Guidelines

Decisions on ownership and commercialisation options

When considering how to treat IPR in each ICT contract, agencies should take an all-of-government approach and apply government procurement best practices. Once they have selected the ownership and commercialisation option which fully meets their business requirements, they may need to ensure that the contract deals appropriately with licences to the pre-existing IP and to the new IP in the deliverables under the contract.

Three options are recommended for the treatment of IPR in ICT contracts:

• Option One: The Customer Agency owns all new IP in the deliverables, with no licence back to the Supplier.
• Option Two:The Customer Agency owns all new IP in the deliverables, with a licence back to the Supplier for its commercial exploitation.
• Option Three:The Supplier owns all new IP in the deliverables, and provides a licence to the Customer Agency and other State Services agencies for any purpose other than commercial exploitation.

Each of the options is described below, together with examples of their application within the State Services.

In selecting an option, agencies need to appreciate the different types of IPR that may be relevant to their project, both existing IPR and IPR that may form part of or be relevant to the deliverables under the contract. As is apparent from the definition of IPR above, examples include copyright, patents, trademarks, registered designs and rights in connection with confidential information. Different rights may exist in both the existing IP and IP to be created under the contract, and agencies may need to consider, for each, where ownership lies or should lie and what licences are or may be required.

Agencies may be assisted in this task by approaching it with an IP-ownership matrix in mind, such as the following table in which one ticks the relevant cells as appropriate (the listed components of IP are not intended to be exhaustive):

Option One:

Customer Agency owns the new IP and decides whether to or who may commercialise

The contract provides that the Customer Agency owns the new IP in the deliverables. The contract does not contain any licence allowing the Supplier to commercialise the IP.

The Customer Agency therefore has full discretion whether or not to commercialise the IP and whether any commercialisation will be done by the Customer Agency or under licence by a third party of the Customer Agency's choice or through some other arrangement. Government ownership of the IPR means that other State Services agencies (or any other people the Customer Agency wishes) can use and modify the IP as the Customer Agency sees fit.

Where the Customer Agency plans to make a subsequent decision about whether to and who should commercialise, it should do so in a timely fashion to ensure that commercial opportunities are not jeopardised.

Factors which might make this option necessary (rather than Options 2 or 3)

There are security or integrity reasons why the Customer Agency does not want the IPR to be commercialised.

The IPR applies to a critical government ICT system. Agencies should own the IPR to:

• maintain government capability and avoid dependency on a supplier for knowledge or control of such a system;
• uphold public confidence that IPR from critical government systems is owned by a government agency and can be used across the State Services.

The Customer Agency wants the ability to enforce the IPR against third party infringers.

The only likely use for the IPR is expected to be other public sector agencies (i.e. the IPR is specialised to government), and the Customer Agency considers that it is best placed to undertake any modifications that are required to allow the IPR to be used by those other agencies.

The Customer Agency considers that any commercialisation is best done by a third party, rather than the original supplier.

The Customer Agency intends to allow free use of the IPR on open source terms.

There are other reasons why the Customer Agency does not want the original supplier to own the IPR, and licensing them to commercialise it is inappropriate.

Preconditions

Anticipates that most of the IP in the deliverables will be newly developed.

Benefits

Enables and encourages all-of-government use and modification of the IP, where appropriate.

Commercialisation opportunities for third parties.

Potential for royalties (this should not be treated as a determinative rationale for ownership of the IPR and commercialisation by government instead of by the commercial sector. Rather, it should be seen as simply an incidental benefit arising from a decision based on one or more of the factors listed above).

Practical examples

Government Shared Network (State Services Commission); Government Logon Service (State Services Commission); Landonline development and operation (Land Information New Zealand); SWIFTT (benefits management system of Ministry of Social Development).

Option Two:

Customer Agency owns the new IP but licenses the Supplier to use and commercialise

The ICT contract provides that the Customer Agency owns the new IP in the deliverables. The contract also provides that the Supplier is granted a licence to commercialise (e.g. use, modify and sell) the new IP.

It covers licensing the new IP in the deliverables, not pre-existing property of the Customer Agency, for example, logos, design.

This option would generally allow both the Customer Agency and the Supplier to commercialise the IP (unless limitations were placed on either party's rights, e.g. by way of an exclusive licence). Customer Agency ownership of the IPR means that other State Services agencies (or any other people the Customer Agency wishes) can use and modify the IP as the Customer Agency sees fit. The Supplier's licence will allow it to commercialise the IP, e.g. to create derivative works and sell them to other clients. It may be appropriate for the contract to contain provisions dealing with the overlap of these use rights, e.g. provisions to ensure that the Supplier does not try to on-sell derivative works to other State Services agencies without notifying the Customer Agency.

The types of licences that could be used (non-exclusive, sole or exclusive) are discussed in the Licence Arrangements section.

Factors which might make this option necessary (rather than option 3)

There is potential for new IP to be commercialised and there is no need for the Customer Agency to undertake that commercialisation, but the IPR is or subsists in a critical government ICT system. Agencies should own the IPR to:

• maintain government capability and avoid dependency on a supplier for knowledge or control of such a system;
• uphold public confidence that IPR in critical government systems is owned by the government and can be used across the State Services without limitation.

The Customer Agency wants the ability to enforce its IPR against infringers.

The Customer Agency wishes to use or share the IP with other agencies in the wider public sector or provide it to overseas governments, and so wishes to have ownership of the IPR to avoid doubt in these parties about their entitlement to use it, but there is potential for the Supplier to commercialise the IP for private sector clients.

Preconditions

Anticipates that most of the IP in the deliverables will be newly developed.

Benefits

Customer Agency makes a conscious choice to allow or become involved in commercialisation.

Enables and encourages all-of-government use and modification of the IP, where appropriate.

Opportunity for suppliers to commercialise newly created IP.

Industry has an additional commercial incentive to tender for government ICT work. This could result in lower prices being tendered.

Practical examples

Agency ICT critical business systems with potential for overseas sale.

Option Three:

Supplier owns the new IP but provides licences to the Customer Agency and all other State Services agencies

The ICT contract provides that the Supplier owns the new IP in the deliverables. The contract also provides that the Customer Agency and all other State Services agencies (and, where applicable, third parties acting for them) are granted a licence to exercise the IPR created under the contract.

This option provides the Supplier with full rights to commercialise the new IP, e.g. to sell it to other clients or to modify it and have full ownership of the IPR in any new or improved systems that it develops using the original IP. The Customer Agency is granted a licence to use the IP.

The contract needs to set out the nature of the Customer Agency's licence and agencies should, where feasible, require licence terms allowing the IP to be provided to, and used by, any State Services agency (and third parties acting for them). The licence may also need to include rights for the Customer Agency and/or other State Services agencies (or third parties acting for them) to modify the IP, e.g. so that a system can be customised for use by other State Services agencies. The licence could also contain concessions for the State Services as a result of allowing the Supplier to own and commercialise the IPR, such as free or discounted access to any enhancements that are made as part of the commercialisation.

Factors likely to make this option appropriate

The contracted deliverables mainly use pre-existing IP (which is owned by the Supplier) and therefore the IP in the deliverables cannot be readily commercialised by the Customer Agency.

Alternatively, there is no need for the Customer Agency to retain ownership and any commercialisation is best undertaken by the Supplier.

Preconditions

The IP is not (a part of) a critical government ICT system.

Benefits

Opportunity for suppliers to commercialise newly created IP.

Encourages suppliers to commercialise newly created IP by removing the potential impediment of non-ownership of the IPR from their negotiations with prospective clients.

Enables commercialisation to occur in a timely manner.

Gives Supplier the ability to enforce its IPR against infringers and thus protect the commercial value of the IPR. (Note the corresponding disadvantage for the Customer Agency, i.e., it cannot enforce a third party breach of the IPR).

Commercial sector has an additional commercial incentive to tender for government ICT work. This could result in lower prices being tendered.

Opportunity for suppliers to sustain Research and Development and upgrade testing in NZ, whilst growing sales globally.

Government gains access to a broader field of providers and an enhanced level of competition by boosting the local market and promoting economic development.

Keeps government focused on its core business activities.

Practical examples

Patient management system; an agency case management system; educational software and digital learning objects.