Legal Aspects Relevant to Outsourcing Transit Functions Not Traditionally Outsourced (2011)

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25 Note, moreover, that in the case of professional ser- vice and A &E contracts, the transit system is required by FTA to include provisions relating to FTA’s inter- ests.144 1. Trademarks The contractor should not use the transit entity’s name, trade name, trademarks, or service marks in any context without the prior written consent of the transit entity. 2. Patent Rights; Copyrights First, note the discussion in Section III (at C.24) of the FTA’s interest in patent rights. Generally a transit system would want to retain ownership of materials and documents generated in connection with the contract, although the contractor should be granted rights or a license to retain copies and use such deliverables. The parties should agree that all copyrightable material to be delivered to the transit system is “works made for hire” under the fed- eral copyright laws. Moreover, the transit system’s rights generally should be limited to the intended use for which any deliverables are provided under the agreement. The transit system should have the right, at its cost, to obtain and hold in its own name patents, copyrights, or such other appropriate protection for any inventions that become the property of the transit sys- tem. Also as a general matter, the contractor may be allowed to retain ownership of its intellectual property, including the methods and processes used by the con- tractor in connection with the deliverables. It is useful to have the contractor grant the transit entity a nonex- clusive, irrevocable, perpetual, fully-paid-for license to use works based on materials owned and independently developed by the contractor before it proposed to pro- vide services to the transit entity. 3. Infringement/Indemnity It is important to have a provision whereby the con- tractor warrants that the materials it uses to perform the contract do not infringe or misappropriate any pat- ent, copyright, or trade secret or other intellectual property of a third party. The contractor should at its own expense indemnify and hold harmless the transit system from and against all claims of infringement in that regard. W. Licensing, Permits, and Taxes The consultant and its subconsultants are required to be appropriately licensed for the professional services required under the terms of the contract. The cost for any required licenses is generally the responsibility of the consultant. The contractor should be liable for any and all taxes due as a result of the contract. 144 See § III.C.24 above. X. Successors and Assigns It is important to include a clause prohibiting the contractor from assigning in whole or part any part of the contract without the express written consent of the grantee. Y. Security Requirements Finally, it is also important to include a clause re- quiring a contractor to comply with any security re- quirements imposed by the transit system, including conducting background investigations of contractor per- sonnel (who meet certain specified criteria), participat- ing in security training, wearing appropriate identifica- tion, and otherwise complying with the transit system’s security policies and requirements. Z. Force Majeure Many contracts include a provision under which the contractor would not be liable for any failure to perform if acceptable evidence is submitted that failure to per- form the contract was due to causes beyond the control and without the fault or negligence of the contractor. Examples of such causes include acts of God, civil dis- turbances, fire, war, or floods; note that some clauses specifically exclude labor-related incidents, such as strikes or work stoppages. AA. Additional Clauses Consideration should be given to having provisions on severability, which regulate what happens to the rest of the contract if one or more provisions are or be- come ineffective or infeasible; on amendment, which spell out how the contract can be amended; on interpre- tation, jurisdiction, and venue; on how the contract is to be interpreted and in what jurisdiction; and on waiver of terms and conditions, which spells out a process for that. CONCLUSION Every indication is that the recent worldwide eco- nomic downturn’s impact on state and local government budgets will be long lasting and will require efforts on the part of public entities to cut costs. The use of out- sourcing is thus likely to be considered more frequently among public transit systems. This digest explains how recipients of federal transit assistance from the FTA interested in considering outsourcing certain activities must first make a careful analysis of the potential out- sourcing’s impact from a labor perspective, discusses typical contractual terms as well as those required by the FTA to protect the federal interest, and offers guid- ance on how the procurement documents should be de- signed.