ARCHIVED Title to Intellectual Property Arising Under Crown Procurement Contracts

Background:

The revised policy on Title to Intellectual Property Arising
under Crown Procurement Contracts, sponsored by Industry
Canada, was approved by Treasury Board (TB) June 1, 2000. The
revised Policy, which supersedes the less well-elaborated 1991
Policy, realizes a Red Book commitment to strengthen the potential
for commercial exploitation by the private sector of intellectual
property (IP) developed under contract with the Federal Government.

Supply Policy Directorate (SPD) has been a member of the working
group that developed the new Intellectual Property (IP) Policy.
Our goal has been to ensure that the Policy will be implementable
and to incorporate in the Policy support for the approach Public
Works and Government Services Canada (PWGSC) took to implement
the 1991 Policy in contracts. SPD, together with Legal Services,
has drafted Model Clauses for IP to assist departments in revising
their contract terms and to ensure consistency with the revised
Policy. It is expected that the effect of the Policy revision on
Supply Operations common service organization function should be
minimal, as the most important changes are to the exceptions which
allow Crown ownership of IP. As with the 1991 Policy, the decision
on ownership is that of the client department.

The approach taken in 1991 was to recognize that departments'
primary interest in procurement is in supporting their operations,
that the Policy did not require that departments compromise their
operations in order to promote commercialization of IP and that
IP should be commercialized by the private sector. From this, we
concluded that we should aim to facilitate contractor ownership
while maintaining departments' ability to use the IP for their
own operations much as if the Crown had owned the IP. The methods
used were to make contractor ownership the default position in
the Research & Development General Conditions (DSS-MAS 9624)
and by writing IP terms that would provide the Crown with broad
rights to use the IP. By giving the Crown the right to use the
IP much as if the Crown owned the IP, it was hoped that reluctance
on the part of clients to allow the contractor to own the IP, based
on concern for their operations, would be reduced.

Policy

The new Policy is essentially the same as the old Policy (1991)
in that it maintains the presumption that IP is best commercialized
by the private sector, and that ownership by the private sector
is generally necessary to allow that commercialization. The new
Policy takes a much more rigorous approach than the old Policy.
While the old Policy effectively allows departments to claim ownership
of IP developed under contract whenever they wish to do so, the
new policy imposes a closed list of exceptions to contractor-owned
IP. A table comparing the exceptions allowing Crown-owned IP under
the 1991 and 2000 policies is attached at Appendix A. Under the
new Policy, a department wishing to own IP, under circumstances
that do not fall within one of the exceptions, will have to make
a TB submission to obtain approval.

The Treasury Board Policy can be viewed at:
http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/Contracting/ownprop_e.html

The Treasury Board Secretariat Contract Policy Notice can be viewed
at:
http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/ContPolNotices/cpn_00-2_e.html

The Implementation Guide (which includes the Model Clauses) for
the Treasury Board Policy can be viewed at:
http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/contracting/tipaucpc_ig_e.html

Implementation of the Policy

The new Policy is being implemented using a phased approach. All
ownership decisions taken on or after October 1, 2000, and all
Request for Proposals (RFPs) and contracts issued on or after December
31, 2000, must be in compliance with the new Policy. This phased
approach is to allow adequate time for training and orientation
for an effective implementation. It is recognized that some projects
with very long lead times may run into problems where the ownership
decision is made before October 1, 2000, but the contract is not
issued until on or after January 1, 2001. A department which has
selected Crown-owned IP under an exception to the 1991 Policy and
cannot justify the decision on the basis of the exceptions to the
2000 Policy will have to make a TB submission to cover the ownership
decision.

The new Policy requires that Departments collect information on
the use of exceptions allowing for Crown-owned IP. The IP report
will be an element of the existing TB contracting reports. The
Supply Systems Directorate of Supply Operations Service Branch
is working to prepare for implementation of the reporting requirement,
scheduled to begin January 1, 2001. The contracting officer will
be able to indicate whether the IP will be contractor-owned or
Crown-owned (and if so, under what exception) by making a choice
from a drop down list in the Automated Buyer Environment system.

Supply Manual:

The revisions to the Supply Manual are attached at Appendix B.
These revisions will be incorporated into the next Supply Manual
amendment, scheduled to be released in the first quarter of 2001.

Standard Acquisition Clauses and Conditions (SACC) Manual:

SPD and Legal Services are amending the SACC Manual to produce
new IP terms (General Conditions, Supplemental General Conditions
and clauses) that will allow contracting officers to continue doing
as they have been with a minimum of disruption, but incorporating
the experience that the Department have gained over the past 8
years. These revised IP terms will be incorporated into the next
SACC amendment, scheduled to be released in the first quarter of
2001.

NOTE: Modifications to a number of IP
clauses will appear in Amendment 00-2 of the SACC Manual, to be
released in December. These modifications are housekeeping changes
and are not the new IP terms referred to above.

Until then, contracting officers are to continue to use the existing
IP terms, including those for real property contracting. These
terms allow contracting officers to assemble contracts which are
consistent with the revised IP Policy. A concordance table of the
current IP terms and the Model Clauses is attached at Appendix
C. This concordance table is to aid contracting officers in dealing
with clients and in structuring contracts. As in any case in the
past, where a client department has a specific need not met by
the use of standard terms, advice from Legal Services should be
sought. The Model Clause language may be used as a basis for custom
terms in such cases.

To deal with requisitions where the client department has made
its IP ownership decision based on the revised 2000 IP Policy rather
than the 1991 Policy, a revised clause K3200T is attached at Appendix
D. Where the client department indicates a reason for Crown ownership
based on the 1991 Policy, the current version of K3200T in the
SACC Manual should be used.

APPENDIX A

APPENDIX B

Revisions to the Supply Manual

6.174 (xx/xx/xx) "Policy - Objectives and Underlying
Principles

"10. Like the 1991 policy, the revised policy aims to increase
commercialization of IP. It recognizes that commercial exploitation
of IP can contribute to economic growth and job creation by having
contractors own the IP they create in the course of their work
under Crown procurement contracts, and it also recognizes that
there will be instances where the Crown will need to retain the
IP in order to act in the broader public interest.

11. It further recognizes that the objective of commercializing
IP from government contracts takes place within the framework
of the government's Contracting Policy and its provisions with
respect to socio-economic objectives.

12. Most importantly, the revised policy recognizes that the
primary objective of Crown procurement contracts is for the Crown
to receive the deliverables contracted for, and to be able to
use those deliverables and any arising IP for Government of Canada
activities."

(Derived from TBS Contracting Policy Notice
2000-2,
July 17, 2000)

Intellectual property (IP) is anything resulting from a contract
which can be copyrighted, trademarked, patented, licensed, etc.
Potentially, IP can result from any contract. The likelihood for
IP is much greater where the goal of the contract is something
new, or might incorporate new processes. IP considerations are
most relevant to research and development contracts, software development,
or where the production of new written material occurs.

The government policy of allowing the contractor to retain the
rights to IP generated under a Crown contract is designed to promote
the development of new ideas, under the belief that the private
sector has a greater capacity to commercialize and benefit from
the IP. The Crown will not arbitrarily refuse to allow a contractor
to retain the rights to IP.

The client department must decide to what extent IP rights are
to be retained by the Crown, and PWGSC plays no part in this determination.
However, the contracting officer must consult with the client department
in the case of research and development or software development
procurements, to determine the client department's position. Contracting
officers may wish to discuss their needs with client departments
to ensure that client departments are aware of the extent to which
we can obtain for them the rights they need to use the IP created
under their contract whether the Crown or Contractor owns the IP.
Subject to market conditions (which will also affect the ownership
terms that may be achieved) PWGSC contract terms are designed with
the goal of ensuring that even where the contractor owns the IP
this does not affect the client department's ability to use the
IP, with the exception of commercialization of the IP by the Crown.

Client department may deal with IP rights in several ways:

Research and Development (R&D) contracts

• Contractor to retain ownership of IP
• Crown to retain ownership of IP

Goods contract with associated R&D

• Contractor to retain ownership of IP
• Crown to retain ownership of IP

Goods contract with no R&D expected

• Crown to retain copyright
• Contractor to retain all IP, including copyright

Services contract with no R&D expected

• Crown to retain copyright
• Contractor to retain all IP, including copyright

Intellectual Property

7.070 (xx/xx/xx) The bid solicitation should make clear to potential
bidders the ownership of any IP rights, as determined by the client
department. SACC Manual clauses may be used in conjunction with
the General Conditions and Supplemental General Conditions to meet
the client department's requirement (re: Annex 7.5). In the case
of low-dollar value procurements which use General Conditions DSS-MAS
9329 or DSS-MAS 9628, the contract would generally be silent on
IP, with the usual result being that the contractor would own any
IP they develop.

7.570 (xx/xx/xx) Unless there has been a change in the client
department's IP position from the bid solicitation, contracting
officers must use, in the contract, the identical clauses used
in the bid solicitation, with the exception of clause K3200T,
which is needed only at the bid solicitation stage (re:
Annex 7.5).

7.575 (xx/xx/xx) Starting January 1, 2001, each department will
have to maintain a record of all contracts valued over the threshold
for solicitation of bids as set out in the Government Contracting
Regulations. Each department will have to specify the contracts
that are contractor-owned IP and that are Crown-owned IP and the
exception(s) invoked (the same reason used in clause K3200T). The
report will be rolled up with the TB report on contracting.

Annex 7.5: INTELLECTUAL PROPERTY CLAUSES

An amendment to this Annex will be released at the same time as
the new clauses are released.

APPENDIX C

Concordance Table between Existing IP Terms and Model Clauses

1A: Research and Development Contracts

Client Decision: Contractor Owns

1B: Research and Development Contracts

Client Decision: Crown Owns

2A: Goods Contract with associated Research and Development 

Client Decision: Contractor Owns

2B: Goods Contract with associated Research and Development

Client Decision: Crown Owns

3A: Goods Contract with no Research and Development expected

Client Decision: Contractor Owns, including Copyright

Note: The above terms provide Canada with ownership
of Foreground IP that is subject to Copyright, other than software
and its associated documentation. Contract is silent on other IP.

3B: Goods Contract with no Research and Development expected

Client Decision: Crown Owns (including Copyright)

Note: The above terms provide Canada with ownership
of Foreground IP that is subject to Copyright, other than software
and its associated documentation. Contract is silent on other IP.

4A: Services Contract with no Research and Development
expected

Client Decision: Contractor Owns, including Copyright

Note: The above terms provide Canada with ownership
of Foreground IP that is subject to Copyright, other than software
and its associated documentation. Contract is silent on other IP

4B: Services Contract with no Research and Development
expected

Client Decision: Crown Owns, including Copyright

Note: The above terms provide Canada with ownership
of Foreground IP that is subject to Copyright, other than software
and its associated documentation. Contract is silent on other IP.

APPENDIX D

K3200T (xx/xx/xx)   Basis for Canada's
Ownership of Intellectual Property

Remarks: Use the following clause in all
bid solicitations in which the client department has determined
that Canada will own any intellectual property arising from the
work under the contract. The contracting officer will insert
the name of the client department or agency and one or more of
the following grounds for Canada ownership, as supplied by the
client department or agency(do not include the exception
number):

(6.1) national security;

(6.2) statutes, regulations or prior obligations of Canada to
a third party or parties preclude Contractor ownership of the Intellectual
Property Rights in Foreground Information;

(6.3) the Contractor has declared in writing that the Contractor
is not interested in owning the Intellectual Property Rights in
Foreground Information;

(6.4.1) the main purpose of the Contract, or of the deliverables
contracted for, is to generate knowledge and information for public
dissemination;

(6.4.2) the main purpose of the Contract, or of the deliverables
contracted for, is to augment an existing body of Canada's Background
Information rights as a prerequisite to their planned transfer
to the private sector, through licensing or assignment of ownership
to another person, for the purposes of commercial exploitation;

(6.4.3) the main purpose of the Contract, or of the deliverables
contracted for, is to deliver a component or subsystem that will
be incorporated into a complete system at a later date, as a prerequisite
to the planned transfer of the complete system to the private sector,
through licensing or assignment of ownership, for the purposes
of commercial exploitation;

(6.5) Canada has opted to own the Intellectual Property Rights
in Foreground Information which consists of material subject to
copyright except computer software or any documentation pertaining
to such software.

Text

The _____ has determined that any intellectual property arising
from the performance of the Work under the Contract will vest in
Canada, on the following grounds: _____.