Last week, the Federal Circuit decided Boeing Co. v. Secretary of the Air Force, a government contract case we have been following because it attracted an amicus brief. Judge Lourie authored a unanimous panel opinion reversing a denial of summary judgment by the Armed Services Board of Contract Appeals, vacating the Board’s entry of final judgment, and remanding. In particular, the Federal Circuit agreed with Boeing’s interpretation of a clause of the Defense Federal Acquisition Regulation Supplement as permitting marking of technical data provided to the government in a way that protects rights against use by third parties. This is our opinion summary.

In this case, Boeing argued it should be permitted under Defense Federal Acquisition Regulation Supplement 252.227-7013 (“the -7013 clause”) to mark technical data in a way that (a) recognizes the Government’s unlimited rights in the data, (b) does not restrict or impair the Government’s rights, and (c) restricts only the rights of third parties to use the data absent permission from the contractor or the Government. As mentioned, Judge Lourie authored the unanimous opinion. He was joined by Judges Newman and Chen.

Judge Lourie explained the background of this case:

The instructions and authorizations of the markings appear in paragraph (f) of the -7013 clause (“Subsection 7013(f)”), which begins: “(f) Marking requirements. The Contractor, and its subcontractors or suppliers, may only assert restrictions on the Government’s rights . . . . Except as provided in paragraph (f)(5) of this clause, only the following legends are authorized under this contract . . .” Boeing marked each technical data deliverable that it submitted to the Air Force with a legend that purports to describe Boeing’s rights in the data as they pertain to third parties. . . . The government rejected Boeing’s technical data deliverables due to the legend. . . . Boeing appealed the COFDs to the Board. Boeing moved for early summary judgment based on its position that the first sentence of Subsection 7013(f) . . .  only applies to legends that restrict the government’s rights in technical data. . . . the Board denied Boeing’s summary judgment motion. . . . The Board agreed with the government that, after stating the words “only the following legends are authorized under this contract,” Subsection 7013(f) lists four specific legends, and it is undisputed that Boeing’s legend is not one of the listed legends.

The court began by looking to the plain language of Subsection 7013(f).

The court explained that two sentences needed to be reconciled: one saying that the contractor “may only assert restrictions on the Government’s rights” and another indicating that “only the following legends are authorized under this contract.” Boeing argued that the plain language meant Subsection 7013(f) applies in a situation in which a contractor does not seek to restrict the Government’s rights in any way. The government, by contrast, asserted that the second sentence clearly means “only the following legends” are permitted and no other legends.

The court concluded that the two sentences when read together are describing the way in which a contractor “may assert restrictions on the Government’s rights.” Thus, the court agreed with Boeing’s interpretation, “that Subsection 7013(f) is only applicable in that context, and it is silent on any legends that a contractor may mark on its data when it seeks to restrict only the rights of non-government third parties.”

The court explained that under the Board’s interpretation, the first sentence would be entirely unnecessary. Further, the court maintained that Boeing’s interpretation was faithful to the overall purpose of the -7013 clause in governing the allocation of data rights between contractors and the government.

The court also addressed a number of the government’s arguments beyond the language of the provision, but ultimately found that no argument persuaded it to depart from the plain language of the text. And the court also found that no policy argument outweighs the plain language of the provision.

Since the court agreed with Boeing’s interpretation, it reversed the Board’s interpretation and vacated the Board’s entry of final judgment.

The court also remanded the case to the Board. While the government asserted on appeal that Boeing’s legends do in fact restrict the government’s rights, the court found that the Board did not resolve factual disputes between the parties regarding whether the legends do or do not restrict the government’s rights. The Federal Circuit left these disputes for the Board to resolve on remand.