Defense contractors are about to lose the legal presumption that internally funded technology stays theirs. Under Section 861 of H.R. 8800, the engrossed, House-passed version of the fiscal 2027 National Defense Authorization Act, every piece of technical data, computer software, and software documentation a contractor delivers under a Defense Department contract would default to government purpose rights — broad government use and license-out authority — unless the contractor proves it deserves something narrower.
The provision adds a new section to federal law, 10 U.S.C. 3776, and it does more than tweak a formula. It reverses who carries the burden when a dispute over data rights lands in front of a contracting officer. The bill text is explicit about how high that bar now sits:
"Any technical data, computer software, or computer software documentation delivered under a contract, subcontract, or other agreement entered into by the Department of Defense shall be provided with government purpose rights unless the contractor establishes, through clear and convincing evidence, entitlement to more restrictive rights," the bill states in new 10 U.S.C. 3776(a).
How Section 861 Flips the Burden of Proof
Under the current regime, a contractor's restrictive markings on a data-rights legend are generally presumed valid once filed, and it falls to the government to challenge them through a validation proceeding if it disagrees. Section 861 inverts that relationship. The default outcome is government purpose rights, full stop, and a contractor that wants limited rights, restricted rights, or a specially negotiated license has to affirmatively establish entitlement to it — not on a preponderance-of-the-evidence standard, but "clear and convincing evidence," a bar borrowed from fraud and civil-commitment law that is deliberately harder to clear than an ordinary civil dispute.
That single word change — from a system where the government bears the burden of disproving a contractor's markings to one where the contractor bears the burden of proving them — is the mechanism driving every other consequence in the bill.
The Assertions Table Gauntlet
Section 861 does not leave "clear and convincing evidence" undefined. To hold onto restrictive rights, a contractor has to simultaneously produce a compliant assertions table identifying which data carries which restriction and why; factual documentation showing the technology was developed exclusively at private expense; clause-specific exclusions from unlimited-rights categories written at the lowest segregable level of the deliverable, rather than blanket exclusions covering an entire item; and portion markings on the actual data that match what the assertions table claims.
Miss any one of those four elements and the deliverable does not get a partial win — it defaults automatically to government purpose rights. A contractor with a strong factual case for private funding but a sloppy or mismatched portion marking loses the argument on a technicality it may not even realize exists until an audit or a dispute surfaces it.
Why 'Critical Readiness Items of Supply' Get an Extra Trap
The bill singles out noncommercial items the Pentagon designates as critical readiness items of supply for the same all-or-nothing treatment. For those items, incorrect restrictive markings, a failure to exclude the unlimited-rights categories that apply, or an incomplete assertions table each independently convert the item to government purpose rights — regardless of whether the underlying private-funding claim was true. The provision treats paperwork discipline on readiness-critical parts as functionally equivalent to the underlying rights question itself.
Section 861 also directs the Secretary of Defense to report to Congress within 180 days of enactment on the feasibility of a "clawback" mechanism — a way to recover money the Pentagon has already paid on contracts where it later determines the government overpaid because a contractor's restrictive data-rights markings were improper. That report would give appropriators and program offices a template for going after money already spent, not just future deliverables.
The Senate's Narrower Rewrite — and a New Court Weapon
The Senate Armed Services Committee's separate FY27 NDAA bill takes a more limited approach. Its own Section 804 creates a parallel burden-shifting rule but applies it only to noncommercial acquisitions, leaving commercial item data rights largely untouched — a materially narrower scope than the House's government-wide default. According to a September 22 analysis from Covington & Burling, the Senate bill pairs that narrower provision with something the House bill does not have: Section 5811, which would let the government sue a contractor in federal district court for specific performance to compel immediate delivery of data — even while the same dispute is still working its way through the Contract Disputes Act process.
Covington's attorneys flagged what that dual-track exposure could mean in practice. "A contractor could be litigating the underlying data rights dispute in the Armed Services Board of Contract Appeals or Court of Federal Claims while simultaneously defending a district court action seeking immediate delivery of the information," they wrote. That would strip contractors of the breathing room the CDA process is designed to provide while a legitimate rights dispute is still unresolved.
The House and Senate versions have not been reconciled. The House has passed H.R. 8800 with Section 861's government-wide default; the Senate Armed Services Committee has reported its own version, Section 804, which is narrower and noncommercial-only. The final scope of any new burden-shifting rule will depend on how those two texts are worked out as the FY27 NDAA moves toward a final bill.
What It Means for Contractors
Whichever version survives conference, the direction of travel is the same: contractors can no longer treat a restrictive-rights legend as self-executing. Under the House's Section 861, a company that has always assumed its proprietary software stays proprietary because it marked the deliverable correctly now has to be able to produce, on demand, a matching assertions table, contemporaneous funding documentation, clause-level exclusions, and portion markings that all line up — and to do it to a "clear and convincing" standard rather than merely a plausible one.
Covington's attorneys warned that the stakes go beyond the right-to-repair debate that has driven much of the public conversation around defense data rights. "The proposed solution appears to have impacts that go beyond DoW's right to repair and broadly affect DoW rights to contractors' internally funded technology," they wrote — meaning the bill's reach extends to any technology a company brought to a DoD program on its own dime, not just repair manuals and maintenance data.
Practical steps for contractors watching this move through conference: audit existing assertions tables against actual delivered data now, rather than waiting for a dispute to expose gaps; build a contemporaneous record of private-expense development as work happens, not after the fact; and track the Senate's Section 5811 closely, since a district-court specific-performance remedy would change the calculus for how aggressively to litigate a rights dispute rather than settle it. The 180-day clawback feasibility report also means contractors should assume that today's questionable marking could become tomorrow's repayment demand, even on contracts already closed out.
