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On December 12, 2017, President Trump signed the $700 billion 2018 National Defense Authorization Act (“NDAA”) into law. Following negotiations between the House and Senate Armed Services Committees, the NDAA includes new provisions relating to software acquisition within Title VIII — Acquisition Policy, Acquisition Management, and Related Matters, Subtitle H, and the following five sections:

SEC. 871. Noncommercial Computer Software Acquisition Considerations.

SEC. 872. Defense Innovation Board Analysis of Software Acquisition Regulations.

SEC. 873. Pilot Program to Use Agile or Iterative Development Methods to Tailor Major
Software-Intensive Warfighting Systems and Defense Business Systems.

SEC. 874. Software Development Pilot Program Using Agile Best Practices.

SEC. 875. Pilot Program for Open Source Software.


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This article focuses on contractor licenses that grant “Restricted Rights” in “Noncommercial Software” to the federal Government under Defense Federal Acquisition Regulation Supplement (“DFARS”) 252.227-7014.  DFARS 252.227-7014 only applies to “Noncommercial Computer Software,” meaning software that is licensed to or developed for the Government, but that is not also licensed to the public.  In contrast to the commercial world, where software licensors generally set the terms under which they wish to license their products, DFARS 252.227-7014 dictates such terms, and codifies required license grants for software developed for the U.S. Department of Defense (“DoD”).  Under DFARS 252.227-7014, even if a licensor develops Noncommercial Software at private expense, the licensor must at least grant Restricted Rights to the Government — although title and ownership of the software always remain with the contractor licensor.

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On August 8, 2016, the U.S. Office of Management and Budget (“OMB”) promulgated an Open Source Software (“OSS”) policy via the Memorandum for the Heads of Departments and Agencies, M-16-21 (“Memorandum” or “M-16-21”). The high-level purposes of the Memorandum are to promote reuse of federal contractor and employee custom-developed code, and to improve the quality of such software through public participation. To these ends, the Memorandum has two major directives: (1) all custom-developed code must be broadly available for reuse across the federal government subject to limited exceptions (e.g., for national security and defense) and (2) under a three-year pilot program, federal agencies are required to release at least 20% of their custom-developed code to the public as OSS. The intent here is to enable continual quality improvements to the code as a result of broader public community efforts. As discussed below, the requirement to release custom-developed code as OSS may effectively reduce the creator’s ownership rights, and have economic impacts on both the value of ownership and pricing when bidding on government contracts.

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