Cubic Defense Applications, Inc.

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of-- )
)
Cubic Defense Applications, Inc. ) ASBCA No. 58519
)
Under Contract No. N00039-03-C-0024 )
APPEARANCES FOR THE APPELLANT: Paul F. Khoury, Esq.
Tracye Winfrey Howard, Esq.
Wiley Rein LLP
Washington, DC
APPEARANCES FOR THE GOVERNMENT: Craig D. Jensen, Esq.
Navy Chief Trial Attorney
David Koman, Esq.
Ellen M. Evans, Esq.
Senior Trial Attorneys
OPINION BY ADMINISTRATIVE JUDGE HARTMAN
ON APPELLANT'S MOTION FOR SUMMARY JUDGMENT
Appellant moves for summary judgment on the ground that the government
"expressly and unambiguously released the claim that is the subject of this Appeal"
when it entered into a "global settlement" with appellant amicably resolving ASBCA
Nos. 56097 and 56288, both of which concerned Contract No. N00039-03-C-0024.
The government opposes appellant's summary judgment motion on the grounds: its
challenge to appellant's data rights assertions here is not barred by the language of the
parties' earlier settlement agreement; the right to challenge data rights assertions by a
contractor is a statutory "right" provided to the Secretary of Defense that cannot be
waived by a contracting officer (CO); and there are genuine issues of material fact
precluding grant of appellant's motion.
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION
During 2003, the Department of the Navy, Space and Naval Warfare Systems
Command (SPAWAR) awarded Contract No. N00039-03-C-0024 (contract), in the amount
of $31,818,433.00 for the design, development, testing, production, integration,
deployment, documentation, engineering technical services and logistical support of a
system meeting the requirements of the AN/USQ-167 Communications Data Link System
(CDLS) to Cubic Defense Applications, Inc. (Cubic). CDLS "is a wideband data link for
the transmission of signal and imagery intelligence data" between a ship and an airborne
military aircraft such as the Global Hawk, U-2, F-18, or P-3. The contract incorporated by
reference various clauses from the Department of Defense Federal Acquisition Regulation
Supplement (DFARS), including: DFARS 252.227-7013, RIGHTS INTECHNICALDATA-
NONCOMMERCIAL ITEMS (Nov 1995); DFARS 252.227-7014, RIGHTS IN NONCOMMERCIAL
COMPUTER SOFTWARE AND NONCOMMERCIAL COMPUTER SOFTWARE DOCUMENTS
(JUN 1995); DFARS 252.227-7015, TECHNICAL DATA-COMMERCIAL ITEMS (Nov 1995);
DFARS 252.227-7019, VALIDATION OF ASSERTED RESTRICTIONS-COMPUTER SOFTWARE
(JUN 1995); and DFARS 252.227-7037, VALIDATION OF RESTRICTIVE MARKINGS
ON TECHNICAL DATA (SEP 1999). (R4, tab 2 at 78,112,241,242)
As part of its 30 September 2002 "proposal" to perform the contract, Cubic submitted
to SPAWAR the following table pursuant to DFARS 252.227-7017, IDENTIFICATION AND
ASSERTION OF USE, RELEASE, OR DISCLOSURE RESTRICTIONS (JUN 1995):
Technical Data or
Name of Person
Computer Software to be Basis for Asserted Rights
Asserting
Furnished With Assertion** Category***
Restrictions****
Restrictions*
CDRL Item A004,
Cubic Defense Systems,
Technical Report- Mixed Funding Limited
Inc.
Studies/Services
CDRL Item A006,
Cubic Defense Systems,
Technical Report- Mixed Funding Limited
Inc.
Studies/Services
CDRL Item A007,
Cubic Defense Systems,
Technical Report- Mixed Funding Limited
Inc.
Studies/Services
CDRL Item AOOZ,
Cubic Defense Systems,
Logistics Management Mixed Funding Limited
Inc.
Information
CDRL Item AOI7,
Cubic Defense Systems,
Baseline Description Mixed Funding Limited
Inc.
Document
CDRL Item AOIG,
Cubic Defense Systems,
Product Drawings and Mixed Funding Limited
Inc.
Associated Lists
CDRL Item AOIL, Cubic Defense Systems,
Mixed Funding Limited
Software Maintenance Plan Inc.
CDRL Item AOIM,
Cubic Defense Systems,
Software Requirements Mixed Funding Limited
Inc.
Specification
CDRL Item AOIN,
Cubic Defense Systems,
System/Subsystem Design Mixed Funding Limited
Inc.
Description
CDRL Item AOIP,
Cubic Defense Systems,
Software Design Mixed Funding Limited
Inc.
Description
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CDRL Item AOIQ,
Cubic Defense Systems,
Software Interface Design Mixed Funding Limited
Inc.
Description
CDRL Item AOIR,
Cubic Defense Systems,
Software Version Mixed Funding Limited
Inc.
Description
CDRL Item AOIS,
Cubic Defense Systems,
Interface Control Mixed Funding Limited
Inc.
Document
CDRL Item AOIT,
Cubic Defense Systems,
Interface Design Mixed Funding Limited
Inc.
Description
Cubic Defense Systems,
CDRL Item AOIU Mixed Funding Limited
Inc.
CDRL Item A009,
Test Plan Computer Cubic Defense Systems,
Mixed Funding Limited
Software Product End Inc.
Items
* For technical data (other than computer software
documentation) pertaining to items, components, or processes
developed at private expense, identify both the deliverable
technical data and each such item, component, or process. For
computer software or computer software documentation identify
the software or documentation.
** Generally, development at private expense, either exclusively
or partially, is the only basis for asserting restrictions. For
technical data, other than computer software documentation,
development refers to development of the item, component, or
process to which the data pertain. The Government's rights in
computer software documentation generally may not be
restricted. For computer software, development refers to the
software. Indicate whether development was accomplished
exclusively or partially at private expense. If development was
not accomplished at private expense, or for computer software
documentation, enter the specific basis for asserting restrictions.
*** Enter asserted rights category (e.g., government purpose
license rights from a prior contract, rights in SBIR data
generated under another contract, limited, restricted, or
government purpose rights under this or a prior contract, or
specially negotiated licenses).
**** Corporation, individual, or other person, as appropriate.
(R4, tab I at 74-76)
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In July 2007, after submitting to the CO a Request for Equitable Adjustment and
Certified Claim in the amount of $6,511,103 contending that Cubic incurred increased costs
and schedule delays as a result of constructive changes arising from specification defects,
and SPAWAR' s failure to approve test plans and procedures and expansion of testing
requirements, Cubic appealed the "deemed" denial of its claim to this Board, which was
docketed as ASBCA No. 56097. During December of 2007, SPAWAR' s CO issued a final
decision asserting a $4,115,001 claim against Cubic for contract relief SPAWAR provided
to Cubic resulting in decreased costs. Cubic again filed an appeal with this Board, and its
second appeal was docketed as ASBCA No. 56288. (R4, tabs 6, 11 at 630-31)
On 24 November 2008, Cubic and SPAWAR officials executed a Stipulation of
Settlement and Agreement (Settlement Agreement) amicably resolving ASBCA
Nos. 56097 and 56288, which provided in part:
WHEREAS, the parties have negotiated and given full
consideration to all matters relating to a compromise and
settlement of all matters contained in ASBCA Nos. 56097
and 56288, as well as all matters and/or claims and
potential matters and/or claims (known or unknown) arising
out of, incidental to, or relating to the Contract;
WHEREAS, in the interest of resolving all matters
relating to ASBCA Nos. 56097 and 56288, as well as all
matters and/or claims and potential matters and/or
claims (known or unknown) arising under or in regard
to the Contract, and under the sound policy of law
favoring the settlement of disputes, the parties
understand and agree that the parties' agreements
herein constitute and represent full consideration for
and satisfaction of any and all matters and/or claims
brought under ASBCA Nos. 56097 and 56288, as well as
all matters and/or claims or potential matters and/or
claims (known or unknown) arising under or in regard
to the Contract.
NOW, THEREFORE, in consideration of the mutual
promises and agreements of the parties hereto, each to the
other, and other valuable consideration, the parties,
intending to be legally bound, hereby agree as follows:
1. Cubic consents to the dismissal with prejudice of
ASBCA No. 56097 ....
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2. The Government consents to the dismissal with
prejudice of ASBCA No. 56288 ....
3. ... [T]he Government will pay Cubic a single, lump-sum
amount of $3,900,000 for complete and final resolution of
ASBCA Nos. 56097 and 56288 ....
4. The parties agree to renegotiate and execute a bi-lateral
modification to Contract Line Item Number (hereinafter
"CLIN") 0012, pursuant to which Cubic shall: (a) upgrade
seven (7) Installation Test Fixtures (hereinafter "ITFs"), to
be provided by the Government to Cubic as
Government-Furnished Property ... for a not-to-exceed price
of$913,749 ....
5. Cubic will resolve, at no cost to the Government, all
issues identified by the Government in SPAWAR Letter
08-154 dated 7 August 2008, including hardware, software,
and firmware retrofits to all CDL systems delivered under
the Contract.... Provided that Cubic meets its commitment
under this Paragraph 5, the Government will not withhold
final payment under the Contract because of this issue
beyond 30 March 2010.
6. Upon Cubic's completion of the work identified in
Paragraph 5 above, the Government will remove any
conditional acceptance concerning the first two CDL
Systems delivered by Cubic under the Contract. ...
7. The Government acknowledges that all data items on
the Contract Data Requirements List (hereinafter
"CORL") previously submitted by Cubic are approved
and that Cubic has no obligation to submit any further
data items with the exception of: (a) Test Reports under
CDRL AOOJ for any remaining hardware deliverables; and
(b) a Test Report documenting the hardware, software, and
firmware retrofits described in Paragraph 5, above.
10. Cubic shall deliver the two INCO kits referenced above
in Paragraph 4 to the Gove1nment by no later than seven (7)
months from execution of the bi-lateral Contract
Modification for CLIN 0012 ....
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11. In anticipation of Contract close-out, the Government
acknowledges that Cubic has fully satisfied all
requirements set forth in Contract Clause B-1 ("Payment of
Fixed Fee Based on Staff Hours") and Contract Clause B-2
("Fee Adjustment Formula") ....
12. The Government, to the extent permitted by law,
releases and saves harmless Cubic, its parent company,
subsidiaries, affiliates, agents, servants, employees,
officials, subcontractors, suppliers, successors, and assigns,
shareholders, and sureties from ASBCA No. 56288 and
any further claim, liability, obligation, appeal, action or
demand, known or unknown, or any other avenue of
relief in connection with, arising out of, incidental to, or
relating to the Contract as of the date this Agreement is
executed. Notwithstanding anything to the contrary,
this release does not extend to any claims related to the
Contract that may arise in the future.
13. Cubic warrants and represents that no other action by
Cubic with respect to the Contract is pending or will be
filed in any court, administrative body, or legislative body
based on any action or inaction by the Government as of
the date this Agreement is executed ....
14. Upon execution of this Agreement, Cubic releases
and saves harmless the Government, including its
officials, officers, enlisted personnel, employees, and
agents from these appeals and from any further claim,
liability, obligation, appeal, action or demand of Cubic, its
subsidiaries, affiliates, agents, servants, employees,
officials, subcontractors, suppliers, successors, and assigns,
shareholders, and sureties from ASBCA No. 56097 and
any further claim, liability obligation, appeal, action or
demand, known or unknown, or any other avenue of
relief in connection with, arising out of, incidental to, or
relating to the Contract (including, but not limited to
claims or appeals for or in regard to alleged delay,
disruption, impact, direct costs and/or cumulative
disruption or impact) as of the date this Agreement is
executed. Notwithstanding anything to the contrary,
this release does not extend to any claims related to the
Contract that may arise in the future.
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15. This Agreement is for the sole purpose of settling all
claims and appeals arising out of, incidental to, or relating
to the Contract, and this Agreement shall not be cited or
otherwise referred to by either Cubic or the Government in
any proceedings, whether judicial or administrative in
nature, except as is necessary to effect the terms of this
Agreement.
16. This Agreement contains the entire agreement and
understanding between the parties concerning the subject
matter herein (including, but not limited to, ASBCA
Nos. 56097 and 56288) and supersedes and replaces all
prior claims, settlement negotiations, and agreements
written or oral concerning the subject matter.
(R4, tab 11) (Emphasis added)
In July of 2009, the parties executed Modification No. P00035 to their contract
altering CLIN 0012 and providing for "settlement of the Contractor's certified claim
against the Government submitted 8 May 2007" and subsequent appeal before the
ASBCA docketed as ASBCA No. 56097, and ''the Government's claim against the
Contractor" docketed as ASBCA No. 56288 (R4, tab 12 at 641). Modification
No. P00035 stated that Cubic will promptly file its submission to dismiss ASBCA
No. 56097 with prejudice upon execution of the modification and that the government will
promptly file its submission to dismiss ASBCA No. 56288 upon execution of the
modification (id. at 642). The modification contained release language similar to that set
forth in the parties' Settlement Agreement. Paragraph 12 of the modification provided:
The Government, to the extent permitted by law, releases
and saves harmless Cubic ... from ASBCA No. 56288 and
any further claim, liability, obligation, appeal, action or
demand, known or unknown, or any other avenue of relief
in connection with, arising out of, incidental to, or relating
to the Contract. Notwithstanding anything to the
contrary, this release does not extend to any claims
related to the Contract that may arise in the future.
[Emphasis added]
(Id. at 644) Paragraph 14 of the modification provided:
Upon execution of this modification, Cubic releases and
saves harmless the Government.. .from ASBCA
No. 56097 and any further claim, liability obligation,
appeal, action or demand, known or unknown, or any other
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avenue of relief in connection with, arising out of,
incidental to, or relating to the Contract (including, but not
limited to claims or appeals for or in regard to alleged
delay, disruption, impact, direct costs and/or cumulative
disruption or impact). Notwithstanding anything to the
contrary, this release does not extend to any claims
related to the Contract that may arise in the future.
[Emphasis added]
(Id.) The ASBCA received motions to dismiss the appeals with prejudice from the
parties in September 2009 and the appeals were dismissed.
During November of 2011, Cubic submitted to SPAWAR a proposal for three
additional CDL Systems, 15 modified KI-1 lA subsystems, an Engineering Change
Proposal, 11 engineering change kits for Aircraft Carrier-Tactical Support Center
Integration, and engineering services (see R4, tabs 14-15, 22). In a table submitted
pursuant to DFARS 252.227-7017, Cubic asserted that the government's right to use,
release, or disclose specific technical data or computer software was restricted to
"Limited" rights on the basis that development of the data and/or software had been
"Internal R&D Funding" (R4, tab 14). Cubic stated that it was "asserting its rights
established in the baseline (initial) COLS Contract (Contract #N00039-03-C-0024) for
legacy COLS items" (id. at 654). About three weeks later, a SPAWAR contract specialist
advised the SPAWAR CO and Cubic by email that he did not agree with Cubic' s assertion
of data rights. He stated:
CORL deliverables under the last contract have been
developed with funding provided by the Government and
not with "internal R&D funding." Data rights should be
"unlimited" since these items have been developed with
Government funding. If this is refuted, then the
Government requires supporting documentation that can
substantiate that internal funding was used.
(R4, tab 15 at 660, 662) During the next six months, the parties engaged in various
communications regarding Cubic's assertion of data rights (e.g., R4, tabs 16-19) and,
on 17 July 2012, met to discuss Cubic's limited rights assertion based on funding
sources (R4, tab 20 at 697). By letter and email dated 20 July 2012, Cubic provided
SPAWAR information it believed justified its limited rights assertion for Part
No. 285875 (programmable loads module) (id. at 697-712, tab 21).
On 2 August 2012, SPAWAR awarded Contract No. N00039-12-C-0084 to
Cubic for three CDL Systems, 15 modified KI-1 lA subsystems, an Engineering
Change Proposal, 11 engineering change kits for Aircraft Carrier-Tactical Support
Center Integration, and engineering services (KI-1 lA Subsystem Contract) (R4,
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tab 22). On the same date, a SPAWAR CO sent a letter to Cubic regarding the initial
Contract No. N00039-03-C-0024, stating:
The Government is challenging the validity of the Cubic
Restricted Rights assertions, because Cubic cites mixed
funding behind the development of...CDRL's, yet claims
Limited Rights in the CDRL's.
As required by []252.227-7037, Validation ofRestrictive
Markings On Technical Data, of the DFARS, which is
incorporated by reference into [the Contract], the [CO]
requires that Cubic provide the written records it is relying
on as justification behind its ... assertions. These records
must be in sufficient detail to enable the [CO] to determine
the validity of the Limited Rights assertions.
Please also be advised that if Cubic fails to respond to this
letter...with the required documentation, the [CO] shall
issue a final decision, in accordance with paragraph (f) of
this clause and the Disputes clause of [the Contract]
pertaining to the validity of the asserted restrictions.
(R4, tab 23 at 838)
By letter dated 6 September 2012, Cubic submitted a response to the CO's letter
stating it was providing "information supporting Cubic's claim of limited and restricted
rights" in Contract No. N00039-12-C-0084, the second COLS contract (R4, tab 24 at 916).
In a letter dated 25 September 2012, the CO advised Cubic that its letter was
"non-responsive" because the government's letter addressed "Cubic's data rights
assertions in the 2003 COLS contract" and Cubic must "justify the data rights assertions
made" with respect to the initial contract "before the allocation of data rights (if any) in
the follow-on ... contract" (R4, tab 25 at 956). The CO added that, "[b]ecause Cubic did
not appear to understand what the Government wanted," the government ''will add an
additional 14 days time to the 60 day period that is currently in effect, to allow Cubic to
provide an3dequate response" by close of business on 16 October 2012 (id. at 957).
By letter dated 16 October 2012, Cubic advised SPAWAR:
In its September 6, 2012 letter, Cubic indicated that
it would deliver [3 items] subject to restriction and that it
would deliver all other technical data and computer
software required under the KI-1 lA Subsystem Contract
subject to Government Purpose Rights ....
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After further review of the KI-1 lA Subsystem SOW
and CDRLs, however, Cubic has determined that the
technical data that are required to be delivered under those
CDRLs relate specifically to the KI-1 lA Subsystem being
developed under the KI-1 lA Subsystem Contract.
Consequently, with the one exception noted below, the
Government is entitled to unlimited rights in that technical
data.
The sole exception to the above is the KI-16
COMSEC Module. As explained and demonstrated ... at
Cubic' s facility on July 17, 2012, Cubic partially developed
the KI-16 using internal IRAD funding. Cubic therefore is
willing to provide SPAWAR with Government Purpose
Rights in the technical data associated with that item.
(R4, tab 26 at 962-63) Cubic added in a footnote to its letter that it understood the
CO's "challenge to Cubic's data rights assertions" to "relate to the assertions made by
Cubic in connection with its proposal for the KI-I IA Subsystem Contract" and not to
"any of the restrictive markings on technical data delivered under Cubic's Contract
No. N00039-03-C-0024" (id. at 962).
In a letter dated 13 November 2012, SPAWAR's CO notified Cubic that its
16 October letter was "non-responsive to the Government data rights challenge" and,
after reviewing the correspondence between the parties, "the Government does not see
how Cubic can possibly take an understanding ... that the Government has been talking
about vetting the data rights assertions to the 2012 (N00039-12-C-0084) COLS
contract" when it "has been attempting to vet the data rights assertions from ... the 2003
(N00039-03-C-0024) contract" (R4, tab 27 at 966). The CO added she "can only
conclude th[at] Cubic's non-understanding is intentional, and ... Cubic either cannot or
will not provide the required documentation behind the assertions" with respect to the
2003 contract (id. at 966-67). The CO advised that, "[i]n view of the above, the
Government will incorporate the [2012 data] assertions into the N00039:.12.:.C-0084
[follow-on] contract" but requires "Cubic provide the written records it is relying on as
justification" for its rights assertions regarding the initial contract (id. at 967). The CO
added, if Cubic failed to provide the required records by close of business on
20 November 2012, she would issue a final decision addressing the validity of the
initial contract asserted restrictions (id.).
On 20 November 2012, Cubic notified the CO that "SPAWAR's challenge to
Cubic's restrictive markings on any technical data delivered prior to November 24,
2008, is barred and moot" because SPAWAR provided Cubic with a general release in
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settling ASBCA Nos. 56097 and 56288, and Cubic "has no obligation to produce - and
will not be producing- any written records to justify" restrictive markings (R4, tab 28
at 974-75). About two months later, SPA WAR's CO issued a "final decision"
notifying Cubic that, because it had "not provided the documentation behind the data
rights assertions" with respect to the initial contract "as required by regulation," it "is
not entitled to make the ... assertions and the Government is entitled to Unlimited Rights
in the technical data and computer software" listed (R4, tab 29 at 989-90). Less than
two weeks later, Cubic timely filed an appeal of the CO's decision with this Board.
STATUTORY AND REGULATORY FRAMEWORK
The first provision specifying treatment by the government of contractor rights
in technical data appeared in the 1955 version of the Armed Services Procurement
Regulation (ASPR). Prior to that time, military regulations addressed only contractor
data subject to a patent or copyright. Bell Helicopter Textron, ASBCA No. 21192,
85-3 BCA 118,415 at 92,388; Donna C. Maizel, Trade Secrets and Technical Data
Rights in Gov 't Contracts, 114 Mil. L. Rev. 225, 235 (1986); Robert M. Hinrichs,
Proprietary Data and Trade Secrets under Department ofDefense Contracts, 36 Mil.
L. Rev. 61, 71 (1967); Arthur R. Whale, Government Rights to Technical Information
Received Under Contract, 25 Geo. Wash. L. Rev. 289,295 (1957).
ASPR 9-112 (4 Jan. 1955), a mandatory clause for all Department of Defense
(DoD) research and development (R&D) contracts, gave the United States "the right to
reproduce, use, and disclose for Governmental purposes" all of the "reports, drawings,
blueprints, data, and technical information specified to be delivered by the Contractor
to the Government under th[ e] contract" with no regard to whether the data originated
before or after the contract award. The DoD construed this grant of right as including
the right to use such data for competitive procurement. B-152684, 44 Comp. Gen. 451
(5 Feb. 1965); Ralph C. Nash, Jr. & Leonard Rawicz, Intellectual Property in
Government Contracts, 457 (6th ed. 2008); Greg S. Sharp, A Layman's Guide to
Intellectual Property In Defense Contracts, 33 Pub. Cont. L.J. 99, 103 (2003); Maizel,
Trade Secrets, 114 Mil. L. Rev. at 235; Hinrichs, Proprietary Data, 36 Mil. L. Rev.
at 71; Ray M. Harris, Trade Secrets as they Affect the Government, 18 Bus. Law 613,
619 (1963); Whale, Government Rights, 25 Geo. Wash. L. Rev. at 296.
After the defense industry objected to the loss of rights in data, DoD rewrote the
ASPR to give contractors protection for data they delivered under supply contracts, while
maintaining unlimited rights in data delivered under R&D contracts. Pursuant to the 1957
regulations, information was classified as "proprietary data, design data, or operational
data." Design and operational data continued to be subject to delivery to and use by DoD
under supply contracts, but "proprietary" data was protected. It was not to be requested in
advertised supply contracts for standard commercial items and was to be obtained in
negotiated supply contracts only if a clear need was established and the data was specified
in the contract's schedule. A clause for data delivered under such contracts provided DoD
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was to obtain rights in proprietary data sufficient to permit the data's required use, which
was "limited rights" if only needed for a limited purpose. This clause was to be used with
another providing: data so limited was to be identified in the schedule as being subject to
limitation; a legend was to be placed on such data identifying the portion or pages to which
the legend applied; and DoD possessed the right "at any time to modify, remove, obliterate
or ignore any marking not authorized by the terms of the contract," subject to contractor
right of appeal under the disputes clause. The 1957 ASPR additionally set forth a new
policy of obtaining and utilizing a contractor's "engineering drawings" to allow
procurement by formal advertisement. DoD's specification for drawing preparation
(Military Specification MIL-D-70327, "Drawings, Engineering and Associated Lists"),
however, required drawings to be so complete that they often revealed trade secrets utilized
in the manufacture of an item. Industry and Members of Congress contended the 1957
revision was "offensive to the American way of business" because the originator of a design
enjoyed no competitive advantage in bidding to perform subsequent solicitations no matter
how much money or private resources it had expended in developing that item, and the
revised ASPR lasted only a year. ASPR 9-201, 9-202.2, 9-203.1, 9-203.2 (9 Apr. 1957)
reprinted at 22 Fed. Reg. 6335, 6336 (8 Aug. 1957); B-138638, 38 Comp. Gen. 667 (6 Apr.
1959); Nash & Rawicz, Intellectual Property at 458-60; Maizel, Trade Secrets, 114 Mil. L.
Rev. at 235; Hinrichs, Proprietary Data, 36 Mil. L. Rev. at 71-72; William Munves,
Proprietary Data in Defense Procurement, 1962 Mil. L. Rev. 155, 169-72, 174; see
Hearings on Proprietary Rights & Data before Subcommittee No. 2 of the House Select
Committee on Small Business, 86th Cong. 2d Sess. 2, 18-20, 32-33 (1960).
During 1958, to provide greater protection of contractor proprietary data, DoD
altered the ASPR to provide that, in any "supply" contract not having experimental or
research work as one of its principal purposes, proprietary data need not be furnished
absent identification in the contract's delivery schedule. ASPR 9.202-l(b) (15 Oct.
1958), reprinted in 23 Fed. Reg. 10432 (30 Dec. 1958); ASPR 9.203-2, reprinted in
23 Fed. Reg. 10434 (30 Dec. 1958). This allowed a DoD contractor to remove its
proprietary data from drawings, unless otherwise specifically required by the delivery
schedule. In sum, DoD received a second set of drawings from the contractor with
trade secrets expunged. Nash & Rawicz, Intellectual Property at 460; Maizel, Trade
Secrets, 114 Mil. L. Rev. at 240; Hinrichs, Proprietary Data, 36 Mil. L. Rev. at 72.
Neither DoD nor contractors, however, were happy with the 1958 ASPR revision.
DoD contended under the regulation it received data that was so incomplete as to be not
useable. The expunged drawings sometimes were referred to as "swiss cheese drawings."
Defense contractors were highly critical ofDoD's interpretation of ASPR's definition of
proprietary data as excluding any component or end product that could be ascertained by
the practice of "reverse engineering." They asserted the 1958 ASPR harmed their
competitive positions by requiring them to disclose information and, if DoD really needed
that data, it should pay for it. Hearings on Proprietary Rights & Data before
Subcommittee No. 2, 86th Cong. 2d Sess. 27, 30, 34, 38-44, 52, 69, 109, 121-42, 175;
Sharp, A Layman's Guide, 33 Pub. Cont. L.J. at 103 (the ASPR at times forced DoD to
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repurchase from original source); Maizel, Trade Secrets, 114 Mil. L. Rev. at 240;
Hinrichs, Proprietary Data, 36 Mil. L. Rev. at 72-73; Munves, Proprietary Data, 1962
Mil. L. Rev. at 156, 166-67, 178-79.
In 1964, as a result of increasing contractor dissatisfaction, DoD abandoned the
concept of contractor "proprietary data" and broadened a contractor's right to protect
data. DoD altered the ASPR to define a contractor's rights in terms of "technical data"
(ASPR 9.201(a) (14 May 1964), reprinted at 30 Fed. Reg. 6969 (25 May 1965)), with
data that was developed at private expense by a contractor being furnished to DoD on a
"limited rights basis" (ASPR 9.202-l(b), reprinted at 30 Fed. Reg. 6969 (25 May 1965))
and other data being furnished DoD on an "unlimited rights basis" (ASPR 9.201(c),
reprinted at 30 Fed. Reg. 6969 (25 May 1965)). The government could no longer claim a
right to use all data under R&D contracts. The contractor's right to assert "limited rights"
in data was not determined by the type of contract at issue but by whether the item at
issue was "developed at private expense." The delivery of"swiss cheese" drawings by a
contractor was foreclosed because the contractor could assert limited rights protection in
data it developed. The contractor had to deliver a complete technical data package to the
government containing a notice that only "limited rights" in data were being conveyed
(known as a limited rights or restrictive legend) if data set forth was developed at
contractor expense. If a technical data package was not so marked, the government
received unlimited rights in that data. If the data furnished was marked with a legend that
was not permitted by terms of the contract, the government could assert only "limited
rights" in that data pending inquiry by it to the contractor. If the contractor failed to
respond to the inquiry or show the legend set forth was authorized, government personnel
could "obliterate such legend." Contractors deemed this an improvement over prior
practice allowing the government to modify, remove, obliterate or ignore a marking on
technical data "without notice" to a contractor. In sum, under the 1964 revised
regulations, whether or not technical data was "developed at private expense" was
determinative ofDoD's right to use the data. The regulatory emphasis was on tracing
whose resources had paid for development of the items, components, or processes offered
for sale. ASPR 9.202-2(b) (14 May 1964), reprinted at 30 Fed. Reg. 6969 (25 May
1965); ASPR 9.202-3(c)(2) (14 May 1964), reprinted at 30 Fed. Reg. 6970 (25 May
1965); ASPR 9.203 (14 May 1964), reprinted at 30 Fed. Reg. 6970-71 (25 May 1965);
Maizel, Trade Secrets, 114 Mil. L. Rev. at 245; John B. Framakides, Technical Data in
Government Contracts, 8 Wm. & Mary L. Rev. 573, 578-79 (1967); Theodore M.
Kostos, Unauthorized Use of Technical Data in Government Contracts: Remedies of the
Data Owner, 6 B.C. L. Rev. 753, 754-55 (1965); Hinrichs, Proprietary Data, 36 Mil. L.
Rev. at 74-76, 78, 80; see American Eng'g Co., B-156959 (Comp. Gen. 6 Dec. 1965)
(government disregarded markings without notice to contractor under 1960 subcontract).
The ASPR, however, did not set forth a definition of the term "developed at
private expense." In 1964, 1969, and from 1973 until 1974, the ASPR subcommittee on
technical data rights attempted unsuccessfully to define the term. DoD maintained that,
where there was a mix of government and private funds, an item could not be said to have
13
been "developed at private expense." Also, where the government paid for an
"improvement" to a privately developed item, it was to receive unlimited rights in the
"improvement" and limited rights in the basic item if that item could be "segregated."
The definition of the term, along with the issue of whether the government should be
contesting limited rights assertions to avoid continued sole source procurement, were
presented to the General Accounting Office (GAO) in various bid protest actions. GAO
essentially adopted the term's definition advocated by DoD. Megapulse, Inc., B-194986,
80-1 CPD ,-r 42 (Comp. Gen. 5 Jan. 1980). 1
The 1964 modified regulations remained in force largely unchanged for
20 years. See Nash and Rawicz, Intellectual Property in Government Contracts at 429;
see also Continental Electronics Mfg. Co., ASBCA No. 18704, 76-1 BCA ,-i 11,654. In
1984, however, public outrage over inflated and excessive prices being charged the
government for sole-source, spare-parts procurements, H.R. Rep. No. 690, 98th Cong.,
2d Sess. 10-12; 39 Fed. Cont. Rep. (BNA) No. 25, at 1183 (Jun. 20, 1983), caused
Congress to examine the issue of data rights in government contracts. It determined
that an inability of agencies to retrieve technical data the government was authorized to
use and furnish to bidders on prospective contracts was impeding the existence of
competition for government contracts. H.R. Rep. No. 690 at 14-15; Maize!, Trade
Secrets, 114 Mil. L. Rev. at 270. Due to the many spare part horror stories that
appeared in the press and the seeming inability ofDoD to draft regulations necessary to
address all relevant issues, Congress enacted three statutes intended to increase
competition for award of government contracts and set forth data rights policies: the
Competition in Contracting Act of 1984 (CICA), Pub. L. No. 98-369 (18 July 1984),
98 Stat. 1175; the Defense Procurement Reform Act of 1984, Pub. L. No. 98-525, Title
XII (19 Oct.), 98 Stat. 2492, 2588-2611; and the Small Business and Federal
Procurement Competition Enhancement Act of 1984, Pub. L. No. 98-577 (30 Oct.
1984), 98 Stat. 3066. William C. Anderson, Comparative Analysis ofIntellectual
Property Issues Relating to the Acquisition of Commercial and Noncommercial Items
by the Federal Government, 33 Pub. Cont. L.J. 47 (Fall 2003); Diane M. Sidebottom,
Intellectual Property in Federal Government Contracts: The Past, The Present, and
1 During 1985, the definition of the term was before us for resolution and we
essentially ruled the same as GAO, i.e., that "private expense" means "totally"
at private expense. We held additionally the term "developed" meant
practicability, workability, and functionability (which we deemed to be
essentially synonymous for this purpose) must be demonstrated, i.e., the item or
component must be analyzed and/or tested sufficiently to demonstrate to
reasonable persons skilled in the applicable art that there is a high probability
the item or component will work as intended. Bell Helicopter, 85-3 BCA
,-i 18,415 at 92,389-94, 92,424; Maize!, Trade Secrets, 114 Mil. L. Rev. at 245,
251-54, 256; Hinrichs, Proprietary Data, 36 Mil. L. Rev. at 76; see, e.g.,
B-190798, B-191007, 78-1CPDi1431 (Comp. Gen. 13 Jun. 1978); B-174866,
52 Comp. Gen. 312 (4 Dec. 1972).
14
I
One Possible Future, 33 Pub. Cont. L.J. 70-71; Maizel, Trade Secrets, 114 Mil. L. Rev.
at 270.
For civilian agencies, Congress required the development of regulations
affording the government "unlimited rights" in all data developed exclusively with
federal funds if such data is specified for delivery and needed to ensure competitive
acquisition of substantial quantities of supplies or services in the future. Small
Business and Federal Procurement Competition Enhancement Act of 1984, Pub. L.
No. 98-577, § 301(b)(l), 98 Stat. 3074 (codified at 41 U.S.C. § 418a(b)(l)(A), (B)
(1984), later recodified at 41 U.S.C. § 2302 (2011)). With respect to DoD, Congress
provided more detailed guidance, specifying that (in prescribing regulations regarding
the legitimate interest of the United States and a contractor in technical or other data
under the FAR) the following factors, among others, shall be considered: "Whether
technical data was developed- (A) exclusively with Federal funds; (B) exclusively at
private expense; or (c) in part with Federal funds and in part at private expense"; and
"the interest of the United States in increasing competition and lowering costs by
developing and locating alternative sources of supply and manufacture." Defense
Procurement Reform Act of 1984, Pub. L. No. 98-525, Title XII (19 Oct.), Part B,
98 Stat. 2492, 2595-96 (codified at 10 U.S.C. § 2320(a)).
Congress stated that regulations issued shall require that, whenever practicable,
a contract for supplies or services: (1) define the respective rights of the United States
and the contractor or subcontractor (at any tier) regarding any technical data to be
delivered; (2) specify the technical data, if any, to be delivered and schedule for such
delivery; (3) establish or reference procedures for determining acceptability of
technical data to be delivered; (4) establish separate contract line items for the technical
data, if any, to be delivered; (5) to the maximum extent practicable, identify in advance
of delivery technical data which is to be delivered with restrictions on the right of the
United States to use such data; (6) require the contractor to revise any technical data
delivered to reflect engineering design changes made during contract performance and
affecting the form, fit, and function of the contract items specified; (7) require the
contractor to furnish written assurance at time of delivery that the technical data is
complete and accurate and satisfies contract data requirements; (8) establish remedies
to be available to the United States when data required to be delivered is found to be
incomplete or inadequate; and (9) authorize the head of the agency to withhold
payments under the contract during any period if the contractor does not meet the
requirements of the contract pertaining to the delivery of technical data. Defense
Procurement Reform Act of 1984, Pub. L. No. 98-525, 98 Stat. 2596; Small Business
and Federal Procurement Competition Enhancement Act of 1984, Pub. L. No. 98-577,
98 Stat. 3075. Congress added that:
(a) A contract for supplies or services ... which
provides for the delivery of technical data shall provide
that-
15
(1) A contractor or subcontractor at any tier
shall be prepared to furnish to the [CO] a written
justification for any restriction asserted by the
contractor or subcontractor on the right of the United
States to use such technical data; and
(2) The [CO] may review the validity of any
restriction asserted by the contractor or
subcontractor under the contract on the right of the
United States to use technical data fumished ... under
the contract if the [CO] determines that reasonable
grounds exist to question the current validity of the
asserted restriction and that the continued adherence
to the asserted restriction by the United States would
make it impracticable to procure the item
competitively at a later time.
Defense Procurement Reform Act of 1984, 98 Stat. 2597; Small Business and Federal
Procurement Competition Enhancement Act of 1984, 98 Stat. 3071 (codified at
41 U.S.C. § 253d, recodified at 41 U.S.C. § 4703). Congress specified that, if after
review a CO determines a challenge to an asserted restriction is warranted, the CO
shall provide a written notice to the contractor or subcontractor asserting the restriction
stating grounds for challenging the restriction and requiring submission of a response
within 60 days justifying validity of the asserted restriction. Defense Procurement
Reform Act of 1984, 98 Stat. 2598; Small Business and Federal Procurement .
Competition Enhancement Act of 1984, 98 Stat. 3071. After failure to receive a
response or review of the response received, the CO is to issue a decision pertaining to
the validity of the asserted restriction. Defense Procurement Reform Act of 1984, 98
Stat. 2597 (codified at 10 U.S.C. § 232l(e) later redesignated 10 U.S.C. § 2321(g));
Small Business and Federal Procurement Competition Enhancement Act of 1984, 98
Stat. 3072. Congress specified, if a response is submitted to a CO by either a
contractor or subcontractor, it shall be considered a "claim" within the meaning of the
Contract Disputes Act (CDA). Defense Procurement Reform Act of 1984, 98 Stat.
2598 (codified at 10 U.S.C. § 232l(f) later redesignated § 232l(h)); Small Business
and Federal Procurement Competition Enhancement Act of 1984, 98 Stat. 3072.
Finally, Congress directed that, upon final disposition, if the CO's challenge to the
restriction on the right of the United States to use the data is sustained, the restriction
on the right shall be cancelled and, if the assertion is found not to have been
substantially justified, the contractor or subcontractor, as appropriate, shall be liable to
the United States for payment of the cost to the United States of reviewing the asserted
restriction. Defense Procurement Reform Act of 1984, 98 Stat. 2598; Small Business
and Federal Procurement Competition Enhancement Act of 1984, 98 Stat. 3072.
I
16
Congress mandated that the changes it made in technical data rights treatment
apply to solicitations issued one year after date of enactment (19 October 1984) and on
10 September 1985 the Defense Acquisition Regulatory (DAR) Council issued a set of
proposed rules to implement those changes. 50 Fed. Reg. 36,887 (1985); Defense
Procurement Reform Act of 1984, 98 Stat. 2599 (§ 2323(c)(2)). The proposed rules
constituted a complete rewrite ofDFARS Subpart 227.4 to accommodate language set
forth in Pub. L. Nos. 98-525 and 98-577. Section 227.471 of the proposed rules
defined "developed at public expense" as data "brought to a point of practical
application," i.e., ''which had been constructed, practiced, or used, and tested so as to
clearly demonstrate that it performs the objective for which it was developed," and was
accomplished without direct government payment at a time when no government
contract required performance of the development effort and the effort was not part of
performing a government contract. Comments upon the proposed rules were to be
submitted by 9 October 1985. 50 Fed. Reg. 36,887 (1985).
On 24 October 1985, the DAR Council decided not to implement the proposed
rules after the consensus of a meeting with representatives of industry, congressional
staffs, the press and the government was that the comment period was "too short." The
DAR Council extended the public comment period to January 1986 and issued a
temporary interim revision incorporating minimal statutory requirements until a final
version of the rules could be implemented. No definition for "developed at private
expense" was set forth in the interim rules. The interim rules, however, addressed the
statutory challenge provision. They stated, after a CO determines that a challenge to a
restrictive marking is warranted, the CO shall send a written challenge notice to the
contractor or subcontractor; any written response from the contractor or subcontractor
shall be considered a claim within the meaning of the CDA that must be certified
regardless of dollar amount; the CO shall issue a final decision stating whether the
restrictive marking(s) challenged are valid or not valid; and the government will
continue to be bound by the restrictive marking for a period of 90 days from issuance
of the final decision or longer if the contractor submits to the CO a notice of intent to
file suit. 50 Fed. Reg. 43,158 (24 October 1985) (DFARS 227.413-l(c)); 50 Fed.
Reg. 41,180 (9 October 1985).
During October 1986, the House of Representatives and Senate agreed to
specifically require DoD to publish regulations defining the terms "developed" and
"at private expense." They stated:
Efforts to define the terms have been ongoing since 1962
without resolution. Because of the lack of definitions in the
Federal Acquisition Regulations and the Defense
Supplement to those regulations, the military departments
have differed in their approach on the issue. The conferees
agreed that a uniform approach throughout the [DoD] was
desirable and necessary ....
17
The conferees believe that previously proposed [DoD]
regulations published for public comment September 10,
1985, defined the term "developed" in an excessively,
stringent manner by requiring an "actual reduction to
practice" - a term of art used to establish an inventor's
priority rights under the patent laws. The conferees agree
that, for purposes of determining whether an item or
process has been developed at private expense, an item
should generally be considered "developed" if the item or
process exists and reasonable persons skilled in the
applicable art would conclude that a high probability exists
that the item or process will work as intended. The
conferees determined, however, that because circumstances
may exist in which such a standard may be inappropriate,
crafting of more exact parameters would be better
accomplished through the regulatory process.
In addition, the conferees agree that as a matter of general
policy "at private expense" development was accomplished
without direct government payment. Payments by the
government to reimburse a contractor for its indirect costs
would not be considered in determining whether the
government had funded the development of an item. Thus,
reimbursement for Independent Research and Development
expenses and other indirect costs ... , although such
payments are in indirect support of a development effort,
are treated for purposes of this Act as contractor funds.
H.R. Rep. No. 99-1001, at 510-11 (1986 Conf. Rep.). With respect to validation of
proprietary data restrictions, Congress amended section 2321 of title 10 (Validation of
Proprietary Data Restrictions) to provide:
(b)(l) The Secretary of Defense shall ensure that
there is a thorough review of the appropriateness of any
restriction on the right of the United States to release or
disclose technical data delivered under a contract to persons
outside the Government, or to permit the use of such
technical data by such persons. Such review shall be
conducted before the end of the three-year period beginning
on the date on which the final payment is made on a
contract under which technical data is required to be
delivered, or the date on which the technical data is
delivered under such contract, whichever is later.
18
DoD Authorization Act, 1987, Pub. L. No. 99-661, 100 Stat. 3816, 3951 (contained in
identical form in Joint Resolution making appropriations for FY 1987 and other
purposes, Pub. L. No. 99-500, 100 Stat. 1783-171 ). Congress added that,
notwithstanding the three-year limitation, ''the United States may challenge a
restriction on the release, disclosure, or use of technical data delivered under a contract
at any time if such technical data-(i) is publicly available; (ii) has been furnished to
the United States without restriction; or (iii) has been otherwise made available without
restriction." 100 Stat. 3952.
Beginning in 1987, after considerable discussion and debate regarding DoD
technical data policy, DoD published a series of draft and interim regulations to reform
its technical data policies and procedures. E.g., 52 Fed. Reg. 12390 (16 Apr. 1987);
52 Fed. Reg. 2082 (16 Jan. 1987). For the first time, DoD added a new category or
type of license (Government Purpose License Rights) to the two existing categories or
types ("limited" rights if developed exclusively at private expense and "unlimited"
rights if developed with federal funds) in an attempt to address the legitimate rights of
DoD and contractors in technical data where there was "mixed funding" of
development. If a contractor's contribution to an item or process developed in part
with federal funds and in part at private expense was significant (more than 50%), DoD
generally was to receive Government Purpose License Rights, rather than unlimited
rights as provided under existing policy. 52 Fed. Reg. 2082 (DFARS 227.472-5,
Standard Rights in Technical Data; 252.227-7013(b)(2), RIGHTS IN TECHNICAL DATA).
During December 1987, in enacting the National Defense Authorization Act for FYs
1988 and 1989, § 808, 101 Stat. 1019, 1128-29, Congress provided further guidance to
DoD regarding the definition of developed exclusively at private expense, mandating
that, in defining such terms, the Secretary shall specify the manner in which indirect
costs shall be treated and shall specify that amounts spent for independent research and
development and for bid and proposal costs shall not be considered to be federal funds
for purposes of the definitions.
On 1 April 1988, the DAR Council again issued interim rules for Subpart 227.4
and Part 252 of the DFARS. The new interim rules, among other things, implemented
section 808 of the National Defense Authorization Act for FYs 1988 and 1989 and
direction from the Deputy Assistant Secretary of Defense (Procurement) that DFARS
Subpart 227.4 be simplified and streamlined. 53 Fed. Reg. 10780.
On 28 October 1988, after evaluating public comments received, the DAR
Council issued another interim rule replacing in its entirety the interim ruled published
on 1 April 1988. 53 Fed. Reg. 43698 (28 Oct. 1988). Among the changes made to the
rule was that "notification and listing procedures" were revised to simplify and clarify
the process for establishing rights in data. This coverage was altered to "clarify that the
listing process does not accelerate the validation process and is not a final
19
determination of rights." DFARS 227.473-1, Procedures for Establishing Rights in
Technical Data, of the new interim rule provided in part:
(2) Preaward Notification.
(i) The offeror is required to identify, in its proposal,
items, components, processes or computer
software which it intends to use and which would
result in delivery of technical data to the
Government with other than unlimited rights ....
(3) Contract award.
(i) The contractor's notification will serve as the
basis for the list to be included in the contract
identifying all technical data with restrictions on
the Government's right of use or disclosure that is
required by paragraph (k) of the clause at
252.227-7013.
(iii) The purpose of the list is to facilitate the
review of contractor assertions required by
10 U.S.C. [§] 2321 and to provide a basis for
Government acquisition planning. It is not a
final determination of rights and does not alter
the rights of the parties under 10 U.S.C.
[§§] 2320 or 2321.
(6) Supporting information. The [CO] should rely on
the representation provided with the contractor's
notification. Detailed supporting information,
either preaward or postaward, should normally not
be requested unless there are reasonable grounds to
question the validity of the assertion. While the
contractor or subcontractor is obligated to provide
sufficient information to fully justify the assertions, the
[CO] should only obtain enough information to
determine if the assertion is reasonable and to evaluate
20
its likely impact on the Government. [Emphasis
Added]
With respect to validation of restrictive markings on technical data, DFARS 227.473-4
of the new interim rule provided:
The clause at 252.227-7037 sets forth rights and procedures
pertaining to the validation of restrictive markings asserted
by contractors and subcontractors on deliverable technical
data and shall be included in all solicitations and contracts
which require the delivery of technical data. The
Government should review the validity of any asserted
restriction on technical data deliverable under a contract.
This review should be accomplished before acceptance of
the technical data but no later than three years after final
payment or three years after delivery of the technical
data to the Government, whichever is later. The [CO]
may challenge restrictive markings if there are reasonable
grounds to question their validity but only if the three-year
period has not expired. However, the Government may
challenge a restrictive marking at any time if the technical
data (1) is publicly available; (2) has been furnished to the
United States without restriction; or (3) has been otherwise
made available without restriction. Only the [CO's] final
decision resolving a formal challenge constitutes
"validation" as addressed in 10 U.S.C. [§] 2321. A
decision by the Government not to challenge a
restrictive marking or asserted restriction does not
constitute "validation."
Id. (Emphasis added) The RIGHTS IN TECHNICAL DATA AND COMPUTER SOFTWARE
clause, DFARS 252.227-7013, in the new interim regulation provided in part:
(k) Identification of restrictions on Government rights.
Technical data and computer software shall not be tendered
to the Government with other than unlimited rights, unless
the technical data or computer software are identified in a
list made part of this contract. This list is intended to
facilitate review and acceptance of the technical data and
computer software by the Government and does not
change, waive, or otherwise modify the rights or
obligations of the parties under the clause at DFARS
252.227-7037. As a minimum, this list must-
21
( 1) Identify the items, components, processes, or
computer software to which the restrictions on
the Government apply;
(2) Identify or describe the technical data or
computer software subject to other than
unlimited rights; and
(3) Identify or describe, as appropriate, the category
or categories of Government rights ... on the use
of disclosure of the technical data or computer
software.
The VALIDATION OF RESTRICTIVE MARKINGS ON TECHNICAL DA TA clause,
DFARS 252.227-7037, in the new interim regulation provided in part:
(b) Justification. The Contractor or subcontractor at
any tier is responsible for maintaining records
sufficient to justify the validity of its markings that
impose restrictions on the Government and others to
use, duplicate, or disclose technical data delivered or
required to be delivered under the contract or
subcontract, and shall be prepared to furnish to the
[CO] a written justification for such restrictive
markings in response to a challenge under paragraph
(d) below.
(d) Challenge.
(1) Notwithstanding any provision of this contract
concerning inspection and acceptance, if the [CO]
determines that a challenge to the restrictive
marking is warranted the [CO] shall send a
written challenge notice to the Contractor or
subcontractor asserting the restrictive markings ....
(3) The Contractor's or subcontractor's written
response shall be considered a claim within the
meaning of the Contract Disputes Act of 1978
(41 U.S.C. [§§] 601 et seq.) and shall be
22
certified ... regardless of dollar amount.
[Emphasis added]
In December 1991, Congress enacted DoD Authorization Act, FY 1992 and
1993, § 807, 105 Stat. 1290, 1421-23, requiring the Secretary of Defense to form a
government-industry advisory committee to develop recommended regulations to
supersede the interim regulations implementing requirements of 10 U.S.C. § 2320,
Rights in Technical Data. After holding meetings between July 1992 and December
1993, the advisory committee mandated by Congress concluded existing regulations
were a disincentive to companies that create new technology with their own funding to
furnish such technology to DoD. The Committee developed revised regulations that it
believed established a balance between data developers' and data users' interests, and
would encourage both creativity and firms to offer newly developed technology to
DoD since it deemed protection of privately developed data crucial for developers,
especially those with limited product lines. 59 Fed. Reg. 31584 (20 June 1994).
On 20 June 1994, the DAR Council published for public comment regulations
adopting the recommendations of the Government-Industry Technical Data Advisory
Committee established pursuant to the National Defense Authorization Act for FYs
1992 and 1993. The proposed regulations identified any government rights in
technical data or computer software as specific nonexclusive, license rights a
contractor has granted the government. 59 Fed. Reg. 31585, 31587. They defined
standard license rights in proposed clauses set forth at DFARS 252.227-7013, RIGHTS
IN TECHNICAL DATA-NONCOMMERCIAL ITEMS, and 252.227-7014, RIGHTS IN
NONCOMMERCIAL COMPUTER SOFTWARE AND NONCOMMERCIAL COMPUTER SOFTWARE
DOCUMENTATION. 59 Fed. Reg. at 31605-07, 31608-11. The rules stated that a
contractor retains all rights not granted to DoD. 59 Fed. Reg. 31587 (DF ARS
227.4034(a)). They added a new Subpart 227.5, Rights in Computer Software and
Computer Software Documentation. 59 Fed. Reg. at 31597-604. The proposed rules set
forth a standard Government Purpose Right applicable in all mixed funding situations
allowing DoD to use such data for "governmental purposes" (including competition but
not commercial use), with the government acquiring "Unlimited Rights" in that data only
five years following award of the development contract or subcontract or a period
negotiated by the parties. 59 Fed. Reg. at 31588. Existing regulations required that
indirect costs of development be considered "government funded" if development was
required for performance of a government contract (53 Fed. Reg. 43698, DFARS
227.471, Definitions (Oct 1988) ("developed exclusively at private expense")), but the
1994 proposed rules specified development accomplished with costs charged to indirect
cost pools be considered development accomplished at "private expense." 59 Fed. Reg.
at 31608. The proposed rules also added a new clause (DFARS 252.227-7015,
TECHNICAL DATA-COMMERCIAL ITEMS) that generally required DoD to acquire
technical data pertaining to "commercial" items or processes only customarily provided
to the public. 59 Fed. Reg. at 31586 (DFARS 227.402-1), at 31611-12. The proposed
rules (DFARS 227.403-13) did not make any significant alterations to DoD's right to
23
review, verify, challenge and validate asserted restrictions on technical data use set forth
in existing regulations. Compare 59 Fed. Reg. 31592-93, 31617-18, 31620, with 53 Fed.
Reg. 43698 (Oct. 1988) (DFARS 227.473-1, Procedures for Establishing Rights in
Technical Data; and 227.473-4, Validation of Restrictive Markings on Technical Data).
In October 1994, Congress passed the Federal Acquisition Streamlining Act of
1994 (FASA), Pub. L. No. 103-355, 108 Stat. 3243, to revise and streamline Federal
government acquisition laws. Among other things, FASA modified 10 U.S.C.
§ 2320(b) to provide a presumption of development at private expense for commercial
items, and added a new subsection (f) to 10 U.S.C. § 2321 specifying that, under
"commercial item" contracts, a CO must presume private expense development
whether or not the contractor submits a justification in response to a challenge notice.
The subsection also provided that challenges under contracts for "commercial items"
can be sustained only if information furnished by DoD demonstrates that the item was
not developed exclusively at private expense.
During June 1995, the DAR Council amended the DFARS to prescribe final
technical data regulations (previously published in June 1994 for comment as interim
rules) with changes made in the rules necessitated by FASA and based on comments
received. 60 Fed. Reg. 33464 (28 June 1995). The final rule revised the 1988 interim
guidance on rights in technical data, and added new guidance on rights in computer
software and software documentation intended to replicate commercial practice. The
rule deleted DFARS Subpart 227.4, Rights in Data and Copyright, and replaced that
subpart with Subpart 227.71, Rights in Technical Data. 60 Fed. Reg. 33469-70. The
new rule made several major changes from the 1988 rule, including separate treatment
for commercial and noncommercial technical data, a requirement to grant government
purpose rights (GPR) (previously known as "government purpose license rights" or
GPLR) in all mixed funding situations, and direction to determine funding at the
lowest segregable level of an item, component, or process. Compare DF ARS
252.227-7013(a)(l 1), (12), (b)(2) (1988), with DFARS 252.227-70I3(a)(7)(i), (11),
252.227-70I4(a)(7)(i), 252.227-7015 (1995).
Because DoD has unique needs for technical data created by its missions, it is
exempt from the standard FAR rules regarding technical data and follows only rules set
forth in the DFARS. FAR 27.400; DFARS 227.400. DFARS Subparts 227.71 (Rights
in Technical Data), and 227.72 (Rights in Computer Software and Computer Software
Documentation) set forth a unique process for acquisition of intellectual property (IP)
license rights in technical data or computer software developed and/or delivered under
a contract. In general, a contractor (developer of IP) retains title to its developed IP
and DoD receives from the contractor a nonexclusive license to use, reproduce,
modify, release, perform, display, or disclose the technical data or software.
The DFARS essentially set forth three different levels of DoD license rights in
noncommercial technical data based on source of funding for data development:
24
limited; unlimited; and government purpose rights. If the data pertain to an item or
process developed exclusively with government funding, DoD receives unlimited rights
and may use, modify, reproduce, perform, display, release or disclose the data to
anyone and for any purpose. DFARS 252.227-7013(a)(I5). If the data pertain to an
item or process developed exclusively with private funding, DoD receives limited rights
and may not share the information with anyone outside DoD unless that disclosure is
temporary and made merely to satisfy one ofDoD's limited internal needs, such as
reviewing competitive contract proposals or performing an emergency overhaul.
DFARS 252.227-7013(a)(13); 10 U.S.C. § 2320(a)(2)(D)(i). If the data pertain to an
item or process developed with both government and private funding, DoD receives
GPR for five-years or other negotiable period and may use, modify, reproduce, perform,
display, release, or disclose the data within the government without restriction and
release or disclose that data to any person or entity outside DoD only for government
purposes. DFARS 252.227-7013(a)(l 1); 252.227-7013(a)(12)(i), (ii). After expiration
of five years or the period negotiated, the GPR in technical data reverts to unlimited
rights. DFARS 252.227-7013(b)(2)(i), (ii). While technical data can be provided with
limited rights, the computer software and software documentation clause does not
contain this choice but instead includes a "restricted rights" license that is substantially
similar to that set forth in the FAR data rights clause. DFARS 252.227-7014(a)(14).
The technical data rights system created by statute and regulation gives DoD
unlimited rights in noncommercial technical data delivered under DoD contracts unless
a contractor takes various affirmative actions to limit such rights both before and after
contract award. DFARS 227.7I03-5(a)(7); 252.227-7013(b)(l)(vii). A contractor
providing non-public information to DoD must act to protect the non-public nature of
that information or accept loss of any right to have it protected. See, e.g., Campbell
Plastics Eng'g & Mfg. v. Brownlee, 389 F.3d 1243, 1247-48 (Fed. Cir. 2004); Bell
Helicopter Textron, 85-3 BCA ,r 18,415 at 92,430-32.
Pursuant to 10 U.S.C. § 2320(b)(5), DFARS 227.7103-3(b) and 227.7203-3(b)
of the final rule mandate inclusion of DFARS 252.227-7017 in all solicitations for
noncommercial items requiring offerors to identify in their offers technical data,
computer software, and software documentation for which restrictions upon use,
release, or disclosure ( other than copyright) would be asserted and to attach a list of
those assertions to their offers. DFARS 252.227-7017(d) specifies the attached list
state, among other things, the technical data or computer software to be furnished with
restrictions, basis for the offeror' s assertion of restriction (e.g., development of item in
whole or in part at private expense), and the asserted rights category (e.g., limited or
government purpose rights). DFARS 227.7103-4(b) and 227.7203-4(b), License
Rights, explain (for technical data pertaining to items, components, or processes, and
for computer software or computer software documentation, respectively) that the
scope of the license acquired by DoD is generally determined by the source of funds
used for development and that determination of source of development funds should be
made "at any practical subitem or subcomponent level or for any segregable portion of
25
a process" for technical data and the "lowest practicable segregable portion" of
software or documentation.
When acquiring and specifying technical data, software, and software
documentation, DoD utilizes a Contracts Data Requirements List (CDRL), DD
Form 1423, to satisfy in part statutory and regulatory mandates to establish to the
extent practicable technical data and software to be delivered under a contract.
DFARS 215.470(b). Prior to award ofa contract, a contractor lists on a CDRL all
the noncommercial technical data and computer software that the contract names as
unlimited rights deliverables that the contractor intends to deliver with less than
unlimited rights. DFARS 252.227-7013(e)(2), (3); 252.227-7014(e)(2), (3). The
contractor must disclose its asserted rights category for each such data item and the
basis for its assertions. DFARS 252.227-7017(b), (d). DoD may use the list during
source selection to evaluate the impact of contractor identified restrictions on DoD
evaluation factors. DFARS 227.7103-10(a)(5); 227.7203-lO(a)(S); Office of the Under
Secretary of Defense for Acquisition, Technology, and Logistics, Intellectual Property:
Navigating Through Commercial Waters, 2-5 (2001). Facts and theories behind the
contractor assertions are handled when needed in other processes and by other clauses.
DFARS 227.7103-10(a)(2); 227.7103-13; 227.7203-10(a)(2); 227.7203-13. Prior,
future, or contemporaneous rights asserted under other contracts do not provide a
certain basis for determining DoD's rights under the current contract. A prior list
assertion (unless formally challenged and resolved) is merely a contractor's position
based upon then existing facts and/or assumptions. DFARS 227.7013-13(a);
227.7103-13(c)(8) (only a CO's final decision or actions of the ASBCA or court of
competent jurisdiction sustaining validity of asserted restriction constitutes validation);
227.7203-13(e)(2) (same). CDRL assertions simply represent the unilateral claim of
the contractor regarding allocation of rights for noncommercial technical data or
software. See DFARS 227.7103-10(a)(4); 227.7203-10(a)(4); 227.7103-13(a);
227.7203-13(a); 252.227-7013(e)(4); 252.227-7014(e)(4). They are not immediately
binding upon DoD, which can challenge those assertions even after final payment under
the contract. DFARS 227.7103-10(a)(4); 227.7103-13(a), (c)(l); 227.7203-10(a)(4);
227.7203-13(a), (d)(2); 252.227-7013(e)(4); 252.227-7014(e)(4); Under Secretary of
Defense, Intellectual Property at 2-5 thru 2-6.
A properly asserted pre-award assertion list made in good faith by a contractor
must be attached to the contract at award. See DFARS 252.227-7013(e)(2);
252.227-7014(e)(2); 252.227-7017(1). A contractor is allowed to update that attachment
only if there is new information or an inadvertent omission in drafting the list that would
not have materially affected the source selection. The factual determination as to whether
either of the two conditions exist is for the CO to make and any update of the attachment
can only be made by CO contract modification. DFARS 252.227-7013(e)(3), (4);
252.227-7014(e)(3), (4). A contractor who fails to make a proper pre-award assertion
and who later cannot satisfy one of the two tests for updating the pre-award assertions is
26
required to deliver all such noncommercial data and software with unlimited rights. See
DFARS 227.7103-5(a)(7); 252.227-7013(b)(l)(vii), (e)(2), (3); 252.227-7014(e)(2), (3).
After award of a contract, a contractor must mark noncommercial technical data
or software it delivers with an authorized marking in an authorized manner showing that
the data or software is submitted in confidence to actually receive protection for its data
or software. Failure to so mark the data results in delivery of the data with unlimited
rights. See DFARS 227.7103-lO(c)(l); 227.7203-lO(c)(l); 252.227-7013(!)(2)-(4);
accord Xerxe Group, Inc. v. United States, 278 F.3d 1357, 1360 (Fed. Cir. 2002);
General Atronics Corp., ASBCA No. 49196, 02-1BCA131,798 at 157,067; Bell
Helicopter, 85-3 BCA 118,415 at 92,409, 92,432-33; Wayne H Coloney Co., B-211789,
83-2 CPD 1242 (Comp. Gen. 23 Aug. 1983). If a contractor shows it inadvertently
delivered unmarked data to DoD and agrees to relieve DoD of liability pertaining to the
unmarked data, it can ask the CO for permission to subsequently mark the data at its
own expense if that request is made within six months of submission. DFARS
227. 7103-10( C)(2); 227. 7203-10( C)(2).
Markings must be placed "on the transmittal document.. .and ... each page of the
printed material containing data for which restrictions are asserted." DFARS
227.7103-lO(b); 252.227-7013(f)(l); 252.227-7014(f)(l). A contractor may apply a
restrictive legend ONLY to those portions of the data/software/page covered by an
authorized assertion. DFARS 252.227-7013(t)(l). When such markings are not so
limited to only the restricted portions of a page, the markings are "nonconforming."
Under Secretary of Defense, Intellectual Property at 2-10 (alteration of prescribed
content or format of marking results in marking being "nonconforming").
The DFARS provide the specific text for markings that may be placed on
noncommercial technical data and software, and may specify the location where the
marking must appear. DFARS 252.227-7013(t)(l), (2)-(4); 252.227-7014(!)(2), (3)-(4).
Any alteration of the prescribed content or format of a marking results in the marking
being "nonconforming." Under Secretary of Defense, Intellectual Property at 2-10.
There are three contractually recognized categories of legends-"justified,"
"unjustified," and "nonconforming." A justified legend is in a prescribed format
authorized for use on the deliverable. See DFARS 227.7103-12(a)(l); 227.7203-12(a)(l).
An "unjustified" legend is an unauthorized marking that does not depict accurately
restrictions applicable. DFARS 227.7103-12(b)(2). A "nonconforming" legend is (a) an
authorized marking that differs in form or substance from the contract marking
requirements or (b) any marking which is not authorized by DFARS 252.227-7013 or
252.227-7014. DFARS 227.7103-12(a)(l); 227.7203-12(a)(l).
A contractor is prohibited from placing a restrictive marking or legend on any
deliverable noncommercial technical data and computer software unless the contract
contains an attachment acknowledging the restrictive assertion covering such
27
data/software. See DF ARS 252.227-7013( e)(2); 252.227-7014( e)(2) (last sentence).
A legend which is in a contract-specified format but which is not authorized for use
due to failure to assert prior to delivery is a "nonconforming" legend. See DFARS
252.227-7013(e)(2); 252.227-7014(e)(2); 227.7103-12(a)(l); 227.7203-12(a)(l). In
sum, when a contractor violates the procedural agreements of the parties' contract
(such as making a proper assertion, using a proper legend format, or limiting
application of the proper format to only that portion of the data covered by a proper
assertion), that legend with regard to that data is "nonconforming."
Correction of nonconforming markings on technical data and computer
software, respectively, are not subject to DFARS 252.227-7037, VALIDATION OF
RESTRICTIVE MARKINGS ON TECHNICAL DATA; and 252.227-7019, VALIDATION OF
ASSERTED RESTRICTIONS - COMPUTER SOFTWARE. Rather, nonconforming legends
may be ordered removed or corrected by simple CO notification and a 60-day period to
correct or comply. If a contractor fails to abide by the CO's order, it loses the right to
assert any restriction on DoD's use and further disclosure of the data or software.
DFARS 252.227-7013(h)(2); 252.227-7014(h)(2); 227.7103-ll(a)(l), 12(a)(l), (2);
Under Secretary of Defense, Intellectual Property at 4-19.
An unjustified marking is one that does not accurately characterize the
restrictions that apply to a particular deliverable. For example, if a limited rights
legend is placed on data for which DoD is entitled to receive GPR, that legend is
unjustified (even if it conforms to the format and content for limited rights legends).
DFARS 227.7103-12(b)(l); 227.7203-12(b)(l); Under Secretary ofDefense,
Intellectual Property at 4-18, 4-19. A CO has the right to review and challenge the
validity of an unjustified marking. DFARS 227.7103-12(b)(2); 227.7203-12(b)(2);
252.227-7013(h); 252.227-7019(e)(l); 252.227-7037(e). Procedures for reviewing and
challenging unjustified legends are set forth in DFARS 252.227-7019 for computer
software and in DF ARS 252.227-7037 for technical data, both of which are based on
10 u.s.c. § 2321.
To discourage contractors from simply marking all their designs and drawings
with proprietary markings, Congress placed restrictions upon the right of contractors to
mark data and codified the means of challenging marked data. Under 10 U.S.C.
§ 2321, Congress has specified a CO may review the validity of any restriction a
contractor asserts on DoD use if the CO determines that reasonable grounds exist to
question the current validity of the asserted restriction and continued adherence to the
asserted restriction would make it impracticable to procure the item to which the
technical data pertain. Congress further expressly specified a CO may initiate a
challenge to a contractor asserted use restriction within three years (now six years,
National Defense Authorization Act for FY 2012, Pub. L. No. 112-81, § 815(b)(l)(A),
125 Stat. 1492-93), of the date on which final payment is made upon the contract under
which the technical data was required to be delivered or the date on which the technical
data was actually delivered, whichever is later. 10 U.S.C. § 2321(d)(2)(B). A
28
challenge to an asserted use or release restriction may also be made after the end of
period set forth by Congress if the technical data involved: is publicly available; has
been furnished to the United States without restriction; or has otherwise been made
available without restriction. 10 U.S.C. § 232I(d)(2)(A)(i)-(iii).
Congress has mandated that a contractor or subcontractor at any tier under a contract
for the delivery of noncommercial data be prepared to furnish to a CO ''written justification"
for the restriction it asserts on the right ofDoD to use such data. 10 U.S.C. § 232I(b). Any
contract that entails delivery of technical data must include the Validation of Restrictive
Marking on Technical Data Clause (DFARS 252.227-7037). DFARS 227.7102-3(c);
227.7I03-6(e)(4); 227.7104-6(e)(4); 227.7203-6(f). That clause requires a contractor to
setup and maintain a system of records that are "sufficient to justify the validity of its
restrictive markings." DFARS 252.227-7037(c); 227.7103-1 l(b); see IO U.S.C. § 2321(b).
While IO U.S.C. § 2321 provides for validation with respect to only technical data, DoD has
issued a clause, DF ARS 252.227-7019 providing a similar process for computer software,
which also requires a contractor to setup and maintain a system of records that are "sufficient
to justify the validity of any markings that assert restrictions on the Government's rights to
use, modify, reproduce, perform, display, release or disclose." DFARS 252.227-7019(b).
If a CO believes there are reasonable grounds to question the validity of an
asserted restriction, the CO is to send a written notice to the contractor that includes the
CO's basis for questioning the assertion and notification that the contractor is to respond
within 60 days. 10 U.S.C. § 232I(d)(3); DFARS 252.227-7037(e)(l); 252.227-7019(e).
The contractor receiving such a notice is to possess the required records to prove what
was "exclusively funded at private expense," and has a contractual obligation to have
such proof on file and available. DFARS 252.227-7013(g); 252.227-7014(g); see
DFARS 252.227-7013(g)(2); 252.227-7014(g)(2); 252.227-7017(f); 252.227-7019(f)(iii);
252.227-7037(b), (e)(3). If the contractor requires more than 60 days to respond, it may
submit a written request for an extension of time detailing its need for more time. The
CO shall grant extra time as appropriate. 10 U.S.C. § 232I(e).
The contractor's response to the CO's challenge is considered a "claim" under the
CDA, which must be certified by the contractor for a technical data validation.
DFARS 252.227-7037(e)(3); 10 U.S.C. § 2321(h). 2 When the contractor submits a
2
We acknowledge that in Alenia North America, Inc., ASBCA No. 57935, 13 BCA
, 35,296, an appeal where neither the letter contract nor "definitized" contract
contained any DFARS or FAR data rights clauses, and the parties never adhered to
the "validation" procedures expressly set forth in 10 U.S.C. § 2321 and DFARS
252.227-7037, we deemed a CO's final decision asserting the government
possessed unlimited rights in technical manuals delivered by a contractor and
directing the removal of the contractor's restrictive legend-stating that manual
"must not be used for any purpose other than that for which it is supplied,"
"reproduced without written authorization," or "disclosed to unauthorized
29
response to the CO, the CO has 60 days to decide whether the justification submitted is
valid. 10 U.S.C. § 232l(g)(2). If the CO determines the contractor failed to justify the
asserted restriction, the CO is to issue a final decision sustaining the challenge and
cancelling the restriction. 10 U.S.C. § 232l(i)(l)(A); DF ARS 252.227-7019(f)(6)(i);
252.227-7037(g)(2)(ii). If the contractor fails to submit a response to the challenge
regarding the asserted restriction, the CO also is to issue a final decision pertaining to the
validity of the asserted restriction. 10 U.S.C. § 232l(g)(l); DFARS 252.227-70I3(g)(2);
252.227-7019(f)(5). For 90 days after the issuance of a final decision, however, DoD must
continue to abide by the contractor-asserted restriction to allow the contractor to commence
an action before either this Board or provide notice of intent to file an action in the United
States Court of Federal Claims pursuant to the CDA. DFARS 252.227-7019(g)(I)(i);
252.227-7037(g)(2)(ii).
By tying the validation to a final decision by a CO, Congress made the matter a
"contract dispute," rather than an independent cause of action in federal district court.
If the contractor wants to dispute the CO's challenge regarding technical data rights, it
cannot assert the matter was "unrelated" to a contract action, as the contractor did in
Megapulse, Inc. v. Lewis, 672 F.2d 959 (D.C. Cir. 1982). Rather, it must appeal the
CO's final decision in accordance with the CDA. 41 U.S.C. § 7104.
In sum, pursuant to statutory procedures providing due process to a contractor,
Congress has statutorily authorized a CO to cancel restrictions on DoD's right to use
noncommercial technical data or software if, in response to a "challenge" by a CO, a
contractor does not submit justification for those restrictions (claim by the contractor),
the CO issues a final decision concluding the asserted restrictions are not valid, and any
suit pursuant to the CDA with respect to the CO's final decision results in a court or
board decision favorable to DoD. 10 U.S.C. § 232l(i)(A).
DECISION
Cubic moves for summary judgment in this appeal contending that SPAWAR
"expressly and unambiguously released the claim that is the subject of this Appeal"
when it entered into a "global settlement" amicably resolving ASBCA Nos. 56097 and
56288, both of which concerned Contract No. N00039-03-C-0024 (app. mot. at 1).
Cubic asserts that: "[SPAWAR's] claim is that Cubic's Limited Rights assertions in
persons"-to be a "government" claim. In so concluding to resolve a question of
jurisdiction, we essentially relied on a line of precedent that this Board has
jurisdiction to decide the respective rights of parties under a contract even though
no monetary relief is sought. E.g., Gen. Elec. Automated Sys. Div., ASBCA
No. 36214, 89-1 BCA 121,195 at 106,959 (citing Systron Donner, Inertial Div.,
ASBCA No. 31148, 87-3 BCA 120,066). We, therefore, do not consider Alenia
to have addressed the nature of a claim under the validation procedures at issue
here under 10 U.S.C. § 2321 and DFARS 252.227-7037 or relevant to this appeal.
30
certain technical data ... delivered under the 2003 ... [CDLS] Contract...are invalid
because Cubic cited 'mixed funding' as the basis of its assertions"; SPAWAR "knew
or reasonably should have known of the basis of that claim ...prior to the parties'
execution of a Settlement Agreement related to the CDLS Contract in November
2008"; and SPAWAR' s claim thus "accrued prior to the execution of the Settlement
Agreement." According to Cubic, the settlement agreement "included plain and
unambiguous mutual releases of all claims related to the CDLS contract" stating that
"all matters and/or claims and potential matters and/or claims (whether known or
unknown) arising out of, or incidental to, or relating to the [CDLS] Contract" were
released and SPAWAR's validation "claim, asserted years after the parties executed the
Settlement Agreement, .. .is barred by the release." (App. reply at 1-2)
SPAWAR responds that Cubic "cites and relies on select parts of the release of
claims to assert that the language bars 'all claims,'" but fails to recognize "other parts
of the Settlement Agreement" which state that the "release does not extend to any
claims related to the Contract that may arise in the future." According to SPAWAR,
the "claim [at issue in this appeal] arose after ...the Settlement Agreement, and is
therefore not barred by the release language in the Agreement which specifically
reserved rights of parties to pursue claims related to the CDLS Contract that arise in the
future." (Gov't opp'n at 8-9)
In arguing that the claim which is the subject of this appeal is barred because the
claim (among others) was released, Cubic repeatedly contends the claim before us is a
"SPAWAR" claim. It asserts that ''the only question before the Board is the legal issue
of whether the Government's data rights claim arose before the parties executed the[ir]
Settlement Agreement" (e.g., app. reply at 5-6). The basic premise underlying Cubic's
assertion, however, is incorrect. The claim before us is not a SPAWAR claim, but a
claim by Cubic.
After years of complaints that data furnished by contractors to the government
with restrictions on use and disclosure was being made available by the government to
others in contravention of the use and disclosure restrictions without an adequate legal
remedy available to a contractor, Congress established by statute a specific procedure to
resolve disputes regarding restrictions on use and disclosure of data that a contractor
imposes on data furnished to the government. DoD subsequently incorporated those
statutory provisions into its regulations and mandatory clauses for its contracts. As
discussed above, during 1984, Congress specified as a matter of law a DoD contract
providing for delivery of technical data shall provide: the contractor or subcontractor at
any tier is to be prepared to furnish the CO a written justification for any restriction
asserted by the contractor or subcontractor on the right of the government to use such
data; and the CO may review the validity of any restriction asserted under the contract
on the right of the government to use such data if the CO "determines that reasonable
grounds exist to question the current validity of the asserted restriction" and that
"continued adherence to the asserted restriction by the United States would make it
31
impracticable to procure the item competitively at a later time." Congress stated that, if
after review the CO determines a challenge to an asserted restriction is warranted, the
CO shall provide a written notice to the contractor or subcontractor challenging the
restriction asserted and requiring submission of a response within 60 days justifying
validity of the asserted restriction. The contractor's response to the CO's challenge
regarding technical data validation is deemed a "claim" under the CDA, DFARS
252.227-7037(e)(iv)(3); 10 U.S.C. § 232l(h), which the contractor must certify,
DFARS 252.227-7037(e)(iv)(3), and the CO shall issue a final decision upon that claim,
DFARS 252.227-7037(g)(l), (2), which can be appealed to the U.S. Court of Federal
Claims or this Board in accordance with the CDA, DFARS 252.227-7037(g)(2)(iv).
Defense Procurement Reform Act of 1984, Pub. L. No. 98-525, 98 Stat. 2598.
Likewise, if a contractor fails to submit a response in support of its challenged use
restrictions, as occurred in this appeal, in order to preclude a contractor from being able
to prevent the resolution of a challenge to the validity of use restrictions, Congress also
expressly specified the CO shall issue a final decision on the validity of the challenged
use restrictions, which can then be appealed to the Court of Federal Claims or this
Board in accordance with the CDA. Id.
In requiring a contractor or subcontractor to furnish "written justification" for a
restriction asserted on use of noncommercial data or software furnished pursuant to a
contract and specifying the contractor's written submittal will be treated as a "claim"
under the CDA, Congress clearly placed the burden of proof for validating a use or
release restriction on a contractor or subcontractor and established that the ''validation"
of such restrictions under contracts subject to 10 U.S.C. § 2321 containing a DoD
''validation" clause, as here, constitutes a "claim" by a contractor under the CDA.
Accordingly, the issue in this appeal is not whether a "claim" by SPAWAR is barred
by the release executed by the parties. Rather, the issue is whether Cubic's "claim"
contending the restrictions it has asserted are valid and subsequent appeal by Cubic of
the CO's final decision to the contrary is barred by the release executed by the parties
over three years earlier.
"A release is a contract whereby a party abandons a claim or relinquishes a right
that could be asserted against another." E.g., Colorado River Materials, Inc. dlbla
NAC Construction, ASBCA No. 57751, 13 BCA ,r 35,233 at 172,991. The scope of a
release, therefore, is a question of contract interpretation. Id. As with any question of
contract interpretation, the first step is to examine the language used by the parties.
Beil BC! Co. v. United States, 570 F.3d 1337, 1341 (Fed. Cir. 2009); Dureiko v. United
States, 209 F .3d 1345, 1356 (Fed. Cir. 2000); Tri-0, Inc. v. United States, 28 Fed. Cl.
463, 470-71 (1993).
Two paragraphs of the parties' Settlement Agreement contain very broad
language. As found above, the second whereas clause of the Agreement states:
32
[I]n the interest of resolving all matters relating to ASBCA
Nos. 56097 and 56288, as well as all matters and/or claims
and potential matters and/or claims (known or unknown)
arising under or in regard to the Contract, and under the
sound policy of law favoring the settlement of disputes, the
parties understand and agree that the parties' agreements
herein constitute and represent full consideration for and
satisfaction of any and all matters and/or claims brought
under ASBCA Nos. 56097 and 56288, as well as all
matters and/or claims or potential matters and/or
claims (known or unknown) arising under or in regard
to the Contract. [Emphasis added]
Similarly, as found above, paragraph 15 of the Settlement Agreement states:
This Agreement is for the sole purpose of settling all
claims and appeals arising out of, incidental to, or
relating to the Contract, and this Agreement shall not be
cited or otherwise referred to by either Cubic or the
Government in any proceedings, whether judicial or
administrative in nature, except as is necessary to effect the
terms of this Agreement. [Emphasis added]
Based on the language of the Agreement, Cubic asserts that the parties'
"Settlement Agreement released 'all matters and/or claims and potential matters and/or
claims (whether known or unknown) arising out of, or incidental to, or relating to the
[CDLS] Contract"' (app. reply at 2). According to Cubic, it and SPAWAR executed a
"global settlement agreement" in November 2008 to settle "all matters contained in
ASBCA Nos. 56097 and 56288, as well as all matters and/or claims and potential
matters and/or claims (whether known or unknown) arising out of, or incidental to, or
relating to the [CDLS] Contract" (app. reply at 3, emphasis deleted). Cubic adds that
the Agreement states that the parties intended the Agreement "to resolve all matters
that were in any way related to or connected with the CDLS Contract" (app. mot. at 5;
accord app. reply at 6 n.7 ("plain language of the Settlement Agreement makes clear
that the parties intended the Agreement to resolve not only the matters in ASBCA
Nos. 56097 and 56288, but 'all claims and potential claims resulting from or relating to
the Contract"'). In sum, Cubic contends (at least initially in its briefs) that SPAWAR
"executed a valid general release, and there is no reason for this Board to entertain the
notion that [SPAWAR] harbored an unspoken, undocumented exception to that broad
release" (app. mot. at 6).
As SPAWAR notes in its opposition to Cubic' s summary judgment motion,
however, it is undisputed that both of the express releases set forth in the Settlement
Agreement for the parties (paragraphs 12 and 14) include the following language:
33
"Notwithstanding anything to the contrary, this release does not extend to any
claims related to the Contract that may arise in the future" (emphasis added).
SPAWAR contends in its opposition to Cubic' s summary judgment motion that this
language demonstrates the Settlement Agreement does not release "all claims" arising
under or associated with the CDLS contract. (Gov't opp'n at 8-9)
Cubic is correct that general language similar to that set forth above indicates an
intent to make an ending of every matter arising under or by virtue of the contract.
E.g., Augustine Med. Inc. v. Progressive Dynamics, Inc., 194 F.3d 1367, 1371-72
(Fed. Cir. 1999). "[A] general release precludes a party to the contractual armistice
from renewing or initiating further combat." HL. C. & Assocs. Constr. Co. v. United
States, 367 F.2d 586, 590 (Ct. Cl. 1966) (quoting United States v. William Cramp
& Sons Co., 206 U.S. 118 (1907)).
The very release that Cubic relies upon as releasing "all claims and potential
claims resulting from or relating to the Contract," however, also expressly states that,
"[n]otwithstanding anything to the contrary, this release does not extend to any claims
related to the Contract that may arise in the future." That language clearly qualifies the
extent of the release. If the release of claims was intended to be unqualified, there
would be no need for any such language of qualification. E.g., Metric Constructors,
Inc. v. United States, 314 F.3d 578, 582 (Fed. Cir. 2002). It provides, in conjunction
with the other release language, that Cubic and SPAWAR are both released by the
other from all matters and/or claims or potential matters and/or claims (known or
unknown) arising under or in regard to the contract, EXCEPT "any claims related to
the Contract that may arise in the future." Bilateral contract Modification No. P00035
memorializing the parties' 2008 Settlement Agreement contained the same language
set forth in the Settlement Agreement concerning CDLS contract claims arising in the
future. As found above, paragraphs 12 and 14 of Modification No. P00035 state:
"Notwithstanding anything to the contrary, this release does not extend to any claims
related to the Contract that may arise in the future." The 2008 settlement agreement
and subsequent bilateral contract modification, therefore, do not effect an ironclad or
complete release of the parties from any and all claims relating to or arising under their
CDLS contract, as Cubic suggests, but instead a "partial" release of claims.
Pursuant to its plain terms, the parties' release (set forth both in the Settlement
Agreement and bilateral contract modification) does "not extend" to contract claims
arising "in the future." We are not free to ignore the express language utilized by the
parties in their Settlement Agreement (and repeated in the contract modification). It is
well established that, in construing the Settlement Agreement, the agreement must be
considered as a whole and interpreted in a way that harmonizes and gives meaning to
all its words and provisions. Julius Goldman's Egg City v. United States, 697 F.2d
1051, 1057 (Fed. Cir. 1983); Thanet Corp. v. United States, 591 F.2d 629,635 (Ct.
CL 1979). An interpretation giving a reasonable meaning to all parts of an agreement
is preferred to one leaving a portion of the agreement useless, inexplicable, inoperative,
34
void, insignificant, meaningless, or superfluous, or achieves a weird and whimsical
result. Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991) (citing
Arizona v. United States, 575 F.2d 855, 863 (Ct. Cl. 1978)). Ifwe do not ignore the
parties' language that "this release does not extend to any claims related to the Contract
that may arise in the future," but construe that language as excepting from the parties'
release CDLS contract claims that "arise in the future," we give a reasonable meaning
to all parts of the parties' agreement in accordance with the principles of contract
construction. See id.
It is the burden of the parties entering into a settlement agreement to expressly
reserve in the agreement any rights that they wish to maintain beyond the date of the
settlement agreement. If the parties intend to leave things open and unsettled, their intent
to do so must be made manifest. Augustine Med, 194 F.3d at 1372. We believe the
parties' language in their Settlement Agreement makes manifest their intent to create only
a "partial" release of Contract claims, and to expressly reserve in the Settlement
Agreement that the release of claims does not apply to "[COLS] contract claims" that
"arise in the future," i.e., their wish to maintain beyond the date of their Settlement
Agreement their ability to pursue CDLS contract claims that "arise in the future."
Compare id., with Tri-0, 28 Fed. Cl. at 470-71 (there is nothing in language of release to
support a holding the parties contemplated a discharge of any subsequent claims);
Advanced Eng'g & Planning Corp., ASBCA Nos. 53366, 54044, 03-1 BCA ,r 32,157
(releases incorporated as part of bilateral modification not "general" releases).
Cubic contends further in its summary judgment briefs that, even if the parties'
release of claims is not a general release, the claim at issue in this appeal is barred by
the Settlement Agreement release because it arose prior to the parties' execution of
their Settlement Agreement, rather than after execution. Cubic states that SPAWAR
knew or should have known it had a basis "to challenge Cubic' s assertion of Limited
Rights in CDLS technical data" when Cubic submitted its CDLS assertions table in
2002 asserting Limited Rights in data due to development of data with mixed funding.
(App. mot. at 7, 8; app. reply at 7, 9) According to Cubic, because the stated basis of
the rights asserted in its CDLS assertions table "is inconsistent-on its face-with the
standard allocation of rights established by DFARS 252.227-7103," the "government
possessed all the information necessary to assert its claim" when Cubic submitted the
CDLS assertions table in 2002 (app. reply at 8).
Cubic, however, once again founds its arguments upon a false premise. This
appeal is not to resolve a "government" claim. As discussed above, the claim that is
before us is not a SPAWAR claim. Instead, pursuant to statute, 10 U.S.C. § 2321,
regulations and contract clauses, DFARS 252.227-7037, this appeal constitutes a
''validation" claim by Cubic pursuant to a process statutorily created by Congress and
detailed in regulations and contract clauses by DoD to allow a contractor to validate its
CDRL assertions of restrictions on government use and release of technical data and
software.
35
For several decades, contractors furnishing technical data and software to the
government complained that the government could remove restrictive use markings
they placed upon their technical data and software without due process of law or any
effective legal remedy available to a contractor to prevent such government action.
E.g., Nash & Rawicz, Intellectual Property in Government Contracts at 468; Int'!
Eng'g Co. v. Richardson, 367 F. Supp. 640, 652-54 (D.D.C. 1973); Int'! Eng'g Co.,
Div. ofA-T-0, Inc. v. Richardson, 361 F. Supp. 818, 823-25 (D.D.C. 1973) (existing
procedure "seriously lacking in adequate standards" for striking a restrictive legend,
furnishing adequate notice of specific objections by a CO, and allowing contractor
opportunity to present evidence and to cross-examine adverse witness), rev'd on other
grounds, 512 F.2d 573 (D.C. Cir. 1975), cert. denied, 423 U.S. 1048 (1976). As the
D.C. Circuit Court of Appeals explained in Aktiebolaget Bo/ors v. United States,
194 F.2d 145 (D.C. Cir. 1951):
The owner of an unpatented trade secret has a
property right in it as long as he does not disclose it. His
right to the exclusive use of it depends upon the
continuance of secrecy. Any person who obtains the secret
from him by ... unlawful means violates his property right
and commits a tort ....
... [O]ne who has lawfully acquired a trade secret
may use it in any manner without liability unless he
acquires it subject to a contractual limitation or restriction
as to its use. In that event a licensee who uses the secret for
purposes beyond the scope of the license granted by the
owner is liable for breach of contract, but he commits no
tort, because the only right of the owner which he thereby
invades is one created by the agreement of disclosure. The
owner could not maintain a suit against him for damages
arising from unlicensed use without pleading and proving
the contract. This being true, the gist of the owner's action
is the breach of the licensing agreement.
Established precedent for nearly a third of a century, therefore, held that the only remedy
available to a contractor contending the government was disclosing or had disclosed
technical data furnished the government with restrictions upon disclosure and use was a suit
for breach of contract, i.e., receipt of money damages. Int'! Eng'g, 512 F.2d 573, cert.
denied, 423 U.S. 1048 (1976); Williams Int'! Corp. v. United States, 7 Cl. Ct. 726, 730-31
(1985); Baldwin-Lima Hamilton Corp. 50 Comp. Gen. 271 (13 Oct. 1970) (Federal Tort
Claims Act exempts claims arising out of interference with contract rights; if licensee's use
exceeds that permitted by license, licensor's remedy lies in contract); Farmakides, Technical
Data in Government Contracts, 8 Wm. & Mary L. Rev. at 575. Many contractors did not
36
consider money damages for contract breach to be an adequate legal remedy because they
desired to preclude the public release of their trade secret or technical data by the
government to avoid significant future economic harm to their business. The U.S. courts of
appeals however held availability of a legal remedy under the Tucker Act, 28 U.S.C.
§ 1491, for contract breach precluded contractors from maintaining an action against the
government in district court under the Administrative Procedure Act (APA), 5 U.S.C.
§§ 701-706, or another legal provision. Int'! Eng'g, 512 F.2d at 577-80; Aktiebolaget, 194
F.2d at 148-50. In 1982, relying upon a recent Supreme Court decision holding a party
seeking to bar an agency's disclosure of information it had supplied that agency has no
cause of action in a district court under the Freedom of Information Act (FOIA), 5 U.S.C.
§ 552; Chrysler Corp. v. Brown, 441 U.S. 281,294 (1979), or the Trade Secrets Act,
18 U.S.C. § 1905, Chrysler, 441 U.S. at 316-17, but may seek review of the agency's action
in district court and potentially obtain an injunction against that action pursuant to the APA,
Chrysler, 441 U.S. at 317, the D.C. Circuit held for the first time in Megapulse, 672 F.2d
959, that a contractor could maintain an action pursuant to the APA and Trade Secrets Act
for an injunction against an agency barring release of the contractor's data because
monetary relief based on breach of contract was not an adequate remedy under the facts of
the appeal. While recognizing an action against the United States "which is at its essence a
contract claim" lies within the Tucker Act and "a district court has no power to grant
injunctive relief in such a case," 672 F.2d at 967, the D.C. Circuit further determined that
the action before it by a government contractor did not present a "disguised contract action"
cognizable only elsewhere. Id. at 968.
Less than two years after the D.C. Circuit's decision in Megapulse, Congress enacted
legislation which expressly provided contractors furnishing technical data to government
agencies with a statutory and regulatory process providing them with due process prior to a
CO removing one of their legends restricting use of data furnished. 10 U.S.C. § 2321;
41 U.S.C. § 253d; Anderson, Comparative Analysis ofIntellectual Property Issues, 33 Pub.
Cont. L.J. at 47. By statute, Congress specified that contracts for supplies or services identify
in advance of delivery to the maximum extent practicable technical data which is to be
delivered with restrictions on the right of the United States to use such data. 10 U.S.C.
§ 2320(b)(5). To satisfy this statutory mandate (and related regulatory requirements), a
contractor lists on a CDRL all noncommercial technical data and computer software that the
contract names as unlimited rights deliverables that the contractor intends to deliver with less
than unlimited rights, specifically disclosing the asserted rights category for each data item
and the basis for its assertions. DFARS 252.227-7013(e)(2), (3); 252.227-7014(e)(2), (3);
252.227-701 ?(b), (d). Pursuant to the statutory and regulatory framework, the CDRL
becomes part of the parties' contract (DFARS 227.7103-10(a)(3); 227.7203-10(a)(3);
252.227-7013(e)(2); 252.227-7014(e)(2); 252.227-7017(±)), the contractor must mark
noncommercial technical data or software it delivers with an authorized marking in accord
with its CDRL assertions (DFARS 227.7103-lO(b)(l), 227.7203-lO(b)(l)), and the contractor
must maintain records sufficient to justify the validity of its CDRL assertions and markings
that impose restrictions on the government's right to use, duplicate or disclose technical data
delivered or required to be delivered. 10 U.S.C. § 232l(b); DFARS 252.227-7037(c).
37
Assertions set forth on a CDRL are not binding on the government. They are simply the
unilateral claim of a contractor regarding allocation of rights for noncommercial technical
data or software. See DFARS 227.7103-10(a)(4); 227.7203-10(a)(4); 227.7103-B(a);
227.7203-B(a); 252.227-7013(e)(4); 252.227-7014(e)(4). They are not binding on DoD,
which is free to issue a challenge to the assertions even after it has made final contract
payment. 10 U.S.C. § 2321(c)(2)(A), (d); DFARS 227.7103-10(a)(4); 227.7103-B(a), (d)(4),
(8) (only a CO' s final decision or actions of the ASBCA or court of competent jurisdiction
sustaining validity of asserted restriction constitutes validation); 227.7203-10(a)(4);
227.7203-6(±); 227.7203-B(a), (d)(2), (e)(2); 252.227-7013(e)(4); 252.227-7014(e)(4);
Under Secretary of Defense, Intellectual Property at 2-5 thru 2-6.
Pursuant to the administrative process preceding a validation challenge, a CO may
request a contractor or subcontractor informally explain the basis for its asserted
restrictions, as occurred between the parties here. If the CO is not satisfied with the
explanation received, as occurred here, the CO may request additional information be
supplied, as also occurred here and appears to have resulted in the parties' July 2012
meeting at Cubic's facility. If the CO then makes a determination that (1) reasonable
grounds exist to question the contractor's rights assertion and (2) continued adherence to
the asserted restriction could make it impracticable to competitively procure the item, the
CO may issue to the contractor a written "challenge" regarding the rights assertion.
10 U.S.C. § 232l(b)(2)(A); DFARS 227.7103-B(c)(l), (d)(2), (4); 252.227-7037(d)(l),
(2), (e); 252.227-7019(d)(l), (2), (3); Nash & Rawicz, Intellectual Property in
Government Contracts at 469.
Only if this standard is met is the CO free to issue a written statement challenging
the contractor's assertion setting forth the CO's specific grounds for questioning the use
assertion(s) and seeking within 60 days production by the contractor to the CO of records
sufficient to justify the validity of its restrictive marking(s). 10 U.S.C. § 2321(b), (d)(3);
DFARS 227.7103-1 l(b), (d)(4); 252.2277037(c), (e)(l); 252.227-7019(b). A contractor's
production of records seeking to justify the validity of the restrictive marking(s) is, by law,
considered to be a "contractor" claim under the CDA. DFARS 252.227-7037(e)(iv)(3);
10 U.S.C. § 2321(b), (h). The CO will then issue a final decision on the contractor's
claim. 10 U.S.C. § 2321(g)(2); DFARS 252.227-7037(g).
Where a contractor, as here, fails to respond to a challenge, i.e., does not produce
written justification to the CO for its asserted use restriction(s), Congress directs "the [CO]
shall issue a [final] decision pertaining to the validity of the asserted restriction," despite
the contractor's lack of response. 10 U.S.C. § 2321(g)(l); DFARS 252.227-7019(t)(5);
252.227-7037(±); Nash & Rawicz, Intellectual Property in Government Contracts at 1376.
Thus, a contractor cannot prevent determination of the validity of its asserted use
restriction(s) by failing to follow or adhere to the procedures set forth by Congress and
DoD for such a determination.
38
The issuance of a final CO decision upon the validity of the asserted use
restriction(s) allows a contractor to immediately obtain review of the CO final decision by
this Board or the U.S. Court of Federal Claims. DFARS 252.227-7019(g)((i), (ii);
252.227-7037(g)(2)(iii), (iv); see 10 U.S.C. § 2321 (h). Some scholars have described the
resulting proceedings before this Board and the Court of Federal Claims as an "injunctive
type proceeding." Nash & Rawicz, Intellectual Property in Government Contracts at 1374.
In accordance with statute, the contractor has the burden of proof on appeal
(10 U.S.C. § 232l(b); DFARS 252.227-7019(b), (t)(iii); 252.227-7037(b)(2)(ii), (c), (e)(ii),
(g)(i)), the standard of review is de novo (41 U.S.C. § 7104(b)(4)), and any determination
by the board or court that is adverse to the contractor can be appealed to the U.S. Court of
Appeals for the Federal Circuit. Until any appeal is concluded, DoD must leave restrictive
markings intact and act in accordance with the restriction. If upon final disposition, the
CO's challenge to the contractor's use or release restriction is not sustained, "the United
States shall continue to be bound by the restriction." 10 U.S.C. § 2321(i)(2)(A); Sharp,
Layman's Guide to Intellectual Property, 33 Pub. Cont. L.J. at 109; Nash & Rawicz,
Intellectual Property in Government Contracts at 469-70; Chester D. Taylor & David W.
Burgett, Government Rights in Data and Software, 88-3 Briefing Papers 22 (Feb. 1988).
As noted above, some scholars have described the resulting proceedings before
us as an "injunctive type proceeding." Nash & Rawicz, Intellectual Property in
Government Contracts at 1374. At this juncture, we need not characterize the nature of
the proceedings Congress created before us, but note that our ultimate determination in
such appeals - determination of the validity of a contractor's asserted use or release
restriction(s)- will provide Cubic with (1) the due process sought by contractors before
a government agency removes, obliterates or ignores a restrictive rights legend on data
furnished it pursuant to a contract and (2) an adequate legal remedy, i.e., preclusion of
an agency's removal, obliteration or disregard of a contractor's asserted use or release
restriction ifwe determine the restriction to be justified. 10 U.S.C. § 232l(i)(2)(A)
(government shall continue to be bound by restriction); DFARS 252.227-7019 (h)(2)(i)
(same); 252.227-7037(h)(2)(i) (same); Nash & Rawicz, Intellectual Property in
Government Contracts at 583 (counterpart FAR clause attempts to answer due process
issues raised in Int'! Eng'g Co., 367 F. Supp. at 653-54).
In sum, Congress and DoD have created a very specific, detailed process for
validating a contractor's use or release restrictions. This process discourages COs from
pursuing the validation of the restrictions prior to contract award and essentially
encourages CO's to accept such restrictions during performance of a contract because a
CO is not to issue a validation challenge until the CO can make two specific
determinations, one of which concerns future re-procurement of the items procured.
The process created by DoD and Congress encourages a CO to make informal inquiries
of contractors if the CO has questions concerning a contractor's justification of a use or
release restriction in an attempt to resolve such issues informally and inexpensively,
and only allows a CO to issue a "written challenge" commencing a formal "validation"
39
r
of a use or release restriction after a CO can determine (1) reasonable grounds exist to
question the contractor's rights assertion and (2) continued adherence to the asserted
restriction could make it impracticable to competitively procure the item. If and when
the CO is able to make these determinations, the CO can issue a written validation
challenge to a contractor seeking production by the contractor within 60 days of
records sufficient to justify the validity of its restrictive marking(s). By statute,
Congress has specified that the contractor's response to the CO's challenge producing
records intended to justify the validity of its restrictive marking(s) is to be treated as a
"contractor" claim under the CDA and a CO is to issue a final decision on the validity
of the restrictive marking(s). Where, as here, if the contractor fails to produce records
to justify the validity of its restrictive marking( s), Congress has further specified that
the CO is to proceed to issue a final decision that the marking(s) are not valid, thereby
allowing a contractor to obtain review of the validity of the marking(s) de novo by
either this Board or the Court of Federal Claims.
In asking us to hold that the action regarding validation of use or release
restrictions before us arose in 2002 when Cubic submitted its table of restrictive marking
(CDRL) assertions to SPAWAR and that table was appended to the parties' contract,
Cubic essentially asks us to ignore the very specific, detailed statutory and regulatory
framework set forth by Congress and DoD for the resolution of validation of use or
release restrictions. As set forth above, Congress has determined that a contractor's
response to a CO' s challenge justifying the validity of its restrictive marking(s) is to be
treated as a contractor "claim" under the CDA. A contractor cannot submit to a CO a
response deemed by Congress as a "claim" or fail to submit a response to the CO until a
CO issues a written validation challenge to the contractor with respect to the restrictive
markings, and the CO cannot issue such a challenge to a contractor until the CO is able to
determine (1) reasonable grounds exist to question the contractor's rights assertion(s) and
(2) the government's continued adherence to the contractor's asserted restriction(s) may
make it impracticable for the government to competitively procure the item.
We recognize, as Cubic asserts, that FAR defines "accrual" of a contract claim as
"the date when all events, that fix the alleged liability of either the Government or the
contractor and permit assertion of the claim, were known or should have been known."
FAR 33.201. As the Court of Appeals explained in Kellogg Brown & Root Servs., Inc. v.
Murphy, 823 F.3d 622, 626 (Fed. Cir. 2016), however, our "[p]recedent elaborates that
whether and when a CDA claim accrued is determined in accordance with the FAR, the
conditions of the contract, and the facts of the particular case." Fixing the date of accrual
of a claim requires first that there is a "claim." Binding precedent illustrates that a claim
does not arise for purpose of running a limitations period "if a claim cannot be filed
because mandatory pre-claim procedures have not been completed." Id. (citing Crown
Coat Front Co. v. United States, 386 U.S. 503, 510-12 (1967)) (pre-CDA case finding that
the contractor's claim "first accrued ... upon the completion of the administrative
proceedings contemplated and required by the provisions of the contract"); Bay Area
Laundry & Dry Cleaning Pension Trust Fund v. Ferber Corp. of Calif., Inc., 522
40
U.S. 192, 200-02 ( 1997) (rejecting as "inconsistent with basic limitations principles" the
position that a claim can arise and the limitations period commence when the claimant's
suit would be premature because required pre-suit procedures had not taken place). In this
appeal, mandatory pre-claim procedures, i.e., CO issuance of a written validation
challenge to Cubic' s asserted use and release restrictions and expiration of a period of at
least 60 days for Cubic either to submit a response justifying its asserted use and release
restrictions with documentation it was required by statute, regulation, and contract to have
maintained to do so or Cubic to fail to submit such a response) did not occur until 2012,
four years after the parties' execution of their 2008 release. Accordingly, the claim before
us regarding validation of Cubic's use and release restrictions did not arise until after
execution of the parties' release and comes within the expressly stated qualification or
exception to that release for claims arising in the future.
Cubic suggests that ifwe determine the validation claim arose after the parties'
Settlement Agreement we are ignoring the CDA, which governs claim accrual (app. reply
at 9-10). The CDA, however, does not define claim or claim accrual. See Rejlectone,
Inc. v. Dalton, 60 F.3d 1572, 1575 (Fed. Cir. 1995) (en bane). Those terms are defined in
the FAR (FAR 33.201, 52.233-1), which does not apply to DoD with respect to data
rights issues. 10 U.S.C. § 2320(a)(l), (b)(3), (7). We note that the DFARS provisions,
which are applicable to DoD with respect to data rights, set forth the administrative and
contractual scheme regarding validation of contractor asserted restrictions created by
Congress and DoD. According to Cubic, SPAWAR fails to cite any legal authority to
support a conclusion by us here that a "specific statute" such as 10 U.S.C. § 2321 trumps
the CDA, which Cubic states "confers the Board's jurisdiction" (app. reply at 9). We
note it is a well-established principle of statutory interpretation that, a statute of specific
intention takes precedence over a general statute, particularly if the specific statute was
later enacted. Brown v. GSA, 425 U.S. 820, 834 (1976) (a precisely drawn statute
pre-empts more general remedies). We do not, however, construe 10 U.S.C. § 2321 as
"trumping" the CDA. With respect to validation of contractor restrictions, we believe our
statutory interpretation reads both statutes together without conflict. See, e.g., Kellogg
Brown & Root, 823 F.3d at 626. Cubic's asserted interpretation of the statutes, on the
other hand, clearly conflicts with Congressional intent in enacting 10 U.S.C. § 2321.
Congress expressly authorized a CO to issue a ''validation challenge" to a contractor
within "six years" after the final contract payment. 10 U.S.C. § 232I(d)(2) (2011). This
authorization clearly is inconsistent with Cubic's suggestion that validation claims accrue
or arise when a contractor's CDRL or data list becomes a part of the contract awarded
since many if not most validation challenges would thereby be barred by the CDA's
six-year statute of limitations long before the Congressionally-authorized period for
bringing such challenges expired. See, e.g., 41 U.S.C. § 7I03(a)(4)(A); Carl Vacketta &
Oliver Holmes, Government Rights in Technical Data, Briefing Papers, 84-12 Fed. Pubs.
7 (Dec. 1984) (not uncommon for government to contest contractor's classification of
data five to ten years after original contract is complete).
41
We note that, with respect to government contracts, it is not unheard of to have
claims arise after a contract has ended. See IO U.S.C. § 2321(d)(2)(B) (validation
challenge may now occur within six years after final contract payment); Kellogg Brown &
Root, 823 F.3d at 629 (claim for subcontractor's costs accrued on a date after all
subcontractor activity ended); American Western Corp. v. United States, 730 F.2d 1486,
1488 (Fed. Cir. 1984) (price reduction allowed after full performance of contract where
contract set forth formula for determining amount of adjustment); Bar Ray Products, Inc.
v. United States, 162 Ct. Cl. 836, 837-38 (1963) (latent defect not discoverable by
ordinary diligence asserted after contract completion); World Wide Tankers, Inc., ASBCA
No. 20903, 77-1 BCA ,r 12,302 (limitations do not begin to run until disputes procedures
afforded by contract are exhausted); Baifield Industries, Div. ofA-T-0, Inc., ASBCA
No. 19025, 75-1 BCA ,r 11,245 at 53,526 (defective cost or pricing data determined
pursuant to contract audit clause within three years after final payment).
While Cubic further suggests that a CO's written validation challenge, by itself, is
a government "claim" (app. mot. at 6-8), pursuant to statute, regulation, and contract, it
is simply an administrative proceeding by a CO attempting to obtain from a contractor
written documentation justifying the contractor's assertion of restrictions on use or
release that a contractor is required to maintain by contract (DFARS 252.227-7037(c),
(e); 252.227-7019(b)), regulation (DFARS 227.7103-I3(b)) and statute (10 U.S.C.
§ 2321(b)). After receipt of the documentation a contractor submits, a CO may agree
with the contractor's assertion of restrictions on use or release by the agency and dispose
of the validation challenge in the contractor's favor. DFARS 252.227-7019(f)(iv)(4);
252.227-7037(g)(l). We note the purpose of a validation challenge is not to examine
whether a contractor "properly" completed its data rights assertion table appended to the
contract, as Cubic appears to suggest (app. mot. at 7, 8; app. reply at 7, 9), but to
determine if a proper "restriction" was asserted by Cubic with respect to specific data.
The issue is whether Cubic was entitled to assert "limited rights" in the specific data, not
whether Cubic erred in listing "mixed funding" upon its data rights assertion table with
respect to items it asserted were subject to the "limited rights" restriction. It is
conceivable Cubic may have erred in listing "mixed funding" on its assertions table
because earlier regulations considered certain costs charged to indirect cost pools as
government funding, thereby constituting "mixed funding," not realizing that Congress
directed that such funding is now to be considered as funding at "private expense," as
discussed above, and therefore be entitled to assert "limited rights" with respect to the
data at issue. See Nash & Rawicz, Intellectual Property in Government Contracts at
511; H.R. Rep. No. 99-1001 at 510-11 (1986 Conf. Rep.) 59 Fed. Reg. 31585, 31608;
National Defense Authorization Act for FYs 1988 and 1989, § 808, 101 Stat. 1019,
1128-29 (amounts spent for independent research and development and bid and proposal
costs shall not be considered to be government funding for purposes of definition of
developed at private expense).
Because we conclude based on the plain language of the parties' 2008 release that
claims arising in the future were expressly exempted from that release and the claim of
42
Cubic regarding validation of its use or release restrictions before us arose after
execution of the parties' release, we need not address SPAWAR' s assertions that the
right to challenge data rights assertions by a contractor is a statutory "right" given to the
Secretary of Defense that cannot be waived by a CO. We therefore express no views on
either SPAWAR's contention or Cubic's counterargument that it follows from a CO
being empowered by the Secretary of Defense to implement a validation challenge that
the CO is also empowered to release or waive the DoD Secretary's right to make such
challenges. See generally Exec. Business Media v. DoD, 3 F.3d 759 (4th Cir. 1983)
(Attorney General's plenary power did not include license to agree to settlement that
violates civil laws governing agency); FN Manufacturing, Inc. v. United States, 42 Fed.
Cl. 87, 93 (1998) (while CO may settle contract claims, CO may not "give away" data
rights which are not at stake if, in doing so, it subverts goals of CICA); D&R Machine
Co., ASBCA No. 50730, 98-1BCA129,462 at 146,236 (parties cannot by agreement
override plain dictates of Congress); Earth Property Services, Inc., B-237742, 90-1
Comp. Gen. 1273 (the existence of a settlement agreement does not permit agency to act
in ways not otherwise permitted by applicable statutes and regulations).
The standards set forth in FED. R. CIV. P. 56 guide us in resolving the motion for
summary judgment in this appeal, which relies on the Rule 4 file. Dongbuk R& U
Engineering Co., ASBCA No. 58300, 13 BCA 135,389 at 173,637; J. W. Creech, Inc.,
ASBCA Nos. 45317, 45454, 94-1BCA126,459 at 131,661; Board Rule 7(c)(2). We
will grant a summary judgment motion only if pleadings, depositions, interrogatory
answers, and admissions on file, together with any affidavits or other evidence, show
that there is no genuine issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. Cubic, the party seeking summary judgment, has the
burden of demonstrating both of those elements. Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986); Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed.
Cir. 1987); Comptech Corp., ASBCA No. 55526, 08-2 BCA 133,982 at 168,082.
SPAWAR, who is the nonmoving party, is entitled to have all reasonable inferences
drawn in its favor. Celotex, 477 U.S. at 322-24; Elekta Instrument S.A. v. 0. U.R.
Scientific Int'!, Inc., 214 F.3d 1302, 1306 (Fed. Cir. 2000).
Based upon ( 1) our interpretation of the language of the parties' settlement
agreement and release, and (2) the contractual, regulatory and statutory provisions
creating and governing procedures for validation of the restrictions asserted by Cubic
on use or release, we conclude that the parties' agreement expressly exempted claims
arising in the future and that the claim before us concerning validation of restrictions
asserted by Cubic on use and release arose after execution of the parties agreement and
release. Accordingly, Cubic is not entitled to judgment as a matter of law.
43
CONCLUSION
For reasons stated above, we deny Cubic's motion for summary judgment.
Dated: 8 May 2018
TERRENCE S. HARTMAN
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
RICHARD SHACKLEFORD OWEN C. WILSON
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 58519, Appeal of Cubic
Defense Applications, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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