The Power Of Procurement Contracts: Software Manufacturer May Bring IP Claims Against Federal Agency

• Published date: 22 March 2024
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Contracts and Commercial Law, Government Contracts, Procurement & PPP
• Law Firm: Fenwick
• Author: David Feder, Zohra Tejani and Andrew Martinez

What You Need To Know

• The Federal Circuit ruled that software manufacturers may seek to enforce End User License Agreements (EULAs) against federal agencies if the EULAs qualify as "procurement contracts."
• This decision overturns a prior Civilian Board of Contract Appeals (CBCA) ruling, which had stated that it didn't have jurisdiction to entertain disputes brought by software manufacturers directly when licensing through resellers.
• The case in question is Avue Techs. Corp. v. Sec'y of Health &amp Hum. Servs.
• In its appeal, Avue Technologies argued that its EULA with the FDA should be considered a procurement contract, enabling direct enforcement under the Contract Disputes Act (CDA). The Federal Circuit found Avue's allegation that its EULA combined with the prime contract qualified as a "procurement contract" sufficiently "nonfrivolous" to establish jurisdiction before the CBCA.
• Still undecided is whether Avue's MSA/EULA qualifies on the merits as a "procurement contract" under the CDA, and what role resellers must play in bringing claims before the CBCA.
• Software manufacturers are advised to take protective measures such as creating firm channel agreements, ensuring their EULAs are incorporated into front-line procurement contracts, and adhering to claim protocols in the case of disputes with federal agencies.

A glimmer of hope from the Federal Circuit for software manufacturers looking to enforce license agreements against the U.S. Federal Government.

In an order issued March 6, 2024, the court said entities licensing software to federal agencies through resellers may enforce end user license agreements (EULAs) directly against the government if the agreements qualify as 'procurement contracts.' The order vacates the earlier decision of the Civilian Board of Contract Appeals (CBCA), which held that it lacked jurisdiction under the Contract Disputes Act (CDA) to entertain disputes brought by software licensors who contract through resellers. On remand, the CBCA will consider whether Appellant Avue Technologies Corporation (Avue) has a 'procurement contract' with the Food and Drug Administration (FDA) capable of direct redress under the CDA.

The case stems from Avue's 2015 contract with the FDA, which purchased licenses for Avue's commercial AI-enabled human resources software via reseller Carahsoft Technology Corporation (Carahsoft) under Carahsoft's Federal Supply Schedule (FSS) contract. These licenses were subject to Avue's EULA, which Avue refers to...