TEAMING AND NONDISCLOSURE AGREEMENTS,WHO NEEDS THEM?

By Robert G. Bruechert, Esq.

            The short answer is that most companies do.  If your company enters into strategic discussions with other companies  and cooperates with other companies on proposal submissions to prospective clients, you should be using nondisclosure agreements and teaming agreements.  They establish the rights, responsibilities, and boundaries of the business relationship you’re engaged in.  This is true even when you deal with companies that you have dealt with for years.  Trust should be a non-issue because we merely act on behalf of our companies that have perpetual life.

            Nondisclosure and Teaming Agreements form the basis of the business relationship that the parties hope will culminate in a contract for the services of your company.  If entered into thoughtfully and purposefully these agreements will protect you and the company’s you deal with regardless of whether you’re acting in the capacity of a prime contractor or subcontractor.  I have found that when these agreements are written fairly from both perspectives they are most likely to be honored.  It is the companies that do not desire to enter into these type of agreements that your business should be wary of.

            Nondisclosure Agreements maybe standalone agreements or may form part of a Teaming Agreement.  Under the terms of most Nondisclosure Agreements, a party receiving proprietary information becomes obligated to protect the proprietary information from another party that is marked with an appropriate conspicuous restrictive legend.  Most agreements also provide for the protection of orally disclosed proprietary information, provided the information is reduced to written form, marked with an appropriate conspicuous restrictive legend, and transmitted from the disclosing party to the receiving party within a reasonable period of time.  These agreements are very important, during the early stages of the business relationship.  Your company is likely to disclose proprietary strategic information with other companies about your product, service, or approach to a particular proposal effort.  Often companies engaged in these types of discussions before committing to a teaming relationship with another company.  This is when your company and your information is most vulnerable.  Alliances between companies that are trying to best position themselves for the award of the work under the program will readily shift.  Without a Nondisclosure Agreement, your proposal strategy may become available to other teams that are forming.  Most companies with value to add to a  proposal strategy, will gladly enter into Nondisclosure Agreements to protect their ideas and will have no issues with protecting your proprietary information.

            When the alliances are solidified, the participants should use a Teaming Agreement to document their arrangement.  Teaming Agreements may be standalone agreements or they may include nondisclosure provisions within their terms.  Under the terms of most Teaming Agreements, the party acting as prime contractor will be seeking the support and cooperation of a subcontractor for a portion of the work that is required under the program.  The party acting as subcontractor will be seeking a reputable prime contractor to secure a portion of the prime contract’s scope via a subcontract from the prime contractor.  Teaming Agreements may establish exclusive business relationships or nonexclusive business relationships.  They are most beneficial to both parties when they detail the rights and obligations of the parties entering into an exclusive relationship.  The prime contractor secures a source for the work that may not be readily available within its own organization.  The subcontractor secures a portion of the work awarded under the prime contract.  In this situation, Teaming Agreements that do not include the “Scope of Work” to be performed by the subcontractor are of little value to the subcontractor.  Subcontractors to enter into teaming agreements with “Scopes of Work” that are to be determined often discover that to be determined means there’s no work for the subcontractor.  They discover that agreement to agree at sometime in the future is as good as no agreement at all.

            Thoughtfully prepared Teaming Agreements include proprietary information provisions that survive the termination of the Teaming Agreement through the end of the program to which it pertains.  In this way information and strategies that have been disclosed will be protected throughout the period of the program and perhaps for several years thereafter.  I have witnessed situations where prime contractors have attempted to not Award the work that was the subject of a Teaming Agreement.  In those instances a simple call to the prime contractor’s legal adviser and a short discussion focused on the obligations of the Prime contractor under the Teaming Agreement usually causes the subcontractor’s Scope of Work to be awarded to the subcontractor without further delay.  But without the teaming agreement, the subcontractor, after having expanded valuable resources during the proposal effort, and after the prime capitalizing on the enhanced proposal created by the subcontractor’s participation, will be left relying on oral promises and vague references to a team, without being able to enforce their understanding and secure the work that day anticipated.

            Trust is an issue that should not weigh heavily in documenting business relationships.  We merely represent companies that are legal entities with perpetual lives.  Management changes, employees seek other employment, and new people take their place to pick up the pieces.  The agreements that we enter into on the company’s behalf last much longer and should accurately describe the relationship the parties envisioned at the outset.

Copyright 2002 Robert G. Bruechert

Return to Top

INTELLECTUAL PROPERTY IN GOVERNMENT CONTRACTING

By Robert G. Bruechert, Esq.

When technical data is developed under a contract using government funds the Federal Acquisition Regulations (FAR) govern.  In accordance with Federal Acquisition Regulation principles, under a government contract, the prime must secure certain rights for the Government.  However, FAR is consistent and clear in permitting the contractor and subcontractor to retain certain rights.  Further, FAR states that "nothing contained in this clause shall require the Contractor to deliver any data the withholding of which is authorized by the Rights in Data --General or other equivalent clause of this contract."  Moreover, the DFARS clauses state that "all rights not granted to the Government are retained by the Contractor" and /or Subcontractor as the case may be, and go on to say that the Prime "Contractor . . . shall not use their power . . . as economic leverage to obtain rights in technical data . . . from their subcontractors . . .".  In fact, the Contractor is required to use the same clause in its subcontracts with modification only with regard to identifying parties and is prohibited from using other clauses "to enlarge or diminish the Government's, the Contractor's, or a higher tier subcontractor's or supplier's rights in a subcontractor's or supplier's technical data . . .".

Therefore, under a contract paid for - directly or indirectly - with government funds, the Contractor usually retains the right to use, release to others, reproduce, distribute, or publish any data first produced or specifically used in the performance of the contract, except to the extent such data may be subject to the Federal export control or national security laws or regulations, or unless otherwise provided or expressly set forth in the contract.  However, also in accordance with FAR, the Contractor grants to the Government, and others acting on its behalf, a paid-up, nonexclusive, irrevocable worldwide license in data to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so.

However, under a contract paid for with non-Contractor private funds, (e.g. commercial jobs and non-U.S. Government) the Contractor usually negotiates to retain the right (through contract clause or separate license) to use, release to others, reproduce, distribute, or publish any data first produced or specifically used by the Contractor in the performance of the contract for enumerated purposes and “usually” grants title to the payer.

Lastly, the Contractor  retains title in data generated using Contractor funds, (e.g. B&P, R&D, contributions, and in-kind contributions).  The Contractor may, through contract clause or separate license, grant to others (for a fee or royalty or in exchange for some other benefit) the right to use, release to others, reproduce, distribute, or publish any such data for enumerated purposes.

Copyright 2003 Robert G. Bruechert