Protecting IP: Key tips for space startups in US government contracts

The space industry is entering a transformative era, fueled by unprecedented levels of private investment and new business models with abundant data from space. In Q2 2024 alone, $2.1 billion in private capital was raised for space infrastructure projects ranging from satellite constellations to spaceports and $1.8 billion for space applications such as those that leverage AI for geospatial intelligence. See Space Capital Q2 Report.

The US government also continues to play an active role in the industry, contributing to space-focused companies with substantial budgets throughout their lifecycle for research and development, testing and prototyping, and procuring products and services to fulfill both commercial and national security missions.

Increased funding - whether from the private or public sector - is accelerating innovation and the development of intellectual property and valuable data.

When considering government funding, grants or agreements, new and nontraditional government contractors building the space economy should be mindful of clauses that could have profound implications for their IP and, as a result, their company's valuation.

This article outlines key considerations that space companies need to know about protecting IP when partnering with the US government, directly or indirectly, with a focus on NASA and the US Space Force (USSF).

Foundational Concepts

In grants and agreements, the US government generally uses a different IP framework built around "data rights" on one hand and patents on the other. In this alternate framework, "data rights" refers to rights to use "technical data" and "computer software" in what is essentially a mix of copyrights and trade secrets protections. While inventions or "subject inventions" and resulting patent protections remain conceptually consistent.

The US government is required to abide by copyright law and to protect trade secrets, but it does so under established (though different) legal and regulatory frameworks. As a result, government and industry can appear to be operating from alternate, parallel universes. See 28 U.S.C. §1498(b) and 18 U.S.C.A. §1905.

Nontraditional entrants should recognize that different legal and regulatory frameworks apply depending on whether the agreement is a grant, cooperative agreement, 'other transaction authority' agreement, or a procurement contract. To even further complicate, there are often agency-specific regulations, contract clauses, and guidance that apply based on the funding agency.

Rights to Inventions

Small business concerns partnering with USSF can elect to retain ownership rights to inventions first conceived or reduced to practice during the performance of a government grant, agreement, or contract. The US government, in turn, receives a broad, unrestricted license to use that "subject invention.". See 48 C.F.R. 52.227-11 with DoD-specific reporting requirements for subject inventions in 48 C.F.R. 252.227-7039. It is important to understand the circumstances under which USSF could demand assignment of title to the subject invention or exercise 'march in' rights (i.e., requiring a license of the invention to third parties to ensure the invention developed with federal funds meets several public policy goals).  

NASA, however, has its own statutory authority with default ownership rights to inventions created under or in connection with its contracts. See 51 U.S.C. 20135.

Nevertheless, there is a regulatory framework applicable to NASA for seeking a waiver. See 14 C.F.R. §§ 1245.100-119.

Examples of Use and Disclosure Rights

1.       NASA and USSF Small Business Innovation Programs

Federal agencies with external R&D budgets of greater than $100 million are required to set aside a certain percentage of that funding to encourage the commercialization of innovation by small businesses.

NASA and USSF (through its innovation arm SpaceWerx) have active Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.  

The US government's use and disclosure rights for technical data and computer software generated under the SBIR/STTR program are governed by 48 C.F.R. § 52.227-20, which applies to civilian agencies such as NASA, and 48 C.F.R. § 252.227-7018, which applies to DoD and the USSF. Under these regulations, the US government has "government purpose rights" in SBIR data and restricts disclosure outside of the government during the protection period, which is extendable for a four- and a five-year-period, respectively.

Note that the 2019 SBIR/STTR Policy Directive includes new definitions and an expanded protection period for the newly defined SBIR/STTR Data to 20 years from the date of award. Not wanting to wait for the SBIR regulations to be updated, in 2021 NASA implemented the 20-year SBIR data protection period with a class deviation for its awards.

2.       Other Transaction Authority Agreements

Both NASA and USSF (under DoD) have statutory authorities under 51 U.S.C. § 20113(e) and 10 U.S.C. §, respectively, to streamline transactions outside of the regulatory requirements that apply to grants, cooperative agreements, and procurement contracts. These are referred to as Space Act Agreements (SAAs) and OT Agreements (OTAs) for NASA and USSF, respectively.

As noted above, NASA typically is granted ownership rights to patentable inventions developed under a contract. However, there are scenarios where NASA would not have default ownership, such as with Reimbursable SAAs, where NASA's costs are reimbursed by the agreement partner.

There are different SAA use and disclosure clauses based on the IP scenarios, including ones that address the handling of Proprietary Data (both first and third party) and contemplate separate Software Usage Agreements. Under DoD, OT agreements cover research, prototype, and production and allow for flexibility and alignment to commercial practices. While there are no mandated IP clauses, OT agreements often incorporate the data rights clauses from the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS).

3.       Procurement Regulations

The data rights clauses in procurement contracts will vary depending on the nature of the procurement-- whether it involves a commercial product or service, preexisting work, or the production of technical data and software.

Fortunately, the US government's policy on commercial computer software is to generally expect "only the rights specified in the license under which the commercial computer software or commercial computer software documentation was obtained." See 48 C.F.R. 227.7202-3.

Space companies should note that NASA and USSF could obtain unlimited rights in certain classes of data even if commercial and developed at private expense. See 48 C.F.R. § 27.404-1 and 48 C.F.R. § 252.227-7015.

Looking ahead, space companies should anticipate changes to the DFARS for modular open systems approach and the associated wide-ranging changes to IP rights. As federal agencies implement new requirements on the use of AI, space companies that deliver AI solutions to NASA or USSF should anticipate new contract clauses granting rights to data generated from AI models.

Conclusion

Partnerships across the innovation lifecycle with NASA and the US Space Force will continue to be a space economy driver. Space companies should be aware of how their IP rights are impacted by these contracts.