New guidelines on technology IP set to move ownership from government hands

In this article senior associate Heidi Leslie and summer clerk Luke Hayward review the State Services Commission's new guidelines for the Treatment of Intellectual Property Rights in ICT Contracts.

New guidelines just released on who owns the intellectual property rights around government technology projects break new ground.

They reverse the previous unofficial default position over ownership of IP, bringing New Zealand into line with other countries such as Australia - and have the overarching aim of freeing up government-generated technology for commercialisation.

The State Services Commission has released the Guidelines for Treatment of Intellectual Property Rights in ICT Contracts to assist government and public sector agencies better align their positions on intellectual property and to understand the key drivers behind ownership and licensing positions.

Up until now the unofficial position has been the government body that commissioned the work should be the owner of the IP, on the theory that ownership would give the government greater control, flexibility, potential future cost-savings and future proofing.

The new guidelines endeavour to reverse this stance so that the supplier should own the new IP and grant licences to its public sector customers.

The rationale behind this approach is that exploiting newly created IP is not generally part of the core business of state sector entities. By holding onto the ownership of IP they may stifle commercialisation opportunities that could benefit New Zealand's economic development.

As the guidelines point out, the "government is often a major player in the creation of new intellectual property, but rarely seeks to commercialise it". The change in IP ownership would help create opportunities for the business sector which has the commercial profit motive critical to successful commercialisation.

Essentially the new guidelines recommend three options for the treatment of IP in ICT contracts:

1. the government body owns the IP;

2. the government body owns the IP but grants a licence back to the supplier; or

3. the supplier owns the IP and grants a licence to the government body commissioning the work and all other government agencies.

The third option is described as the default. In reality, however, it only appears to be the default where the IP is not part of a critical government ICT system and the contracted deliverables mainly use the supplier's pre-existing IP or there is no need for the government to retain ownership.

There is no guidance (and therefore flexibility) on how to determine whether the contracted deliverables mainly use pre-existing IP (this could be measured, for example, by percentage in terms of content, criticality to the system or price). There is no mention in this formula of pre-existing third party IP (i.e. IP that belongs to neither the supplier nor the government), so we have to assume that, under the guidelines, the "supplier's pre-existing IP" includes IP provided by third party.

The guidelines recommend that the government body should own the IP only if any of the following circumstances apply:

• there are security or integrity reasons for the government body to own the IP;

• the IP applies to a critical government system;

• the government wants the ability to enforce the IP against infringers;

• other public sector agencies are the only likely users of the IP;

• the government body wants a third party other than the original supplier to be able to commercialise the IP;

• the government body intends to allow free use of the IP on open source terms;

• there are other reasons why the government body does not want the original supplier to own the IP.

Government suppliers will need to be aware that these guidelines are not law and that giving effect to the third option of supplier ownership will require express contractual provisions to that effect. For example, under the Copyright Act, the Crown owns all copyright in works commissioned under contracts for services unless the contract specifically provides otherwise. IP ownership clauses between the supplier and the government will need to be carefully and thoughtfully drafted to give effect to option three of the guidelines. The guidelines helpfully provide sample clauses to be used for this purpose.

Overall, the new guidelines give the government more flexibility in negotiating its IP position in ICT contracts. They also offer good insight into the relative benefits and disadvantages of government ownership of IP and some transparency to the rationale behind positions on IP ownership. The decision to implement new guidelines is a positive move which has the potential to add value to the New Zealand economy and the ICT community.

For a copy of the guidelines visit: www.e.govt.nz/policy/ipr

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