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

<RULE> DEPARTMENT OF DEFENSE <SUBAGY>Defense Acquisition Regulations System</SUBAGY> <CFR>48 CFR Part 252</CFR> <DEPDOC>[Docket DARS-2022-0030]</DEPDOC> <RIN>RIN 0750-AL67</RIN> <SUBJECT>Defense Federal Acquisition Regulation Supplement: Update of Challenge Period for Validation of Asserted Restrictions on Technical Data and Computer Software (DFARS Case 2022-D016)</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Defense Acquisition Regulations System, Department of Defense (DoD). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective January 17, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> David Johnson, telephone 202-913-5764. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> DoD published a proposed rule in the <E T="04">Federal Register</E> 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. <HD SOURCE="HD1">II. Discussion and Analysis</HD> 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: <HD SOURCE="HD2">A. Summary of Significant Changes From the Proposed Rule</HD> There are no significant changes from the proposed rule. <HD SOURCE="HD2">B. Analysis of Public Comments</HD> <HD SOURCE="HD3">1. Technical Data or Software Delivered, Furnished, or Otherwise Provided to the Government</HD> <E T="03">Comment:</E> 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. <E T="03">Response:</E> 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 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. <HD SOURCE="HD3">2. Changes To Align With Statutory Language Related to Restrictions Asserted</HD> <E T="03">Comment:</E> 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. <E T="03">Response:</E> 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.” <HD SOURCE="HD3">3. Definition of Fraud</HD> <E T="03">Comment:</E> 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. <E T="03">Response:</E> 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. <HD SOURCE="HD3">4. Applicability to Commercial Products or Commercial Services</HD> <E T="03">Comment:</E> 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. <E T="03">Response:</E> 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. <HD SOURCE="HD3">5. Question About Other Rulemaking Case</HD> <E T="03">Comment:</E> A respondent requested that DoD expedite the issuance of proposed rule for DFARS Case 2023-D022, Definition of Subcontract. <E T="03">Response:</E> This comment is outside the scope of this rule, which implements section 815(b) of the NDAA for FY 2012. <HD SOURCE="HD1">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</HD> 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. <HD SOURCE="HD1">IV. Expected Impact of the Rule</HD> 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. <HD SOURCE="HD1">V. 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