In our last post on intellectual property and government contracts, we went over a basic discussion about data rights and then addressed the matter of unlimited data rights for the government. As discussed, unlimited data rights basically give the government free rein to do as they wish with the data. More importantly, the FAR provides that such unlimited data rights are the government’s default rights. But there is a way to limit the government’s rights: limited data rights.
NOTE: This only concerns contracts regulated by FAR. If you’re dealing with the Department of Defense, DFARS data rights clauses will also apply. It has similar provisions, but they also differ in important ways. We’ll talk about limited rights under DFARS in a later post.
While there are times where giving the government unlimited data rights is expected and unavoidable, contractors obviously don’t want to give the government the ability to sell, distribute, and disclose important company information such as trade secrets, business plans, software code, and the like. Fortunately, there is a means to limit the government’s rights to a contractor’s preexisting data, and those are “limited data rights” and “restricted computer software.” For this post, we’ll look at just limited data rights.
Limited Data Rights
It’s important to explain what sort of data this applies to first. FAR 27.401 provides:
“Limited rights data means data, other than computer software, that embody trade secrets or are commercial or financial and confidential or privileged, to the extent that such data pertain to items, components, or processes developed at private expense, including minor modifications. (Agencies may, however, adopt the following alternate definition: Limited rights data means data (other than computer software) developed at private expense that embody trade secrets or are commercial or financial and confidential or privileged.”)
Basically, if the contractor produced the data on its own, completely outside of some government funded contract, and the data is something like trade secrets or is something a company would keep confidential, that data can be limited rights data. If it is made in the context of a government contract or the data isn’t trade secrets, customer lists, or something along those lines, limited rights can’t apply.
So, what are limited rights exactly? FAR 27.401 states “[l]imited rights means the rights of the Government in limited rights data as set forth in a Limited Rights Notice.”
A little digging, however, takes us to FAR 27.404-2, “Limited Rights Data and Restricted Computer Software.” Here, the regulation explains that, generally, limited rights means that the contractor may withhold the data from the government and provide form, fit, and function data instead. This rule applies when FAR 52.227-14 is included in the contract in its basic form. However, if the government nonetheless needs the data, an alternate version of FAR 52.227-14, “Rights in Data – General” named Alternate II will be used instead. With Alternate II, the government can require delivery of the limited rights data. However, government can’t reproduce or otherwise disclose or distribute the data in question without the contractor’s permission or if for purposes expressly permitted in the limited rights data notice (more on that in a bit)
So, it is vital to check which version of FAR 52.227-14 is in your contract before you decide to withhold or deliver limited rights data to the government. If your contract involves the production or sharing of data, FAR 52.227-14 will be (or at least should be) in it.
Getting Limited Rights Protections
If your contract includes the basic form of FAR 52.227-14, you simply need to withhold the data you believe is limited rights data, identify which data you are withholding to the contracting officer, and provide applicable form, fit, and function data instead.
If the contract includes the Alternate II version of FAR 52.227-14, your contract either requires you to deliver limited rights data, or the contracting officer might request you deliver limited rights data that you initially withhold (or both). If the contract itself is requiring delivery of the limited rights data, you cannot withhold it, you must send it. If the contract does not require you to deliver the limited rights data in question, you should withhold it, but if the contracting officer requests you deliver it, you must comply. Regardless whether the contract requires delivery or the officer requests delviery, there is an absolutely essential procedure you must follow.
FAR 52.227-14, Alternate II, states that the contractor must deliver the data with a Limited Rights Notice, which is helpfully provided:
(a) These data are submitted with limited rights under Government Contract No. _______ (and subcontract _______, if appropriate). These data may be reproduced and used by the Government with the express limitation that they will not, without written permission of the Contractor, be used for purposes of manufacture nor disclosed outside the Government; except that the Government may disclose these data outside the Government for the following purposes, if any; provided that the Government makes such disclosure subject to prohibition against further use and disclosure: [Agencies may list additional purposes as set forth in 27.404–2(c)(1) or if none, so state.]
(b) This notice shall be marked on any reproduction of these data, in whole or in part.
Omitted Notices and Incorrect Notices
In whatever format you provide the data to the contracting officer on, this notice needs to be present in some way. Do not omit this notice. The clause notes that data without any restrictive markings will be treated as giving the government unlimited rights to it. While you can get that corrected if you make a request within six months after delivery, the government is not liable for anything that happens until that correction is actually made.
Additionally, only use the wording from FAR 52.227-14, Alternate II, provided above. Simply including a statement or tag stating “These are limited rights data” will result in the marking being considered incorrect. While FAR 52.227-14 allows contracting officers to correct such markings or permit correction by you at your expense, the officer may also simply treat it as if the data omits markings all together. Furthermore, if the officer believes that the data in questions is not subject to limited rights, the officer may return the data or ignore the markings. If they perform the latter, they must make a written inquiry within 60 days to you to give you a chance to justify that the data is subject to limited rights, and the government may be liable in the meantime for any disclosures if it turns out the data that is subject to limited rights.
As we’ve noted before, intellectual property law is tricky, and that is even more so the case in government contracts. In our next review of the intellectual property rights realm in government contracting, we’ll be looking at restricted computer software, a similar concept, but one with some important distinctions.
Questions about this post? Email us or give us a call at 785-200-8919.