How funding sets software rights

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1. Software is licensed separately from data

The Defense Federal Acquisition Regulation Supplement (DFARS) treats computer software apart from technical data, in subpart 227.72 and the clause at DFARS 252.227-7014. That clause covers software and documentation other than commercial ones. Computer software means computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, formulae and related material that would enable the software to be reproduced, recreated or recompiled (DFARS 252.227-7014(a)). It does not include computer databases or computer software documentation.

A computer program is a set of instructions, rules or routines recorded in a form capable of causing a computer to perform a specific operation or series of operations (DFARS 252.227-7014(a)). Computer software documentation means owner’s manuals, user’s manuals, installation and operating instructions and similar items, in any medium, that explain the software’s capabilities or how to use it. Software that does not qualify as commercial computer software is other than commercial computer software, and that is the category this clause governs. The clause governs all other than commercial software and documentation, except that software that is small business research data falls under DFARS 252.227-7018 (DFARS 252.227-7014(b)). Unlimited rights in software mean the rights to use, modify, reproduce, release, perform, display or disclose it in any manner and for any purpose, and to authorize others to do so (DFARS 252.227-7014(a)).

2. The license and who grants it

The government obtains rights in computer software or documentation, including a copyright license, under an irrevocable license (DFARS 227.7203-4(a)). The license is granted or obtained by the contractor that developed the software, or by the licensor if the developer is not the licensor. The contractor or licensor keeps all rights not granted to the government. As with data, who paid for development generally sets the scope of a software license.

Contractors or licensors may, with some exceptions, restrict the government’s rights in software developed exclusively or partially at private expense (DFARS 227.7203-4(a)). Without the government’s agreement, they may not restrict its rights in software developed exclusively with government funds. Nor may they restrict its rights in computer software documentation required to be delivered under a contract.

3. When software counts as developed

The clause defines developed in three parts, one for each kind of deliverable (DFARS 252.227-7014(a)). A computer program is developed once it has been successfully operated in a computer and tested enough to show reasonable persons skilled in the art that it can reasonably be expected to perform its intended purpose. Software other than programs is developed once tested or analyzed to the same standard. Documentation required under a contract is developed once written, in any medium, in enough detail to meet the contract’s requirements.

The software clause defines the funding terms (DFARS 252.227-7014(a)). Private expense means development charged wholly to indirect cost pools, or to costs not allocated to any government contract, or any combination of them. The determination should be made at the lowest practicable level. On a fixed-price contract, the cost of finishing development above the price or ceiling is left out when deciding the type of funding. Mixed funding combines such private costs with costs charged directly to a government contract.

4. Segregable portions

The source of funds should be determined at the lowest practicable segregable portion of the software or documentation (DFARS 227.7203-4(b)). The DFARS gives a software subroutine that performs a specific function as an example. Contractors may assert restricted rights in a segregable portion of software that otherwise qualifies for restricted rights under DFARS 252.227-7014.

5. Three standard licenses, one for documentation

The standard license rights in computer software are unlimited rights, government purpose rights or restricted rights (DFARS 227.7203-5). The standard license in computer software documentation conveys unlimited rights. In unusual situations, a special license may be negotiated where the standard rights do not meet the government’s needs, or where it would accept lesser rights for other consideration. The licensor is not obliged to give greater rights, and the contracting officer is not required to accept lesser ones.

The government obtains unlimited rights in software developed exclusively with government funds, and in documentation required to be delivered under a government contract (DFARS 227.7203-5(a)(1) and DFARS 227.7203-5(a)(2)). It also obtains them in corrections or changes to software or documentation it furnished to the contractor (DFARS 227.7203-5(a)(3)). Software or documentation that is publicly available, or released by the contractor without restrictions on further use, carries unlimited rights too (DFARS 227.7203-5(a)(4)). Disclosure that came only from selling or transferring an interest in the software, or part of a business, does not count.

The list continues with software or documentation obtained with unlimited rights under another government contract or through negotiation (DFARS 227.7203-5(a)(5)). It ends with software or documentation whose restrictive conditions have expired, or whose government purpose rights period and the contractor’s exclusive commercial right have ended (DFARS 227.7203-5(a)(6)).

6. Mixed funding and derivative software

Except where unlimited rights apply, the government obtains government purpose rights in software developed with mixed funding (DFARS 227.7203-5(b)(1)). The period is negotiable, and the clause provides a nominal five-year period (DFARS 227.7203-5(b)(2)). Longer periods should be negotiated when five years is not enough to commercialize the software or, for software developed by subcontractors, to recognize their interests. The period starts when the instrument that required development is executed, and when it ends the government has unlimited rights (DFARS 227.7203-5(b)(3)).

The clause protects the government’s rights in software or documentation that the contractor later uses to prepare derivative software, or embeds in other software or documentation (DFARS 227.7203-5(e)). The government keeps the rights it obtained under the development contract in the unmodified portions of the derivative product. Restricted rights in privately funded software are covered in restricted rights in computer software.

Key terms

Computer software	Programs, code, design details and related material that let software be reproduced or recompiled.
Software documentation	Manuals and instructions explaining the software, licensed with unlimited rights by default.
Developed	Operated and tested, or analyzed, enough to show it can perform its intended purpose.
Segregable portion	The smallest practicable part of software at which funding is determined, such as a subroutine.
Derivative software	Software built from or embedding earlier software, where government rights survive in unmodified portions.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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