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 (DFARS).
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
- 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
- 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
- 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
- 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 (Rights in Technical Data—Noncommercial Items) and DFARS 252.227-7014 (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
- 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
- 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 60 days to correct or justify the marking
- Wait for the contractor’s response before acting
If the contractor corrects the marking within 60 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
- The contractor loses the ability to restrict government rights
However, DFARS 252.227-7013(f) and 252.227-7014(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
- 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
- Inconsistent markings undermine the contractor’s credibility
Best practice: Use 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.
The Identification Requirement. DFARS 252.227-7013 and 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
- Delivery schedules identifying data and applicable rights
Consequences of Failure to Identify. Data not identified at contract formation may be:
- Presumed to be delivered with unlimited rights
- Subject to challenge if later marked with restrictive legends
- 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 Steps:
- Review the contract data delivery requirements carefully
- Identify all technical data and software to be delivered
- Determine which data was developed at private expense and qualifies for restrictions
- List this data specifically in your proposal or in a contract attachment
- Specify 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.
Where to Apply Legends:
- Place legends on the first page or title page of documents
- Include legends 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
- Include legends in file headers or metadata for electronic deliveries when appropriate
When to Apply Legends:
- Mark data before initial delivery to the government
- 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:
- 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
- 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(c) and 252.227-7014(f) establish procedures for these challenges.
Grounds for Challenge. 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
- The data does not qualify for the asserted restrictions
Challenge Procedures:
- The government provides written notice to the contractor specifying the basis for challenge
- The contractor has 60 days to respond, providing evidence supporting the restrictive marking
- The government reviews the contractor’s response and makes a determination
- If the government determines the marking is unjustified, the contractor can appeal under the Contract Disputes Act
Contractor Response to Challenges:
- 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
- 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
- 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 60 days with corrected legends
- Provide explanation of why the correction is appropriate
- 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
- 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 (for example, limited rights when government purpose rights should apply), treat this as a nonconforming marking
- Provide the correct legend in response to government notice
- 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/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
- 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
- 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 (title pages, individual pages, media containers)
- Retain copies of delivered data showing how it was marked
- 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
- 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:
- Competitors may obtain access to your proprietary information through FOIA requests or government disclosure
- Technical approaches and methodologies you developed at private expense may become publicly available
- Pricing information and cost structures may be disclosed to competitors
Reduced Revenue Opportunities:
- If the government obtains unlimited rights, it can authorize competitors to use your data
- Follow-on contracts or commercial applications may be jeopardized
- Licensing opportunities are lost when data enters the public domain
Contractual and Legal Disputes:
- Disputes over data rights are costly and time-consuming
- Improper marking can lead to challenges requiring extensive documentation and legal support
- 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. 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.