Magazine article National Defense

Defense Innovation Initiatives out of Sync

Magazine article National Defense

Defense Innovation Initiatives out of Sync

Article excerpt

In the first of four trips to Silicon Valley over the last year to advance his innovation agenda, Defense Secretary Ashton Carter assured his Stanford audience that DoD is a strong proponent of protecting intellectual property rights. However, this statement does not reflect actual policy on intellectual property, a reality widely understood, and the disconnect suggests this innovation outreach is likely in vain.

Defense acquisition policy is defined in statute, in regulation, in published guidelines, in training and in defense media--and most if not all of it is public. DoD's competition guidelines include a large section on intellectual property strategy which instructs government contracting officers to establish an IP strategy for the "full spectrum of IP and related issues," which it deems as a "critical mechanism to remove barriers to competition." In the month following Carter's first visit to Silicon Valley, then-chief acquisition officer for the Air Force Bill LaPlante wrote: "We cannot achieve our goals of developing, procuring and fielding adaptable and agile capabilities without our government program offices 'owning the technical baseline.'"

At the Reagan National Defense Forum, defense procurement chief Frank Kendall expressed the view that "industry uses IP as a weapon to gain competitive advantage."

Carter recognized in that first Silicon Valley speech that "IP is often the most important and valuable asset a company holds." Company valuation by investment bankers, stock market analysts and venture capitalists is in large part based on the company's intellectual property portfolio, and its ability to monetize it through new products and financial returns. DoD's own guidebook on intellectual property, written in 2001 understood that "a company's interest in protecting its IP from uncompensated exploitation is as important as a farmer's interest in protecting his or her seed corn."

The 2012 National Defense Authorization Act awarded the government new rights to data generated or used in performance of a contract and data required for segregation and reintegration of items into major programs--even for commercial items--plus other new rights. These new rights already in statute have been dormant since then subject to rulemaking which was finally introduced June 16. The prospect of these powerful new government rights going into effect has been unsettling in the defense industrial base and a warning to the non-traditional defense industrial base. However, the House version of the 2017 NDAA would walk back much of the potential threat of the 2012 statute, obviating the new proposed rule if it survives the legislative process. In the meantime, the "813 government industry advisory panel" created by the 2016 NDAA, is reviewing all DoD policy on intellectual property and data rights for potential legislative action.

The government reasons that control of intellectual property provides the ability to "level" the playing field and enable competition by removing the competitive advantage of the innovator. A closely related objective is government strategy to avoid sole-source suppliers or "vendor lock." Both of these strategies require the intellectual property of the innovator to be distributed to third parties in order to create competition and alternate sources of procurement. The logic of such policy, considering these two issues, is understandable given a process confined to contracting alone. But it is a strategy that fails to understand the chilling effect such policies have on potential innovators considering a business case on where to invest and on whose problems to solve. The Defense Business Board captured the disconnect between objective and policy by concluding that "current IP rules crush industry upside potential" and that DoD process "destroys competitive advantage that should result from investment in innovation."

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Other risks potential innovators must allow for in their decision making are government strategies to reverse engineer parts, components and software, and partnerships with the government that can result in their technology being classified under the International Traffic in Arms Regulation. …

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