Dual-use ventures are businesses that develop products or
services serving both civilian and military purposes. These companies often
receive government funding for research and development (R&D) projects.
Understanding the legal and regulatory aspects of dual-use ventures is crucial
for compliance and success in both commercial and government markets.
Small Business Innovation Research (SBIR) Program
The SBIR program provides funding to small businesses
engaged in innovative technology development. To qualify:
- Ownership
Requirement: The business must be at least 50% owned by U.S. citizens
or qualifying entities.
- Venture
Capital Investment: If venture capital (VC) firms are involved, the
business may still be eligible, but the VC must be over 50% owned and
controlled by U.S. individuals. Certain restrictions apply, particularly
if the business is owned by multiple venture capital operating companies
(VCOCs), hedge funds, or private equity firms.
Intellectual Property (IP) and Government Data Rights
Managing IP rights is vital, especially when government
contracts are involved. Government data rights define how technical data and
software are used by the government and how IP is protected in these contracts.
- Government
Data Rights: These are similar to non-disclosure agreements (NDAs)
with the government, outlining restrictions on the use, disclosure, and
sharing of data.
- SBIR
Data Rights: Specifically for data developed under SBIR contracts,
these rights grant the government limited use of technical data or
software for a period of 20 years. After 20 years, the government gains
broader rights to the data.
Subcontracts and Integration of Technology
In government contracts, subcontracts are common, especially
when small businesses collaborate with larger prime contractors. Properly
structuring subcontracts and understanding IP rights in these agreements is
essential.
- Subcontracting
Arrangements: Prime contractors often handle the overall contract with
the government, while subcontractors provide specific technology or
services. IP agreements should be carefully negotiated to ensure that
small businesses retain ownership of their innovations.
- FAR
27.304-3: This clause prevents prime contractors from using their
position to unfairly acquire IP rights from subcontractors.
Federal Acquisition Regulation (FAR) Compliance
FAR compliance is a fundamental requirement in government
contracting. These regulations provide a framework for government contracts,
ensuring that businesses meet ethical standards, follow equal opportunity
guidelines, and comply with property and conduct requirements.
- Key
FAR Clauses:
- Ethics
and Conduct: FAR 52.203-13 outlines the Code of Business Ethics and
Conduct, requiring businesses to adhere to ethical practices in their
operations.
- Equal
Opportunity: FAR 52.222-26 mandates non-discrimination in hiring and
employment practices, ensuring fair treatment for all workers, including
veterans.
- Government
Property: FAR 52.245-1 addresses the use of government property,
specifying how businesses should manage and account for any
government-owned resources involved in the project.
Export Controls and ITAR Compliance
Dual-use ventures often deal with technologies that may have
military or sensitive applications, making them subject to export controls.
- Export
Administration Regulations (EAR): Technology subject to EAR is
regulated for export based on national security concerns. Companies must
understand the restrictions on sharing technology with foreign entities
and ensure compliance when taking technology abroad.
- International
Traffic in Arms Regulations (ITAR): ITAR governs the export of
defense-related materials and technologies. Companies involved in dual-use
ventures must be cautious about sharing sensitive technology with non-U.S.
persons and ensure that any export activity complies with these
regulations.
Conclusion
Understanding the legal landscape surrounding dual-use ventures is essential for navigating government contracts, protecting intellectual property, and ensuring compliance with regulations. By carefully managing eligibility for funding programs like SBIR, safeguarding IP rights, adhering to FAR clauses, and maintaining export control compliance, dual-use ventures can successfully operate in both the commercial and government markets. These considerations provide the foundation for businesses to develop innovative technologies while safeguarding their intellectual property and ensuring long-term success.