Contractor’s Software Rights under Defense Contract
Are you a defense contractor who has created software with commercial applications, but is part of a deliverable for a DOD contract? How do you retain rights in a software delivered as part of a defense contract? This post will focus on how to make sure that you retain the rights to any software that is a deliverable in a defense contract. The Defense Federal Acquisition Regulations or DFARs define the government’s rights in noncommercial software. Specifically DFAR 252.227-7014 defines three levels of rights the government obtains in noncommercial software; 1) unlimited rights, 2) government purpose rights, and 3) restricted rights. The government’s rights in the software are most limited under the “restricted rights” section. According to DFAR 252.227-7014(b)(3)(i) the government has restricted rights in noncommercial software required to be delivered or otherwise provided to the government under the contract that was “developed exclusively at private expense.” Developed exclusively at private expense is defined in DFAR 252.227-7014(7) as:
development was accomplished entirely with costs charged to indirect cost pools, costs not allocated to a government contract, or any combination thereof.
(i) Private expense determinations should be made at the lowest practicable level.
(ii) Under fixed-price contracts, when total costs are greater than the firm-fixed-price or ceiling price of the contract, the additional development costs necessary to complete development shall not be considered when determining whether development was at government, private, or mixed expense.
Software delivered under a government contract must contain a marking explaining the government’s rights in the software, see DFAR 252.227-7014(f)(3). Note that a license to the software does not imply any rights to any patent in the software, see DFAR 252.227-7014(i).
Restricted rights are defined in DFAR 252.227-7014(a)(14) as the government has rights to:
(i) Use a computer program with one computer at one time. The program may not be accessed by more than one terminal or central processing unit or time shared unless otherwise permitted by this contract;
(ii) Transfer a computer program to another Government agency without the further permission of the Contractor if the transferor destroys all copies of the program and related computer software documentation in its possession and notifies the licensor of the transfer. Transferred programs remain subject to the provisions of this clause;
(iii) Make the minimum number of copies of the computer software required for safekeeping (archive), backup, or modification purposes;
(iv) Modify computer software provided that the Government may—
(A) Use the modified software only as provided in paragraphs (a)(14)(i) and (iii) of this clause; and
(B) Not release or disclose the modified software except as provided in paragraphs (a)(14)(ii), (v) and (vi) of this clause;
(v) Permit contractors or subcontractors performing service contracts (see 37.101 of the Federal Acquisition Regulation) in support of this or a related contract to use computer software to diagnose and correct deficiencies in a computer program, to modify computer software to enable a computer program to be combined with, adapted to, or merged with other computer programs or when necessary to respond to urgent tactical situations, provided that—
(A) The Government notifies the party which has granted restricted rights that a release or disclosure to particular contractors or subcontractors was made;
(B) Such contractors or subcontractors are subject to the use and non-disclosure agreement at 227.7103-7 of the Defense Federal Acquisition Regulation Supplement (DFARS) or are Government contractors receiving access to the software for performance of a Government contract that contains the clause at DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends;
(C) The Government shall not permit the recipient to decompile, disassemble, or reverse engineer the software, or use software decompiled, disassembled, or reverse engineered by the Government pursuant to paragraph (a)(14)(iv) of this clause, for any other purpose; and
(D) Such use is subject to the limitation in paragraph (a)(14)(i) of this clause; and
(vi) Permit contractors or subcontractors performing emergency repairs or overhaul of items or components of items procured under this or a related contract to use the computer software when necessary to perform the repairs or overhaul, or to modify the computer software to reflect the repairs or overhaul made, provided that—
(A) The intended recipient is subject to the use and non-disclosure agreement at DFARS 227.7103-7 or is a Government contractor receiving access to the software for performance of a Government contract that contains the clause at DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends; and
(B) The Government shall not permit the recipient to decompile, disassemble, or reverse engineer the software, or use software decompiled, disassembled, or reverse engineered by the Government pursuant to paragraph (a)(14)(iv) of this clause, for any other purpose.
The rights provided to the government under a restricted rights license to the software appear to be reasonable for most cases.
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