Government’s Right to Disclose Proprietary Information under “Limited Rights” License Expanded under New DFARS Amendment

5.23.2013 - Posted in E&B Alerts – Government Contracts

On May 21, 2013 the Department of Defense adopted a final amendment to the Defense Federal Acquisition Regulation Supplement (DFARS) implementing § 821 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 11-84). Under § 2320, the Government is granted a "limited rights" license that prohibits it from distributing proprietary technical data of contractors. The limited rights license historically had two exceptions: (1) the "type" exception, allowing disclosure of data that is effectively non-proprietary; and (2) the "special needs" exception, allowing disclosure for certain important Government functions (e.g. emergency repair and overhaul). DFAR §§ 2320(a)(2)(C) and (D).

Section 821 adds an important third exception to the Government’s limited rights license, authorizing the Government to disclose proprietary technical data it received under a contract to certain third-party support contractors. The disclosed information may be used by the support contractor only to advise and provide technical assistance to the Government pursuant to the original contract. For example, if the Government is contracting for a computer program that will need to be adapted to an existing program, the amendment authorizes the Government to engage a third-party support contractor and disclose to it necessary proprietary technical information to facilitate the adaptation.

The amendment is based on an interim rule enacted in March 2011 (76 Fed. Reg. 11363) and the subsequent public comments. One of the key protections offered to the contractor is that the support contractor and its employees must sign use and non-disclosure agreements (NDAs) before any information may be disclosed. DFARS § 252.227-7025. Contractors are expressly authorized to enforce the NDAs through a direct cause of action for any NDA breach. DFARS § 252.227-7025(c). However, the NDAs are not without limitation; for example, the contractor has no authority to require the support contractor to agree to any additional terms or conditions not provided for in the statute. See DFARS § 252.227-7025.

The amendment contains a number of changes from the interim rule. For example, the support contractor is now required to notify the Contractor within thirty days of the time that information is released to the support contractor. DFARS § 252.227-7025(b)(5)(iii). "Restricted rights" was redefined to limit information use to be consistent with the authorization granted the Government. See, e.g., DFARS 252.227-7014(a)(15)(v)(D), (vi)(C), and (vii). The term "authorized person" has been eliminated and replaced with more definitive text. See, e.g., DFARS § 252.227-7014(a)(15)(vii) (permitting a support contractor to "release or disclose the computer software to a person authorized to receive restricted rights computer software. . . .").

Details and information about the amendment can be found at the Federal Register. If you have any questions, please visit us at our Website, or email Jeff H. Eckland at mailto:[email protected]or Mark J. Blando at [email protected].