(Editor’s Note. The rights of the Governments to use, duplicate, modify or disclose the technical data and computer software that you create or deliver to either the government or prime contractor can significantly affect your profitability. If you are a developer of technical data or software, you want to limit the government’s rights to your proprietary information to, for example, prevent others from obtaining that information to bid on other government contracts or use it in the private sector; if you are a replicator that manufactures parts and components but not a designer then you want to maximize your ability to obtain proprietary information. Though some issues can be quite complex, recent changes in these rights have created the need to provide at least some basic understanding of this area. We have used an article written by Andrea Mayner, Director of Contracts at Trident Data Systems, in the August 1997 issue of Contract Management as the basis for explaining the rights and an article by David Burgett, Daniel Sweeny and Greg Kunzi Papers of the law firm of Hogan & Hartson L.L.P. in the October 1995 issue of Briefing Papers as well as the Mayner article for recommended actions. This article is intended as a basic introduction and further research may be warranted.)

First, lets clear up a couple of misconceptions about technical data and computer software rights (when we refer to both we will use the term "data rights"). First, data rights refer to the government’s right to use the data or software not the contractor’s right to use it. Though the government’s rights may vary, the contractor may freely use the same data and software for its commercial purposes. Second, data rights are not about ownership but the type of licenses the Government buys. The government buys license rights not ownership.

The rights we will be discussing will primarily be those issued by the Department of Defense in June 1995 in the Defense Federal Acquisition Regulation Supplement that replaced the "interim" rule in effect since 1988. These newer rules are intended to be simpler and more favorable to the originating contractor by providing greater opportunity for it to retain proprietary rights and restrict those of the government. The data rights we will discuss pertain largely to noncommercial technical data and software. Though we will discuss what qualifies as "commercial" there is little discussion of commercial data rights which under the new rules provide that commercial data and software will be purchased under the same licenses offered to the public.

Definitions

Technical Data. DFARS 252.227-7013 addresses technical data and states all "recorded information, regardless of the form or method of the recording, of a scientific or technical nature". This category of data is commonly recorded data related to contract items, components or processes that tell how to use, maintain, modify or manufacture a product. Examples include design drawings, specifications, tolerances, manufacturing drawings, maintenance handbooks and operating instructions. Ordinarily the most important type of technical data is that which is useful in manufacturing the product and if control is lost, the originator will lose its advantage over competitors in both the government and commercial marketplace.

Data not considered technical data is user information that is valuable only when used in conjunction with the product and is usually impossible to control because of broad dissemination with the product. Also, in contract to useful manufacturing data is that related to form, fit and function data that enables the user to use the item, maintain it or integrate it into other products or systems but not to manufacture it.

DFARS 252.227.7014 address computer software which means "computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, formulae or related material that would enable the software to be reproduced, recreated or recompiled". It does not include computer databases or software documentation.

Source of Funding

The type of rights given to the government is now based on the source of funding. When sourcing is exclusively government, the government obtains "unlimited rights" for "developed" technical data and software. When sourcing is exclusively private, then the government has "limited rights" over technical data and "restricted rights" over software. When funding is mixed, the government has "government purpose rights" over both technical data and computer software.

The new rules limit exclusive government funding to that which is derived from a contract and did not include any private expense. Exclusive government funding refers only to direct costs associated with performance of a government contract. Exclusive private funding now refers to those costs charged indirectly to indirect cost pools. If it is the contractor’s normal practice to charge such costs as manufacturing engineering, design engineering and development of software costs to indirect cost pools, then the resulting source of funds will be considered exclusively private. The new rules will also permit the common practice of having subcontractors develop new items and components at their own expense and then sell them to the prime contractor. Mixed funding means partial private and partial government funding with no mention as to percentage.

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