Tensions are brewing in the defense contracting business over government efforts to secure rights to manufacturers' intellectual property. The clash pits military buyers who want to break up suppliers' monopolies against companies whose livelihood depends on keeping tight control over their designs.
To do that in a market that is dominated by single-source manufacturers, the
Except in limited circumstances, contracting officials cannot disclose a private company's proprietary data outside the government.
In the spare-parts and equipment repair business, particularly, manufacturers fear so-called aftermarket vendors who take other companies' designs and make them for a bargain price.
Friction over data rights has ebbed and flowed in cycles over the past several decades. The tensions are once again becoming palpable as the defense budget falls, said
"The government is being significantly more aggressive trying to obtain data rights," Carey said. "That effort is driven by a desire to use the data for follow-on procurements."
Frustration on both sides is coming to a head. The origins of the conflict can be traced back to the mid-1990s, when the
What sowed the seeds of the current discontent were contracts agreed upon years ago in which data requirements were not well defined. Deals were negotiated on the basis of fairly limited data delivery, Carey said. The
Some military agencies have begun demanding IP rights without properly compensating the contractor, said Carey. "That is the environment we are in right now."
The cards are being stacked against contractors, as the
As IP disputes become more frequent, contractors confront a dilemma. They can agree to their customers' demands or take them to court.
Disagreeable contractors risk angering their customer and jeopardizing future work, Carey said. A contracting officer can issue a bad performance rating, which would prevent the contractor from competing for future work. "The customer can bring a significant amount of pressure to bear," he said.
The topic was discussed last month at an industry conference, where
"Industry has a legitimate business case. We get that," LaPlante said. "But we have to have that discussion," he added. 'We need a compromise where government has appropriate data rights and industry can stay competitive. We can get the best deal for everyone."
Finding an acceptable compromise will not be easy, said
Attorneys suggest that, to get beyond this impasse, the government should consider licensing agreements so companies are compensated for their IP.
There is no easy solution, said
"Free and open competition is a fundamental tenet of procurement policy," he said. "But unless the government chooses to fund all R&D costs, it needs manufacturers' data rights."
If the government wants rights, he said, it should pay for the R&D. Unless the
The debate is unfolding as contractors are being asked by a cashstrapped
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