Key Takeaways

  • Intellectual property (IP) in government contracts includes patents, copyrights, technical data, and software developed or used under federal agreements.
  • Ownership and use rights depend on funding sources, contract clauses, and applicable federal regulations such as the FAR and DFARS.
  • The government usually receives a license to use IP created under a contract but does not automatically gain full ownership.
  • Contractors must properly mark and manage proprietary data to retain control over their IP.
  • The Department of Defense (DoD) recently issued an IP Guidebook to help agencies and contractors navigate data rights, licensing, and technology transfer.
  • Early negotiation of IP clauses and documentation is crucial to avoid disputes and unintended disclosure.

Creating intellectual property in government contracts can lead to many very lucrative opportunities. Once you land a government contract, you have the chance to possibly become extremely successful and obtain additional contracts down the road. The government could also value your IP so much so that they license it from you.

Intellectual Property in Government Contracts: Overview

A federal government contract can be a significant source of money-making business for a private company, especially those engaging in new product and technology development.

The federal government is a big contributor to the creation of new technology and spends over $100 billion every year on contracts and grants with companies to create these processes and products.

Intellectual property is, in many cases, a company’s most important asset. It can take the form of trademarks, patents, and copyrights. It can also exist in a different, lesser-known form of proprietary data and trade secrets.

With regard to government contracts, this information can be incredibly valuable for the contractor because it can result in additional contracts to follow.

The right of exclusion, defined as the right to exclude anyone else, is dubbed as “one of the most essential sticks in the bundle of rights that are commonly characterized as property.”

“With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.”

With regard to Department of Defense contracts, the rights of any technical information that is furnished to the government by a subcontractor are governed by the provisions of the contract, but also the Defense Federal Acquisition Regulations Supplement, which are referenced in the contracts.

For those companies that are developing technology, getting a government contract can present a plethora of opportunities within a business. It also can be challenging when mitigating the possible risk of losing IP rights at the same time.

IP rights are typically determined by the contract clauses that are imposed by regulation when they are created and used as part of a government contract.

In some situations, the government can impose intellectual property terms that are different for every contract. Despite this, the government contract terms can create a large range of different outcomes when it comes to ownership and the use of the intellectual property after it is delivered to the government.

Because of this, the contractors need to place priority on understanding, reviewing, and negotiation of the terms of IP before any contracts are signed.

Once the contract is executed, the contractor needs to make sure that at least one person from their management or legal team knows the IP rules and ensures there is strict compliance throughout the performance of the contract.

The government rights often rely on if the contract involves:

  • A patent or a patentable subject
  • Copyrighted material
  • Computer software
  • Technical data

A contractor is typically allowed to keep the ownership of the technology they had a hand in developing or that they delivered in the scope of the federal contract. In return, the government will generally receive a non-exclusive license to utilize that intellectual property.

That license will be dependent on the type of technology, the source of the funding, and the outcome of any negotiations among all parties involved. While discussing those rights, all parties are often looking to balance competition in the promotion of technical innovation while also protecting intellectual property rights while also providing the public with the opportunity to use the technology that was created using federal money.

A contract is won by competitive advantage. Your competitive advantage will help create your IP. The IP can relate to a certain design, more effective processes, a great benefits and wage package, or a skilled set of managers and employees.

In order to retain your competitive advantage, you need to ensure you hold on to the confidentiality of whatever you are producing while also innovating new IP.

Understanding Ownership and License Rights

When negotiating intellectual property in government contracts, understanding ownership rights versus government license rights is essential. In most cases, contractors retain ownership of IP developed at private expense, while the government acquires specific license rights that allow it to use the technology for governmental purposes. These rights are defined under the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) frameworks.

The main types of government license rights include:

  • Unlimited Rights: The government can use, disclose, or distribute the IP without restriction—usually when the work is fully funded by the government.
  • Government Purpose Rights: The government can use the IP for any government purpose but cannot authorize others to use it for commercial purposes.
  • Limited or Restricted Rights: These apply to proprietary data or software developed at private expense, limiting the government’s use and disclosure of the IP.

To avoid unwanted disclosure, contractors must properly mark deliverables that include proprietary or restricted data. Failure to include appropriate markings could result in the government acquiring broader rights than intended.

Key Contract Clauses Affecting IP Rights

Specific clauses within the FAR (Part 27) and DFARS (Subpart 227) determine ownership and use rights. For example:

  • FAR 52.227-11 (Patent Rights – Ownership by the Contractor) outlines the contractor’s rights to inventions developed with federal funding.
  • DFARS 252.227-7013 (Rights in Technical Data – Noncommercial Items) governs the delivery and marking of technical data.
  • DFARS 252.227-7014 (Rights in Noncommercial Computer Software and Documentation) applies to software created under defense contracts.

Understanding these clauses allows both parties to negotiate clear terms on data deliverables, usage limits, and ownership status before contract award.

The DoD Intellectual Property Guidebook

In 2024, the Department of Defense (DoD) issued its updated Intellectual Property Guidebook for DoD Acquisition, designed to help contracting officers and contractors manage IP throughout the lifecycle of defense programs.Key principles from the Guidebook include:

  • Encouraging early IP planning during acquisition to prevent disputes later.
  • Promoting negotiated solutions that balance contractor innovation with government access.
  • Requiring comprehensive IP strategies as part of acquisition planning and proposal development.

This guidebook also emphasizes documenting IP decisions in a Contract Data Requirements List (CDRL) and maintaining clear communication between the government and contractors regarding technical data needs.

Protecting Proprietary Data and Trade Secrets

Protecting proprietary data is one of the most significant challenges in government contracting. Contractors should:

  • Clearly identify and label proprietary materials before submission.
  • Use nondisclosure agreements (NDAs) when sharing data with subcontractors or government personnel outside the contract’s scope.
  • Maintain strong internal compliance systems to ensure consistent application of marking and reporting requirements.

Failure to follow proper procedures could cause loss of trade secret protection or grant the government broader rights than intended. Contractors should also keep detailed records of development funding sources to establish whether data was produced at private or government expense.

Practical Tips for Contractors

To successfully navigate IP issues in federal procurement, contractors should:

  1. Review IP clauses early in the proposal stage.
  2. Negotiate clear data rights to avoid misunderstandings later.
  3. Document funding sources to determine whether deliverables were developed with private or government funds.
  4. Use appropriate legends and markings on all technical data.
  5. Train project managers and engineers on compliance with FAR/DFARS IP provisions.
  6. Consult experienced government contracts counsel before agreeing to any IP provisions that may affect ownership or commercialization

Frequently Asked Questions

1. Who owns intellectual property created under a government contract?

Generally, the contractor owns IP developed at private expense, while the government gains specific usage rights based on funding and contract terms.

2. What are government purpose rights?

They allow the government to use, reproduce, or disclose IP for governmental use but prevent the release of that IP for commercial purposes without the contractor’s permission.

3. What is the DoD Intellectual Property Guidebook?

It’s a resource published by the Department of Defense providing guidance for managing IP rights in defense acquisitions and fostering early IP planning.

4. How can contractors protect proprietary data?

By properly marking documents, maintaining detailed funding records, and using NDAs when necessary.

5. Why is IP negotiation important in government contracts?

Because IP clauses can determine long-term rights to inventions, software, and data, influencing a contractor’s ability to commercialize or reuse technology in future projects.

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