When doing business with the Department of Defense (DOD), contractors must ensure that protecting their intellectual property (IP) and understanding DOD’s data rights regime under the Defense Federal Acquisition Regulation Supplement (DFARS) is top of mind. DOD released its Intellectual Property Guidebook (Guidebook) in May 2025. This blog, the third in the series, takes a closer look at the doctrine of segregability, modular licensing, special categories of data, and the general rules surrounding the government’s data rights in each. Visit this link to access Parts 1 and 2.
Segregability and Modular Licensing
As detailed in Part 2, three basic funding scenarios determine what Data Rights the government receives:
- developed exclusively at private expense (i.e., industry as the sole developer/investor of IP);
- developed exclusively with government funds (i.e., the government is the sole developer/investor of IP); and
- developed with mixed funding (i.e., a joint development/investment arrangement between the contractor and the government).
Deliverables can be made up of various components that have different Data Rights attached to them so each component’s funding source should be assessed at the lowest practicable segregable level. This concept is referred to as the doctrine of “segregability.” The question becomes, for example, what Data Rights does the government have in a particular bolt or sensor in an engine, not what Data Rights the government has in the engine. This will allow a contractor to clearly assert specific rights over its IP in its proposal and if necessary, negotiate any Data Rights to its advantage.
A potential downside of segregability is that it sometimes limits competition on large systems funded substantially by the government because the government must rely solely on the discrete subsystem Original Equipment Manufacturer (OEM) for parts, new units, or maintenance or repair. To mitigate this issue, the Guidebook proposes a Modular Open System Approach (MOSA) and modular licensing, enabling the government to “limit the impact of restrictions on privately developed components by treating those components and technology as proprietary ‘black boxes’ that are described with releasable FFF data and well-defined and described functionalities, interfaces, and MSIs to the remainder of the system components.”[1] Modular licensing, according to the Guidebook, will allow “other vendors to identify suitable alternatives for the proprietary black boxes, or, if necessary, to contract with the OEM for support for those black boxes, but to limit such sole-source efforts to the black box itself rather than the whole system.”[2]
Special Categories of Data
The Guidebook discusses five special categories of data with exceptions to the standard DFARS Data Rights and funding source test:
- Operation, Maintenance, Installation, and Training (OMIT) Data. OMIT Technical Data (TD) is data that is necessary for operation, maintenance, installation, or training purposes (other than DMPD).[3] The government may require Unlimited Rights in OMIT TD regardless of the funding source.
- Form, Fit, and Function (FFF) Data. FFF data is TD that “describes the overall physical, functional, and performance characteristics (along with the qualification requirements, if applicable) of an item, component, or process to the extent necessary to permit identification of physically and functionally interchangeable items.”[4] Like OMIT TD, the government may require Unlimited Rights in FFF data irrespective of the funding source.
- Modular System Interface (MSI). An MSI is “a shared boundary between major systems, major system components, or modular systems, defined by various physical, logical, and functional characteristics, such as electrical, mechanical, fluidic, optical, radio frequency, data, networking, or software elements.” Generally, government purpose rights shall be provided to the government in TD pertaining to an MSI used in a modular open system approach (MOSA) when developed with mixed funding and exclusively at private expense.[5]
- Non-Commercial Computer Software Documentation (CSD). Non-commercial CSD includes owner’s manuals, user’s manuals, installation instructions, operating instructions, and other similar items, regardless of storage medium, that explain the capabilities of or provide instructions for using non-commercial CS. The DFARS grants Unlimited Rights in non-commercial CSD required to be delivered under the contract, regardless of funding source.
- Detailed Manufacturing or Process Data (DMPD). DMPD is TD that “describe[s] the steps, sequences, and conditions of manufacturing, processing or assembly used by the manufacturer to produce an item or component or to perform a process.”[6] Unlike OMIT or FFF Data, the government does not automatically get Unlimited Rights in DMPD but instead it depends on the funding source for development or the rights negotiated by the parties. Notably, the government is not allowed to require that contractors grant Unlimited Rights to DMPD related to privately developed products or processes. The Guidebook advises that when DMPD (developed at private expense) is truly needed by the government, it should detail the specific use case for the DMPD and negotiate just compensation for the delivery and use of such with the contractor.[7]
Conclusion
Determining what Data Rights the government receives in TD or CS can be complex. Thankfully, the Guidebook offers comprehensive insights and a behind-the-scenes look at how DOD handles Data Rights and the acquisition of IP. Stay tuned for Part 4 of this blog series, where PilieroMazza will discuss the proper assertion of Data Rights, marking requirements, and Data Rights disputes and challenges.
If you have questions regarding data rights, the Guidebook, or intellectual property, please contact Cy Alba, Jacqueline Unger, Daniel Figuenick, Abigail Finan, or another member of PilieroMazza’s Government Contracts or Intellectual Property & Technology Rights practice groups.[8]
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[1] Guidebook at 24.
[2] Guidebook at 24-25.
[3] See the Guidebook at Table 2 for examples of what qualifies as OMIT data.
[4] See the Guidebook at Table 2 for examples of what qualifies as FFF data.
[5] 10 U.S.C. § 3771(b)(7).
[6] Guidebook at 17.
[7] See the Guidebook at Table 2 for examples of what qualifies as DMPD.
[8] Special thanks to Lauren Aguilar, a paralegal in PilieroMazza’s Government Contracts Group, who assisted with this blog.
