Mark Collins- RCN Canadian Surface Combatant, Irving, Intellectual Property…and Espionage (plus fighters and Trump)

Further to these posts,

RCN Canadian Surface Combatant: Intellectual Property Brouhaha

Irving Halifax Has Lead Evaluating RCN Canadian Surface Combatant Design/Weapons Systems Bids

Irving Working with BAE Systems: Implications for RCN Canadian Surface Combatant?

some important points about the IP issue and its implications–including for new RCAF fighters too–are made in this piece (do read it all):

The Canadian Government, Defense Procurement, and Software: Out of Phase with Western Defense Development and Modernization?

The Liberal regime needs to be cognizant that Canada will always be a modest sized customer in the world arms market.

As such, unique and irregular Canadian requirements and unorthodox procurement processes will sharply inflate cost and create long term issues of sustainability.

Kludgey Canadian equipment that fails to meet reasonably anticipated expectations from allies raise doubts as to the credibility of Canada’s commitment to collective defense.

The Case of the Canadian Surface Combatant Program: Software Transfer as a Non-Starter

The Canadian Surface Combatant (CSC) program demanded that bidders hand overtheir intellectual property (IP) and data to prime contractor Irving Shipbuilding, including “foreground and background data” and software source code.

While it is no longer a disqualifier to not do so up front, this demand raises major issues for suppliers.

Requiring a bidder’s a priori disclosure of IP and data to a private company (and potential competitor!) like Irving shipbuilding is highly irregular.

The details required are down to specifications for the last nut, bolt and screw, including tools used and part numbers. While the intent may be to deprive the vendor of follow-on revenues for maintenance and upgrades, it is far more damaging to the world shipbuilding industry.

Serious questions arise as to how (if at all) the data can be safeguarded by the contractor and/or the Canadian government, and its leakage to both adversaries and other competitors. While the intent is that provision of this data enables Irving Shipbuilding to walk away from the vendor for future upgrades and maintenance, it has many other consequences.

The IP requirement means that the prime contractor and Canadian officials will be able to become a competitor to all bidders. Because they will be the only party to see everyone’s IP, Canadians will be able to aggregate the data, cherry pick and reverse engineer IP and designs from all bidders.

This goes beyond depriving vendors of follow-on revenues.

It means that Canada, and particularly Irving Shipbuilding, will have the unfair advantage of seeing the issues, flaws and best features in all bidder’s designs.

Canada would then be in a prime position to offer maintenance and support to not just the CSC, but for all vendor’s products, potentially becoming a competitor to every bidder, not to mention building its own next generation ship from bidders’ designs.

Whether it is the intent of the Government of Canada to facilitate this is not known.

Indisputably it is an unfair competitive advantage handed to anyone who has access to the data…

Apparently no one at DND or Irving Shipbuilding thought about how they would build a CSC without access to commercial electronics like devices from Xilinx, Intel, IBM, Freescale, Siemens, TSMC, etc. None of these firms will consent to their technology being handed over and if that is a condition, they will likely bar the use of them in the CSC program, causing bidders to find new and, as yet, non-existent sources.

Even if bidders agree to these terms, only one whom will be successful will still have to deal with the likelihood of theft of their IP and the likelihood that their software, intentionally or otherwise, will be compromised. Canadian government institutions and firms have a sorry record of protecting their intellectual property in this regard.

IP Security and the Threat of Theft from Non-Liberal Regimes

The U.S. was recently victimized by a Canadian subsidiary of United Technologies who illegally handed over to the PRC software intended to be used in their Z-10 military helicopter on the pretext of bidding for a civilian helicopter contract. That incident will weigh heavily on any decision to permit disclosure of sensitive US technologies to Canadian subsidiaries.

The very fact that it is now known that bid documents will contain sensitive IP that can compromise every bidder’s product will make Canada and Irving Shipyards a high priority intelligence target for Russia, China, Iran, North Korea [emphasis added], etc. facing threats from the bidder’s home countries [see also on China: “Chicom State-Owned Firms’ Investment in US: a Good Thing?“].

Compromise of CSC bidding documents data in Canada will result in the damage not just to CSCs, but also to other operators of the same platform — potentially creating a nightmare for every country foolish enough to authorize their vendor to release the IP.

And a bonanza for Chinese military shipbuilders eager to clone the best designs…

The Fighter Case in the Broader Context

The larger question is whether such IP giveaway for the privilege of bidding will be replicated in other government procurements like the replacement Fighter program.

If so, the U.S. can make it difficult simply by refusing to allow release of APIs and other interfaces, resulting in a low level of integration into U.S. systems, making the CSC and F/A-18 Super Hornets effectively unintegrated “one off” pieces in the age of network centric warfare.

Upgrading the systems ex post to U.S. standards for security to enable them to work closely together will likely be costly (if permissible at all) and be subject to stringent licensing terms — frustrating the original IP “hand over” requirement.

The U.S. may limit Canada’s access to compiled modules and ban Canada from updating mission data files altogether…

The Coming of the Trump Administration

The Trump Administration will also be zeroing in on Canadian defense procurement demands like “100% offset” requirements and take a close look at how those deals required of Boeing if the F/A-18 Super Hornet “interim” buy goes ahead [on those new fighters: “What Stinking RCAF Fighter “What Stinking RCAF Fighter “Capability Gap” for NORAD and NATO?“]…

Danny Lam is an independent analyst based in Calgary…

Mark Collins, a prolific Ottawa blogger, is a Fellow at the Canadian Global Affairs Institute; he tweets @Mark3Ds

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