FlightSafety v. Air Force: Court Upholds Data Marking Challenge

In 2015 the U.S. Air Force contracted with prime contractor CymSTAR to develop and sustain simulation systems for its Training Systems Acquisition III program. In October 2018 CymSTAR awarded subcontracts to FlightSafety International Inc. to supply and install visual system replacements for C‑5 Aircrew Training System simulators at several Air Force installations. Those subcontracts required FlightSafety to furnish technical drawings for commercial items, and they incorporated the Defense Federal Acquisition Regulation Supplement (DFARS) clauses addressing technical data rights, including the Commercial Technical Data Clause (DFARS 252.227‑7015) and the Validation of Restrictive Markings Clause (DFARS 252.227‑7037).

FlightSafety delivered twenty‑one drawings in mid‑2018. Because these drawings were developed entirely at private expense and related to commercial items, FlightSafety placed restrictive legends on each drawing. Its “Long Marking” labeled the drawings proprietary and confidential, stated that use was limited without written authorization, and included a copyright notice. The “Short Marking” merely noted that rights were reserved, and a proposed “Alternate Marking” acknowledged the government’s unrestricted rights but referenced DFARS procedures that were inapplicable. The Air Force rejected each legend, asserting that the restrictive language would make it impracticable to procure the associated items competitively and challenging them under the Validation Clause.

Legal framework: DFARS clauses and statutory context

Under 10 U.S.C. § 2320 and its implementing DFARS provisions, the government’s rights in technical data vary according to the source of funding and whether the data are commercial or noncommercial. For noncommercial data funded solely by the government, the government obtains “unlimited rights” to use, reproduce and disclose the data for any purpose. For commercial technical data developed at private expense, contractors may generally restrict release or disclosure outside the government, except for specific categories including data necessary for operation, maintenance, installation or training—so‑called OMIT data. For such privately funded commercial OMIT data, the Commercial Data Clause grants the government “unrestricted rights,” meaning it may use and disclose the data for future procurements and other purposes.

The Validation Clause establishes procedures for challenging restrictive markings and permits the contracting officer to cancel or ignore markings found to be improper. The authorizing statute, 10 U.S.C. § 2321, allows the Secretary of Defense to challenge any use or release restriction if there are reasonable grounds to question the current validity of the restriction. FlightSafety argued that the government could only challenge the funding source of privately developed data, but the Federal Circuit noted that the statute’s presumption of private funding does not bar challenges to restrictive legends that impair government rights.

Proceedings before the Armed Services Board

After the Air Force demanded removal of the legends, FlightSafety requested a contracting officer’s final decision, which found the markings impermissible. FlightSafety appealed to the Armed Services Board of Contract Appeals, contending: (1) the government could not challenge the markings on commercial data developed at private expense; (2) its legends did not restrict the government’s rights; and (3) the drawings were not OMIT data. The third count was later dismissed pursuant to a settlement that stipulated the drawings would be treated as OMIT data and that the government would have unrestricted rights in them. On cross‑motions for summary judgment, the Board ruled for the government, concluding that the Validation Clause permits challenges to restrictive markings regardless of funding source and that all three legends improperly limited the government’s rights.

Federal Circuit’s analysis and decision

On appeal the Federal Circuit reviewed the Board’s grant of summary judgment de novo. The court examined the statutory and regulatory framework and agreed that the government’s rights depend on the category of data. Because the drawings were treated as OMIT data, the Air Force held an unrestricted rights license, allowing it to use the data for future procurements. FlightSafety argued that “unrestricted” rights in the Commercial Data Clause were narrower than the “unlimited” rights granted under the Noncommercial Data Clause, but the court noted that commentators treat the terms as materially equivalent and concluded that paragraph (b)(1) of the Commercial Data Clause granted unrestricted rights free from the prohibitions in paragraph (b)(2). Thus, the Air Force could use the drawings in follow‑on procurements.

The court rejected FlightSafety’s statutory argument that the government may challenge markings only when it disputes whether data were developed at private expense. Section 2321 permits challenges to any use or release restriction where reasonable grounds exist, and the presumption of private funding simply shifts the burden of proof on one type of challenge. The court also dismissed FlightSafety’s reliance on legislative history, emphasizing that the plain statutory language controls. The court found further support in DFARS clauses, which direct contracting officers to include the Validation Clause in commercial contracts and authorise challenges when reasonable grounds exist.

Addressing the three legends individually, the court held that each was improper. The Long Marking’s use of “proprietary” and “confidential” suggested confidentiality obligations inconsistent with the government’s unrestricted rights and appeared to require written authorization for use, which the statute does not contemplate. The associated copyright notice failed to recognize the government’s existing license and therefore misled as to the government’s rights. The Short Marking’s reservation of unspecified rights likewise implied confidentiality and ambiguity, impermissibly limiting the government’s ability to use and disclose the data. Finally, the Alternate Marking, although acknowledging the government’s unrestricted rights, purported to subject the government’s use to DFARS procedures inapplicable to OMIT data and referenced a clause governing noncommercial data, creating confusion and thereby contradicting the government’s rights. The Federal Circuit concluded that contractors may place restrictive markings on privately funded commercial data but only to accurately reflect the government’s rights and not to impair them. It affirmed the Board’s decision that all three legends were improper and that the Air Force could cancel them.

Implications for contractors and data rights

FlightSafety v. Secretary of the Air Force underscores the importance of understanding the data rights regime when contracting with the federal government. Contractors who develop commercial items at private expense may assert limited restrictions on technical data, but those restrictions cannot hinder the government’s statutory and contractual rights to use and disclose data required for operation, maintenance, installation or training. The case clarifies that the DFARS “unrestricted” rights license for OMIT data is functionally equivalent to an “unlimited” rights license and that the government may challenge any restrictive legend that conflicts with those rights. It also confirms that the Validation Clause provides the government with a mechanism to challenge improper markings regardless of funding source, and that failing to remove invalid legends can lead to cancellation of the markings.

Government contractors should carefully tailor restrictive legends to conform to DFARS clauses and avoid ambiguous terms like “proprietary” or “confidential” when the government holds unrestricted rights. When in doubt, consult counsel experienced in data rights to ensure compliance and to preserve both proprietary interests and the government’s rights. The decision also serves as a reminder that settlements designating data as OMIT data will entitle the government to use the information for future procurements.

Help with data rights disputes

If your business is facing questions about data rights under the DFARS or disputes over restrictive markings, schedule a consultation with Whitcomb, Selinsky PC. Our attorneys handle matters involving technical data rights, DFARS compliance, and challenges to restrictive legends in government contracts. Schedule a consultation to learn how our team can help protect your intellectual property while meeting government requirements.