DEPARTMENT OF DEFENSE TECHNICAL DATA POLICIES They’re Slowly Evolving

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36 Nash & Cibinic Rep. NL ¶ 13

Nash & Cibinic Report | February 2022

The Nash & Cibinic Report

Intellectual Property

Ralph C. Nash

¶ 13. DEPARTMENT OF DEFENSE TECHNICAL DATA POLICIES: They’re Slowly Evolving

The Government Accountability Office has issued a comprehensive report on the progress being made by the Department of Defense to implement congressional requirements for alterations to its policies on technical data. See Defense Acquisitions: DOD Should Take Additional Actions To Improve How It Approaches Inteerty, GAO-22-104752 (Nov. 30, 2021), making four recommendations concerning this ongoing effort. See also

Technical Data To Support Sustainment

The substantive issue that underlies all of the efforts to “improve” the DOD’s data policies is identified by the GAO as the services’ current inability to obtain rights to detailed manufacturing or process data (DMPD), which is often necessary to obtain competition during the sustainment of a weapon % of the life-cycle costs are incurred). This long-standing “problem” is caused by the provisions in that call for limited rights in technical data developed at private expense in paragraph (B), but exon technical data “necessary for operation, maintenance, installation, or training (other than detailed manufacturing or process data, including such data pertaining to a major system component) [emphasis added]” in paragraph (C)(iii), and prohibit requiring a contractor or subcontractor “as a condition of being responsive to a solicitation or as a condition for the award of a contract—(i) to sell or otherwise relinquish to the United States any rights in technical data,” or “(ii) to refrain from offering to use, or from using, an item or process to which the contractor is entitled to restrict rights in data under subparagraph (B)” in paragraph (H). This complex array of provisions results in contractors being able to claim limited rights to DMPD developed at private expense.

The GAO report contains some interesting examples of this problem which it had identified in prior reports:

• In July 2006, we reported that a lack of technical data rights for several Army weapons systems disrupted sustainment plans intended to achieve cost savings and meet legislative requirements for depot maintenance capabilities. For example, when acquiring the Stryker family of vehicles, the Army did not obtain technical data rights needed to develop competitive offers for the acquisition of spare parts and components. Following the initial acquisition, the program analyzed alternatives to the contractor’s support strategy and attempted to

acquire rights to the manufacturer’s technical data package, which describes the parts and equipment in sufficient technical detail to allow the Army to use competition to lower the cost of parts. The contractor declined to sell the Stryker’s technical data package to the Army. According to an Army Audit Agency report, the project office stated that the cost of the technical data, even if available, would most likely be prohibitively expensive at that point in the Stryker’s fielding, offsetting any cost savings resulting from competition.

• In September 2014, we reported that the F-35 program did not acquire technical data needed to compete a subsequent award of the F-35 or its subsystems under its previously awarded system development contract. We also reported that program officials did not have an understanding of the technical data rights DOD owned, what technical data rights it might still need, or how much it would cost to acquire those data rights to support

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the future sustainment of F-35 aircraft. We recommended that the F-35 program should, among other things, develop a long-term IP strategy that identifies (1) current levels of technical data rights ownership by the federal government, and (2) all critical technical data rights and their associated costs. DOD concurred with the recommendation and stated that the program planned to address these technical data rights issues as part of the program’s future sustainment strategy. However, in July 2021, we found that the F-35 program still does not have a comprehensive understanding of the technical data rights it currently owns, what technical data rights it may still need, or how much it will cost to acquire data needed to support F-35 sustainment.

• In March 2020, we found that a lack of technical data contributed to sustainment problems for several Navy ship programs, and that focusing on sustainment earlier in the acquisition process could save billions of dollars. Navy officials stated they did not have a clear understanding of all the IP needed until ship systems broke and Navy maintainers could not repair the systems with the IP available to them. Navy ship maintainers told us that once a ship is delivered it is often too late to implement strategies or agreements with manufacturers to get the IP needed to fully sustain the ship systems at an affordable price. We made several recommendations to the Navy, including that the Assistant Secretary of the Navy for Research, Development, and Acquisition should ensure that all shipbuilding programs develop and update life-cycle sustainment plans, in accordance with DOD policy, to demonstrate how they will affordably operate and maintain ship classes during sustainment.

According to DOD’s acquisition policy in place at the time of our review, shipbuilding programs should document IP strategies early in acquisition planning to assess technical data needs and to determine what IP deliverables and license rights the program must acquire from contractors. The Navy agreed with this recommendation but has not addressed it yet. [Footnotes omitted.]

The lesson from these examples is clear. Contractors, in general, will not sell their DMPD rights after a system is developed at a price that the military service regards as reasonable. Thus, the only way to obtain such rights is during the competition for the development contract. While this has been known for many years, the GAO report is critical of the fact that the most recent guidance in DOD Instruction 5010.44, Intellectual Property Acquisition and Licensing (Oct. 16, 2019), does not directly address this issue. The GAO therefore recommended that the Under Secretary of Defense for Acquisition and Sustainment “ensure that DOD’s planned guidebook on IP clarifies how DOD personnel can pursue detailed manufacturing or process data.” The report indicates that the DOD concurred with this recommendation and stated that “clarifying guidance” would be added to its IP Guidebook to be published in the first quarter of calendar year 2022.

This has been the Dnumber of years. See Postscript II: Obtaining More Rights in Technical Data aware, Postscript: Obtaining More Rights in Technical Daoftware, Pre-ightr: An Emerging Technique, Postscritellectual Property Rights, Intellectual Property Stratof Defense Guidance, 28 NCRObtaining More Rights in Technical Data and Computer Software: A Steady Erosion of Contractor Rights, Unfortunately, the report does not contain any information on recent use of solicitation provisions in develts asking offerors to give the agency some sort of Government purpose license rights to DMPD or to propose some other scheme to reduce the costs of sustainment of the system. Thus, all we have is fragmentary evidence of whether competitive pressure will achieve the goal of permitting competitive procurement during sustainment.

The Intellectual Property Cadre

The other major issue addressed in the GAO Report is the progress the DOshing the IP cadre called for by § 802 of the National Defense Authorization Act for Fiscal Year 2018, The report indicates that the cadre consists of 5 people—one permanent position and four temporarat the department intends to supplement that with cadres in each service. The report discusses the current status of the cadre in considerable detail and concludes with the following “key takeaways:”

DOD organizations are working to meet their assigned IP responsibilities. However, DOD has not fully addressed how the IP Cadre—DOD’s new group of specialized experts—will fulfill all of its responsibilities.

The IP Cadre faces uncertainty in these areas:

• : DOD currently plans to provide the Director of the IP Cadre and his team in the Office

Funding and staffing

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of the Secretary of Defense (OSD) with funding for five positions through fiscal year 2023. IP Cadre members told us the temporary positions were a disincentive during the hiring process and could present future staffing obstacles.

• : The members of the IP Cadre at OSD expect to tap into a larger pool of IP experts across t program offices by helping them develop IP strategies and negotiate with contractors, among other things. However, DOD has not yet detailed how the Director of the IP Cadre and the OSD team will work with these other experts.

Program support

DOD to suppor

• : DOD officials said the department lacks sufficient expertise in two key areas—IP valuation ing its worth) and financial analysis. DOD is currently conducting a pilot project to study valuation strategies. However, DOD officials said more work is needed to provide this expertise.

Expertise

(determin

Determining the IP Cadre’s staffing and resource needs will help DOD better position the IP Cadre for success.

One might infer from the tenor of the GAO discussion that DOD officials are not fully invested in this means of solving their technical data problem. Yet they concurred with the GAO recommendation that the Secretary of Defense “determine the collaboration, staffing, and resources needed, both within the Office of the Secretary of Defense and across the components, to execute DOD’s proposed federated approach for the IP Cadre.” In concurring, the DOD stated that it would stick with the current situation until July 1, 2023, when it will reassess whether more or permanent staffing of the cadre is advisable. We take that to mean that these DOD officials regard the cadre as a pilot program that has to prove its worth in order to become a permanent part of the solution to the technical data problem.

Training

The balance of the report deals with the perceived need to train a lot of acquisition professionals on the intricacies of technical data policy and practice. This is a matter of coordination between the chairman of the IP cadre and the Defense Acquisition University. The GAO report describes the current state of training as follows:

DAU developed a 5-year strategic plan for improving IP training after a comprehensive review of its IP and Data Rights courses and training materials, and based upon recommendations from IP Cadre staff and other DOD stakeholders. To implement parts of that plan, DAU has undertaken several efforts. For example, DAU introduced a foundational IP credential in September 2020, based on seven existing IP training courses. The credential is intended to provide learners with a general understanding of a range of IP topics. DAU is currently in the process of updating those IP courses to reflect legislative and policy changes from the past 5 years. The DAU IP Learning Director told us DAU tentatively plans to complete those updates by June 2022. DAU also plans to develop topical IP credentials and other IP training materials. Additionally, DAU created an IP community of practice web portal that visitors can use to identify DAU’s IP-related training courses. This web

portal serves as one of the OSD IP Cadre’s primary conduits for disseminating IP resources. For example, we found that as of August 2021, the portal contained over 40 documents, including recent IP-related policies, a collection of IP and data rights best practices, templates, and videos.

The strategic plan also includes more than 60 other activities related to IP training. Proposed activities include creating or updating specific IP training courses and collaborating with industry groups to develop IP-related learning resources. This aligns with our discussions with the IP Cadre, officials within the military departments, and representatives from industry groups, who identified a number of areas where additional training could be helpful. For example, officials from the OSD IP Cadre and military departments told us that DOD personnel responsible for activities across the acquisition life cycle would benefit from training tailored to their roles.

[Footnotes omitted.]

This sounds as if the DOD is embarked on the fool’s errand of training all members of weapon system program teams on the intricacies of technical data policy and practice. Yet the report contains a caveat indicating that DAU officials are skeptical:

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However, DAU officials told us that DAU’s ability to execute all the potential activities, including creating or

updating courses that it identified in its strategic plan, is limited by resource constraints. DAU’s strategic plan identifies seven priority issue areas, which DAU plans to address through December 2022. However, DAU has not identified which activities it will fund after that time frame—i.e., from January 2023 through December 2025, (the end date for the strategic plan). The DAU Learning Director for Intellectual Property told us DAU has not prioritized activities for fiscal year 2023 and beyond because the OSD IP Cadre has not yet identified which activities DAU should prioritize during that period.

Nonetheless, the GAO report contains the following recommendations to which the DOD concurred:

The Assistant Secretary of Defense for Acquisition should ensure that the Director of the IP Cadre collaborates with the President of DAU to prioritize IP-related tasks that DAU should undertake between 2023 through 2025.

The Assistant Secretary of Defense for Acquisition should ensure that the Director of the IP Cadre develops additional guidance to help component heads and [Directors of Acquisition Career Management] identify the DOD personnel in key career fields that would benefit most from receiving IP training and credentials.

We have never believed it was possible to train the entire workforce and this would indicate that it isn’t going to happen in the near future. The DOD would be far better off quickly to create a fully functioning cadre of experts and make them available to each program office for as long as it takes to structure its technical data strategy. The current situation sounds like a little bit of cadre and a little bit of training folks in the program offices—resulting in a little bit of effectiveness and a lot of confusion with which industry will have to deal.

Required Reading

The GAO report also lays out the last decade’s congressional mandates and the DOD implementation in the works. Thus, it is required reading for keeping up with this evolving area. The GAO has done a real service in thoroughly documenting where we are as the DOD struggles to reduce the costs of sustainment of weapon systems. There is no more challenging aspect of the Government procurement process than trying to balance the needs of industry to protect its intellectual property with the needs of the military services to minimize the costs of operating and maintaining their weapon systems. RCN

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