Plans are firming up regarding widening of Route 175, and Maryland commits funds to a guaranteed ride home program.
- Brad Aaron
Thursday, June 10, 2010
Monday, June 7, 2010
Developing Your Technology and Business through a CRADA
The BRAC-mandated expansion of the missions of Fort Meade and Aberdeen Proving Ground presents technology companies numerous opportunities to expand their own businesses. And Cooperative Research and Development Agreements - CRADAs – can be a valuable tool in exploiting those prospects.
In its simplest form, a CRADA is a technology transfer tool made possible by the Federal Technology Transfer Act of 1986 (“FTTA”). Technically, it is a contractual relationship between private industry, a state or local government or a university (each, a “partnering party”), and a federal research laboratory for the joint development of a specific deliverable or general research.
Under the terms of a CRADA, a lab is permitted to provide personnel, services, facilities, equipment and intellectual property, but no funds. The partnering party (e.g., a technology company) brings the same resources as well as the funding.
Any federal research laboratory (a facility where research, development or engineering is performed by federal government employees) may enter into a CRADA if the work is consistent with the mission of the agency running the lab. APG hosts two such labs: Aberdeen Test Center and Army Research Laboratory - Aberdeen Proving Ground Site. A comprehensive list of these laboratories and their missions is maintained at www.federallabs.org.
Initiating a CRADA
Potential partnering parties can initiate a CRADA to incorporate federally-owned technology into a new or existing commercial product. As mandated by the FTTA, small businesses and businesses located in the U.S. that agree to manufacture any products resulting from the CRADA in the U.S. are given special consideration by federal labs. Additionally, a lab may seek out CRADA partners to commercialize its technology or gain access to the technical or financial resources of a partnering party.
All CRADAs share certain features. Each CRADA identifies the resources each party must provide and how any intellectual property will be owned and/or licensed (discussed below). It also sets forth the key legal terms, such as the length of term (which can vary from a month to several years), dispute resolution, warranty, and indemnification. The lab will typically disclaim all warranties related to performance of any research, and require the partnering party to indemnify the lab for damages resulting from the partnering party’s commercialization of any resultant inventions. CRADAs are not subject to the Federal Acquisition Regulation.
Protecting Your Intellectual Property
Because a CRADA is a technology transfer, the most important provisions in a CRADA relate to intellectual property.
A partnering party may license a lab-owned invention created before the CRADA if the invention is within the scope of the CRADA for reasonable compensation when appropriate. A lab may also license or assign any inventions created by the lab while performing work under the CRADA to the partnering party. In exchange for an assignment of ownership, the lab will retain a worldwide, non-exclusive, non-transferable, irrevocable, paid-up license to the invention.
If the lab assigns invention ownership rights or grants an exclusive license to the partnering party, the lab is entitled to certain rarely exercised “march in” rights that permit the lab to grant a license to use the invention to a third party in limited circumstances. These circumstances include a determination by the federal government that such a license is necessary to meet health or safety needs or public use requirements according to applicable federal regulations. Another circumstance is the failure of the partnering party, under the CRADA, to comply with the requirement that it manufacture the products embodying the invention in the United States.
If the partnering party makes an invention under the CRADA, the partnering party owns the invention, and the lab will receive a worldwide, non-exclusive, non-transferable, irrevocable, paid-up license for governmental purposes only.
Trade secrets and confidential information disclosed by the partnering party under the CRADA are protected from disclosure by the lab. Additionally, any information developed in the course of the CRADA is considered a trade secret, and confidential information may be protected from disclosure for up to five years after development.
Summary
CRADAs, like all tech transfer agreements, are complicated arrangements. While the assistance of counsel is strongly recommended, following are five key points for a contractor to keep in mind when negotiating a CRADA:
1. Do the necessary due diligence. Before negotiating a CRADA, a contractor needs to be sure the government has the technology that the contractor thinks it does. Understanding the technology upfront can save a contractor from disappointment with a CRADA that may have been months in the formation.
2. Identify each party’s intellectual property upfront in the CRADA. This will help ensure there is no confusion at a later date as to which party owns what intellectual property.
3. Understand the licensing scenario being created through the CRADA. If a contractor’s intellectual property will be shared by the government with the contractor’s competitors at a later date, the contractor needs to consider the impact this may have on its business.
4. Know when to step away from CRADA negotiations. Because entering into a poorly drafted CRADA can adversely impact a contractor’s business, a contractor should be prepared to walk if the deal is not meeting the contractor’s needs.
5. Consider whether the long term goals of commercialization and/or research are reflected in the agreed-upon CRADA.
- Brad Aaron
In its simplest form, a CRADA is a technology transfer tool made possible by the Federal Technology Transfer Act of 1986 (“FTTA”). Technically, it is a contractual relationship between private industry, a state or local government or a university (each, a “partnering party”), and a federal research laboratory for the joint development of a specific deliverable or general research.
Under the terms of a CRADA, a lab is permitted to provide personnel, services, facilities, equipment and intellectual property, but no funds. The partnering party (e.g., a technology company) brings the same resources as well as the funding.
Any federal research laboratory (a facility where research, development or engineering is performed by federal government employees) may enter into a CRADA if the work is consistent with the mission of the agency running the lab. APG hosts two such labs: Aberdeen Test Center and Army Research Laboratory - Aberdeen Proving Ground Site. A comprehensive list of these laboratories and their missions is maintained at www.federallabs.org.
Initiating a CRADA
Potential partnering parties can initiate a CRADA to incorporate federally-owned technology into a new or existing commercial product. As mandated by the FTTA, small businesses and businesses located in the U.S. that agree to manufacture any products resulting from the CRADA in the U.S. are given special consideration by federal labs. Additionally, a lab may seek out CRADA partners to commercialize its technology or gain access to the technical or financial resources of a partnering party.
All CRADAs share certain features. Each CRADA identifies the resources each party must provide and how any intellectual property will be owned and/or licensed (discussed below). It also sets forth the key legal terms, such as the length of term (which can vary from a month to several years), dispute resolution, warranty, and indemnification. The lab will typically disclaim all warranties related to performance of any research, and require the partnering party to indemnify the lab for damages resulting from the partnering party’s commercialization of any resultant inventions. CRADAs are not subject to the Federal Acquisition Regulation.
Protecting Your Intellectual Property
Because a CRADA is a technology transfer, the most important provisions in a CRADA relate to intellectual property.
A partnering party may license a lab-owned invention created before the CRADA if the invention is within the scope of the CRADA for reasonable compensation when appropriate. A lab may also license or assign any inventions created by the lab while performing work under the CRADA to the partnering party. In exchange for an assignment of ownership, the lab will retain a worldwide, non-exclusive, non-transferable, irrevocable, paid-up license to the invention.
If the lab assigns invention ownership rights or grants an exclusive license to the partnering party, the lab is entitled to certain rarely exercised “march in” rights that permit the lab to grant a license to use the invention to a third party in limited circumstances. These circumstances include a determination by the federal government that such a license is necessary to meet health or safety needs or public use requirements according to applicable federal regulations. Another circumstance is the failure of the partnering party, under the CRADA, to comply with the requirement that it manufacture the products embodying the invention in the United States.
If the partnering party makes an invention under the CRADA, the partnering party owns the invention, and the lab will receive a worldwide, non-exclusive, non-transferable, irrevocable, paid-up license for governmental purposes only.
Trade secrets and confidential information disclosed by the partnering party under the CRADA are protected from disclosure by the lab. Additionally, any information developed in the course of the CRADA is considered a trade secret, and confidential information may be protected from disclosure for up to five years after development.
Summary
CRADAs, like all tech transfer agreements, are complicated arrangements. While the assistance of counsel is strongly recommended, following are five key points for a contractor to keep in mind when negotiating a CRADA:
1. Do the necessary due diligence. Before negotiating a CRADA, a contractor needs to be sure the government has the technology that the contractor thinks it does. Understanding the technology upfront can save a contractor from disappointment with a CRADA that may have been months in the formation.
2. Identify each party’s intellectual property upfront in the CRADA. This will help ensure there is no confusion at a later date as to which party owns what intellectual property.
3. Understand the licensing scenario being created through the CRADA. If a contractor’s intellectual property will be shared by the government with the contractor’s competitors at a later date, the contractor needs to consider the impact this may have on its business.
4. Know when to step away from CRADA negotiations. Because entering into a poorly drafted CRADA can adversely impact a contractor’s business, a contractor should be prepared to walk if the deal is not meeting the contractor’s needs.
5. Consider whether the long term goals of commercialization and/or research are reflected in the agreed-upon CRADA.
- Brad Aaron
Tuesday, June 1, 2010
Award of Virginia BRAC-Related Contract
The DoD just awarded General Dynamics Information Technology a three year, $146.2 million contract to provide IT services in support of the BRAC-related influx of DoD workers at the Washington Headquarters Services located in Alexandria, Virginia - the same site that has been the subject of some recently proposed legislation.
- Brad Aaron
- Brad Aaron
Potential BRAC Slowdown in Virginia
The U.S. House of Representatives recently approved a provision restricting the expansion of BRAC into Northern Virginia pending development of a plan by the Pentagon to insure that any shift of BRAC-related employees will not increase the traffic congestion on and around Interstate 395 in Alexandria. This provision, part of the annual defense authorization bill, is not included in the Senate’s version of the same bill and, consequently, will be addressed during reconciliation of the two bills. The Senate bill is scheduled for a vote this month.
- Brad Aaron
- Brad Aaron
Wednesday, May 26, 2010
Growing Scrutiny of Independent Contractor Classification
In order to effectively leverage the potential contracting opportunities of BRAC, businesses need to be able to draw upon a skilled workforce at a moment’s notice. Of course, given the vagaries of the government contracting process, oftentimes it is not financially practical for a business to maintain a full time complement of employees. Rather, many businesses engage independent contractors, which give a business the flexibility of quickly ramping up to meet the needs of its customers without costly overhead.
Unfortunately for the unwary contractor, federal and state agencies have begun to crack down on the use of independent contractors. Specifically, government authorities, concerned about the potential misclassification of employees as independent contractors, are stepping up investigation efforts and imposing stiff penalties. And small businesses in particular will be a major target for the IRS effort, reports BusinessWeek, because these organizations typically do not have the attorneys and tax consultants employed by large businesses to maneuver through the complex rules governing classification or the financial wherewithal to defend the business through a lengthy investigation. Additionally, government contractors of all sizes appear to be under stricter scrutiny as well. For example, a Connecticut labor union may have prodded Connecticut state officials to investigate possible misclassification by a Skanska unit on a UConn construction project. Doubtless, the government contractor’s substantial payroll and subcontracting reporting requirements present ample fodder for these independent contractor misclassification investigations.
And with the recent introduction of H.R. 5107 in the U.S. House of Representatives amending the Fair Labor Standards Act to impose additional recordkeeping requirements on businesses that utilize independent contractors on both public contracts and for private work, more scrutiny and greater fines may be on the way. Potential new requirements include the maintenance of records of the hours of independent contractors and the amounts paid to the independent contractor. Additionally, civil penalties could be increased to $5,000 per misclassified worker.
These increased enforcement efforts and the potential tightening of related regulations are aimed at what is believed to be a significant, costly problem for workers and for federal and state governments. Some businesses purposely misclassify employees as independent contractors to avoid payroll taxes and workers compensation and unemployment insurance premiums. Many other businesses misclassify out of a failure to understand the law. Either way, the practice is believed to cost federal and state governments millions in tax dollars.
In order to avoid liability for misclassification, employers must understand the requirements and restrictions and take the necessary steps to ensure that those requirements and restrictions are properly implemented before classifying any personnel as an independent contractor.
Dennis Robinson, an attorney in WTP’s Baltimore office, has been tracking this issue. He recently wrote two articles that offer some practical tips for employers who wish to ensure proper classification of their employees and independent contractors. One, for the Winter 2010 issue of the Whiteford, Taylor & Preston Construction Newsletter, addresses the Maryland Workplace Fraud Act of 2009, which imposes civil penalties of up to $20,000 per employee for knowing misclassification of workers in the construction and landscaping industries. The other, for the April 2010 issue of the Perry Hall/White Marsh Business Association Newsletter, analyzes the increased federal effort to investigate and penalize misclassification.
- Dennis Robinson and Will Pearce
Unfortunately for the unwary contractor, federal and state agencies have begun to crack down on the use of independent contractors. Specifically, government authorities, concerned about the potential misclassification of employees as independent contractors, are stepping up investigation efforts and imposing stiff penalties. And small businesses in particular will be a major target for the IRS effort, reports BusinessWeek, because these organizations typically do not have the attorneys and tax consultants employed by large businesses to maneuver through the complex rules governing classification or the financial wherewithal to defend the business through a lengthy investigation. Additionally, government contractors of all sizes appear to be under stricter scrutiny as well. For example, a Connecticut labor union may have prodded Connecticut state officials to investigate possible misclassification by a Skanska unit on a UConn construction project. Doubtless, the government contractor’s substantial payroll and subcontracting reporting requirements present ample fodder for these independent contractor misclassification investigations.
And with the recent introduction of H.R. 5107 in the U.S. House of Representatives amending the Fair Labor Standards Act to impose additional recordkeeping requirements on businesses that utilize independent contractors on both public contracts and for private work, more scrutiny and greater fines may be on the way. Potential new requirements include the maintenance of records of the hours of independent contractors and the amounts paid to the independent contractor. Additionally, civil penalties could be increased to $5,000 per misclassified worker.
These increased enforcement efforts and the potential tightening of related regulations are aimed at what is believed to be a significant, costly problem for workers and for federal and state governments. Some businesses purposely misclassify employees as independent contractors to avoid payroll taxes and workers compensation and unemployment insurance premiums. Many other businesses misclassify out of a failure to understand the law. Either way, the practice is believed to cost federal and state governments millions in tax dollars.
In order to avoid liability for misclassification, employers must understand the requirements and restrictions and take the necessary steps to ensure that those requirements and restrictions are properly implemented before classifying any personnel as an independent contractor.
Dennis Robinson, an attorney in WTP’s Baltimore office, has been tracking this issue. He recently wrote two articles that offer some practical tips for employers who wish to ensure proper classification of their employees and independent contractors. One, for the Winter 2010 issue of the Whiteford, Taylor & Preston Construction Newsletter, addresses the Maryland Workplace Fraud Act of 2009, which imposes civil penalties of up to $20,000 per employee for knowing misclassification of workers in the construction and landscaping industries. The other, for the April 2010 issue of the Perry Hall/White Marsh Business Association Newsletter, analyzes the increased federal effort to investigate and penalize misclassification.
- Dennis Robinson and Will Pearce
Tuesday, May 25, 2010
Wednesday, May 12, 2010
APG Fraud Hotline and False Claims Acts
The FBI announced last month the establishment of a hotline for the reporting of fraud in connection with the awarding of approximately $2 billion in BRAC–related construction contracts at Aberdeen Proving Ground, exposing the unwary or unscrupulous contractor to a variety of sanctions.
The most typical form of fraud associated with these contracts is submission by a contractor of a false claim for payment from the Government, which is prohibited under both the Civil and Criminal False Claims Act (“FCA”) statutes. Under the Civil FCA, lawsuits may be brought against contractors by either the U.S. Department of Justice or by a whistleblower, usually a competitor or a disgruntled employee of the contractor being sued, who stands to recover up to 30% of any money recovered from a contractor under the Civil FCA.
The Civil FCA broadly defines “claim” to include “any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.” While the most obvious examples of a “false or fraudulent claim” include a contractor’s presentment of an invoice to the Government for work it never performed, or for supplies never delivered, in recent years, the U.S. Department of Justice and some federal courts have significantly broadened the definition of what constitutes a false claim for purposes of Civil FCA liability to include a number of situations far more subtle than flagrant mischarging and fraudulent invoicing. For example, the Government may elect to impose civil penalties against a contractor if the work for which the contractor seeks payment does not conform to the contract specifications. In addition, some courts have interpreted the Civil FCA to also prohibit a contractor from making false statements or records in order to avoid an existing obligation to the Government. Liability can also arise under the Civil FCA if a contractor fails to comply with the various laws and regulations incorporated into most federal contracts – including wage and hour laws, equal employment opportunity laws, OSHA regulations, environmental laws, and the like. In theory, if a contractor is required to comply with such laws and regulations in the performance of its contract, and the Government’s payment under the contract is contingent upon a contractor’s compliance with these laws and regulations, a contractor that violates any such regulation but still gets paid may be liable under the Civil FCA for submitting a false claim. Moreover, since Government contractors must certify compliance with these and other federal laws and regulations to first, obtain a Government contract and second, remain eligible to perform it, any false certification of compliance with applicable laws and regulations may also constitute a violation of the Civil FCA. Thus, for example, if a contractor falsely certifies that it pays applicable prevailing wages in accordance with the federal Davis-Bacon Act, when in fact it does not, such a false certification could form the basis for a Civil FCA violation against that contractor.
Civil penalties for FCA violations can be stiff. Under the Civil FCA, the Government can recover an amount equal to three times the actual damages sustained, plus penalties of between $5,000 and $11,000 per violation. Such penalties can multiply rapidly since each false claim, invoice, or material misstatement is counted as a separate violation. Significantly, a contractor does not escape liability under the Civil FCA even if the Government ultimately does not pay on the claim, which means that a contractor may be liable for civil monetary penalties under the Civil FCA even if the Government has suffered no damage.
Note that with the passage last year of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), the scope of potential FCA liability now includes not just fraud against the Government but also fraud against Government contractors (e.g., a subcontractor submitting a false claim for payment to a prime contractor). Further, FERA has lowered the threshold for a FCA claim. Formerly, a contractor had to make a false claim or submit a false invoice with the intent to fraudulently obtain money from the Government; under FERA, a contractor need only knowingly make a false statement or submit a false claim, without the intent to fraudulently obtain monies from the Government.
- Brad Aaron
The most typical form of fraud associated with these contracts is submission by a contractor of a false claim for payment from the Government, which is prohibited under both the Civil and Criminal False Claims Act (“FCA”) statutes. Under the Civil FCA, lawsuits may be brought against contractors by either the U.S. Department of Justice or by a whistleblower, usually a competitor or a disgruntled employee of the contractor being sued, who stands to recover up to 30% of any money recovered from a contractor under the Civil FCA.
The Civil FCA broadly defines “claim” to include “any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.” While the most obvious examples of a “false or fraudulent claim” include a contractor’s presentment of an invoice to the Government for work it never performed, or for supplies never delivered, in recent years, the U.S. Department of Justice and some federal courts have significantly broadened the definition of what constitutes a false claim for purposes of Civil FCA liability to include a number of situations far more subtle than flagrant mischarging and fraudulent invoicing. For example, the Government may elect to impose civil penalties against a contractor if the work for which the contractor seeks payment does not conform to the contract specifications. In addition, some courts have interpreted the Civil FCA to also prohibit a contractor from making false statements or records in order to avoid an existing obligation to the Government. Liability can also arise under the Civil FCA if a contractor fails to comply with the various laws and regulations incorporated into most federal contracts – including wage and hour laws, equal employment opportunity laws, OSHA regulations, environmental laws, and the like. In theory, if a contractor is required to comply with such laws and regulations in the performance of its contract, and the Government’s payment under the contract is contingent upon a contractor’s compliance with these laws and regulations, a contractor that violates any such regulation but still gets paid may be liable under the Civil FCA for submitting a false claim. Moreover, since Government contractors must certify compliance with these and other federal laws and regulations to first, obtain a Government contract and second, remain eligible to perform it, any false certification of compliance with applicable laws and regulations may also constitute a violation of the Civil FCA. Thus, for example, if a contractor falsely certifies that it pays applicable prevailing wages in accordance with the federal Davis-Bacon Act, when in fact it does not, such a false certification could form the basis for a Civil FCA violation against that contractor.
Civil penalties for FCA violations can be stiff. Under the Civil FCA, the Government can recover an amount equal to three times the actual damages sustained, plus penalties of between $5,000 and $11,000 per violation. Such penalties can multiply rapidly since each false claim, invoice, or material misstatement is counted as a separate violation. Significantly, a contractor does not escape liability under the Civil FCA even if the Government ultimately does not pay on the claim, which means that a contractor may be liable for civil monetary penalties under the Civil FCA even if the Government has suffered no damage.
Note that with the passage last year of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), the scope of potential FCA liability now includes not just fraud against the Government but also fraud against Government contractors (e.g., a subcontractor submitting a false claim for payment to a prime contractor). Further, FERA has lowered the threshold for a FCA claim. Formerly, a contractor had to make a false claim or submit a false invoice with the intent to fraudulently obtain money from the Government; under FERA, a contractor need only knowingly make a false statement or submit a false claim, without the intent to fraudulently obtain monies from the Government.
- Brad Aaron
Subscribe to:
Posts (Atom)
