Could the Clause Trigger Changes to Intellectual Property Rights?
Data ownership is one of the key considerations for any AI integration. Some AI-driven software agreements give vendors the right to use a company’s data to train their AI models or even retain that data. If that company is using AI systems as part of a federal contract, the government’s ownership stake can further complicate matters.
The most recent proposal defi nes
“background data” as pre-existing proprietary content, reference materials, knowledge bases, and IP owned or controlled by a contractor that may be incorporated into LLM processing. Importantly, the new language specifi cally states that the contractor retains ownership of that data in its original form. That protection was absent in the initial draft and is a welcome step in the right direction. But the June draft also states that “the government retains ownership of all feedback provided by the government to the contractor with respect to the LLM or custom developments, regardless of whether such feedback is generated by government personnel, the contractor, or through automated processes.”
Although the June draft clarifi es that contractors retain ownership of their background data, SIIA remains concerned that the proposal gives the government broad rights in certain AI-generated outputs created during contract performance. The organization argues that those provisions could blur the traditional distinction between a contractor’s pre-existing intellectual property and work products generated from that proprietary information.
Could Government Contracts Reshape Commercial
Agreements? The proposal’s order-of-preference language could be just as consequential
38 FEDA News & Views
as the data ownership defi nitions. “The proposed clause introduced a departure from a lot of established procurement norms by implementing this order of precedence that would override the standard commercial licensing terms and safety policies,” Abbate said. “By incorporating this new clause into the highest precedence tier, GSA is essentially placing its AI safeguarding requirements above all other commercial terms, including a contractor’s standard commercial agreements and any negotiated terms as well.”
That could create a situation where a distributor agrees to federal AI requirements that confl ict with the commercial licensing terms of the software it uses. It could also infl uence commercial customers outside of government contracting. “If a vendor accepts those federal terms, then the posture can eventually fl ow back down to how the commercial deals are structured as well,” Abbate explained. “So, it goes beyond just government here.”
Are Contractor
Obligations Feasible? The June draft requires contractors not only to follow the clause’s requirements themselves, but also to fl ow those requirements down to their subcontractors and suppliers and verify that they comply. As Abbate points out, that would require an incredible amount of oversight. “[SIIA] members are concerned that would be unsustainable and add another level of expense to compliance,” she said. “There’s a lot of administrative bureaucracy by demanding this type of very rigorous due diligence.” A new provision also requires the contractor to notify the contracting offi cer within 72 hours of any change that causes the software to fall out of compliance with the clause. “Our members don’t see that as very effi cient and cost effective in the context of
federal acquisition,” Abbate said. “We have recommended that the terms of service align with standard commercial terms whenever possible here, because that’s going to be the lowest lift. That would then also mirror the real market best practices rather than creating an entirely new regulatory framework.”
What Actions Should
Distributors Take? The GSAR clause is still just a proposal. The deadline for the most recent round of public comments was Aug. 3 and more changes are likely before the clause is codifi ed — if it is codifi ed. With the fi nal rule still likely a long way off, Abbate believes there is no need for distributors to make operational changes at this point. “My impression based on the July listening session is that GSA is receptive of the fact that things need to be adjusted further,” Abbate said. The key for businesses is to be on alert for updates because these AI contract rules affect more than just AI developers.
“This is a big challenge for companies across the board in terms of having to invest more in compliance over time,” Abbate continued. “It’s a concern, especially for smaller companies who are not necessarily AI companies by nature but are trying to adapt to the technology and understand how they can best comply.” Her broader advice to distributors
is to treat the GSA proposal as just one part of a fast-changing policy environment. “Look beyond just what GSA is doing and continue to pay attention to broader trends in the AI governance landscape,” she said. “View this GSA clause as one snapshot.” That snapshot may change, but
underlying questions like who owns data, which systems count as AI, what obligations can fl ow through a supply chain, and whether government terms override commercial protections are likely to remain important for distributors long after this clause is fi nalized.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60
