1 Meeting Proprietary Marking Challenges and Structuring NDA’s with Subcontractors in the Current Data Rights Environment Breakout Session # C15 Clint Paulson July 29, :00 PM

2 Establishes Government rights to technical data provided in the contract. Under this Clause the Government will either have: 1.Unlimited Rights 2.Limited Rights (applies to technical data) 3.Restricted Rights (applies to computer software) FAR Rights in Data - General

3 Unlimited Rights Defined as the “right of the Government to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so” FAR Rights in Data – General (Cont)

4 Unlimited Rights Government shall have unlimited rights to: 1.Data first produced in performance of this contract 2.Data delivered under this contract unless provided for otherwise as limited rights data or restricted computer software 3.Form, fit, and function data delivered under contract FAR Rights in Data – General (Cont)

5 Limited Rights Pertains to: 1.Trade secrets 2.Privileged financial data 3.Other proprietary data developed at private expense Restricted Rights (Same as above except pertains to computer software) FAR Rights in Data – General (Cont)

6 Government shall have unlimited rights to an expanded scope of technical data: 1.Data that has been or will be developed exclusively with Government funds 2.Form, fit and function data 3.Data in which the Government has obtained unlimited rights under another government contract as a result of negotiations DFARS Rights in Technical Data – Noncommerical Items (FEB 2012)

7 Adds category of “Government purpose rights” 1.Government purpose Rights “means the rights to release or disclose technical data outside the Government…for United States government purposes” 2.Pertains to data developed with mixed funding 3.Applies for 5 year period - after expiration of 5 year period Government is entitled to unlimited rights DFARS Rights in Technical Data – Noncommerical Items (FEB 2012) (Cont)

8 Government shall have limited rights in technical data pertaining to items developed exclusively at private expense Private expense: Defined as “development accomplished entirely with costs charged to indirect cost pools, costs not allocated to a government contract, or any combination thereof” DFARS Rights in Technical Data – Noncommerical Items (FEB 2012) (Cont)

9 Limited rights data is authorized to be released or disclosed to Government support contractors under the following conditions: Contractor will be notified of disclosure Government support contractors must treat data in accordance with Contractor may require each support contractor to enter into an NDA Limited Rights Data

10 The Contractor shall not deliver any data with restrictive markings unless data is listed on Data Rights Assertion List Identification of Restricted Rights Data Technical Data to be Furnished with Restrictions Basis for AssertionAsserted Rights Name of Company Asserting Rights Formula to accurately predict winner of 2012 Presidential Election Developed partially at private expense Government PurposeElections “R” Us Team management system to ensure the Red Sox always beat the Yankees Developed exclusively at private expense Limited RightsWorld Series Champs

11 Contractors, subcontractors and suppliers shall conspicuously and legibly mark all technical data that qualify for such markings: Each page for which restrictions are asserted needs to be marked Portions of a page subject to restrictions shall be identified by circling, underscoring, with a note, or other appropriate identifier Data transmitted directly from one computer to another shall contain a notice of asserted restrictions Marking Requirements

12 GOVERNMENT PURPOSE RIGHTS Contract No. Contractor Name Contractor Address Expiration Date The Government's rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(2) of the Rights in Technical Data—Noncommercial Items clause contained in the above identified contract. No restrictions apply after the expiration date shown above. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings. Government Purpose Rights Marking

13 LIMITED RIGHTS Contract No. Contractor Name Contractor Address The Government's rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(3) of the Rights in Technical Data--Noncommercial Items clause contained in the above identified contract. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings. Any person, other than the Government, who has been provided access to such data must promptly notify the above named Contractor. Limited Rights Marking

14 1.DFARS is a required flowdown without alteration 2.Contractor shall not use its obligation to protect subcontractor rights in technical data as an excuse for failing to meet its contractual obligations to the Government 3.Subcontractor may submit asserted restrictive rights data directly to the Government rather than through a higher tier contractor Applicability to Subcontractors

15 Good News - DFARS provides an excellent framework on how to exchange sensitive technical data between the Government and prime Contractors Bad News - DFARS provides insufficient guidance on how Contractors should exchange sensitive technical data with their subcontractors The Adam and Eve Dilemma What’s the Problem?

16 Company sensitive data is protected by: Statute (i.e. Trade Secrets Act, the Economic Espionage Act, the Procurement Integrity Act) Regulation (i.e. FAR, DFARS, AFFARS, etc Contractual Agreements (i.e. NDA/PIA) Sharing Sensitive Data within Private Industry

17 Proprietary information is data that provides a company a competitive advantage and would be detrimental to that competitive advantage if disclosed to an outside party Companies tend to be overly cautious when it comes to protecting their proprietary data Technical data is often overly marked which can result in negative customer relationships Before entering into an NDA or marking data, a company should determine if data is truly worth protecting What is Proprietary Information?

18 An NDA is a legal contract between at least two parties that governs how the parties will share and protect proprietary/sensitive data Typically includes at a minimum: Parties, Purpose, and Period Obligations of parties with regard to sharing and protecting proprietary/sensitive data Non-Disclosure Agreements

19 Typical NDA/PIA language: Information disclosed hereunder shall be considered “Proprietary Information” and subject to the terms and conditions of this agreement if conspicuously marked with a stamp or legend identifying it as “Proprietary” or “Confidential” or with a substantially equivalent designation Marking Sensitive Data

20 Typical Markings: Proprietary or Company Confidential Competition Sensitive Most Private Proprietary / Customer Funds or / Mixed Funds or / Company Funds or / Business Data Proprietary Level I, II, III Marking Sensitive Data

21 Sample Legend: This document contains proprietary technical data or information pertaining to items, components, processes, or other matter developed or acquired by Raytheon Company at Raytheon’s private expense (“Raytheon Proprietary/Raytheon Funds”). It also may contain data developed by Raytheon with mixed Raytheon and Customer funds (“Raytheon Proprietary/Mixed Funds”) or exclusive Customer funds (“Raytheon Proprietary/Customer Funds”), marked appropriately. It is restricted to use only by persons authorized by Raytheon in writing to use it. Disclosure to unauthorized persons would likely cause substantial competitive harm to Raytheon’s business position. This document, data or information shall not be furnished, disclosed to, copied or used by persons outside Raytheon without Raytheon’s express written approval. This document, data or information has not been finalized by Raytheon for official, contractual delivery. If/when it is finalized for delivery directly to the US Government, Raytheon personnel or others Raytheon authorizes in writing may remove and replace the non-conforming markings of technical data only with conforming ones. At that time, the US Government’s rights in and to this proprietary technical and/or business data or information are as specified in the FAR, DFARS or applicable agency regulation, which will be made part of the contract. Marking Sensitive Data

22 1.Simplify, Simplify, Simplify… Do you really need various markings? Can you simplify your legend? 2.Reduce confusion and state your intended marking scheme in the NDA 3.Reduce unnecessary repetition by including your disclaimer/legend in the NDA General Marking Suggestions

23 Submitting proprietary data to the Government presents significant challenges to Prime and Subcontractors Government is a customer not a competitor Government has mandated marking scheme designed for the Government and Prime contractor relationship Government is not a party to NDA’s Government is inflexible (i.e. it’s difficult to negotiate FAR or DFARS Clauses) Proprietary Data Submitted to Government

24 1.Subcontractor may submit data directly to Government per DFARS Not acceptable to Prime’s 2.Per typical NDA, Prime contractor may identify and mark proprietary information received by disclosing party with appropriate restrictive legends for submittal to Government Not acceptable to Government and Prime’s 3.Per typical NDA, Prime may remove disclosing party’s proprietary marking with permission Not acceptable to Subs or Prime’s Proprietary Data Submitted to Government

25 Effectively communicate the issue throughout customer community Involve all affected parties Think creatively and be flexible Search for solutions that are agreeable to everyone Restructure contractual agreements (i.e. NDA’s) to meet your specific needs How to Resolve these Significant Hurdles

26 Proprietary information disclosed pursuant to this agreement shall be clearly marked in the header of each page containing proprietary information as “Proprietary.” If marked Proprietary and the contractor is also asserting the Government has less than unlimited rights, then the document must also contain the appropriate restrictive legends as set forth in DFARS If marked proprietary and the contractor is not asserting the Government has less than unlimited rights, then the document must also be marked “Government Unlimited Rights” Example of Revised NDA Language

27 COMPANY PROPRIETARY/ GOVERNMENT LIMITED RIGHTS Contract No. Contractor Name Contractor Address XXXX’s use of this data is restricted by the applicable NDA agreed upon between the parties and incorporated into the above identified contract. The Government's rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(3) of the Rights in Technical Data--Noncommercial Items clause contained in the above identified contract. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings. Any person, other than the Government, who has been provided access to such data must promptly notify the above named Contractor. Sample Marking

28 COMPANY PROPRIETARY/ GOVERNMENT UNLIMITED RIGHTS Contract No. Contractor Name Contractor Address XXXX’s use of this data is restricted by the applicable NDA agreed upon between the parties and incorporated into the above identified contract. The Government has unlimited rights to this data as set forth in the DFARS , Rights in Technical Data--Noncommercial Items Clause contained in the above identified contract. Sample Marking

29 QUESTIONS?