Your IP Playbook Just Expired: What the Federal Contracting Overhaul Means for Data Rights, CRADAs, and Deals

Nov 02, 2026
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By: Daniel J. Gershman

The Rules Everyone Relied On Are Being Rewritten

For decades, companies that sold to the federal government, or that held patents born of federal research dollars, could count on one thing: the IP rules rarely changed. That era is over. In April 2025, President Trump signed Executive Order 14275, Restoring Common Sense to Federal Procurement, launching a top-to-bottom rewrite of the Federal Acquisition Regulation (FAR).1 That effort, the “Revolutionary FAR Overhaul,” has now reached the rules that govern patents, technical data, and software.2 At the same time, the Department of Commerce has wielded Bayh-Dole “march-in” rights more aggressively than any administration before it.3

The upshot: government agencies have more room to ask for more, and prepared companies have more room to say no. Whether you are in-house counsel at a government contractor, a deal lawyer pricing a target’s patent portfolio, or a founder signing your first agreement with a federal lab, these changes affect how government-facing IP is valued, protected, negotiated, and diligenced. Below, we walk through what has changed, show how these dynamics play out in a real Cooperative Research and Development Agreement (CRADA) negotiation, and lay out what to do now.

What’s Actually Changing

  • A leaner FAR. Executive Order 14275 directs the FAR Council to produce a FAR that is simpler, clearer, and built for speed.4 The stated goal is to return the FAR to its statutory roots, use plain language, and strip out most requirements that no statute imposes.5 Agencies first implemented the reforms in fiscal year 2025 through temporary “model class deviations,” and formal notice-and-comment rulemaking followed.6 In all, the FAR Council is issuing twelve proposed rules covering the entire FAR.7
  • Defense-style data rights for everyone. On September 18, 2026, the FAR Council proposed a rewrite of FAR Part 27, which covers patents, data, and copyrights (FAR Case 2026-011).8 The proposal would scrap FAR subpart 27.4, Rights in Data and Copyrights, and its clauses entirely, replacing them with content drawn from the Defense Federal Acquisition Regulation Supplement (DFARS).9 Coverage would split into two subparts: one for technical data and software in noncommercial products and services, and one for commercial products and services.10
  • Civilian-agency contractors feel this most. Their data rights have lived under the civilian FAR clauses for decades. Now they would move to the defense model, with its own license categories and marking legends, including “Government Purpose Rights,” “Limited Rights,” and “Restricted Rights.”11 Defense-style procedures would come along too: validation of asserted restrictions, deferred ordering of technical data or software, and payment withholding tied to technical data.12 If your assertion, marking, and delivery practices were built for the old civilian clauses, it is time to rebuild them.
  • New patent clauses that reach commercial items. The proposal adds two DFARS-derived patent clauses: FAR 52.227-24, Patents—Reporting of Subject Inventions, and FAR 52.227-25, Patent Rights—Ownership by the Contractor (Large Business), while existing patent clauses would “substantially remain.”13 The FAR Council proposes applying these patent clauses, and the new technical data clauses, to commercial products, commercial services, and commercially available off-the-shelf (COTS) items.14 Commercial vendors should not assume these clauses will stay out of their contracts.
  • A win for SBIR/STTR holders. The proposal would align the FAR with the Small Business Administration’s SBIR/STTR Policy Directive, setting a single, non-extendable 20-year data protection period. When it ends, the government gets a “Government Purpose Rights” license, not unlimited rights.15 That favors companies holding SBIR/STTR data, and it turns the protection-period clock into something buyers should value precisely.

The comment period on the Part 27 proposal closed on October 19, 2026, so the rule is still a proposal, and the final version could differ.16

More Discretion Means More Negotiation, on Both Sides

A theme runs through the whole overhaul: fewer fixed rules, more contracting officer judgment. The FAR Council says cutting unnecessary mandates will “clarify and reinforce the contracting officer’s discretion to determine the best way to apply policies and practices.”17 Much of the detailed “how to” guidance is moving out of the regulation and into non-regulatory resources such as the FAR Companion.18

Negotiation itself is changing, too. Proposed revisions to FAR Part 15 would move from formal “discussions” toward real negotiation, letting contracting officers negotiate more than once with a single offeror without doing the same with everyone else.19 Commentators say this “may give contracting officers greater latitude.”20 The revised Part 27 keeps agencies’ authority to adopt alternative IP policies and clauses where laws, executive orders, treaties, or international agreements require it.21

Here is why that matters. Agencies with more discretion can push harder for broader licenses, deferred-ordering rights, or data that contractors would rather keep. But the defense-derived framework also treats data rights as something the parties can negotiate, and that opens a door for prepared contractors. Companies that identify their privately funded technology early, assert restrictions properly, and show up with a clear licensing position will win more of these exchanges. Companies that sign standard terms without review may give away valuable rights. For commercial items, the proposed rules say agencies should acquire only the technical data, data rights, and licenses customarily provided to the public.22 Use that principle when an agency asks for more.

Case Study: What Deliberate Negotiation Looks Like in a CRADA

The FAR overhaul governs procurement contracts. But the same push and pull shows up in CRADAs, the agreements federal labs use under the Federal Technology Transfer Act (15 U.S.C. § 3710a) to collaborate with private companies. In a typical CRADA, the government provides no funding; each side contributes people, facilities, and know-how. That makes IP the main currency of the deal.

We recently represented an emerging defense technology company negotiating a CRADA with a research and engineering center to adapt and test the company’s proprietary hardware for military platforms. The center’s standard form leaned the way government forms usually do. Our markup did what this post recommends: identify the technology early, define restrictions precisely, and limit government rights to stated purposes. Highlights:

  • Draw the Background Technology line broadly. We expanded the company’s Background Technology schedule beyond its core designs to cover software and modeling tools, outside test data, tooling, know-how, and improvements the company makes outside the CRADA, whether before or after signing. That schedule decides what is pre-existing IP and what is “CRADA IP,” so precision here pays off later.
  • Fence the government’s license. The form gave the government a license to the company’s sole CRADA inventions and data for government purposes. We made that license nontransferable and barred the government from using the company’s data for competitive reprocurement or to help a third party manufacture or reverse engineer the company’s products.
  • Use the statute’s data protection. CRADA law lets the parties shield certain data generated under the agreement from disclosure for up to five years. We designated the company’s CRADA technical data and all test, simulation, and performance data as protected, and added confidentiality terms, a cure period for marking mistakes, and a ban on using the information in solicitations.
  • Lock in the exclusive license option. We replaced an undefined field of use with a defined one, doubled the window to elect an exclusive license from six to twelve months, and pre-agreed core license terms such as territory, sublicensing, and term.
  • Keep licenses alive. Under the form, any unilateral termination killed license options. Now only the company’s own voluntary termination without cause has that effect, and the government’s cancellation rights require notice, a 30-day cure period, and objective performance criteria.
  • Make the deal M&A ready. We added a right to assign the CRADA without government consent in a merger, change of control, or sale of the business, and required government support contractors to sign NDAs directly with the company and to exclude direct competitors.

Where these negotiations get stuck. Even a strong markup leaves friction points worth watching in any CRADA:

  • Duration of protection. Treating CRADA-generated trade secrets as proprietary indefinitely can conflict with the statute’s five-year window. Expect government pushback and draft a clear rule for which protection controls.
  • Milestones that don’t match. If license cancellation turns on “objective” milestones, make sure the work plan’s milestones are not labeled non-binding or left blank.
  • Open economics and broad fields. Royalty rates and commercialization benchmarks are often left bracketed, which clouds valuation. A field of use that reaches commercial and law enforcement markets will draw scrutiny from an agency focused on its mission.
  • Joint IP and follow-on contracts. Joint inventions and joint data often default to shared ownership with irrevocable government licenses. Additionally, if the technology moves into procurement, the defense-style assertion and validation rules will apply, so CRADA protections must carry over into later contract markings.

March-In Rights: From Theory to Enforcement Tool

How it works. Under the Bayh-Dole Act, a university, nonprofit, or small business that keeps title to a federally funded invention takes on ongoing duties, including commercializing it and giving preference to U.S. industry.23 March-in rights under 35 U.S.C. § 203 enforce those duties. If the funding agency finds one of four statutory conditions unmet, it can require the patent holder to license the invention to a third party on reasonable terms, and if the holder refuses, the agency can grant the license itself.24 March-in doesn’t take the patent away. It forces licensing.25

The Harvard test case. For more than 40 years, march-in was mostly theoretical: outside parties petitioned on specific patents, and agencies said no.26 That changed on August 8, 2025, when Commerce Secretary Howard Lutnick wrote to Harvard alleging Bayh-Dole noncompliance across its federally funded portfolio and purporting to begin a march-in process under Section 203.27 Harvard was told to report on every patent arising from federally funded research by September 5, 2025.28 The alleged violations fell into three buckets:

  • late invention disclosure and title election;29
  • failure to follow the U.S.-manufacturing preference for exclusive licenses;30 and
  • failure to achieve practical application.31

Two things make this matter different. Commerce opened it on its own, with no third-party petition, and it targets an entire portfolio rather than a single product.32 Commentators have questioned whether Commerce has jurisdiction, since march-in decisions usually belong to the funding agency, while Commerce has traditionally administered the government-wide regulations.33 As of the latest public reporting we reviewed, no march-in license has actually been granted.34

The broader policy context. Observers note that the Administration has repeatedly relied on Bayh-Dole tools, including march-in and the substantial domestic manufacturing requirement.35 One commentator also reports that the Administration adopted a Biden-era NIH affordability mandate on October 1, 2025.36 Meanwhile, NIST’s draft interagency march-in framework, which would let agencies consider price among the relevant factors, remained unfinalized as of mid-2026. It has not been withdrawn, but it is not binding.37

What does it mean for deals? For acquirers, investors, and licensees, Harvard shows that march-in is now a real enforcement risk, not a remote possibility.38 In practice:

  • Valuation. A patent subject to compelled licensing may be worth less than its exclusivity alone would suggest. Federally funded patents in a portfolio, particularly in life sciences and advanced manufacturing, deserve closer attention when building a valuation model.
  • Diligence. The provisions Commerce cited in the Harvard matter are a ready-made diligence checklist: timely disclosure and title election under 37 CFR 401.14, the Section 204 U.S.-manufacturing preference in exclusive licenses, and documented steps toward practical application.39 Buyers should ask for iEdison records and utilization reports, which are the evidence a patent holder would need to produce quickly if challenged.40
  • Inbound university licenses. Targets that license university technology carry the licensor’s Bayh-Dole compliance risk. A compliance failure by the university can put the licensee’s exclusivity at risk, even though the licensee had no control over the university’s reporting.
  • Deal protection. Buyers should consider specific representations on government funding and Bayh-Dole compliance, special indemnities or escrows for identified exposure, and closing conditions or covenants that require any reporting deficiencies to be fixed before closing.

Key Takeaways for Counsel and Deal Teams

  1. Map your federally funded IP. Identify every patent, data set, and software asset developed wholly or partly with government funding. Note the funding agency and the contract or grant clauses that apply.
  2. Audit Bayh-Dole compliance now. Confirm that invention disclosures, title elections, and utilization reports are timely and documented, and that exclusive licenses comply with the U.S.-manufacturing preference or are covered by waivers.41
  3. Prepare for the defense-style data rights model. Civilian-agency contractors should update their assertion, marking, and data-delivery procedures to fit the proposed DFARS-derived framework, including validation and deferred-ordering procedures.42
  4. Negotiate deliberately. Because contracting officers have more discretion, come to negotiations with a clear data-rights strategy and push back on requests that go beyond the licenses customarily provided to the public.43
  5. Treat CRADAs as deal documents. Schedule Background Technology in detail, limit government licenses by purpose and transferability, designate data for statutory protection, pre-negotiate exclusive license terms, and make sure licenses and the agreement itself survive termination and a sale of the company.
  6. Track the final Part 27 rule. The comment period closed October 19, 2026. Companies with significant data or software portfolios should watch for the final rule and be ready to adjust their practices.44
  7. Make federal IP a core M&A diligence item. Add Bayh-Dole and data-rights reviews to the standard diligence checklist, and price and allocate march-in risk through representations, indemnities, and covenants.
  8. Monitor developments. The Harvard proceeding, the NIST march-in framework, and the remaining FAR overhaul rulemakings are all still in progress.45 Companies should revisit their positions as each one moves forward.

The Bottom Line

Federal IP policy is moving toward more discretion and more enforcement at the same time. That combination punishes passivity and rewards preparation. The companies that come out ahead, whether they are signing a procurement contract, a CRADA, or a merger agreement, will be the ones that know exactly what IP they own, assert it carefully, and negotiate as if every clause will matter in their next deal. Because it probably will.

How is your organization adapting its federal IP strategy? We would welcome your thoughts. If you are negotiating a CRADA or other government agreement, or diligencing a target with government-facing IP, contact Falcon Rappaport & Berkman to discuss how these developments affect you.

  1. Exec. Order No. 14,275, 90 Fed. Reg. 16,447 (Apr. 18, 2025), https://www.federalregister.gov/d/2025-06839.
  2. Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 9, 27, and 47, 91 Fed. Reg. 59,584 (proposed Sept. 18, 2026) (to be codified at 48 C.F.R. pts. 9, 27, 47, 52), https://www.federalregister.gov/d/2026-19159.
  3. CASRAI Editorial Bd., Commerce Department’s Bayh-Dole March-In Proceeding Against Harvard: The 2025 Test Case, CASRAI (July 24, 2026), https://casrai.org/news/harvard-bayh-dole-march-in-proceeding-2025.
  4. https://www.regulations.gov/document/FAR-2026-0003-0001
  5. Revolutionary FAR Overhaul, Acquisition.gov (May 2, 2025), https://www.acquisition.gov/content/revolutionary-far-overhaul.
  6. Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 9, 27, and 47, 91 Fed. Reg. 59,584 (proposed Sept. 18, 2026) (to be codified at 48 C.F.R. pts. 9, 27, 47, 52), https://www.federalregister.gov/d/2026-19159.
  7. Id.
  8. Id.
  9. Id.
  10. Id.
  11. Id.
  12. Id.
  13. Id.
  14. Id.
  15. Id.
  16. Id.
  17. Id.
  18. Id.
  19. Aron Beezley, Steven C. Herrera & Patrick Quigley, 5 FAR Overhaul Changes Government Contractors Should Watch, JD Supra (Sept. 28, 2026), https://www.jdsupra.com/legalnews/5-far-overhaul-changes-government-5778947.
  20. Id.
  21. FAR Overhaul – Part 27, Acquisition.gov, https://www.acquisition.gov/far-overhaul/far-part-deviation-guide/far-overhaul-part-27 (last visited Oct. 23, 2026).
  22. Revolutionary FAR Overhaul Parts 8, 12, 13, 15, 38, 44, and 51, 91 Fed. Reg. at 59,406, https://www.regulations.gov/document/FAR-2026-0003-0001
  23. CASRAI Editorial Bd., Commerce Department’s Bayh-Dole March-In Proceeding Against Harvard: The 2025 Test Case, CASRAI (July 24, 2026), https://casrai.org/news/harvard-bayh-dole-march-in-proceeding-2025.
  24. Id.
  25. Id.
  26. Id.
  27. Id.
  28. Id.
  29. Id.
  30. Id.
  31. Id.
  32. Id.
  33. Id.
  34. Id.
  35. Jennifer Plitsch, Kayleigh Scalzo, Kate McNulty & Jennifer Bentley, Presidential Memorandum Tasks Agencies with Removing Canadian Origin Items from Federal Procurement System, Inside Gov’t Conts. (Sept. 28, 2026), https://www.insidegovernmentcontracts.com/2026/09/presidential-memorandum-tasks-agencies-with-removing-canadian-origin-items-from-federal-procurement-system/.
  36. DrugPatentWatch, March-In Rights: The Dormant Nuclear Option That Could Reshape Drug Pricing and Pharma IP, DrugPatentWatch (May 2, 2026), https://www.drugpatentwatch.com/blog/march-in-rights-explained-can-they-really-lower-prescription-drug-costs/.
  37. CASRAI Editorial Bd., Commerce Department’s Bayh-Dole March-In Proceeding Against Harvard: The 2025 Test Case, CASRAI (July 24, 2026), https://casrai.org/news/harvard-bayh-dole-march-in-proceeding-2025.
  38. Id.
  39. Id.
  40. Id.
  41. Id.
  42. Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 9, 27, and 47, 91 Fed. Reg. 59,584 (proposed Sept. 18, 2026) (to be codified at 48 C.F.R. pts. 9, 27, 47, 52), https://www.federalregister.gov/d/2026-19159.
  43. https://www.regulations.gov/document/FAR-2026-0003-0001
  44. Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 9, 27, and 47, 91 Fed. Reg. 59,584 (proposed Sept. 18, 2026) (to be codified at 48 C.F.R. pts. 9, 27, 47, 52), https://www.federalregister.gov/d/2026-19159.
  45. CASRAI Editorial Bd., Commerce Department’s Bayh-Dole March-In Proceeding Against Harvard: The 2025 Test Case, CASRAI (July 24, 2026), https://casrai.org/news/harvard-bayh-dole-march-in-proceeding-2025.

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