Local development shops have received a late Christmas present from the State Services Commission in the form of a government policy vesting intellectual property developed during IT contracts with private sector partners.
Last week, the Commission released new guidelines, stating that intellectual property (IP) created within government-commissioned ICT contracts should, by default, be vested in the supplier, who should have the opportunity to commercialise that IP anywhere outside the New Zealand government.
The move was greeted by local ICT services supplier Simpl. Chief executive Bennett Medary described the policy as “enlightened”, saying it recognises that government agencies are not in the business of commercialising IP.
“There’s not much competitive value in government agencies retaining IP to deny it to competitors,” he says.
Medary says it’s now up to the providers to reflect on the opportunities created and to seek partners to help them commercialise their innovations if necessary to “translate that into wealth opportunities for New Zealand”.
The State Services Commission says the approach will offer the greatest overall benefit to the New Zealand economy.
“Only in limited circumstances will agencies seek to own and commercially exploit the intellectual property rights arising from these contracts,” says SSC deputy commissioner for ICT Laurence Millar.
“Exploitation of the IPR [intellectual property rights] created, except in specific circumstances, is not a core business activity of government agencies,” say the guidelines “and the commercial sector is usually better positioned and motivated to seek out and take advantage of marketplace opportunities.”
By rewarding suppliers in this way, “government gains access to a broader field of providers and an enhanced level of competition [that results from] boosting the local market and promoting economic development,” the SSC policy says.
If the supplier is given the IP rights, “the commercial sector has an additional commercial incentive to tender for government ICT work,” it adds. “This could result in lower prices being tendered.”
Medary says providers should reflect this in their pricing and seek to reuse IP wherever possible rather than developing from scratch.
“Take a New Zealand view,” he says. “The government does not own the IP, but they did pay for it.”
Previous handling of intellectual property from such contracts has been inconsistent and government has been conscious of a need to introduce a more consistent approach across agencies. This is in line with an increasingly “all-of-government” approach to ICT procurement.
The SSC has considered the risk of a supplier going out of business, or otherwise being unable to support the developed product, but this can usually be covered by measures such as putting code in escrow so it can be recovered and the support responsibility taken up by another company.
In return for ownership of the rights, the supplier should grant a licence to all government agencies to use the product freely, say the guidelines.
There will be exceptions to the policy in the case of systems “critical” to the operation of government. Also, if the customer agency wants the ability to enforce the IP rights against third party infringers or the only likely use for the IP rights is expected to be other public sector agencies, among other scenarios.
The document sets out a third option, where the agency holds the IP but licences the supplier to further exploit it.
This might be appropriate where the system is critical to government functions but has potential for commercialisation and the agency is not able or willing to undertake this.
The guidelines do not apply to systems based on open source software, the licensing terms for which were considered in a separate document issued almost two years ago (Computerworld, March 13, 2006).
CIO provides legal insight on the changes here.