Bitmanagement

US Navy Accused of Tech Piracy

The Navy is entangled in two long-running federal court cases involving intellectual property theft.

David Axe

Sailors assigned to the Forward Liaison Element of the littoral combat ship USS Freedom (LCS 1) observe Freedom as it arrives in Singapore. Image: US Navy)

The US Navy is under fire for allegedly stealing hundreds of millions of dollars worth of intellectual property, including software and a high-speed ship design, but the sailing branch insisted that it respects intellectual-property rights.

The Navy is entangled in two long-running federal court cases involving IP theft. In March, German software company Bitmanagement asked a federal court for a summary judgement after accusing the Navy of illegally installing $600 million in software on more than 500,000 computers.

In 2011, the company agreed to license to the Navy 38 copies of its virtual-reality software. The Navy was reportedly happy with the software and Bitmanagement began negotiating to sell additional copies. But then the company said it made a startling discovery.

"Even as it negotiated with Bitmanagement over the proposed large-scale licensing of its product, the Navy was simultaneously copying and installing that software, without Bitmanagement’s advance knowledge or authorization, on a massive scale," the firm claimed in its lawsuit.

The Navy declined to comment on the ongoing lawsuit. Bitmanagement did not respond to an email inquiry.

Meanwhile, the Navy is appealing the April 2017 decision by a federal judge to award FastShip LLC $6.5 million in damages after the judge determined that the Navy used one of FastShip's patented hull designs without paying for it.

"There appear to be no hard and fast rules it has to follow in matters of I.P.," FastShip founder David Giles told me via email, referring to the Navy.

Danny Hernandez, public affairs officer for the U.S. Navy's head of research, development and acquisition, objected to that characterization. "The Navy prides itself on having the most respected intellectual-property program in the US government."

FastShip and Bitmanagement stand to lose millions of dollars as the cases play out. For its part, the Navy risks its reputation. "The Navy depends heavily on acquired technology," Hernandez said. But inventors might be less willing to work with the Navy if they believe the sailing branch might steal their ideas.

FastShip is a case study in the potential danger of collaborating with the Navy. In the early 1990s, Giles patented a new type of ship hull that glides across the water instead of plowing through it. He founded FastShip in the hope of applying the new hull design to speedy cargo vessels.

In 2002, defense contractor Lockheed Martin partnered with FastShip in the development of a new, high-speed warship called the Littoral Combat Ship, Giles told me via phone. Lockheed dropped FastShip in 2004 and went on to win a multi-billion-dollar series of contracts to build the new warships for the Navy.

Giles claimed the ships featured his hull design—but the Navy never paid to license it. FastShip sued in 2012. The same day the judge sided with Giles and his company, FastShip filed a separate lawsuit against Lockheed.

Rather than celebrating the favorable judgment, Giles lamented that his case took so long. The Federal Acquisition Regulation, or FAR—the set of laws that governs feds' adoption of privately-developed technology—gives inventors the right to seek "full and fair compensation" when the government uses their ideas.

But it's up to the Justice Department to determine what's full and fair and how quickly to pay up, if at all. "We first filed exactly 10 years ago," Giles told me. "It took two years for the USA to respond." Only then did FastShip decide to go to court.

Many companies cannot afford to wait years to get paid for their work. Indeed, FastShip sought bankruptcy protection in 2012, the same year it sued the government.

Hernandez said the Navy is fair to inventors. "The Navy completely respects the contractor ownership of all I.P. developed solely at contractor expense and the contractor ownership, with a license to the government, of all I.P. developed by contractors using government funding," Hernandez told me.

But Giles said the Navy does whatever it wants with regard to other people's inventions. "The US government is a law unto itself."