DoD clashes with suppliers over data rights.

• Author: Erwin, Sandra I.
• Position: Defense Watch

Tensions are brewing in the defense contracting business over government efforts to secure rights to manufacturers' intellectual property. The clash pits military buyers who want to break up suppliers' monopolies against companies whose livelihood depends on keeping tight control over their designs.

With the Defense Department under pressure to slash costs as budgets shrink, officials are targeting weapons programs for potential savings. They are particularly keen on reducing the cost of weapons maintenance and production by opening up the market to new competitors.

To do that in a market that is dominated by single-source manufacturers, the Defense Department needs what is known as "rights in technical data."

When the Pentagon buys a weapon system, it retains unlimited rights to the data if the item was designed with government funds. But when a product is financed by a private company, the firm keeps full control of the intellectual property and the government is simply a buyer.

Except in limited circumstances, contracting officials cannot disclose a private company's proprietary data outside the government.

As the Pentagon in recent decades has become more dependent on the private sector for high-tech equipment, it now reali7es that many of the existing arrangements restrict the government from seeking competing bids for maintenance or production of that equipment unless the manufacturers grant data rights. For most suppliers, that equates to killing the goose that lays the golden eggs.

In the spare-parts and equipment repair business, particularly, manufacturers fear so-called aftermarket vendors who take other companies' designs and make them for a bargain price. Pentagon program managers would like to benefit from the cutthroat deals but cannot legally release design data to competitors without the manufacturer's permission.

Friction over data rights has ebbed and flowed in cycles over the past several decades. The tensions are once again becoming palpable as the defense budget falls, said Jason A. "Jay" Carey, a government contracting attorney at McKenna Long & Aldridge LLP. "The government is being significantly more aggressive trying to obtain data rights," Carey said. "That effort is driven by a desire to use the data for follow-on procurements."

Frustration on both sides is coming to a head. The origins of the conflict can be traced back to the mid-1990s, when the Defense Department saw its R&D budgets collapse and decided it...