While at Starbase 173 for crew rotation, Picard runs into an old acquaintance, Captain Phillipa Louvois, who once prosecuted him in the Stargazer court-martial, but is now working for the JAG (Judge Advocate General) office in this sector. Also on hand is Commander Bruce Maddox, who once on board the Enterprise, announces his intention to dismantle Data.

Maddox is an expert in cybernetics, and has worked for years to recreate the work of Dr. Soongh, and he believes examining Data will give him the boost he needs to create many more androids like Data. However, when Picard, wary of Maddox's vagueness, declines the offer, Maddox produces orders transferring Data to his command.

After talking to Data, Picard goes to Phillipa to find a way to block the transfer. Unfortunately, the only option is for Data to resign from Starfleet. This he does, immediately, but is interrupted while packing by Dr. Maddox, who claims Data cannot resign. Data says that he must, to protect Soongh's dream.

Maddox takes his complaint to Phillipa, and claims that since Data is property, he cannot resign. As she starts looking into this possibility, Data is thrown a going-away party and wished well in whatever he chooses to do. However, Phillipa then tells Picard and Riker that, according to the Acts of Cumberland, Data is the property of Starfleet, and thus cannot resign, or even refuse to cooperate with Maddox. Further, if a hearing is held to challenge this ruling, since Phillipa has no staff, serving officers must serve as counsel, with Picard defending and Riker prosecuting.

Riker does some research and presents a devastating case for the prosecution, turning Data off while talking about cutting Pinocchio's strings. Picard, taken aback, asks for a recess, and talks to Guinan. Guinan subtly gets Picard to realize that if Data, and his eventual successors, are held to be "disposable people", that's no better than slavery all over again. Picard, renewed, presents his defense.

He asks Data why he values such things as his medals, a gift from Picard, and especially a holographic image of Tasha (surprising Phillipa with Data's statement that they were "intimate"). He calls Maddox as a hostile witness, and demands from him the requirements for sentience. Finally, Picard points out that the possibility of thousands of Datas is becoming a race, and claims that "Starfleet was founded to seek out new life-well there it sits!!" Phillipa rules in favor of Data, who refuses to undergo Maddox's procedure. Maddox cancels the transfer order, and Data comforts Riker, saying he will not easily forget how Riker injured himself (by prosecuting) to save Data.