Australia: QWIK QITC Series: Dealing with intellectual property rights (IPR) in QITC contracts

Last Updated: 23 February 2018
Article by Trent Taylor and Barton Donaldson

Most Read Contributor in Australia, August 2018

The QITC framework

In August 2017, the Queensland State Government introduced the new Queensland Information Technology Contracting (QITC) framework for procurement of information and communications technology (ICT) products and services by Queensland Government.

In this QWIK QITC Series, we are providing general information in respect of how the framework operates.

In the previous edition of QWIK QITC Series, we discussed how specifications and requirements are incorporated into the QITC contracts, how the precedence of annexed and incorporated documents is determined, and considerations for Government entities and suppliers when a supplier has published specifications for its Licensed Software, Hardware, or As-A-Service products.

In this edition of the QWIK QITC Series, we will consider the manner in which Government organisations deal with intellectual property rights (IPR) in QITC contract documents.

Background

Where the ICT products and services that the supplier is providing to the Government entity include new deliverables, such as Developed Software, ownership of IPR will be key issue for the negotiations. Beyond having clear rights to use the created materials, the agreed position on IPR is also likely to impact the pricing of the contract.

How are Intellectual Property Rights defined in QITC?

In both the General Contract and the Comprehensive Contract (see QWIK QITC Week 2), Intellectual Property Rights is broadly defined, and includes "all copyright, trade mark, design, patents, semiconductor or circuit layout rights and other proprietary rights, and any rights to registration of such rights existing anywhere in the world, whether created before or after the date of the Contract". Note that it is an inclusive definition, but specifically excludes moral rights.

What Intellectual Property Rights are contemplated by QITC?

There are three types of material containing IPR contemplated by the QITC contracts:

  1. Pre-Existing Material is the background material of each party developed prior to commencement of the contract, or created independently, and any adaptations, translations or derivatives of that background material. Licensed Software, As-A-Service and Third Party Material is excluded.
  2. New Material is any new material created under the QITC contract by or on behalf of the supplier for the Government customer. Pre-Existing Materials, Licensed Software, As-A-Service and Third Party Material is excluded.
  3. Third Party Material is any material where a third party owns the IPR. Third Party Software is not included in the Comprehensive Contract, and this is dealt with separately in Module 2 (Software).

Note that the parties can specify materials to be Pre-Existing Material, New Material and Third Party Material in the Contract Details.

Ownership of Intellectual Property rights in QITC

The standard positions in the QITC contracts for ownership of IPR are as follows:

  • The IPR in Pre-Existing Material is owned by the party who created it, and any IPR in any adaptations, translations or derivatives are immediately assigned to the owner of those Pre-Existing Materials on creation.
  • The supplier licenses any IPR in its Pre-Existing Material incorporated in any deliverables to the Government customer. Critically, the licence is perpetual, non-exclusive and royalty-free, but the Government customer is restricted from using the Pre-Existing Material for commercial purposes. However, the licence is sub-licensable to certain other Government entities at no additional cost.
  • The parties can specify in the Contract Details whether the supplier or the Government customer will own all or part of the New Material. For whichever party is specified as owning the New Material, the New Material vests in or is assigned to that party upon creation, and they grant a licence to the other party on slightly differing terms.
  • Where the Government customer owns the New Material, the supplier is granted a very broad licence to use the IPR in the New Material, including commercialisation, subject to the supplier removing all the Government customer's confidential information (including personal information for the purposes of privacy legislation) from the New Material.
  • Where the supplier owns the New Material, the Government customer is granted an identical licence to that of the supplier's Pre-Existing Material.
  • Where Third Party Material is incorporated in any deliverables, the supplier must obtain for the Government customer a licence (whether by sub-licence or direct licence from the third party) to use the Third Party Material.

The parties may also decide to specify deal-specific changes to these positions in the Contract Details. If ownership or licensing of IPR will need to be radically different to these standard positions, the parties should consider a Bespoke Contract (see QWIK QITC Week 1).

Please note that there are slightly different terms which apply where the New Material is Developed Software, or the Third Party Material is Licensed Software, and this will be addressed in next week's article focussed on procurement of software products and services under the QITC framework. We will also consider the warranties and indemnities in respect of ownership of IPR and third party IPR infringement claims in a later article.

Who should own the New Material?

When contemplating a position on IPR ownership under a QITC contract, Government customers should have regard to the Queensland Public Sector Intellectual Property Principles.

These Principles recommend that the Government should take reasonable steps to ensure that Queensland has the best opportunity to benefit from IPR whether by way of ownership, license or other entitlement. A Government customer may also need to consider whether the supplier should retain the ownership of some or all of the IPR in New Material where there is a greater public interest than the State owning the IPR - for example, for the purposes of supporting Queensland industry or enabling or facilitating the more efficient delivery of services. However, if the Government customer intends to exclusively commercialise the IPR, or licence the IPR on a broad scale, the Government customer should consider ownership.

A similar approach is recommended in the Queensland Government's guidelines for supplier terms and conditions (see QWIK QITC Week 1).

Takeaways

For Government organisations

  • Carefully consider what IPR will likely be created as part of the deliverables for the ICT project, and consider these in the context of the standard positions of the QITC contracts. If you need to adopt a very different approach, and the project carries a high risk, then a bespoke contract should be used.
  • Consider whether it is preferable for the Government or the supplier to own the IPR in any New Material in the circumstances of the project, having regard to appropriate policy. Consideration may be required of whether the Government requires exclusive rights in the IPR in order to achieve the project outcomes. There may be public benefits in allowing the supplier to retain the IPR, particularly where they are a start-up or an emerging enterprise, and these also need to be taken into account.
  • If you want to be able to exercise all IPR in any New Material that the parties agree the Government will own, you should ensure that the New Material is developed by the supplier without reference to, or by incorporating, any of the supplier's Pre-Existing Material.

For suppliers

  • Note that the licence to your incorporated Pre-Existing Materials extends to certain other Government entities as a standard position. If the IPR in your Pre-Existing Materials are critical to your business, consider adopting a different licensing approach (via a bespoke contract or if supplier terms are permitted – see QWIK QITC Week 2 for further details), or take technical measures to avoid including certain Pre-Existing Materials in the actual Deliverables. This should be considered early, in consultation with the Government customer.
  • While it is natural (and preferable) to seek to adopt a position of full ownership when it comes to developed IPR, consider whether it may be more appropriate to assign the IPR to the Government customer and accept the broad licence back in the GITC contracts. This licence is irrevocable, transferable and sub-licensable, and allows you to commercialise the IPR.
  • Ensure that you have a right to either sub-license or obtain a licence for a Government entity for any third party material that you provide as part of, or incorporate in, the goods and/or services under a QITC contract.

In the next edition

We will consider in more detail key issues in respect of procurement of software and software-related services under the QITC Framework.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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