Skip to the main content.
Free Case Review
BLOGS & LEGAL INSIGHTS:
BUSINESS LAW
Hero-Split-Right
CONSUMER LAW

Hero-Split-Left

 

WEBINARS

green lock security thumb

green lock security thumb

 

VIDEO LIBRARY

green lock security thumb

green lock security thumb

 

ADDITIONAL RESOURCES

5 min read

Funding DOD Innovation: Understanding Technology Investment Agreements

 
A Technology Investment Agreement (TIA) is used by the Department of Defense (DOD) to stimulate research and development. The ultimate goal is to foster the best technologies for future defense needs. A DOD component enters into a TIA with a non-federal party. Per the DOD policy, the parties must include one or more for-profit firms that will be involved in the research performance or the commercial application of the research results. TIA encourages participation by commercial firms in defense research. It does this by reducing barriers faced by the firms and promoting new relationships among performers in the defense and commercial sectors interested and active in particular technologies and industrial bases. As a result, commercial sector firms are more willing to engage in research relevant to national defense. In turn, the DOD benefits by accessing the broadest possible technology and industrial base. Additionally, it has access to the latest advancements in particular technologies of interest and quicker, more affordable availability.
 
A TIA is not a “contract” within the definition of the term in the Federal Acquisition Regulation (FAR). Also, the agreement recipient does not receive fees or profits. Thus, a TIA is not subject to the FAR or the Defense FAR Supplement (DFARS), including data rights clauses that apply to procurement contracts.   
 
Since TIA recipients engage in technology development and investment, it is natural to expect that much intellectual property (IP) would result from such activities. IP is one of the most valuable assets that the recipient can gain from participating in a TIA. Thus, being free from the provisions of the FAR and DFARS that are mandatory or applicable to contracts, the parties can negotiate the allocation of rights in technical data and/or software developed during the performance of the TIA in ways that they believe best accommodate and encourage the commercial sector entity to participate in the program as well as meet Government’s needs.  
 
A significant decision was rendered in July 2018 by the Armed Services Board of Contract Appeals (ASBCA) regarding the respective rights of the Government and the TIA recipient in software developed by the recipient with costs charged to TIAs. The TIAs were awarded pursuant to 10 USC §2358 “Research and development projects” (now 10 U.S.C.§4001). In this ASBCA case, the fact that a TIA is not a “contract” according to the definition of the term in the FAR proved crucial. 
 
ASBCA No. 60373 was decided on July 17, 2018. It concerned a procurement contract and a pair of TIAs between the U.S. Army and the Boeing Company. The procurement contract required Boeing to deliver, as a part of Apache aircraft, certain software developed by Boeing under the TIAs. A specially-negotiated clause to address the license rights for software developed under the TIAs was not in the contract. However, it did have DFARS 252.227-7014, the standard DOD provision governing rights in noncommercial computer software delivered under the contract. In addition, each of the TIAs (referred to as TIA1 and TIA2 for purposes of this blog) included an explicit statement and assurance by the Agreement Officer that it was not a procurement contract. The Government contributed close to $9 million to the TIA1 effort of developing software for the Apache helicopter, called the “Warfighter’s Associate,” while Boeing contributed no funds. For TIA2, the Government contributed close to $12 million. Boeing contributed the rest of the funding needed to develop embedded mission avionics processing architecture for application to combat helicopters and tactical unmanned air vehicles. Each of these TIAs had provisions addressing deliverables to the Government. This included some specified software items under TIA1 and the Government’s rights to the software. TIA2 had no software deliverables.
 
Boeing delivered certain software under the aforementioned procurement contract, with portions of the software marked with restricted rights. Boeing asserted that those portions were developed exclusively at private expense pursuant to the TIAs mentioned above. The Government challenged the assertions. It claimed the Government was entitled to Government Purpose Rights (i.e., much broader in scope than restricted rights) based on the development of the software at mixed funding (i.e., Government funding and Boeing’s funding). Not being happy with Boeing’s response to the challenge, the Contracting Officer issued a final decision denying Boeing’s claim of restricted rights based on software development exclusively at private expense. Boeing appealed to the ASBCA and filed a motion for partial summary judgment. 
 
The Board needed to answer the following question presented by the motion: Does development with costs charged to a TIA constitute development at private expense according to DFARS 252.227-7014(a)(8)? DFARS 252.227-7014(a)(8), included in the procurement contract under which Boeing delivered the software in question to the Government, defines “[D]eveloped exclusively at private expense” as “development was accomplished entirely with costs charged to indirect cost pools, costs not allocated to a government contract, or any combination thereof.”  
 
The Board considered development under a contract and development under a TIA. It concluded that any costs charged to a TIA could not be said to have been allocated to a government contract since a TIA is not a contract. Accordingly, any software developed at costs charged to a TIA cannot have been developed at costs allocated to a government contract. Thus, the funding of the TIAs for the development of software satisfied the definition of “developed exclusively at private expense” at DFARS 252.227-7014(a)(8). Accordingly, the Board granted Boeing’s motion for partial summary judgment. It held that, as a matter of law, software developed with costs charged solely to the TIAs is developed exclusively at private expense. It rejected the Government’s argument that the fact that the Government funded a part of the cost of TIA2 and the entirety of the cost of TIA1 meant that the software development could not have been accomplished exclusively at private expense. The Government equated “private expense” with non-Governmental funding. The Board found this argument to be irrelevant to the question.
 
Declaring that contract interpretation is a matter of law and applying the plain language rule of interpretation, it held that to the extent Boeing developed software with costs charged to the TIAs, the software was developed exclusively at private expense within the meaning of DFARS 252.227-7014(a)(8). It reasoned that the rights the Government is entitled to in software, under the DFARS clause, depended upon the cost of the software development being charged directly to a contract. It further reasoned that a TIA is not a procurement contract as the term “contract” is defined in the FAR. The Army filed a motion for reconsideration, which the Board denied in June 2020.
 
Even though technical data or software developed with costs charged to a TIA are deemed to have been developed at private expense for purposes of determining rights in them, this does not always and automatically mean that the Government is not entitled to any rights. Instead, it means that the developer is entitled to restrict how Government can use, reproduce, disclose, modify, display, etc., the technical data and the software deemed to have been developed at private expense. This holds despite the Government’s funding contributions (often substantial) toward the development effort under TIAs. Therefore, what rights the Government acquires in any particular piece of technical data or software developed under a TIA depends on the particular provisions the parties negotiate and include in the Agreement. 
 
When addressing data and software rights aspects in a TIA, the inclusion and application of the typical DFARS data rights and software rights clauses, or clauses largely mimicking them, can be tempting to the harried government personnel and the partner entity eager to begin its TIA, especially if they have prior experience with using the clauses and feel a level of comfort with them. However, an unthinking, automatic inclusion of the DFARS clauses based purely on convenience or experience with them in the context of procurement contracts can work to the disadvantage of the TIA recipient. 
 
Instead, the recipient should endeavor to negotiate bespoke provisions that best suit its needs and effectively protect its IP interests.

Contact Us