ASDEFCON - Defence Takes a New Approach
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The Australian Standard for Defence Contracting (“ASDEFCON”) suite of tendering and contracting templates are used by the Department of Defence (“Defence”) for the acquisition of goods and services. Each ASDEFCON template meets a different procurement need and profile, depending on the size, complexity and nature of the procurement activity.
The ASDEFCON Technical Data / Intellectual Property (TD/IP) framework is a key Defence reform initiative to improve and streamline Defence’s procurement processes. The framework seeks to achieve a more appropriate balance between the TD/IP needs of Defence and the protection of industry's interests, as well as reflecting the fundamental importance of TD as a key enabler of capability outcomes.
In this article we set-out the categories of material, the ownership and licensing regime and attempt to distil complex topics into a brief description of the regime. The intent is to capture the essence of the changes although many subtleties and controversial aspects are not captured in this overview.
The ASDEFCON TD / IP framework is initially being published as part of the update to ASDEFCON (Strategic Materiel) V3.1 and will be progressively incorporated into the remaining templates. References within this article are to the ASDEFCON (Strategic Materiel) V3.1 Part 2 Draft Conditions of Contract (“Contract”).
Defence and Industry Intellectual Property Working Group
The new ASDEFCON TD/IP framework was created following the formation of a working group comprising Defence and industry.
Defence industry has previously raised a number of issues on the approach taken in the ASDEFCON suite of contracting templates in relation to Intellectual Property and Technical Data. Defence has acknowledged continuing difficulties with the Intellectual Property and Technical Data provisions in the ASDEFCON templates and formed the view that they should be reviewed and recast, with a much greater focus on Technical Data.
As a result, the Defence and Industry Intellectual Property Working Group was formed to provide a forum in which representatives from defence industry and Defence will explore key TD/IP issues and then develop practical solutions for their treatment in the ASDEFCON templates. An improved baseline ASDEFCON ‘template’ position is expected to facilitate an improved negotiation process and outcomes.
Old Approach
Defence found that the former ASDEFCON approach tended to focus on intellectual property issues to the detriment of commercial issues and technical data. The resulting IP licence was overly broad and a complex mix of background, foreground and third party IP. The following issues were identified:
Insufficient focus on TD as capability enabler
Overly board IP enabler
Inadequately developed IP plans
Practical complexity in identifying/managing IP categories
Inadequate recognition of Software
Uncertainty regarding Third Party IP
The following diagram illustrates (within the dotted red line) that the focus on IP under the former approach meant that all forms of IP tended to be captured and in many instances the various items of IP were muddled between the foreground, background and third party IP categorisation:
source: ASDEFCON Technical Data and Intellectual Property Framework presentation, Department of Defence.
New Approach
The objectives of the new approach are to:
Balance Defence and industry interests
Elevate the importance of technical data
Improve negotiation outcomes
Improve intellectual property / technical date management practices.
The new approach moves away from the categorising of IP as foreground, background and third party IP and rights based on those IP categories to the categorising of TD and Software and rights based on those TD and Software Categories.
Firstly, this is achieved through the adoption within the Contract of key concepts of technical data, software and contract material:
source: ASDEFCON Technical Data and Intellectual Property Framework presentation, Department of Defence
The IP provisions within the Contract recognise that TD and Software enable outcomes with the focus on that TD and software that is necessary to achieve the outcome and consequently the IP rights for that TD and Software. This is a similar approach to that of the US Department of Defense.
The Contract now refers to a number of different categories of TD and Software at clauses 5.2 to 5.6.
Source: ASDEFCON Technical Data and Intellectual Property Commercial Handbook, Early exposure draft Version 0.1, 9 April 2018, Department of Defence
These mutually exclusive categories were developed to assist in the determination of the licensing approach that is most suitable to a particular item of TD or Software.
There are 5 default licences that apply to TD and software in addition to a category of material called Contract Material (at clause 5.7) which has different licensing rights.
source: ASDEFCON Technical Data and Intellectual Property Framework presentation, Department of Defence
Effect of changes
The former broad and vague IP concepts are illustrated in the diagram below with the mixed rights attributable to each shown using source code, COTS software and maintenance manual as examples. The new approach is intended to provide clearer delineation between the categories.
source: ASDEFCON Technical Data and Intellectual Property Framework presentation, Department of Defence.
The diagram below illustrates the new focus is on the TD and Software that is Delivered under the Contract.
source: ASDEFCON Technical Data and Intellectual Property Framework presentation, Department of Defence.
Ownership
The licences complement a revised approach to ownership. The Contract does not seek to change the ownership of any existing IP. For new IP (i.e. IP created under the Contract or a Subcontract), Defence’s default position, reflected in clause 5.1, is that the Contractor will be the owner.
If the Commonwealth requires ownership of IP in specific items of TD or Software because a licence of the TD or Software granted to the Commonwealth would be insufficient to protect the Commonwealth's interests, under clause 5.1.3, an exception exists to enable the Commonwealth to own newly created IP in specific items of TD and Software that are identified. The Commonwealth may require ownership of this TD and Software for reasons relating to national security and/or strategic interests associated with the program or a Capability's whole of life requirements.
Right to Use
Ownership and licensing is coupled with the key concepts within the Contract of right to “Use” and right to sublicence.
Right to use is a broad licence to use, reproduce, modify TD/Software for Defence Purposes:
“Use” means, in relation to a licence of any TD, Software or Contract Material granted to a licensee, to:
(a) use, reproduce, adapt and modify the TD, Software or Contract Material in accordance with the licence; and
(b) disclose, transmit and communicate the TD, Software or Contract Material:
(i) to the licensee's employees, officers and agents; and
(ii) to a sublicensee under a sublicence granted in accordance with the licence.
Within clauses 5.2.2.(a), 5.3.2(a) and 5.7.1(a), the right to “Use” is coupled with the term, “for any Defence Purpose”:
"Defence Purpose" means a purpose related to any of the following:
a. the defence and defence interests of Australia;
b. the national security of Australia;
c. the provision of aid or assistance in respect of an emergency or
disaster (whether natural or otherwise); and
d. peacekeeping or peace enforcement activities
This broad definition affords Defence a licence for a wide scope of matters and can be contrasted to a licence narrower in scope where the “Use” would be confined to the performance of a contract. For some categories, the licence for Defence purposes is subject to restrictions (e.g. High Sensitive TD/Software” while for the Technical Data/Software category, there are no restrictions on “Defence Purposes”).
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TDSR
While the provisions relating to the IP ownership and licensing for the TD, Software and Contract Material is contained within the Contract, these provisions may be modified by the parties through the Technical Data and Software Rights (TDSR) Schedule.
The TDSR Schedule is not an exhaustive list of all TD or Software to be provided under the Contract or a Subcontract. The Approved TD List (forming part of the Master TD Index) and the Approved Software List will list all relevant TD and Software. The TDSR Schedule will only list specific TD or Software where a restriction applies to the Defence's rights under the Contract.
The Procurement Process
Tenderers must provide a draft TDSR Schedule as part of their tender setting out the restrictions required by the tenderer in any resultant Contract.
Significant onus is paced on a tenderer to categorise TD or Software and the restrictions that the Tenderer will place on Defence’s use of the TD or Software or a restriction on the grant of a Sublicence for "other Defence Purposes". For example, a tenderer will, in the case of Highly Sensitive TD and Highly Sensitive Software, need to:
describe all items of Highly Sensitive TD and Highly Sensitive Software,
identify any restrictions on the Commonwealth’s rights to Use and Sublicense the listed TD or Software and
specify the reasons in support of categorising the TD or Software as Highly Sensitive TD or Highly Sensitive Software and the restrictions being proposed within the draft Technical Data and Software Rights (TDSR) Schedule.
Key points for contractors
The method of categorising TD and Software and ascribing IP rights based on those TD and Software Categories is an innovative measure to address the muddled categorising of IP as foreground, background and third party IP and rights based on those IP categories traditionally used in contracts dealing with IP. This may provide some benefits to Defence in the form of efficiencies during the contract formation and contract management stages and more broadly in dealing with IP and the rights Defence hold to use and otherwise deal with the IP.
The challenge for defence industry is in the categorisation of its own TD and Software and to present this within the draft TDSR in a tender submission. This will require contractors to examine and categorise its TD and Software on a different footing to that currently used with Defence contracts. There is also a requirement arising to develop and maintain standard wording for use within a Defence tender submission for existing material and any newly developed material.
The danger for contractors is the failure to adequately identify and label TD and Software within a tender submission. This could result in competitors having access to IP and the Government having overly broad rights to “Use” this IP beyond what the contractor envisaged. An overly cautious approach may conversely mean that a contractor will be unsuccessful in a tender submission if Defence considers that the restrictions are too great for its purposes.
We advise that defence industry begins the process of analysing and categorising its products to ascertain which ASDEFCON category it should be categorised and appropriate restrictions. This will require the development of wording and maintenance of templates for this purpose.
Please contact Opportuna Legal for further advice in relation to ASDEFCON and procurement contracts with the Department of Defence.
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Disclaimer
Opportuna Legal communications are intended to provide commentary and general information. They should not be relied upon as legal advice. If you would like further information in relation to this matter or other legal matters please contact Opportuna Legal.
