On May 22, 2013, the Department of Defense finalized an interim rule (which was published over two years ago on March 2, 2011), with some changes, that permits the government to give government support contractors access to the technical data of other contractors. Enactment of this provision was required by Section 821 of the National Defense Authorization Act for Fiscal Year 2010. The final rule is effective immediately.

Under the Defense Federal Acquisition Regulation Supplement (“DFARS”), contractors who privately develop technical data that will be used in performance of a contract may restrict the government’s rights to “limited rights” or, in the case of computer software, “restricted rights.” As described in the DFARS Part 227, these restrictions generally limit the government’s use of this technical data to only in-house use.

Until recently, there were only limited exceptions for when the government could disclose certain information outside the government: (1) a “type” exception, which includes publicly available data or form, fit and function data; and (2) a “special needs” exception for certain critical government activities, such as in emergency situations. Now there is a third exception. The government may now release technical data to a “covered government support contractor” for the purpose of receiving independent and impartial advice or technical assistance.

Contractors are not left without certain protections and remedies. First, prior to any disclosure to a support contractor, the government must give notice to the contractor. Contractors may then require the support contractors to enter into a non-disclosure agreement (“NDA”) directly with the contractor, although the contractor may waive the requirement for an NDA. By obtaining an NDA directly from the support contractor, and as stated in the text of the clause, the contractor is able to enforce its rights to its technical data directly against the support contractor. The NDA must address the restrictions on the support contractor’s use as described in DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends, but additional terms and conditions may be included if mutually agreed upon by the parties to the NDA. Support contractors should be aware that they have an obligation to ensure that employees understand the disclosure restrictions placed on the proprietary information.

As a reminder, contractors should always be sure they have processes in place to protect their rights in and the value of their proprietary data. It is important to maintain appropriate records to ensure that technical data can be substantiated as privately developed, and it is critical to have processes in place to ensure that technical data is properly marked at all times. Contractors who are informed that their technical data will be transferred to support contractors should be prepared to negotiate NDAs directly with these contractors.

78 Fed. Reg. 30233-30242 (May 22, 2013)