On June 16, 2016, the U.S. Department of Defense issued a proposed rule to implement Section 815 of the National Defense Authorization Act for Fiscal Year 2012. Industry and practitioners alike have awaited this proposal since Congress enacted Section 815 in December 2011, substantially amending 10 U.S.C. § 2320. Under the proposed rule, if technical data or computer software are “segregation or reintegration” data, they may be released to a third party, including a competitor, even if they are limited-rights data or restricted-rights software, subject to constraints: that the recipient may use the data or software only for segregation or reintegration, and that the recipient must later destroy the data or software. The rule also permits the DOD to require delivery, without any time limits, of various technical data and software that either have been generated or merely “utilized” in the performance of a contract.

These are significant changes to the ways DOD contractors have conducted “data rights” business for almost 50 years, and the proposed rule, which occupies 21 pages in the Federal Register (81 Fed. Reg. 39,483–39,503), contains other notable revisions. This rule therefore is recommended, though dense, reading. Nonetheless, after a years-long process of listening to industry and academic input, the DOD’s proposed rule mostly turns a badly written Section 815 into a workable framework allowing contractors certain protections while keeping in line with DOD’s Better Buying Power initiative toward modularity and “plug-and-play” open systems architectures. A number of potential pitfalls remain, however, and two of them are particularly troublesome.

Originally published in Law360 on June 29, 2016.