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[Federal Register Volume 90, Number 11 (Friday, January 17, 2025)]
[Rules and Regulations]
[Pages 5736-5740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00722]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 252

[Docket DARS-2022-0030]
RIN 0750-AL67

Defense Federal Acquisition Regulation Supplement: Update of 
Challenge Period for Validation of Asserted Restrictions on Technical 
Data and Computer Software (DFARS Case 2022-D016)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2012, which 
addresses the validation of proprietary data restrictions.

DATES: Effective January 17, 2025.

FOR FURTHER INFORMATION CONTACT: David Johnson, telephone 202-913-5764.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 89 FR 
31686 on April 25, 2024, to implement section 815(b) of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Pub. L. 
112-81). Section 815(b) amended 10 U.S.C. 2321 (currently 10 U.S.C. 
3782) by increasing the validation period for asserted restrictions 
from three years to six years. Section 815(b) also amended 10 U.S.C. 
2321 to provide an exception to the prescribed time limit for 
validation of asserted restrictions if the technical data involved are 
the subject of a fraudulently asserted use or release restriction. Two 
respondents submitted public comments in response to the proposed rule. 
DoD also held a public meeting on May 17, 2024.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule. A discussion of the comments and the changes made to the rule as 
a result of those comments is provided, as follows:

A. Summary of Significant Changes From the Proposed Rule

    There are no significant changes from the proposed rule.

B. Analysis of Public Comments

1. Technical Data or Software Delivered, Furnished, or Otherwise 
Provided to the Government
    Comment: The respondents suggested that the revisions to the 
clauses at DFARS 252.227-7019, Validation of Asserted Restrictions--
Computer Software, and 252.227-7037, Validation of Restrictive Markings 
on Technical Data, to consistently reference technical data and 
computer software ``delivered or otherwise provided to the Government'' 
should be removed from the final rule. The existing clause language 
already references technical data delivered, software delivered, 
technical data required to be delivered, and software required to be 
delivered. Respondents assert that the phrase ``otherwise provided to 
the Government'' is ambiguous and inconsistent with existing statutes. 
The respondents also asserted that this language may result in a 
potential chilling effect on the relationship between Government and 
contractors.
    Response: References to technical data and computer software 
``delivered or otherwise provided'' to the Government appear multiple 
times in the current contract clauses at DFARS 252.227-7013, Rights in 
Technical Data--Other Than Commercial Products and Commercial Services, 
and DFARS 252.227-7014, Rights in Other Than Commercial Computer 
Software and Other Than Commercial Computer

[[Page 5737]]

Software Documentation. These references cover technical data and 
computer software ``delivered or otherwise furnished'', ``delivered or 
otherwise provided'', and ``delivered, furnished, or otherwise 
provided'' to the Government, and both clauses reference the validation 
clauses. In addition, DFARS 252.227-7019(e) currently references 
``software delivered, to be delivered under this contract, or otherwise 
provided to the Government in the performance of this contract.'' 
Accordingly, these revisions ensure consistency with existing language 
in DFARS 252.227-7019, 252.227-7013, and 252.227-7014, and clearly 
signals the scope of the validation clauses. The Government therefore 
declines the suggestion to remove these revisions from the final rule.
2. Changes To Align With Statutory Language Related to Restrictions 
Asserted
    Comment: A respondent suggested that the replacement in several 
places in the DFARS of the phrase ``restrictive markings'' with the 
phrase ``asserted restriction'' is unnecessary for statutory alignment 
and may result in confusion.
    Response: The underlying statutes (10 U.S.C. 3781-3786) repeatedly 
reference challenge, justification, and validation of ``restriction[s] 
asserted'' and ``asserted restriction[s].'' The statutes do not refer 
to restrictive markings. The final rule aligns the clauses with the 
underlying statutory language, and it creates consistent nomenclature 
and syntax throughout the clauses. The final rule references validation 
of ``asserted restrictions'', rather than validation of restrictive 
markings (which is inconsistent with the statutory language and more 
likely to be confused with the separate procedures for ensuring 
conformity of those markings). Rather than the confusing syntax of 
``striking'' an asserted restriction, the final rule references 
striking ``restrictive markings.''
3. Definition of Fraud
    Comment: The respondents requested clarification with respect to 
when a use or release restriction would be considered ``fraudulently 
asserted.'' In addition, the respondents proposed specific requirements 
and limitations for the Government when invoking this exception to the 
six-year challenge period.
    Response: As stated in the proposed rule, the statutory revisions 
being implemented in DFARS Case 2022-D016 do not establish a 
specialized definition of ``fraudulently asserted'' or a knowledge 
requirement. The respondents proposed requirements and limitations on 
this exception to the six-year challenge period. The respondents did 
not provide, and DoD is not aware of, either an existing statute, 
policy, or regulation that includes the proposed requirements or 
limitations, or evidence of congressional intent to impose the proposed 
requirements or limitations.
    As with other instances of the term fraud in the Federal 
Acquisition Regulation and DFARS, DoD relies upon the common meaning of 
the terminology used in the statute and regulatory implementation, 
informed by applicable procurement statutes, other applicable statutes, 
and case precedent. In addition, the existing validation procedures 
require the Government to state the specific grounds for challenging 
the asserted restriction, which includes the grounds for invoking the 
exception to the six-year challenge period. Such grounds are subject to 
review by a court of competent jurisdiction or the Armed Services Board 
of Contract Appeals.
4. Applicability to Commercial Products or Commercial Services
    Comment: One respondent recommended revisions to the proposed 
language in DFARS 252.227-7037(e)(1) to clarify whether sufficient 
information to reasonably demonstrate funding for the development of 
commercial products or commercial services must be provided with every 
challenge.
    Response: The original language indicates that challenges will 
``[s]tate the specific grounds for challenging the asserted restriction 
including, for commercial products or commercial services, sufficient 
information to reasonably demonstrate that the commercial product or 
commercial service was not developed exclusively at private expense.'' 
This requirement related to commercial products or commercial services 
is not optional, and the proposed revision was not intended to change 
this requirement. For the sake of clarity, the final rule reverts to 
the original language.
5. Question About Other Rulemaking Case
    Comment: A respondent requested that DoD expedite the issuance of 
proposed rule for DFARS Case 2023-D022, Definition of Subcontract.
    Response: This comment is outside the scope of this rule, which 
implements section 815(b) of the NDAA for FY 2012.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT), for Commercial Products (Including Commercially 
Available Off-the-Shelf (COTS) Items), and for Commercial Services

    This final rule amends the clauses at DFARS 252.227-7019, 
Validation of Asserted Restrictions--Computer Software, and DFARS 
252.227-7037, Validation of Restrictive Markings on Technical Data. 
However, this final rule does not impose any new requirements on 
contracts at or below the SAT, for commercial products including COTS 
items, or for commercial services. The clause will continue to apply to 
acquisitions at or below the SAT, to acquisitions of commercial 
products including COTS items, and to acquisitions of commercial 
services.

IV. Expected Impact of the Rule

    This final rule includes changes to lengthen the validation period 
for asserted restrictions from three years to six years. This final 
rule also provides an exception to the prescribed time limit for 
validation of asserted restrictions if the technical data or computer 
software involved are the subject of a fraudulently asserted 
restriction. Therefore, the final rule may increase the number of 
challenges to which contractors must respond. However, DoD cannot 
quantify the estimated number of the additional challenges at this 
time.

V. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, as amended.

VI. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD will submit a copy of 
the interim or final rule with the form, Submission of Federal Rules 
Under the Congressional Review Act, to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United

[[Page 5738]]

States. A major rule under the Congressional Review Act cannot take 
effect until 60 days after it is published in the Federal Register. The 
Office of Information and Regulatory Affairs has determined that this 
rule is not a major rule as defined by 5 U.S.C. 804.

VII. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
and is summarized as follows:
    DoD is amending the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement section 815(b) of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Pub. L. 112-81), 
which addresses the period for validation of proprietary data 
restrictions. The objective of the rule is to implement section 815(b), 
which amended 10 U.S.C. 2321 (currently 10 U.S.C. 3782) by increasing 
the validation period for asserted restrictions from three years to six 
years. Section 815(b) also amended 10 U.S.C. 2321 to provide an 
exception to the prescribed time limit for validation of asserted 
restrictions if the technical data involved are the subject of a 
fraudulently asserted use or release restriction. This rule will ensure 
that the Government has adequate opportunity to challenge discrepancies 
or inaccuracies in contractor assertions of data and software rights.
    The public comments raised no significant issues in response to the 
initial regulatory flexibility analysis.
    This rule applies to small entities that have contracts with DoD 
requiring delivery of data, including technical data and computer 
software. DoD obtained data for fiscal years 2020 through 2022 from the 
Procurement Business Intelligence Service for all contracts and 
modifications that include one or more of the following DFARS clauses: 
252.227-7013, Rights in Technical Data--Other Than Commercial Products 
or Commercial Services; 252.227-7014, Rights in Other Than Commercial 
Computer Software and Other Than Commercial Computer Software 
Documentation; 252.227-7015, Technical Data--Commercial Products and 
Commercial Services; and 252.227-7018, Rights in Other Than Commercial 
Technical Data and Computer Software--Small Business Innovation 
Research Program and Small Business Technology Transfer Program. DoD 
awarded on average 54,255 contract actions per year that included one 
or more of the listed clauses to 9,550 unique entities, of which 28,657 
contract awards (53 percent) were made to 6,033 unique small entities 
(63 percent).
    This rule does not impose any new reporting, recordkeeping, or 
other compliance requirements for small entities.
    There are no known alternatives that would accomplish the stated 
objectives of the applicable statute.

VIII. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies to this 
final rule. However, these changes to the DFARS do not impose 
additional information collection requirements to the paperwork burden 
previously approved by the Office of Management and Budget (OMB) under 
OMB Control Number 0704-0369, entitled DFARS Subpart 227.71, Rights in 
Technical Data; and Subpart 227.72, Rights in Computer Software and 
Computer Software Documentation, and related provisions and clauses.

List of Subjects in 48 CFR Part 252

    Government procurement.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.

    Therefore, the Defense Acquisition Regulations System amends 48 CFR 
part 252 as follows:

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
1. The authority citation for part 252 continues to read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

0
2. Amend section 252.227-7019--
0
a. By revising paragraph (b);
0
b. In paragraph (d)(2)(i)(B) by revising the second sentence;
0
c. In paragraph (e)(1) by revising the second sentence;
0
d. In paragraph (f)(1)(ii) by removing ``within 60 days'' and adding 
``in writing within 60 days'' in its place;
0
e. In paragraph (g)(3)(i)(B) by removing ``government'' and adding 
``Government'' in its place.
    The revisions read as follows:

252.227-7019  Validation of Asserted Restrictions--Computer Software.

* * * * *
    (b) Justification. The Contractor shall maintain records sufficient 
to justify the validity of any asserted restrictions on the 
Government's rights to use, modify, reproduce, perform, display, 
release, or disclose computer software delivered, required to be 
delivered, or otherwise provided to the Government under this contract 
and shall be prepared to furnish to the Contracting Officer a written 
justification for such asserted restrictions in response to a request 
for information under paragraph (d) of this clause or a challenge under 
paragraph (f) of this clause.
* * * * *
    (d) * * *
    (2) * * *
    (i) * * *
    (B) * * * If the Contractor fails to correct or strike the 
unjustified marking and return the corrected software to the 
Contracting Officer within 60 days following receipt of the software, 
the Contracting Officer may correct or strike the marking at the 
Contractor's expense;
* * * * *
    (e) * * *
    (1) * * * Except for software that is publicly available, has been 
furnished to the Government without restrictions, has been otherwise 
made available without restrictions, or is the subject of a 
fraudulently asserted use or release restriction, the Government may 
exercise this right only within 6 years after the date(s) the software 
is delivered or otherwise furnished to the Government, or 6 years 
following final payment under this contract, whichever is later.
* * * * *

0
3. Amend section 252.227-7037--
0
a. By revising the section heading and the clause heading and date;
0
b. By revising paragraphs (c), (d), (e)(1) introductory text, and 
(e)(1)(iii);
0
c. In paragraph (e)(4) by removing ``restrictive markings'' and adding 
``asserted restrictions'' in its place;
0
d. By revising paragraph (g)(1);
0
e. In paragraph (g)(2)(i) by removing ``restrictive marking'' and ``In 
order to'' and adding ``asserted restriction'' and ``To'' in their 
places, respectively;
0
f. By revising paragraphs (g)(2)(ii) through (iv);
0
g. In paragraph (h)(1)(i) by removing ``marking'' and adding ``marking 
that is based on the asserted restriction'' in its place;
0
h. By revising paragraphs (h)(1)(ii) and (i); and
0
i. In paragraph (k) by removing ``restrictive markings'' and 
``subcontractors'' and adding ``restrictions'' and ``subcontractor'' in 
their places, respectively.
    The revisions read as follows:

252.227-7037   Validation of Asserted Restrictions on Technical Data.

* * * * *

[[Page 5739]]

VALIDATION OF ASSERTED RESTRICTIONS ON TECHNICAL DATA (JAN 2025)

* * * * *

    (c) Justification. The Contractor or subcontractor at any tier 
is responsible for maintaining records sufficient to justify the 
validity of its asserted restrictions on the rights of the 
Government and others to use, duplicate, release, or disclose 
technical data delivered, required to be delivered, or otherwise 
provided to the Government under the contract or subcontract. Except 
as provided in paragraph (b) of this clause, the Contractor or 
subcontractor shall be prepared to furnish to the Contracting 
Officer a written justification for such asserted restrictions in 
response to a challenge under paragraph (e) of this clause.
    (d) Prechallenge request for information. (1) The Contracting 
Officer may request the Contractor or subcontractor to furnish a 
written explanation for any asserted restriction on the right of the 
United States or others to use, disclose, or release technical data. 
If, upon review of the explanation submitted, the Contracting 
Officer cannot determine the basis of the asserted restriction, the 
Contracting Officer may further request the Contractor or 
subcontractor to furnish additional information in the records of, 
or otherwise in the possession of or reasonably available to, the 
Contractor or subcontractor to justify the validity of any asserted 
restriction on technical data delivered, to be delivered, or 
otherwise provided to the Government under the contract or 
subcontract (e.g., a statement of facts accompanied with supporting 
documentation). The Contractor or subcontractor shall submit such 
written data as requested by the Contracting Officer within the time 
required or such longer period as may be mutually agreed.
    (2) If the Contracting Officer, after reviewing the written data 
furnished pursuant to paragraph (d)(1) of this clause, or any other 
available information pertaining to the validity of an asserted 
restriction, determines that reasonable grounds exist to question 
the current validity of the asserted restriction and that continued 
adherence to the asserted restriction would make impracticable the 
subsequent competitive acquisition of the item or process to which 
the technical data relates, the Contracting Officer will follow the 
procedures in paragraph (e) of this clause.
    (3) If the Contractor or subcontractor fails to respond to the 
Contracting Officer's request for information under paragraph (d)(1) 
of this clause, and the Contracting Officer determines that 
continued adherence to the asserted restriction would make 
impracticable the subsequent competitive acquisition of the item or 
process to which the technical data relates, the Contracting Officer 
may challenge the validity of the asserted restriction as described 
in paragraph (e) of this clause.
    (e) * * *
    (1) Notwithstanding any provision of this contract concerning 
inspection and acceptance, if the Contracting Officer determines 
that a challenge to the asserted restriction is warranted, the 
Contracting Officer will send a written challenge notice to the 
Contractor or subcontractor making the asserted restriction. The 
challenge notice and all related correspondence shall be subject to 
handling procedures for classified information and controlled 
unclassified information. Such challenge will--
* * * * *
    (iii) State that a Contracting Officer's final decision, issued 
pursuant to paragraph (g) of this clause, sustaining the validity of 
a prior asserted restriction identical to the current asserted 
restriction, within the 3-year period preceding the current 
challenge, shall serve as justification for the current asserted 
restriction if the prior validated restriction was asserted by the 
same Contractor or subcontractor (or any licensee of such Contractor 
or subcontractor) to which such notice is being provided; and
* * * * *
    (g) * * *
    (1) If the Contracting Officer determines that the Contractor or 
subcontractor has justified the validity of the asserted 
restriction, the Contracting Officer will issue a final decision to 
the Contractor or subcontractor that sustains the validity of the 
asserted restriction and that states that the Government will 
continue to be bound by the asserted restriction. The Contracting 
Officer will issue this final decision within 60 days after receipt 
of the Contractor's or subcontractor's response to the challenge 
notice, or within such longer period that the Contracting Officer 
has notified the Contractor or subcontractor that the Government 
will require. The Contracting Officer will provide notification of 
any longer period for issuance of a final decision within 60 days 
after receipt of the response to the challenge notice.
* * * * *
    (2) * * *
    (ii) The Government agrees that it will continue to be bound by 
the asserted restriction for a period of 90 days from the issuance 
of the Contracting Officer's final decision under paragraph 
(g)(2)(i) of this clause. The Contractor or subcontractor agrees 
that, if it intends to file suit in the United States Court of 
Federal Claims, it will provide a notice of intent to file suit to 
the Contracting Officer within 90 days from the issuance of the 
Contracting Officer's final decision under paragraph (g)(2)(i) of 
this clause. If the Contractor or subcontractor fails to appeal, 
file suit, or provide a notice of intent to file suit to the 
Contracting Officer within the 90-day period, the Government may 
cancel or ignore the restrictive markings that are based on the 
asserted restrictions, and the failure of the Contractor or 
subcontractor to take the required action constitutes agreement with 
such Government action.
    (iii) The Government agrees that it will continue to be bound by 
the asserted restriction where a notice of intent to file suit in 
the United States Court of Federal Claims is provided to the 
Contracting Officer within 90 days from the issuance of the final 
decision under paragraph (g)(2)(i) of this clause. The Government 
will no longer be bound, and the Contractor or subcontractor agrees 
that the Government may strike or ignore the restrictive marking 
that is based on the asserted restriction, if the Contractor or 
subcontractor fails to file its suit within 1 year after issuance of 
the final decision. Notwithstanding the foregoing, where the head of 
an agency determines, on a nondelegable basis, that urgent or 
compelling circumstances will not permit waiting for the filing of a 
suit in the United States Court of Federal Claims, the Contractor or 
subcontractor agrees that the agency may, following notice to the 
Contractor or subcontractor, authorize release or disclosure of the 
technical data. Such agency determination may be made at any time 
after issuance of the final decision and will not affect the 
Contractor's or subcontractor's right to damages against the United 
States where its asserted restrictions are ultimately upheld or to 
pursue other relief, if any, as may be provided by law.
    (iv) The Government agrees that it will be bound by the asserted 
restrictions where an appeal or suit is filed pursuant to the 
Contract Disputes statute until final disposition by an agency Board 
of Contract Appeals or the United States Court of Federal Claims. 
Notwithstanding the foregoing, where the head of an agency 
determines, on a nondelegable basis, following notice to the 
Contractor that urgent or compelling circumstances will not permit 
awaiting the decision by such Board of Contract Appeals or the 
United States Court of Federal Claims, the Contractor or 
subcontractor agrees that the agency may authorize release or 
disclosure of the technical data. Such agency determination may be 
made at any time after issuance of the final decision and will not 
affect the Contractor's or subcontractor's right to damages against 
the United States where its asserted restrictions are ultimately 
upheld or to pursue other relief, if any, as may be provided by law.
    (h) * * *
    (1) * * *
    (ii) If the asserted restriction is found not to be 
substantially justified, the Contractor or subcontractor, as 
appropriate, shall be liable to the Government for payment of the 
cost to the Government of reviewing the asserted restriction and the 
fees and other expenses (as defined in 28 U.S.C. 2412(d)(2)(A)) 
incurred by the Government in challenging the asserted restriction, 
unless special circumstances would make such payment unjust.
* * * * *
    (i) Duration of right to challenge. (1) The Government may 
review the validity of any restriction on technical data, delivered 
or to be delivered under a contract, asserted by the Contractor or 
subcontractor. During the period within 6 years of final payment on 
a contract or within 6 years of delivery of the technical data to 
the Government, whichever is later, the Contracting Officer may 
review and make a written determination to challenge the 
restriction. The Government may, however, challenge a restriction on 
the release, disclosure, or use of technical data at any time if 
such technical data--

[[Page 5740]]

    (i) Are publicly available;
    (ii) Have been furnished to the United States without 
restriction;
    (iii) Have been otherwise made available without restriction; or
    (iv) Are the subject of a fraudulently asserted use or release 
restriction.
    (2) Only the Contracting Officer's final decision resolving a 
formal challenge by sustaining the validity of a restrictive marking 
constitutes ``validation'' as addressed in 10 U.S.C. 3785(c).
* * * * *
[FR Doc. 2025-00722 Filed 1-16-25; 8:45 am]
BILLING CODE 6001-FR-P
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