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Government software intellectual property: Mine, yours or ours?

Government software intellectual property: Mine, yours or ours?

Software is an asset that carries considerable value. Why then, should a supplier get the intellectual property rights, if the government has already done much of the heavy lifting?

Just before Christmas, the NSW government announced a reverse on its position on intellectual property rights, in situations such as software developed for government under contract. This means the default position will now be that suppliers, not the government, will own intellectual property rights over newly developed systems. The announcement was made when most of us were typically thinking about beer, barbecues and mistletoe, rather than the complexities of government procurement. Against this quiet backdrop however, the intellectual property announcement generated some stormy commentary and blog traffic from those in the IT industry.

Ownership of intellectual property is a critical issue. Many government projects cost millions of dollars and involve significant business and commercial risk.

There are reasonable concerns about the government position

Software is an asset that carries considerable value. Why then, should a supplier get the intellectual property rights, if the government has already done much of the heavy lifting?

The idea appears to run counter to smart business practice. In a worst case scenario, the government could be giving away ownership of what might be the next big leap in technology. If you pay a contractor to do a job, then why would you give away ownership of the asset they have just created?

Furthermore, if the government comes up with a unique idea, and that idea has value, then why shouldn’t the government make money by licensing it or offering it for sale? Indeed isn’t this the role of some agencies like CSIRO?

The government’s position also has significant merit

The New South Wales government did not take this decision in isolation. During 2010, the Federal Government also changed its position. This decision followed careful consideration of recommendations in the 2008 Gershon Report. In addition, the Victorian government has successfully taken this position for a number of years.

The change in policy affects the default position on intellectual property. It is not a blanket change. Government executives still have to demonstrate they have come up with an efficient, effective and ethical solution. For example, the revised Federal government guidelines outline a raft of issues that still need to be considered before coming to a decision, including: the core objectives of the particular agency; opportunities for savings; the underlying value of the IP; and overall management and administration costs. Either way, the government still retains its own licence to use the software.

The change in policy does not just declare open season on software assets, but it does send a signal to the market that government typically isn’t in the business of becoming a software supplier.

On balance

It is important to remember that the previous policy was itself far from optimal. Given the costs, intellectual property frequently languished on the shelf and lost value as technology moved on. Software innovation indeed moves very quickly. There is only a narrow window where a newly created asset has significant value. After that point, it just becomes another legacy system.

Previous government efforts to on-sell software IP had their own problems, as government agencies hold a particular position in the IT industry. Agencies are both a regulator (through industry policy), and purchaser (through government contracts). Software IP ownership also puts agencies into the position of being a supplier, with a financial stake in a solution that competes directly against other software suppliers.

From a practical perspective, many agencies have discovered there is a big difference between a bespoke system aimed at meeting the needs of a particular agency, and a commercial product. While the IP may have a lot of intrinsic value for that particular agency, it may have little value as a commercial venture.

By offering IP ownership as part of the procurement process, the market is able to put a value on software under development. If the industry believes the IP has commercial worth, then a competitive process should see that additional value reflected in the price tendered back to government.

On balance, the government’s revised approach to intellectual property provides a pragmatic solution to what is otherwise a complex problem.

Kevin Noonan is a research director in Ovum’s government practice. Email comments to kevin.noonan@ovum.com

To comment on this article, please email the editor.

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