DoD’s Demand for Commercial IP Ownership Hampers Innovation and Industry Collaboration

In December, the Department of Defense Intellectual Property Cadre convened its first-ever “DoD IP Forum,” bringing together government officials and industry leaders to discuss the growing role of commercial software in national security and how intellectual property (IP) policies affect defense innovation. The forum highlighted a critical tension: the U.S. government’s increasing reliance on dual-use commercial technology clashes with its demand for broad IP ownership rights, which many in industry view as a barrier to collaboration.

The Department of Defense (DoD) has recognized that intellectual property policy is a significant obstacle to rapidly acquiring and sustaining advanced technologies for America’s warfighters. The recently released National Defense Industrial Strategy explicitly underscores the importance of IP and data rights policies as key to flexible acquisition and sustainment processes.

Currently, the government often requires companies to grant either “unlimited rights” or “government purpose rights” to technical data and software. Unlimited rights allow the government unrestricted use, modification, and disclosure of software, including sharing with competitors. Government purpose rights permit broad government use but limit external use to government purposes only. While intended to protect national security interests, these requirements risk forcing commercial software providers to relinquish their core intellectual property assets.

This dynamic discourages many commercial technology firms, especially younger, non-traditional defense contractors, from pursuing government contracts. The resulting reduction in public-private partnerships undermines the United States’ ability to maintain a technological edge over global competitors.

Leaders from Palantir Technologies and Tangram Flex, companies deeply engaged with the DoD, emphasize that the department should reconsider its approach to IP ownership. They argue that the government conflates IP rights with concerns about vendor lock-in and interoperability—two distinct issues that require separate solutions.

Vendor lock-in occurs when the government becomes dependent on a single provider’s proprietary technology, limiting competition and increasing costs. Interoperability refers to the ability of different systems to work together seamlessly. The DoD fears that without ownership of IP, it cannot avoid vendor lock or ensure interoperability. However, industry experts contend that forcing companies to surrender core IP is not the answer and that protecting patents, copyrights, trademarks, and trade secrets does not inherently conflict with interoperability goals.

Data rights encompass both ownership of government-generated data and commercial intellectual property. While software-as-a-service companies agree that the government should own its data exclusively, disputes arise over rights to commercially developed IP, such as proprietary source code.

The DoD’s need to access and own its data is undisputed, as stated in the 2020 Department of Defense Data Strategy, which describes DoD data as a “high interest commodity” that must be accessible to authorized users. However, the department’s insistence on owning commercial IP through unlimited or government purpose rights is more controversial.

The 2022 DoD report on competition in the industrial base highlights concerns that vendor lock can impede acquisition, support, and upgrades of critical systems. While these concerns are valid, the approach of demanding broad IP rights from commercial vendors may inadvertently stifle innovation by deterring companies from engaging with the defense sector.

Commercial software companies are willing to grant the government broad rights to non-core IP elements, such as derivative logic, models, interface control documents, and application programming interfaces. Their primary objection lies in surrendering core IP developed through independent research and venture capital funding, which is essential to their business viability.

If companies were forced to give up their core IP with every government contract, they would risk free appropriation by competitors, undermining their ability to sustain innovation. This is especially critical given concerns about protecting American technology from foreign adversaries like China.

Despite the apparent conflict, the interests of the DoD and commercial providers are not fundamentally opposed. Industry seeks a fair return on investment without creating vendor lock, while the military aims to avoid lock-in and promote interoperability. The key question is whether DoD ownership of commercial IP truly advances these goals.

The evidence suggests it does not. Instead, a more nuanced IP policy that protects commercial core IP while addressing interoperability and vendor lock through other mechanisms could foster greater innovation, encourage more companies to work with the government, and ultimately better support America’s warfighters.

Reforming intellectual property policies to balance government needs and commercial interests is critical to accelerating the adoption of emerging technologies and maintaining U.S. technological superiority in defense.