentrate on your scenario. A party
outside the government obtains the material when there has been
no blanket, public release by government and there is no
explicit release to that party.
DODD 5230.9 is a low hurdle in my opinion. Policy statement
three, "The public release of official DOD information is
limited only as necessary to safeguard information requiring
protection in the interest of national security or other
legitimate governmental interest, as authorized by
references (g) through (t)" [italics added] is instructive. It
essentially requires official information to go through public
affairs and cautions one to look at those references in
preparing to do so. It is entirely silent on the subject we are
discussing.
DODD 5230.25 is limited: "the application of this Directive
is limited only to such technical data that disclose critical
technology with military or space application" and "such
technical data" appears to refer to data falling under the Arms
Export Control Act. It explicitly mentions only the classes of
rights not under discussion. It mentions data rights as
we are discussing them only as follows:
2.2.5. Does not alter the responsibilities
of DoD Components to protect proprietary data of a private
party in which the Department of Defense has "limited
rights" or "restricted rights" (as defined in subsections
9-201(c) and 9-601(j) of the DoD Federal Acquisition
Regulation Supplement, reference or which are authorized to be
withheld from public disclosure under 5 U.S.C. 552(b) (4)
(reference (i)). [italics added]
DODD 5230.24, one of
the references in 5230.9, only specifies distribution
statements. "Statement A" is of particular interest [all
emphasis added]:
E3.1.1.1. DISTRIBUTION STATEMENT A. Approved
for public release; distribution is unlimited.
E3.1.1.1.1. This statement may be used only on unclassified
technical documents that have been cleared for public release
by competent authority in accordance with DoD Directive 5230.9
(reference (f)). Technical documents resulting from
contracted fundamental research efforts will normally be
assigned Distribution Statement A, except for those rare
and exceptional circumstances where there is a high
likelihood of disclosing performance characteristics of
military systems, or of manufacturing technologies that are
unique and critical to defense, and agreement on this
situation has been recorded in the contract or grant.
E3.1.1.1.2. Technical documents with this statement may be
made available or sold to the public and foreign nationals,
companies, and governments, including adversary governments,
and may be exported.
E3.1.1.1.3. This statement may not be used on technical
documents that formerly were classified unless such documents
are cleared for public release in accordance with reference
(f).
E3.1.1.1.4. This statement shall not be used on classified
technical documents or documents containing export-controlled
technical data as provided in DoD Directive 5230.25 (reference
(c)).
Then we get into the restrictive categories.
Note the comment for Distribution Statement B concerning
proprietary information: "To protect information not owned by
the U.S. Government and protected by a contractor's "limited
rights" statement, or received with the understanding that it
not be routinely transmitted outside the U.S. Government.
That condition is explicitly nullified by the unlimited rights
statements.
From this, and my experience with these statements, unlimited
rights data would likely be marked with Distribution Statement
A. It provides adequately in 6.3.3 and Distribution Statement B
for those limited rights statements we are not
discussing.
From this I have to conclude that unlimited rights data in
government hands is under the weakest "protection" one can
imagine. If I have ten copies of a document with Statement A I
can simply hand them out, in Heathrow Airport if I choose. Sir
George, XYZ's fierce competitor, can then take the thing and
tear the cover off along with that cute little form in the back.
That would be foolish, because if XYZ challenges him he has torn
off immediate protection.
Let's say he did tear the statement off. Let's even say he found
something left in the trash that had no distribution statement
and even had not been "officially released." His defense finds
the data released with the unlimited rights we are discussing.
Those court discussions mentioning "potential" release to the
world and dilution of "trade secret" status by granting of
unlimited rights of this sort come into play. There seem to be a
number of judges saying "What secret?" in this situation as the
precedents are examined.
Murder gets acquittal. The innocent are found on death row.
Despite our desires the justice system is an uncertain thing. It
is not impossible XYZ would not prevail, but I'd say XYZ is in a
crap shoot and very likely with dice loaded against them if they
choose to pursue the matter.
By
FARA FASAT on Monday, January 06,
2003 - 01:21 am:
Vern, I'm asking a different question. Your (c)
assumes that the government released the data but did not go
through proper channels. To simplify things, I'll agree that
there is little chance of protecting the data in that situation.
However, my XYZ/ABC scenario assumes that the government does
not want the data released. I think it makes a difference
because now the third party has no right to it. After all,
misappropriation occurs when one takes something without a right
to do so.
By the way, I still don't think that possession = ownership. I
certainly do seem to think that a licensee is not the
owner of a trade secret, and I am somewhat surprised that you
think a licensee is. I am sure that Microsoft (not to mention,
oh, maybe all software companies), would also be
surprised. However, further response must wait until I get back
Monday and have access to my resources and a high speed
connection.
Anon, you spent a lot of time discussing a reg that says the
government may release unlimited rights data. That
doesn't prove that the contractor has no rights in it, nor does
it prove that a third party is entitled to it no matter whether
the government wants it released. Now if the reg said that the
government must release unlimited rights data, this whole
discussion would be over. Fortunately, it's more fun than that.
Yep, it's probably a crap shoot, but if I owned it and the
government didn't release it, I'd sure try everything possible
to stop a misappropriator from using it. After all, my brains
created it, not the third party's.
By
Vern Edwards on Monday, January 06,
2003 - 09:45 am:
FARA:
You know, I think that you've stopped reading anybody's comments
but your own.
When did I say that possession equals ownership? Please show me
the quote. Are you talking about my comments of Jan 2 at 1:12?
If so, please go back and read them again, carefully, this time.
I do not think that possession and ownership are the same thing.
I do not think it and I did not say it. What I said was that
ownership is a confusing idea in intellectual property. What I
said was that the government owns the drawings that the
contractor delivered to it, and depending on what rights the
government gets, the contractor might not be able to control
what the government does with the drawings, or what others do
who got the drawings from the government. What I said was that
rights in data without possession of the data gives the
government no control. What I said was that instead of arguing
about ownership, we would do better to talk about the
power to control. What good does it do to say that a
contractor "owns" data when the government controls its
disclosure and use by itself and others, subject to no restraint
by the contractor?
And I didn't say that a licensee is an owner; I quoted a
federal statute that says it. And I asked you what you thought
about that statute. Well, what do you think?
In your XYZ/ABC example, why doesn't the government want the
unlimited rights data released? Even if data are classified or
subject to export controls, some contractors can get it; it just
depends on who they are. If a third party is in possession of
data that the government does not want it to have, that does not
give the contractor a right of action against that third party.
The government may plan to release or already have released the
data to other third parties, and a court may decide for that
reason that the data are not trade secrets. And the third party
may have come into possession of the data inadvertently and
innocently, which would mean that they did not misappropriate
it.
And you are not paying attention to what Anon19 and I have been
saying about DOD regulations governing the release of unlimited
rights data. Have you read those regulations?
Finally, do you know how the law defines "misappropiration"? If
not, I suggest that you look it up. I have already acknowledged
that a third party cannot commission or commit burglary, but
there are many ways in which a third party can come into
unauthorized possession of data that do not constitute theft or
misappropriation. Unauthorized possession by a third party is
not necessarily the result of misappropriation by the third
party.
Finally, the issue is not what you would want to do to prevent a
third party from using data; the issue is what you would be able
to do to prevent it.
And by the way, FARA, I did not like your comment about John
restoring sanity to this conversation. I am not insane and
Anon19 does not sound insane. We disagree with you (as do
others) and we have been trying to explain why in a respectful
way. What John did was to make a bunch of unsupported
assertions, such as:
"If the Government does not release the data or authorize others
to release the data, but some party comes into possession of the
data and attempts to use it without authorization, either direct
or indirect, from the Government or the contractor, I believe
the contractor can take legal steps to prevent that unauthorized
use, particularly if the data is copyrighted by the contractor."
He doesn't say why he believes what he believes. He cites no law
and no court decision. He describes no legal theory. He may be
right, but he has yet to prove it or even make a good case.
And copyright cannot prevent use; it can only prevent copying.
Vern
By
Anon19 on Monday, January 06, 2003
- 10:52 am:
FARA is hanging on a slender thread here: "However, my
XYZ/ABC scenario assumes that the government does not want
the data released " and is using an example when the
contracting agency, for its own purposes, does not want
something released. That agency is not "the government." Though
quaint, the courts still largely hold that our government
represents the public and its information is public information
with certain reasoned reservations for such things as national
security, which we've stipulated is not the case here.
FARA says, "After all, my brains created it, not the third
party's," ignoring the fact that his brains, as applied to this
effort, were being entirely funded by the public's purse.
Moreover, he performed the work under a contract clause making
it abundantly clear he was to deliver that product without
strings attached as to the public use of that product. Lola
mentioned "breach of the contract terms" in connection with an
attempt to undermine the clear conditions of those contract
terms. I agree.
Let's get something clear. Unlimited rights only apply when
the public purse has paid for the development. They do
not apply when the work has been funded by corporate or a
mix of corporate and public funds. In both those cases the less
than unlimited rights conditions apply. So, let's stipulate that
FARA's contention only applies when FARA has been hired, put on
notice in advance that the work will be essentially the public's
to use as its representative (government) sees fit and has
agreed to apply "my brains" to that delivery.
After agreeing and performing this contracted work FARA relies
on the contracting agency to be "the government" and not want to
release this publicly funded work to the public. He cites in
support an Air Force case where an Air Force agency resisted a
FOIA action using the "trade secret" argument. Agencies
sometimes tend to get their backs up, in my opinion forgetting
just who they really work for, in FOIA cases. I've so far been
unable to locate a copy of the ruling, but trust Vern's detailed
work and noted on Friday, December 27, 2002 - 01:04 that FARA
has misread the case in the first place and quotes Conax:
"a higher court in the same jurisdiction (District of Columbia)
as the Pacific Sky district court, said: '[I]f the
drawings belong to the government without limitation, [the
contractor] has no trade secrets to be protected.'"
A premise of trade secret protection is that it is a secret
and can be protected by the originator. For example, there is
common legal opinion that a trade secret cannot reside in
physical articles easily subject to reverse engineering. One
must rely on revealing the secret and seek a patent for such
items. Now, in FARA's case the intellectual work was done under
clear conditions that the company or individual was under hire
to the government and was to deliver the product of their brains
with rights vested in the government to potentially absolutely
divulge any secrets it might contain. Conax wording that
there are "no trade secrets to be protected" applies.
FARA will say, "My contracting agency is protecting them by not
releasing them" to which I state again that an agency or even a
Department is not the government. If they have their own reasons
for keeping the "secret" they must justify that on national
security or other such grounds as there is no evidence in
directives that unlimited rights data can be protected under
trade secret grounds. Another clause would have to have been in
place for that to happen. FARA is safe only so long as one
agency succeeds in making arguments that are quite weak.
FARA, if pigs had wings they could fly. If your agency succeeds
in dragging its feet long enough you might have a trade secret.
FARA says "I'd sure try everything possible to stop a
misappropriator from using it" It is obvious your secret's fate
is entirely in the hands of others. Some courts appear to have
stated that alone is enough to make it not your secret.
Your competitor, rather than being a "misappropriator," is
actually among those funding your work and buying the unlimited
rights.
I thus believe FARA's competitor could possibly even join in an
action against FARA's agency with a claim that the work must be
made public unless it can prove it must "safeguard information
requiring protection in the interest of national security or
other legitimate governmental interest" as stated in 4.3 of
5230.9. That should make for some interesting cases. They are
only one among millions of others and higher authority that have
means of forcing your cooperative agency to change its mind. You
are relying on a most slender thread of "secrecy." FARA might as
well recite the "secret" in Times Square and hope no one hears.
Then it appears FARA doesn't hear much and persists in the
fantasy.
By
Anon19 on Monday, January 06, 2003
- 01:32 pm:
Vern, There is little point in trying to convince FARA.
I've had more success in talking to the snow and making it leave
my drive so it is easy to find other diversions. I also contend
we've exhausted the specifics of FARA's question. Neither has
FARA offered evidence to extend thinking on the subject. I'm not
willing to argue the constant "clarifications" and reiteration
of the same worn proposition. I do agree there is more
interesting thinking on the subject of IP and strategy for both
industry and government.
FARA and those sharing the view would be better served to invest
in internal development where other clauses apply and not rely
on slender chances to control what is really out of their
control. They would also be better served if they thought of
those things they can leverage even when they have done
the work under unlimited rights for the government.
The Lockheed case offers an example: "Incidental benefits to the
taxpayer from performance of the research (for example,
increased experience in a field of research) do not
constitute substantial rights in the research . . ."
The data one develops under an unlimited rights clause may not
be a dependable trade secret; however, the insubstantial
experience gained can be quite valuable. A company is probably
far wiser to concentrate on leveraging this rather than on the
ability to hold essentially public information secret. One that
accepts the fact that its "secret" really is out of its control
and concentrates on using its experience to do whatever better,
faster and cheaper will probably grow and survive while the one
clinging to straws is consumed in survival of the fittest.
I'm definitely cheering the wolves here. Or maybe it is the
squirrels. Remember that wonderful and short run add about the
running of the squirrels? Forget the bulls, fast, nimble
squirrels are the ones to worry about.
By
Vern Edwards on Monday, January 06,
2003 - 01:48 pm:
All:
I don't know the answer to the question that I asked at
the end of my post on Jan 5.
To me, this is about sharing information and ideas in an attempt
to get to some kind of an answer, even if only tentative. I
don't consider this discussion a contest and I'm not trying to
win. I'm not trying to defend a position or attack anyone
else's. I'm not on any side. I just want to reason my way to a
conclusion of some kind, if that's possible, with the help of my
colleagues.
I enjoy conversation and debate and since I don't work in an
office I miss the opportunity to do that with colleagues. But
this discussion is taking a turn toward the sophomoric. I can be
as sophomoric as the next guy, but I've made a New Year's
resolution to be intelligent. So, if we're not going to proceed
in an orderly and collegial way, then I'm done.
Vern
By
FARA FASAT on Monday, January 06,
2003 - 07:00 pm:
I guess the only way to respond to the last couple of
posts is to take the accusations in order. That doesn't allow
for a logical sequence but, oh well. Also, sorry about the
sanity comment, but it was meant to lightheartedly commend John
for succinctly summarizing the issue and bringing the discussion
back to the original question, from which it had digressed.
(Vern, your summary of 1/5 was also good, so thanks for that
‘sanity’ also.).
Vern, you seem miffed that I think you equated possession with
ownership, and told me to go back and read your post "carefully"
and to "please show me the quote." Well I did, and here are your
words: "If the government wants to possess, i.e., own, any such
data...." "The government's rights in data are effective only
with respect to data which it possesses, i.e., owns." Finally,
you said that I “seem to think that a licensee is not an owner
of a trade secret.” How else am I supposed to interpret those
words? I didn't make them up, and I didn't stop reading
everyone's comments but my own. I certainly read yours, and you
seemed to be saying something contrary to my basic
understandings.
I am glad you now say that you do not think possession and
ownership are the same thing, but I hope you can see why I
thought so from your comments. I agree that the power to control
the data is more important than outright ownership.
Nevertheless, ownership is still important. After all, the owner
has the inherent right to authorize others to use the data
through a license. A licensee can only authorize others if the
licensor gives him that right.
I don't think I am reading too much into the description of the
government's rights as a “license.” Here is what others have to
say about it:
From the DoD guide "Intellectual Property: Navigating Through
Commercial Waters": "As a general rule under government
contracts, the contractor-developer is allowed to retain
ownership of the technical data and computer software it
developed; and the Government receives only a license to use
that technical data and computer software. DoD does not "own"
the technical data and computer software included in
deliverables, even if the Department paid for 100 percent of the
development costs." (page 1-4).
"Contractors are generally permitted to retain ownership (e.g.,
title) of the IP rights governing the technologies/information
that they develop or deliver under DoD contracts; and DoD
receives only a (nonexclusive) license to use that IP...." (page
2-2).
"In general, the contractor-developer retains title to the IP,
and the Government receives a nonexclusive license to use,
reproduce, modify, release, perform, display, or disclose the
data or software." (page 2-3).
"The Government may own the delivered physical medium on which
the IP resides, but it generally will not own the IP rights."
(page 2-7).
From the Fed Pubs “Rights in Technical Data & Computer Software”
(1995): “Under the regulations, the Government obtains rights in
technical data under an irrevocable license granted or obtained
for the Government by the contractor. The contractor (licensor)
retains all rights in the data not granted to the Government.
That means that the contractor “owns” the technical data and, in
general, may do anything with the data it wishes. (pp. A-70-71).
Enough on that. You then asked what I think of 18 U.S.C. 1839,
which seems to define an owner as including a licensee. Frankly,
I don’t know, but I’m holding “Milgrim on Trade Secrets” and it
seems to have no problem distinguishing between an owner and a
licensee of a trade secret. Maybe Congress meant the definition
of an owner to be all-encompassing, like “person” is defined to
include “corporation.” It’s not accurate and it makes no literal
sense, but it substitutes one word where several would have to
be used otherwise.
Next up: you asked “In your XYZ/ABC example, why doesn't the
government want the unlimited rights data released?” I don’t
know but I will find out. I put a call in to the attorney who
handled it, and will post the answer up here if possible.
Am I paying attention to the regulations you and Anon cited, and
have I read them? Yes and yes. While I have not immersed myself
in them, I have scanned through them, and I don’t believe they
require the government to release unlimited rights data.
Thus, it seems that the government can choose not to release the
data, which happens to be my scenario and question. Make no
mistake about it – once the data is out it is out, and there is
no protecting it. It doesn’t matter whether the data comes out
through a voluntary release, a FOIA request, a license, or any
other authorized way. I have never argued anything different.
Do I know how the law defines misappropriation? I think so. And
while you say that “unauthorized possession by a third party is
not necessarily the result of misappropriation by the third
party,” I would direct your attention to the definition of theft
in 18 U.S.C. 1832 (the same chapter you went to for your
definition of “owner”). Note that all three of the substantive
subsections include the term “without authorization” (the last
two subsections are attempts and conspiracies). There may be
some examples of innocent unauthorized possession, but the
definition sure covers a lot of territory. Besides, my scenario
assumes misappropriation, not innocent or authorized possession.
Vern asked the right question on 1/5 and 1/6. For a start at the
answer, let me turn to the master himself, Ralph Nash. In
“Intellectual Property in Government Contracts” volume 2, he
discusses unlimited rights at chapter 1.I.B.6. On page 71 he
states: “The right to disclose the data in any manner as
specified by the definition of unlimited rights clearly gives
the Government the right to extinguish any trade secret by such
disclosure including the right to use such data for competitive
procurement purposes. However, much of the technical data
delivered to the Government may not be disclosed to other
contractors for many years or ever.” (I note that he said ‘right
to disclose’ leads to the ‘right to extinguish, not ‘has
extinguished’). He then refers to an argument made in another
text that “the mere giving of unlimited rights to the Government
does not in itself constitute relinquishment of a trade secret
through disclosure” and analogizes it to a Supreme Court case in
which a trade secret license was upheld even though the secret
later became public. He ends the paragraph with: “Similarly,
licensing agreements for technical data, to which the Government
has a right of disclosure, should not be invalidated after
disclosure by the Government so long as they are reached prior
to the time the data comes into the public domain….”
Isn’t this what I have been asking, whether the contractor has a
protectable interest as long as the government has not released
the data? Doesn’t Professor Nash distinguish between the
right to release data vs. the actual release? If the
contractor can license the data before the Government releases
it, doesn’t there have to be a property interest there to
license? And if there is a property interest, why can’t the
contractor protect it? In short, if you can license it why can't
you protect it? I think one answer may be in the potential
release vs. actual release.
I hope that’s enough thought for now. If the above is considered
sophomoric, then I hope I have included enough references to be
in good company.
I don’t have time to address Anon’s comments, which surely need
it but which, at any rate, I find rude, insulting and
condescending (“talking to snow”; “if pigs had wings”; indeed).
Oh heck, I just have to, so here goes.
If an agency or department is not the government ("I state again
that an agency or even a Department is not the government"),
then what is? You imply that it is the public, but if so, then
every reference to “government” in the US Code and CFR takes on
an entirely new meaning. Can we just substitute the word
“public” for “ Government” every where it shows up?
You also said that my competitor funded my work (presumably
through tax dollars) and bought the unlimited rights. Where in
the FAR, DFARS, or any reference does it say that the public has
the unlimited rights license? Everything I read says the
government has it.
There’s more, but now I truly am out of time. Too much work not
done over the holidays. Once more, just to be clear: I agree
that unlimited rights and data protection may be inconsistent,
and I don't have a "position" on it. I'm just raising issues,
and I haven't seen a definitive debunking yet. In particular,
Professor Nash's comments are interesting, and I would like to
see some discussion of them.
By
Vern Edwards on Monday, January 06,
2003 - 07:51 pm:
FARA:
Good comments.
I don't want to focus on the past, but I want to say that you
took two of my sentences about possession and ownership out of
context and reached the wrong conclusion about what I meant.
Enough said about that, since you now understand my thinking in
that regard.
As for your disagreement with the defintion of "owner: in 18
U.S.C. § 1839(4), all I can say is that it says what it says,
whether you and Milgrim agree or not. I don't know why it says
what it says, but there it is. However, I will say that it
reinforces my position that it doesn't make much sense to talk
about ownership in the context of data rights under government
contracts. The data rights clauses speak for themselves and what
they speak about is the right to control (use, disclose, etc.),
not ownership. In fact, if the Find function on my computer is
working properly, the words "own," "owner," and "ownership" do
not appear anywhere in DFARS Part 227 or in any of the data
rights clauses.
Misappropriation is an important idea. I think that a party can
come into unauthorized possession of data without having
misappropriated it, if they didn't know that they were not
authorized to have it. I reread 18 U.S.C. § 1832 at your
suggestion. "Knowing" and "knowingly" are important words in
that section. For instance, look at item (3): "receives, buys or
possess such information knowing the same to have been stolen or
appropriated, obtained, or converted without authorization." In
the scenario that I sketched earlier, the third party who
received the data from a government employee might not know that
the employee had not followed proper release procedures. Indeed,
the employee may not have known it. I believe that in such a
case there was no misappropriation by the third party.
What I find informative, however, are your quotes from Nash and
Rawicz, and I intend to study that text closely during the next
few days. I've also obtained some other texts that I'm going to
look at. (It appears from the quotes that you provided that Nash
and Rawicz did not cite any case law in support. Is that
correct?) Nash has told me that very few contractors have
pursued trade secret infringement litigation with regard to data
that they'd given to the government with unlimited rights.
As for licenses made before the government releases the data,
they are enforceable as contracts, regardless of whether or not
the data remain trade secrets. I saw a case to that effect, but
I cannot remember it. This means little, to me, because the
issue lies with a third party which has obtained the data
without prior agreement with the contractor.
I'm hung up on the idea that it doesn't make sense for a
contractor to claim that something is a trade secret and that
disclosure could damage its interests when the government could
release it to anybody at any time and authorize others to do so,
whether the government has actually done so or not. Moreover, I
question whether a contractor is entitled to rely on the
government's internal policies about release in making a claim
of trade secret infringement. I think that any lawyer defending
someone in a trade secret infringement case would raise these
questions.
You've made some good points in this last post of yours and
you've given me some things to read and to think about. I'll get
back to you in a day or so.
You and Anon19 are on your own for a while. Try to behave
yourselves.
Vern
By
Anonymous on Tuesday, January 07,
2003 - 10:49 am:
I have been following this very interesting thread
from the sidelines but would like to add my $0.02. To me, the
question of whether the "owner" in FARA's hypo (the contractor
that delivered the unlimited rights data to the Govt) could
bring an injunctive action against a private party who
mysteriously winds up with the data even though the Govt says it
did not intend to, and believes it did not, disclose the data to
the private party, hinges on whether the data constitute a trade
secret at the time the private party came into possession of it.
In private actions for injunctive relief, whether or not the
data are a trade secret is a matter of state law. (In 1996,
trade secret misappropriation was federalized to an extent; it
is now a felony under the Economic Espionage Act of 1996.)
Different states have different laws, but most states define
trade secret similar to the EEA definition (which was based on
the Uniform Trade Secrets Act), which provides that a trade
secret is:
"all forms and types of financial, business, scientific,
technical, economic, or engineering information . . . if--
(A) the owner thereof has taken reasonable measures to keep such
information secret; and
(B) the information derives independent economic value, actual
or potential, from not being generally known to, and not being
readily ascertainable through proper means by, the public . . .
."
Does FARA's information meet this definition? Let's deal with
criterion (B) first. Even assuming that information mysteriously
showing up in one private party's possession is not "generally
known to ... the public," it seems to me that if the information
was obtainable under FOIA it would be "readily ascertainable
through proper means by the public" and therefore would not meet
the definition of trade secret. And even if the Govt does not
"want" to release the data to the public, it cannot withhold it
in the face of a valid FOIA request unless one of the FOIA
exemptions is met.
Exemption 4 -- the trade secret exemption -- probably would not
permit the Govt to withhold the data because that exemption is
limited to information that is privileged or confidential, and I
would think that the contractor's willingness to give the Govt
unlimited rights in the data would negate any claim of privilege
or confidentiality. Although I haven't researched this point,
think of it this way: assume the Govt WANTED to release the
data, and the contractor filed a "reverse FOIA" lawsuit to block
the Govt's action, contending that exemption 4 prohibited
release. I'd think the Govt would win in a slam dunk based on
the fact that it had been given unlimited rights to release the
data to anyone. If this is true, then it seems to me that the
contractor would have a hard time showing that the data
constituted an exemption 4 trade secret even if the Govt didn't
want to relase it.
Exemption 1 -- the national security exemption -- might apply.
If so, then the Govt wouldn't be required to release the data
under FOIA and criterion (B) of the trade secret definition
would be met.
Criterion (A) of the trade secret definition is more
problematic. Even using a broad defintion of the word "secret,"
it would be tough to contend that a contractor who has given the
Govt unlimited rights to release the data to the world "has
taken reasonable measures to keep such information secret." (I'm
not aware of any case law on this question.) I understand that
sharing data with a large number of people does not necessarily
negate "secrecy"; companies can disclose trade secrets to a
large number of people (employees, customers, suppliers) under
nondisclosure agreements and still maintain trade secret
protection. But here there is no nondisclosure agreement
preventing the Govt from disclosing the secret to others; in
fact, it's just the opposite: the Govt has unlimited rights to
disclose the data to anyone it wishes, and for any reason.
So I think FARA's hypothetical contractor would have a tough
time obtaining an injuction (or damages) for misappropriation of
a trade secret under the law of most states. FARA, are there any
other torts you can think of that might apply here? Tortious
interference with contract perhaps (recognized in smome states)?
By obtaining the data without an authorized Govt release, is the
private party interfering with the contract (license) negotiated
by the Govt and contractor? If so, would the fact that the data
might be obtainable under FOIA be relevant?
By
FARA FASAT on Tuesday, January 07,
2003 - 12:27 pm:
Thanks for the post Vern. Here are a few more
thoughts.
The more I think about it, the more I think that the definition
of owner in 18 USC is just a one-word substitution meant to
cover all persons from whom a trade secret can be taken, much as
"person" is meant to cover all individuals and business
entities. A corporation is not a person, but the word person is
what the law uses. And while control may be more important than
actual ownership, we can't forget that the contractor is the
owner. It might be useful in the analysis down the road.
Since my whole scenario is based on the case where the
government does not release the data, the Nash comments are
interesting. They appear to draw a line at the release: before
the release the data can be licensed by the owner; after the
release, no. This partially helps with Anonymous 1/7's question
as to whether the contractor can be said to have taken
reasonable steps to protect the data if it gives an unlimited
rights license. I think that if the contractor takes all other
regular steps to protect it, AND the government does not
release it, then the contractor might meet this test. Again,
"could release" vs. "did release."
Whether the government has the discretion to not release
data is of course an important issue. I don't think the
contractor's chances are good in a reverse-FOIA action over
unlimited rights data. Nevertheless, my scenario assumes no
release, and what to do with an unauthorized user. (I'll exclude
innocent unauthorized users, but once you notify them they no
longer are operating without knowledge).
By
Vern Edwards on Tuesday, January
07, 2003 - 01:12 pm:
FARA:
I acknowledge the distinction you are making between "could
release" and "did release", but what is your reaction to the
following comments of Anonymous of 1/7 at 10:49am:
"Even using a broad defintion of the word 'secret,' it would be
tough to contend that a contractor who has given the Govt
unlimited rights to release the data to the world 'has taken
reasonable measures to keep such information secret.' (I'm not
aware of any case law on this question.) I understand that
sharing data with a large number of people does not necessarily
negate 'secrecy'; companies can disclose trade secrets to a
large number of people (employees, customers, suppliers) under
nondisclosure agreements and still maintain trade secret
protection. But here there is no nondisclosure agreement
preventing the Govt from disclosing the secret to others; in
fact, it's just the opposite: the Govt has unlimited rights to
disclose the data to anyone it wishes, and for any reason"?
He/she is thinking along the same lines that I am, which is that
once a contractor has given the data to someone and told them
that they can use it in any way they see fit, disclose it to
anyone they choose (including a competitor of the contractor)
for any reason whatsoever, and authorize others to do the same,
it is inconsistent to later claim trade secrecy, even if the
person to whom you gave the data has not yet disclosed it to
anyone.
A contractor who gives data to the government with unlimited
rights is not entitled to demand that the government use any
formal procedure to authorize its use or disclosure or to take
care in the way that it uses or discloses it. The contractor is
not entitled to any remedy if the government is careless in its
approach to use and disclosure.
Moreover, we know from DOD FOIA policy that DOD agencies are not
to refuse FOIA release of unlimited rights data on the basis of
trade secrecy. Indeed, DOD agencies are to refuse such release
only on the grounds of national security (classified or
export-controlled) and not on the basis of the contractor's
business interests.
These considerations strike me as powerful defenses against
trade secret infringement litigation. I do not argue that a
third party has the right to break into a contractor's files or
to hire a burglar, or to pay someone to breach a nondisclosure
agreement. But if a third party gets unlimited rights data
through a government source, either directly or from a
government contractor or subcontractor, whether release was
authorized or not, I doubt that the contractor can persuade a
court to issue a TRO or an injunction on the basis of
misappropriation/theft of a trade secret.
What do you think?
Vern
By
Anon19 on Tuesday, January 07, 2003
- 03:41 pm:
I will only quote one of the many references on the
web and literature discussing the UTSA "reasonable protection"
requirements. In
"Can You Keep A Secret?" (Contract Management / October
2002; by Kenneth B. Weckstein and Tammy Hopkins) the following
advice is applicable:
Trade secrets should be marked as such, and
employees should be informed of the company's specific
protocol for treatment of trade secrets. (Note that marking
documents as trade secrets will not meet the requirements of
the Federal Acquisition Regulation and contractual
requirements for preserving rights in data.)
Access to such information should be on a "need-to-know"
basis. Moreover, the public or other third parties generally
should not be given access to the information. Where third
party access is required, specific measures should be employed
to ensure that the party is under a duty not to disclose
the information. [Emphasis added]
Clearly no such duty can be imposed under the
unlimited rights clause.
Here is the key. How would plaintiff answer the almost certain
defense question:
Has the information ever been given to
another party without restrictive conditions placed upon them
to treat it as a trade secret?
An answer of "Yes" would appear to be
nullification of "trade secret" protection requirements as the
information has been exposed without any "duty not to disclose."
Short of perjury, plaintiff must answer "Yes." Defense would
then obtain the exact details of the unlimited rights clause,
the likelihood of eventual release, potential of official
release at any unknown moment (without even a prior notification
requirement), probable compelled release under FOIA, and so on.
We cannot predict firmly, but I believe Justice's scales would
tilt--at least a bit.
After the "misappropriation" comment I did a matrix against the
UTSA "Misappropriation" statements. As a result I believe
plaintiff would have to prove, with prior knowledge of the
unlimited rights situation, that:
(1) The defendant knew the data was obtained by "theft, bribery,
misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other
means"
(2) "prove the negative" that it did not come from anyone in
government or any person authorized by the government to be in
possession of the unlimited rights data. This would thus presume
the government treats "Distribution Statement A" data as
accountable!
Do the matrix yourselves. I'd be interested in any substantial
and logical alternatives. I will not argue that a case exists
where there is proof the data came into the hands of someone
through their own "improper means" (theft, bribery,
misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other
means) actions. That has not been posed and they probably have a
little problem with EEA there.
By
Anon19 on Tuesday, January 07, 2003
- 04:36 pm:
FARA, I read back and see you have specific
complaints. I cannot just let them pass. They go way beyond the
importance of simple contracting.
If an agency or department is not the government ("I state
again that an agency or even a Department is not the
government"), then what is?
To a contractor reading contract documents it may seem the
agency is "the government" and the agency may presume that
mantle for contract purposes yet among the agencies and
particularly the Executive, Legislative and Judicial branch
officials it is just an agency and your first step in these
decisions. Civics 101.
You also said that my competitor funded my work (presumably
through tax dollars) and bought the unlimited rights. Where in
the FAR, DFARS, or any reference does it say that the public has
the unlimited rights license? Everything I read says the
government has it.
FAR and DFARS are just agency regulations, not the Constitution
or law. Start with the first answer and extrapolate to clearly
stated policy extending from agency statements to our national
documents and the public who puts the top levels in or out of
office. Remember who, in this country still, the government
"belongs to"? Without clear need to do otherwise (most commonly
security related) anything purchased with public funds is
presumed to be in the public's reach. Take a good look at FOIA.
A little work with those court cases will also show you how that
is commonly enforced upon those forgetting just who they are
working for. From the above I'm a bit shocked at your views of
just who you really work for when you are performing a
government contract. Your contracting Agency is just the agent
from a government perspective.
I'm mildly sorry you took offense. I think you have been
stubbornly clinging to a position in spite of considerable
evidence it is quite tenuous. I also think you are proposing a
version of having and eating your cake since you have been
proposing working fully funded by the taxpayer and then
trying to make additional exploitation of doubtful validity. I
have absolutely no problem with a contractor exploiting any
advantage they can when so funded as long as it does not
infringe on public rights. You most certainly have my full
support to exploit experience and excellent performance so
gained.
By
FARA FASAT on Tuesday, January 07,
2003 - 07:34 pm:
Vern, here are my answers to your questions. By the
way, I am and have been playing the role of the opposite side
here; I don't necessarily think these arguments will win. I
posed the original question out of genuine interest in the
answer, and I am convinced that the hurdles are high. But hey,
the idea here is to encourage debate.
One possible argument is to assert that an unlimited rights
license to the government has no parallel under traditional IP
law. It is unlikely that any IP owner would ever grant such a
license; it should just sell it outright. Essentially, the
contractor gives it because the law requires it, not because the
contractor wants to or because it makes business sense. Absent
the law applicable only to governent funding, a contractor could
have its development work fully funded by a customer, with the
contractor retaining ownership and the customer getting only a
license for its own use.
For the above reason, I could argue an exception to the standard
criteria for trade secret protection in that the unlimited
rights license is compelled and not the result of arms-length
negotiations, and that the contractor has fulfilled all other
requirements to protect its data.
As for the FOIA arguments, I don't know. I could give it the old
moot court try, but I have to research it a little. However,
isn't the FOIA argument just a variation of the "could release"
vs. "did release" argument? In other words, a requestor could
submit a FOIA request, therefore the data can't be protected?
Now, here's a slight twist on the original question. Much data
will never be delivered under the contract. For this
data, does anyone dispute that the contractor owns it, can mark
it, and protect it as a trade secret? I believe that in an
earlier post, and in some of the reference materials, it is
acknowledged that even though the government technically has
unlimited rights in this data, those rights do not actually vest
unless the data is delivered. If we agree that this data can be
protected, is there much difference between data that is not
delivered and data that is not released?
Just food for thought.
By
Vern Edwards on Tuesday, January
07, 2003 - 08:34 pm:
FARA:
I think that if the contractor did not deliver the data to the
government, it then controls the data absolutely and can
maintain a trade secrets claim, even if the government has
unlimited rights.
To me, the issue is control. So, I think that there is a
difference between unlimited rights data that were not delivered
to the government, and data that were delivered to the
government with unlimited rights, but which the government has
not disclosed. In the former case, the government has rights,
but no control. In the latter case, the government has both
unlimited rights and unlimited control, which is why I don't
think the contractor can claim a trade secret.
But I'm still readin' and thinkin'.
Vern
By
FARA FASAT on Thursday, January 23,
2003 - 04:37 pm:
It seems a shame to waste this new thread, so here
goes.
There was a lot of opposition to the idea of marking unlimited
rights data with the word "proprietary." I can buy that.
However, I have talked to several people on this issue --
attorneys, senior contracts people -- and they all agree that
the contractor needs to identify it as his in some way. The
question then is, how do you mark it in a way that does not run
afoul of the "nonconforming marking" rule in 227-7013? (Put
aside the trade secrets argument for this question. We'll come
back to it later).
After all, I think most if not all would agree that certain
minimal information must go on data, such as date, part or
drawing number, version, revision number, etc., and I hope that
no one will assert that even these can not go on data. Does a
contractor's name, "XYX", cross the line? What about "Property
of XYZ"? "Created by XYZ"?
The answer may be in what a "marking" is. There is no definition
in the DFARS, but there are hints. 227-7037 requires the
contractor to justify the "markings that impose restrictions on
the Government and others to use, duplicate, or disclose...."
227-7013(g) pairs the word "restrictive" with "markings" in most
of that section. As I argued way back in the beginning of this
discussion, the rule may only apply to markings that restrict
the government's use. This was innovative to some; fraudulent to
others. Nevertheless, it would allow the basic information to go
on a drawing without violating the markings rule.
If you accept that, then how much can you put on before you
restrict the government's use? I'll accept that the word
"proprietary" could be read as a restriction. Now, what about
the others I mentioned above?
By
Ralph Nash on Tuesday, February 25,
2003 - 05:56 pm:
FARA -- It appears that you have exhausted the other
commentators but your original question was an excellent one.
You need a marking but the DFARS prohibits one. The only marking
you can put on, apparently is a copyright notice. That is more
valuable than the other folks believe because it prohibits not
only copying but the making of derivative works.
What interest me is that the DFARS contains no guidance on how
the Government transfers rights. There is little doubt that the
unlimited right gives the Government the right to, in effect,
destroy your trade secret but when does it do that? If the
unlimited right is a license with a right to sublicense, as I
believe it is, when does the Government actually sublicense
others? I have never seen an actual license of this type. Is
giving a FOIA requester the data with no markings a sublicense
to use it for commercial purposes? I have my doubts. Is
providing the data to a company for a specific purpose on a
Government program a sublicense for commercial purposes? How
would the normal contracting officer respond if a company asked
for a license to use some unlimited rights data for commercial
purposes? Would he or she worry about the accuracy of the data
and whether the Government would have some liability if it was
inaccurate? My guess is that many contracting officers would
hesitate before actually giving such a sublicense.
In any event, thanks for the question and the interesting thread
it created. I will add this issue to those discussed in our
Intellectual Property series.
By
FARA FASAT on Wednesday, February
26, 2003 - 06:20 pm:
Prof. Nash - thanks for joining in. All of us value
your contributions. Those are all interesting points, and more
evidence of the complications of applying the data rights
provisions.
Since the last posting in this thread, I talked about this
problem with a government contracts attorney who focusses on IP
issues. He said that he would definitely mark the data with some
sort of contractor identification to indicate that it belonged
to the contractor, and maybe even further stating that it was
being provided with unlimited rights to the government. His
rationale: this is not a "restrictive" marking and thus is not
prohibited by the DFARS. I guarantee that I didn't prompt him or
use leading questions to get that out of him. I'm throwing that
out to the general reading population since it got a heated
reaction last time.
By
Ralph Nash on Tuesday, March 04,
2003 - 05:05 pm:
FARA Interesting suggestion. Incidentally, for a case
saying that a contractor retains an asset of value in unlimited
rights data see Lockheed Martin Corp. v. U.S., 210 F.3d 1366
(Fed. Cir. 2000).
By
Vern Edwards on Tuesday, March 04,
2003 - 07:08 pm:
Ralph:
The court did not say that Lockheed retained a trade secret
interest in any data, which, as I recall, is what FARA has been
asking about. The court said that Lockheed retained an interest
in the data for tax credit purposes because the government's
rights were not exclusive. Right?
"If the taxpayer [Lockheed] does not have the right to use or
exploit the results of the research, its expenditures are not
entitled to the tax credit regardless whether there is an
agreement that the research will be paid for only if successful,
and regardless whether the taxpayer receives some 'incidental
benefit' such as increased experience. On the other hand, it
follows that as long as exclusive rights are not vested in
'another person,' the taxpayer may retain substantial rights.
Treasury Reg. § 1.41-5(d) thus implements the statute's purpose
of giving a tax credit only to those taxpayers who themselves
take on the financial burden of research and experimentation to
develop new techniques, equipment, and products that they can
use in their businesses."
The government had argued that the taxpayer retained substantial
rights only if it had retained the right to prevent others from
using the data. Lockheed actually opposed that argument and
argued in response that it retained substantial rights as long
as it could use the data, whether it could prevent others from
using it or not.
The question before us has been whether or not a contractor
retains a trade secret interest in data which it has delivered
to the government with unlimited rights.
By
FARA FASAT on Friday, March 07,
2003 - 09:28 pm:
Prof. Nash's point is interesting in that he is simply
saying that the Court recognized an asset of value even in
unlimited rights data. For that statement alone it is useful
because some here have argued that the contractor retains
nothing of value once it gives an unlimited rights license.
Since there do not appear to be any cases on the specific issue
of a trade secret vs. unlimited rights in a government contract,
one can only look to the rationale and discussion in similar
cases and craft an analysis from them. If I were briefing this
issue, I would look for any statements noting the value retained
in unlimited rights data.
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