2020 NDAA: Contractors Supplying Technical Data to Receive Protection of Data Rights During Challenges, Again

The draft 2020 National Defense Authorization Act, if enacted, will revoke the government’s ability to exercise rights in technical data during a supplier’s challenge to the contracting officer’s decision as to the validity of the asserted “use or release restrictions” on that data. It would reinstate the previous safeguard afforded to data suppliers, allowing them to protect their valuable–and often irreplaceable–intellectual property rights unless and until the contracting officer’s decision to remove the restrictions is sustained.

Keep in mind, this is just a draft provision, as the Senate version of the 2020 NDAA doesn’t contain the provision discussed in this blog.

Section 812 of the draft bill will repeal Section 866 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019. Section 866 was the amendment to 10 U.S.C. § 2321(i) that extended the government’s authority to exercise rights in technical data to the time prior to the final disposition of challenges to the supplier’s asserted “use or release restrictions” in that data.

These “use or release restrictions” (as set forth in 10 U.S.C. § 2321) limit the federal government’s rights to use, release, and disclose a contractor’s technical data and to “permit the use of such technical data by persons outside the Government.” Any contractor supplying technical data to the government under a contract at any tier may assert these restrictions, subject to certain terms and conditions.

Where “reasonable grounds exist to question the current validity of the asserted restriction,” the Secretary of Defense may challenge them with the contracting officer. And after the contracting officer’s decision on the restrictions, the supplier may submit a claim again asserting their validity.

Prior to the Section 866 amendment in the 2019 NDAA, the government could only exercise rights in this challenged technical data “upon final disposition” of the supplier’s claim—and only if the contracting officer’s decision was sustained. The Section 866 amendment removed the protection during that time frame by adding the following provision under 10 U.S.C. § 2321(i):

Upon filing of a suit or appeal under the contract dispute statute by a contractor or subcontractor in an agency Board of Contract Appeals or United States Claims Court related to a decision made by a contracting officer under subsection (g), the Secretary of Defense, or a Secretary of a military department for programs for which milestone decision authority has been delegated, on a nondelegable basis, may, following notice to the contractor or subcontractor, authorize use of the technical data in dispute if the Secretary determines in writing that compelling mission readiness requirements will not permit awaiting the final decision by the agency Board of Contract Appeals or the United States Claims Court.

This amendment had the potential to result in windfalls to the U.S. government. Given the finicky nature of some intellectual property (disclosure restrictions for patents, confidentiality requirements for trade secrets, etc.), certain rights could be lost entirely if the government uses and releases the data at will while those rights are being vindicated. And even where a supplier’s restriction is held valid in the final disposition, he or she could end up surrendering certain intellectual property rights in the process.

Fortunately, Section 812 of the draft 2020 NDAA would repeal this provision. It restores the previous language, which only allows the government to exercise rights in technical data upon the final disposition of a sustained challenge. This will significantly limit the government’s current rights to technical data and will provide more effective protection for government contractors supplying their valuable intellectual property to the federal government.

In essence, this proposed provision would limit the government’s rights and enhance the rights of contractors. Sure, the FAR, DFARS, and other applicable regulations provide avenues for contractors to protect their rights in the data they deliver, but only when strict notification and marking requirements are met. And if the government can simply use, release, and allow others to use a contractor’s properly protected and validly restricted technical data while the contractor is defending its rights, those protections may be meaningless. This provision, if enacted, would restore the prior protection of contractors’ data rights to prevent that from happening.

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