Navy Accused of Copyright Piracy

July 29, 2016

broken copyright symbolIn a recent lawsuit, the United States Navy has been accused of piracy – copyright, not maritime.  A German software company, Bitmanagement Software, initiated litigation against the Navy in the U.S. Court of Federal Claims, seeking millions of dollars in damages for alleged theft of virtual reality software provided to the Navy by Bitmanagement.  This case illustrates the challenges present as parties involved in software development project attempt to transition for collaborative development to commercial use.

Bitmanagement established a business relationship with the Navy.  The company provided a version of its virtual reality software for experimental use by the Navy.  The parties collaborated to customize the software for Navy use.  They were also involved in negotiations to establish a full commercial license to permit widespread use of the software by the Navy.

Matsuura Blakeley BannerIn order to facilitate the customization and integration processes, the Navy reportedly asked Bitmanagement to disable the piracy controls incorporated into the software.  After those controls were disabled, Bitmanagement alleges that Navy personnel created more than 500,000 copies of the software for use by Navy personnel, despite the fact that a license for that use had not yet been executed.  Bitmanagement claims that the software remains in widespread use by Navy personnel even though licensing terms have not been established.

This dispute illustrates the important intellectual property management challenges that develop even when the parties involved have established a business relationship.  In this particular case, the business relationship had proven to be successful, the parties managed to collaborate to develop a customized version of the VR software that met the operational needs of the Navy.  However, ineffective management of the intellectual property through the development stage and during the transition to full commercial use seems to have ruined the working relationship.

It is widely recognized that intellectual property rights must be effectively managed and secured in the commercial marketplace.  It is also important to appreciate that intellectual property rights can be exceptionally vulnerable during product customization and commercial roll-out stages.  The Bitmanagement dispute with the Navy demonstrates that intellectual property problems can arise even when a product development partnership has been successful.

Under certain circumstances, business partners can pose threats to intellectual property rights that are as serious as those presented by malicious outsiders.  It is important to secure proprietary intellectual property against both external threats and misuse by business partners.