In late November 2022, the Armed Services Board of Contract Appeals (ASBCA) ruled that the U.S. Government can mount a validation challenge against proprietary markings on commercial data developed exclusively at private expense and also force the removal of restrictive markings from certain commercial data as unjustified.

The case[1] involved a contract between the Air Force and CymSTAR, LLC. (CymSTAR), the prime contractor. However, the data rights issues concerned CymSTAR’s subcontractor, FlightSafety International, Inc. (FlightSafety). In September 2017, CymSTAR won a Task Order contract to provide operations, maintenance, and sustainment services for the C-5 Aircrew Training System. CymSTAR subcontracted with FlightSafety to supply and install a visual system replacement for the weapon system trainers. The subcontract explicitly stated that FlightSafety-provided items are commercial products. It included Defense Federal Acquisition Regulation Supplement (DFARS) 252.227-7015 Technical Data – Commercial Items and DFARS 252.227-7037 Validation of Restrictive Markings on Technical Data. Both of these contract clauses flowed down from the prime contract as required. The subcontractor identified the 21 drawings (technical data) that it provided to the Government as proprietary and claimed that the Government had only “limited rights” in the data based on exclusive private expense development of the data.

Accordingly, FlightSafety placed restrictive markings, including the word “proprietary,” on the delivered data. The Government did not dispute that the drawings were developed exclusively at private expense and were commercial technical data. Nonetheless, in July 2018, the Government disapproved of the markings as “non-conformal proprietary markings” and ordered their removal. FlightSafety declined to remove the markings but did agree to allow the Government to disclose the data per DFARS 252.227-7015(b)(3)(ii)[2] and (iii)[3]. Additionally, it suggested an alternate restrictive marking that the Government found to be no more acceptable than the previous markings.

The Air Force challenged the restrictive markings under the authority of DFARS 252.227-7037, asserting that FlightSafety’s technical data constituted operations, maintenance, installation, and training (OMIT) data to which the Air Force was entitled to unrestricted rights under DFARS 252.227-7015(b)(1)(iv). Even though FlightSafety claimed the data involved is commercial data, it did not dispute that three drawings consisted of OMIT data. Further, sometime during its appeal, FlightSafety reached a partial settlement with the Government, agreeing to treat the remaining 18 drawings as if they were OMIT data under DFARS 252.227-7015(b)(1). The effect was that all 21 drawings that FlightSafety delivered to the Government were considered OMIT data. However, while admitting that all of its drawings were OMIT data, FlightSafety, nonetheless, claimed that the Government could not challenge the proprietary marking because the commercial data had been developed exclusively at private expense and the Government could not show otherwise. It further claimed that the proprietary marking on the commercial data still allowed the Air Force to use the data for OMIT purposes; therefore, the Government had no reason to object to the marking.

In June 2020, the Air Force’s contracting officer (CO) denied the claims of FlightSafety who then appealed the CO’s denial to the ASBCA in August 2020. The following addresses the two technical data rights-related questions and how the Board ruled on each.

PROTEST

Under the validation clause, DFARS 252.227-7037, can the Government mount a challenge against the validity of restrictive legends on technical data even if the Government does not dispute that the data in question has been developed exclusively at private expense? The Board’s final decision, “Yes.”

FlightSafety cited DFARS 252.227-7037(b)(1) – presumption regarding development exclusively at private expense – to support its position. They stated that the CO must presume that asserted restrictions are justified if the items to which the technical data pertains have been developed exclusively at private expense. The Air Force countered that this provision applies only to challenges if rights restrictions are based on the source of funding for the development of the technical data and does not prohibit challenges to restrictive markings placed on certain types of the data, such as OMIT data.

The Board applied the plain meaning rule of contract interpretation and, giving preference to interpretation that gives meaning to all parts of the contract over one that leaves a part of the contract useless and void, read -7037(b)(1) as a part of the whole of the clause and the contract in which it is included. Consequently, the Board agreed with the Air Force. It determined that DFARS 252.227-7037 indeed permits the Air Force to mount such a challenge regardless of whether FlightSafety developed exclusively at its own private expense the technical data pertaining to the commercial items. It cited DFARS 252.227-7037(e)(1)(i), which requires the CO’s challenge letter to state the specific grounds for the challenge as “making no sense if the contracting officer could only challenge the funding source.” That is, if the funding source were the only allowed basis for a challenge, then there would be no need for the contracting officer to lay out the specific grounds, as the grounds will already be understood to be the funding source.

The Board pointed out further that there are other types of reasons for challenging a restrictive marking of privately-developed technical data, such as restrictive markings on data that is already publicly available (such as by previous inadvertent release of the data with no restrictive marking), even if the data had been developed exclusively at private expense.

Is FlightSafety’s restrictive marking on its commercial OMIT data appropriate? The Board’s final decision, “No.”

Contrary to its initial position that 18 of the drawings were detailed manufacturing or process data, FlightSafety agreed through a partial settlement with the Government that all of the delivered drawings, including the 18, were OMIT data. Nonetheless, it maintained restrictive markings on them. FlightSafety claimed the Government’s rights in the commercial data under DFARS 252.227-7015(b)(2) excluded the right to use the data to produce additional quantities of the commercial item. It further claimed that disclosure to outside entities without FlightSafety’s written permission was prohibited except in limited circumstances. The Air Force asserted that under DFARS 252.227-7015(b)(1)(iv), it was entitled to unrestricted rights to the commercial OMIT data in all cases, including using the data for manufacturing additional quantities of the commercial items if the Government wished to do so and was capable of doing so just with the OMIT data.

Once again, the Board applied the plain language rule of interpretation of DFARS clauses and contracts to give meaning to each provision. Consequently, it concluded that the Commercial Technical Data clause permits the Air Force to produce additional quantities of the relevant item using the data to which the Government has unrestricted rights. It noted that the clause places no limit on unrestricted rights license that comes with OMIT data delivered to the Government. It agreed with the Air Force that the prohibition against manufacturing additional items applies only to data covered by -7015(b)(2) but not to the data listed as being subject to (b)(1). OMIT data is specifically covered by -7015(b)(1)(iv).

Having concluded that both the commercial and non-commercial technical data clauses give the Government unrestricted rights or unlimited rights in some types of data developed exclusively at private expense, such as OMIT data, the Board determined that the commercial restrictive marking on FlightSafety’s commercial OMIT technical data delivered to the Government is inconsistent with the unrestricted rights that Air Force obtained under the contract. It, therefore, declared the restrictive marking to be unjustified. Even though contractors used commercial restrictive markings to notify users of proprietary data, they could not use such markings to prevent the Government from exercising its rights. The Board found the various phrasings of the restrictive markings[4] used by FlightSafety to contradict the unrestricted rights that the Government acquires in commercial OMIT data and declared that such markings must be removed.

Further, the Board agreed with the Air Force that the copyright notice appearing in the restrictive marking “encumbers the Government’s unrestricted rights” to the OMIT data because the Commercial Technical Data clause includes a copyright license to the Government for the technical data in question. It relied on the Federal Circuit’s decision in Boeing v. Secretary of the Air Force[5] to hold that FlightSafety may not include a copyright notice applicable to the Air Force.

In summary, under the data rights validation clause DFARS 252.227-7037, the U.S. Government had the right to challenge restrictive markings on commercial technical data without contesting its exclusive private expense development. Further, the Government acquired unrestricted rights in all commercial OMIT data and could use such data even to produce additional quantities of the commercial item to which the OMIT data pertains.

TAKEAWAY

A government contractor providing commercial supplies and services to the Government is advised to make sure that none of the types of data covered by DFARS 252.227-7015(b)(1) contains “detailed manufacturing or process data.” DFARS defines this as “technical data that describe the steps, sequences, and conditions of manufacturing, processing or assembly used by the manufacturer to produce an item or component or to perform a process.” In other words, make sure that any information, not publicly available, that can enable or be useful to someone else in manufacturing the supplies or performing the services, is not included in form, fit, and function (FFF) data or in OMIT data. Closely review your FFF and OMIT data to ensure that they contain only true FFF data or OMIT data and no information that can possibly aid in the production of additional quantities of the supplies or performance of the contracted services.

[1] Appeal of FlightSafety International, Inc., ASBCA No. 62659
[2] This paragraph addresses disclosure of commercial technical data by the Government to covered Government support contractors with disclosure notification to the contractor.
[3] This paragraph addresses the requirement of a non-disclosure agreement from the receiving covered Government support contractor.
[4] “Flight Safety Proprietary,” “Proprietary Information,” “This document, including the information contained herein, is confidential and/or proprietary to FlightSafety Internation Inc.”
[5] The Boeing Company v. Secretary of the Air Force, 983 F3d 1321 (2020).