Federal government contracts, particularly defense contracts, frequently require contractors to deliver technical data and computer software. The government’s rights to use, modify, and disclose this data depend critically on how contractors mark delivered materials. Improper or missing markings can result in the government obtaining broader rights than intended, potentially compromising contractors’ proprietary information and competitive position. At Pannier Law, P.C., we help defense contractors understand and protect their data rights under the Defense Federal Acquisition Regulation Supplement.
Categories of Government Data Rights
The DFARS establishes different categories of rights the government can have in technical data and computer software. Understanding these categories is essential to proper marking.
Unlimited rights allow the government to use the data for any purpose, release or disclose the data to anyone without restriction, and permit others to use the data without limitation. The government typically obtains unlimited rights in data developed exclusively with government funding or data that does not qualify for limited or restricted rights.
Government purpose rights allow the government to use the data for any government purpose, release or disclose the data to other government contractors for government purposes, and release the data outside the government after a specified period, typically five years unless extended. Government purpose rights typically apply to data developed with mixed government and private funding.
Limited rights for technical data restrict the government to using the data internally and not releasing or disclosing the data outside the government without contractor permission. Limited rights apply to technical data developed exclusively at private expense that pertain to items, components, or processes developed exclusively at private expense.
Restricted rights for computer software limit the government to using the software on government computers, making backup copies, and not modifying, reproducing beyond authorized copies, or disclosing the software without permission. Restricted rights apply to commercial computer software and computer software developed exclusively at private expense.
Required Legends for Data Rights Protection
DFARS 252.227-7013 addressing rights in technical data for noncommercial items and DFARS 252.227-7014 addressing rights in noncommercial computer software and noncommercial computer software documentation specify the precise legends contractors must use to assert rights restrictions. These clauses provide exact text for legends asserting government purpose rights, limited rights in technical data, restricted rights in computer software, and specially negotiated license rights. Contractors must use these legends exactly as specified in the DFARS clauses. Variations or custom markings do not effectively restrict government rights.
Nonconforming Markings versus Unmarked Data
The DFARS distinguishes between nonconforming markings and completely unmarked data, with different consequences for each.
Nonconforming markings occur when contractors use markings that vary from the prescribed DFARS legends, include additional restrictive terms beyond DFARS legends such as proprietary or confidential, use outdated or incorrect legend language, or apply incorrect legends for the type of rights intended. When data is delivered with nonconforming markings, the government must notify the contractor of the nonconforming marking, provide the contractor sixty days to correct or justify the marking, and wait for the contractor’s response before acting. If the contractor corrects the marking within sixty days, the government will treat the data according to the corrected legend. If the contractor fails to respond or cannot justify the marking, the government may correct the marking itself, but the contractor does not automatically lose all rights in the data.
Unmarked data refers to technical data or software delivered without any restrictive legend. The consequences are more severe. The government automatically obtains unlimited rights in unmarked data, no notice to the contractor is required, and the contractor loses the ability to restrict government rights. However, DFARS 252.227-7013 subdivision (f) and DFARS 252.227-7014 subdivision (c) provide limited relief for inadvertent omissions. Contractors can request permission to add proper legends if the omission was inadvertent. Requests must be made within six months of delivery. The government will deny permission if the data has already been released or disclosed without restriction. Even if permission is granted, the government retains rights it obtained before the legend was added.
The distinction is critical. Nonconforming markings can be corrected with government cooperation, while unmarked data may result in permanent loss of rights unless corrected within the six-month window before any disclosure.
Multiple or Conflicting Markings
Contractors sometimes apply both authorized DFARS legends and additional restrictive terms such as proprietary, confidential, or company private. This practice creates problems. When data bears both an authorized DFARS legend and additional restrictive markings not authorized by the DFARS, the additional markings are considered nonconforming, the government may challenge the additional markings, the contractor must either remove the additional markings or justify them, and if not justified, only the authorized DFARS legend remains effective.
Multiple conflicting DFARS legends on the same data also create problems. The government may treat the marking as nonconforming, the contractor must clarify which legend applies, and inconsistent markings undermine the contractor’s credibility. Best practice involves using only the single appropriate DFARS legend without additional restrictive terms.
Identifying Data for Delivery with Restrictions
Beyond proper marking, contractors must identify data subject to restrictions at contract formation. DFARS 252.227-7013 and DFARS 252.227-7014 require contractors to identify, to the extent practicable, technical data or computer software to be delivered with other than unlimited rights. This identification typically occurs in the contractor’s proposal or offer, attachments to the contract specifically listing restricted data, or delivery schedules identifying data and applicable rights.
Data not identified at contract formation may be presumed to be delivered with unlimited rights, subject to challenge if later marked with restrictive legends, or difficult to defend against government challenges to restrictive markings. Early identification provides notice to the government about what data will bear restrictions and establishes the basis for those restrictions.
Practical identification involves carefully reviewing the contract data delivery requirements, identifying all technical data and software to be delivered, determining which data was developed at private expense and qualifies for restrictions, listing this data specifically in your proposal or in a contract attachment, and specifying the rights category that will apply to each identified item. Thorough upfront identification prevents disputes and protects contractor rights.
The Marking Process
Proper marking requires attention to detail and consistency throughout contract performance. Legends should be placed on the first page or title page of documents and included on each page containing restricted information if only portions of a document are restricted. Apply legends to the medium’s external container when delivering electronic media and include legends in file headers or metadata for electronic deliveries when appropriate.
Mark data before initial delivery to the government and apply legends to all copies delivered, including drafts if submitted for government review. Ensure legends appear on data delivered to the government directly and data delivered to other contractors working on government contracts.
Common marking errors to avoid include using generic terms like proprietary instead of DFARS legends, failing to mark every page of restricted documents, using outdated legend language from superseded DFARS versions, inconsistent marking across related documents, and marking data as restricted when the government funded its development, resulting in unjustified markings. Systematic marking procedures and quality control reviews help prevent these errors.
Government Challenges to Restrictive Markings
The government may challenge restrictive markings it believes are unjustified. DFARS 252.227-7013 subdivision (c) and DFARS 252.227-7014 subdivision (f) establish procedures for these challenges. The government may challenge markings when it believes data was developed with government funding and should not bear restrictive markings, the asserted rights category is more restrictive than the government’s actual rights, the markings are inconsistent with other information showing government funding or rights, or the data does not qualify for the asserted restrictions.
Challenge procedures involve the government providing written notice to the contractor specifying the basis for challenge, the contractor having sixty days to respond providing evidence supporting the restrictive marking, the government reviewing the contractor’s response and making a determination, and if the government determines the marking is unjustified, the contractor can appeal under the Contract Disputes Act.
Contractor responses to challenges should provide documentation showing the data was developed at private expense, present evidence of the costs incurred in private development, show that the data qualifies for the asserted rights category under DFARS standards, and submit declarations from technical personnel with knowledge of the data’s development. During challenges, the government must continue treating the data according to the restrictive markings while the challenge is pending. The government cannot act on the data as though it has greater rights until the challenge is finally resolved, and contractors retain their asserted rights unless and until a final determination goes against them.
Correcting Marking Errors
When contractors discover marking errors after delivery, options exist for correction depending on the circumstances. For nonconforming markings, wait for government notice of the nonconformity, respond within sixty days with corrected legends, provide explanation of why the correction is appropriate, or if the government has not yet noticed the error, proactively notify the government and request permission to correct.
For unmarked data, determine whether the omission was inadvertent, submit a request to add the proper legend within six months of delivery, explain why the omission was inadvertent rather than intentional, provide the proposed legend to be added, and understand that the request will be denied if the data has been released or disclosed. For incorrect legends, if a wrong DFARS legend was used, treat this as a nonconforming marking, provide the correct legend in response to government notice, and explain the circumstances of the error. Prompt action when errors are discovered increases the likelihood of successful correction.
Best Practices for Protecting Data Rights
Defense contractors should implement systematic practices to protect data rights throughout the contract lifecycle. At proposal and contract formation, carefully review data delivery requirements in solicitations, identify all technical data and software you will deliver, determine what rights restrictions apply to each deliverable based on development funding, list restricted data items in your proposal with rights categories specified, and negotiate for appropriate restrictions when solicitation terms are unclear or inadequate.
During contract performance, establish marking procedures ensuring all deliverables receive proper legends, train personnel on DFARS legend requirements and marking procedures, implement quality control reviews of data before delivery, maintain records of data development costs to support restrictions, and document development circumstances for data bearing restrictive markings.
When delivering data, verify that proper legends are applied before delivery, ensure legends appear on every required location including title pages, individual pages, and media containers, retain copies of delivered data showing how it was marked, and maintain delivery records showing what was delivered when and to whom.
In response to government actions, respond promptly to notices of nonconforming markings, provide substantive justification when the government challenges restrictive markings, request correction opportunities when unmarked data is discovered within six months, and escalate to formal dispute resolution when necessary to protect important data rights.
The Consequences of Inadequate Data Rights Protection
Failing to properly protect data rights can have serious business consequences. Loss of competitive advantage may occur when competitors obtain access to your proprietary information through Freedom of Information Act requests or government disclosure, technical approaches and methodologies you developed at private expense become publicly available, or pricing information and cost structures are disclosed to competitors.
Reduced revenue opportunities result when the government obtains unlimited rights and can authorize competitors to use your data, follow-on contracts or commercial applications are jeopardized, or licensing opportunities are lost when data enters the public domain. Contractual and legal disputes over data rights are costly and time-consuming. Improper marking can lead to challenges requiring extensive documentation and legal support, and relationships with government customers may be strained.
Strategic Guidance for Defense Contractors
Data rights protection in defense contracting requires understanding DFARS requirements, implementing systematic marking and identification procedures, maintaining documentation of development funding and circumstances, and responding effectively to government challenges and correction opportunities. Success depends on attention to detail throughout the contract lifecycle from initial proposal through final data delivery. Contractors must balance the need to protect proprietary information with their obligations to provide the government appropriate rights based on development funding.
At Pannier Law, P.C., we provide comprehensive guidance on data rights issues including reviewing solicitations to identify data rights implications, advising on data rights strategies during proposal development, establishing marking and identification procedures, responding to government challenges to restrictive markings, resolving data rights disputes through negotiation or litigation, and implementing compliance programs for DFARS data rights requirements. Our experience encompasses the full range of data rights issues facing defense contractors.
For guidance on your government contracting matters, contact us at (310) 971-5093 or visit www.pannierlaw.com.
Disclaimer: This article provides general information only and does not constitute legal advice or create an attorney-client relationship. For advice tailored to your specific circumstances, consult with a qualified attorney.
About the Author: William Pannier, founder of Pannier Law, P.C., has over 20 years of experience representing clients in government contract matters.
