IP and CMMC — two issues that could derail defense innovation efforts

… there are two thorny issues that need to be effectively addressed on this innovation journey: intellectual property (IP) and security. Both issues have seen increased attention in the past few years, but they are starting to go a bit sideways. Some recent requirements in DoD competitions for unlimited IP rights have raised major concerns with potential bidders while the department’s Cybersecurity Maturation Model Certification (CMMC) initiative has struggled to achieve its desired objective to date.

That was Jerry McGinn, executive director at Mason GovCon, at Breaking Defense.

I tend to see these two issues as part of the upfront costs new entrants have to pay in order to enter the defense sector. It is pretty clear in the case of CMMC that there will be costs associated with establishing cybersecurity measures and getting them audited. This will be a “go/no go” decision when CMMC appears on contract RFPs.

Intellectual property can be a “pay-to-play” decision as well but in a different way. Companies have to invest their own dollars to develop capabilities and intellectual property, but will be forced to hand it over to government when it pays for integrating/using it (and the government will want to pay 10-15% profit on-top of on-going contracts). The question is whether the government will pay for that IP itself at a value that more than covers the firm’s expenses and opportunity cost (which can be large if commercially viable), as well as whether government can protect it.

Here’s more from Jerry, this time on Government Matters.

Intellectual property is the lifeblood of innovation, and in the Department of Defense, it matters a lot. During the Cold War, stealth technology was piece of intellectual property but it was defense focused. Today, what you see, the cutting edge innovation in the Department of Defense is things like artificial intelligence, robotics, autonomy. These are heavily commercial, heavily software-driven technologies and their intellectual property is commercial.

 

Dealing with that as the Department of Defense becoming a more savvy customer needs to be addressed. And the DoD has been proactive on this, publishing an Intellectual Property policy back in late 2019…

 

In the case of IP, if the government wants unlimited rights so it can maintain and develop the system as it goes throughout its lifecycle. A company may say, I don’t want to give up those rights, I’m going to walk away and not compete for this program — which means DoD won’t get access to this potential innovation.