B-152410, JUN. 9, 1964

B-152410, JUN. 9, 1964

TO MCGOWN, GODFREY, LOGAN AND DECKER:

REFERENCE IS MADE TO YOUR TELEFAX DATED SEPTEMBER 3, 1963, AND LETTERS DATED JANUARY 21, 1964, AND MAY 18, 1964, AS WELL AS TO THE LETTERS DATED SEPTEMBER 30, 1963, AND FEBRUARY 11, 1964, FROM YOUR ATTORNEYS IN WASHINGTON, D.C., PROTESTING ON BEHALF OF HOWELL INSTRUMENTS, INCORPORATED, AGAINST AN AWARD BY THE DEPARTMENT OF THE AIR FORCE OF A CONTRACT TO THE GAP INSTRUMENT CORPORATION UNDER INVITATION FOR BIDS NO. 30-635-63-368.

THE FACTS SURROUNDING THE PROTEST MAY BE SUMMARIZED AS FOLLOWS. HOWELL INSTRUMENTS, INCORPORATED, IS A MANUFACTURER OF ELECTRONIC DEVICES, INSTRUMENTS AND INDICATORS. ONE OF ITS PROPRIETARY PRODUCTS IS THE H204 DIGITAL VOLTMETER. IN THE YEAR 1960 HOWELL RECEIVED INFORMATION THAT THE AIR FORCE WAS EXPERIENCING DIFFICULTY WITH THE CM 35/GPN D-ARSONVAL MOVEMENT VOLTMETER WHICH WAS INSTALLED IN CHASSIS NO. 42752, A COMPONENT OF A VAN MANUFACTURED BY THE GILFILLAN CORPORATION AS PART OF A RADAR GROUND CONTROL APPROACH SYSTEM. HOWELL, ON ITS OWN INITIATIVE, APPROACHED THE AIR FORCE AND OFFERED THE USE OF ITS DIGITAL VOLTMETER AS A POSSIBLE SOLUTION TO THE PROBLEM. IT WAS SOON DISCOVERED THAT THE DIGITAL VOLTMETER ALONE WOULD NOT ENTIRELY SUIT THE PURPOSES OF THE AIR FORCE AND SO HOWELL BEGAN TO ENGINEER AN ADAPTION KIT COMPATIBLE WITH THE CHASSIS. THE PACKAGE EVENTUALLY DEVELOPED, DESIGNATED THE H204 DIGITAL VOLTMETER ASSEMBLY, WAS COMPRISED OF OFF-THE-SHELF-ITEMS AVAILABLE FROM VARIOUS MANUFACTURERS. IT IS ASSERTED BY PROTESTANT THAT, ALTHOUGH THE COMPONENTS WERE, FOR THE MOST PART, NOT NOVEL, THE PROBLEMS POSED TO IT BY THE AIR FORCE WERE UNKNOWN, AT THAT TIME, IN THE COMMERCIAL WORLD OUTSIDE OF THE HOWELL ORGANIZATION AND THE HOWELL SOLUTION TO THEM (THE PARTICULAR CONFIGURATION OF THE ASSEMBLY) WAS A NEW, USEFUL, AND CAREFULLY GUARDED SECRET.

BY LETTER DATED FEBRUARY 7, 1961, FROM HEADQUARTERS, SOUTHWESTERN AIRWAYS AND AIR COMMUNICATIONS SERVICE REGION, THE COMPANY WAS GRANTED PERMISSION TO INSTALL THREE HAND MADE MODIFICATION KITS IN THE GOA VANS AND TO CONDUCT A 30 DAY TEST AND EVALUATION OF THE MERITS OF THE EQUIPMENT AT DYESS AND CARSWELL AIR FORCE BASES. DURING THE 30 DAY PERIOD AIR FORCE AND COMPANY PERSONNEL WORKED SIDE BY SIDE AND CERTAIN MODIFICATIONS WERE MADE TO IMPROVE THE ASSEMBLY. UPON CONCLUSION OF THE TESTING AIR FORCE PERSONNEL PRAISED THE EQUIPMENT AND RECOMMENDED ITS ADOPTION IN REPORTS TO A HIGHER ECHELON.

HOWELL SUBMITTED AN UNSOLICITED DOCUMENT WHICH IT DESIGNATED AN ENGINEERING CHANGE PROPOSAL SETTING FORTH CERTAIN DATA CONCERNING THE ASSEMBLY ON MAY 8, 1961. IN JULY OF 1961 A MEETING WAS HELD AT THE ROME AIR MATERIEL AREA LOOKING TOWARD THE PURCHASE OF THE HOWELL ASSEMBLY, AND, THE AIR FORCE WAS INFORMED THAT THE COMPANY EXPECTED TO BE THE RECIPIENT OF A SOLE SOURCE NEGOTIATED AWARD IN THE EVENT THE ITEM WAS TO BE PURCHASED. R.O.A.M.A. REACTED NEGATIVELY TO THE SUGGESTION OF A SOLE SOURCE PROCUREMENT AND NOTIFIED SCOTT AIR FORCE BASE ON AUGUST 7, 1961, THAT THE CM-35/GPN VOLTMETER WOULD NOT BE REPLACED AS: "THIS HEADQUARTERS HAS NOT BEEN ENTIRELY ASSURED THAT FOLLOW-ON SUPPORT FOR THIS ASSEMBLY WOULD BE ON A COMPETITIVE BASIS DUE TO PROPRIETARY RIGHTS BEING INVOLVED.'

NONETHELESS, OVER A YEAR LATER ON NOVEMBER 6, 1962, A TWO-STEP FORMALLY ADVERTISED PROCUREMENT WAS INITIATED AND THE HOWELL COMPANY SUBMITTED A TECHNICAL PROPOSAL. PROPOSALS WERE SOLICITED UPON THE BASIS OF A GENERAL STATEMENT OF WORK, ENTITLED "RONE 24," WHICH, YOU ALLEGE, FOR THE FIRST TIME OPENED UP TO COMPETITION THE IDEA OF THE SUPERCEDENCE OF THE D- ARSONVAL MOVEMENT VOLTMETER BY A DIGITAL VOLTMETER.

PROTESTANT'S VICE PRESIDENT ORALLY PROTESTED THE ISSUANCE OF THE INVITATION AT A MEETING IN THE OFFICE OF THE DEPUTY COMMANDER, ROME AIR MATERIEL AREA, ON DECEMBER 4, 1962, ASSERTING THAT THE STATEMENT OF WORK IMPROPERLY UTILIZED FOR COMPETITIVE BIDDING PURPOSES DATA SUBMITTED BY HOWELL IN CONFIDENCE. WRITTEN PROTEST, HOWEVER, WAS NOT LODGED AT THAT TIME. THE SECOND STEP, NAMELY THE ISSUANCE OF AN INVITATION FOR BIDS, WAS INITIATED ON MAY 22, 1963.

A DOCUMENT ENTITLED "SUPPLEMENT TO STATEMENT OF WORK, RONE-24," WAS DISTRIBUTED TO EACH BIDDER AT A BIDDERS' CONFERENCE ON MAY 27, 1963. THIS SUPPLEMENT SETS FORTH THE TECHNICAL CHARACTERISTICS AND COMPONENTS OF THE DESIRED MODIFICATION KITS IN GREAT DETAIL. THUS, INTER ALIA, IT STATED:

"1. TWELVE ADJUSTABLE FIXED ALIGNMENT VOLTAGES SHALL BE PROVIDED. THE POTENTIOMETERS FROM WHICH THE VOLTAGES ARE TAPPED SHALL BE 10 TURN * * *

"2. A VERNIER ADJUSTMENT POTENTIOMETER SHALL BE PROVIDED ON THE FRONT PANEL FOR FINE (PLUS OR MINUS 1 VOLT) ADJUSTMENTS OF THE ALIGNMENT VOLTAGES.

"3. ARTIFICIAL ANGLE ADJUSTMENT (ANGLE VOLTAGE) (ANGLE BIAS) POTENTIOMETERS SHALL BE PROVIDED * * * THE POTENTIOMETERS SHALL BE 10 TURN

"A. MGCA--- 106 EA. * * *"

BIDS WERE OPENED ON JUNE 4, 1963, AND THE FOLLOWING BIDS WERE RECEIVED:

TABLE

GAP INSTRUMENT CORPORATION $248,110.43

TRIDERA ELECTRONICS, INC.

SOLID STATE 675,308.29

SERVO STATE 621,215.73

HOWELL INSTRUMENTS, INC. 368,654,74

BY LETTER DATED JUNE 12, 1963, HOWELL FOR THE FIRST TIME MADE WRITTEN PROTEST AGAINST THE ALLEGED UNAUTHORIZED DISCLOSURE AS PART OF THE INVITATION FOR BIDS OF ENGINEERING DATA DEVELOPED BY IT AT ITS OWN EXPENSE. DESPITE THIS PROTEST, AWARD OF A FIXED-PRICE CONTRACT FOR MODIFICATION KITS, TECHNICAL AND ENGINEERING DATA, WAS MADE TO GAP INSTRUMENT CORPORATION, THE LOWEST BIDDER, ON AUGUST 23, 1963. SHORTLY THEREAFTER, THE PROTEST WAS BROUGHT BEFORE THIS OFFICE FOR DISPOSITION.

YOU CONTEND ON PROTESTANT'S BEHALF THAT ALTHOUGH A DIGITAL VOLTMETER IS GENERALLY NONPROPRIETARY, THE IDEA OF SUBSTITUTING A DIGITAL VOLTMETER TOGETHER WITH THE NECESSARY ADAPTION EQUIPMENT IN PLACE OF THE CM-35/GPN D -ARSONVAL MOVEMENT VOLTMETER AS PART OF THE GROUND CONTROL APPROACH SYSTEMS OF THE AIR FORCE ORIGINATED WITH HOWELL INSTRUMENTS, INCORPORATED; THAT HOWELL CONSUMED TWO YEARS OF ENGINEERING TIME AND MADE A LARGE FINANCIAL INVESTMENT IN THE DEVELOPMENT OF THE ADAPTION KIT AND THE SELECTION AND IDENTIFICATION OF ITS NECESSARY COMPONENTS; THAT DURING THE COURSE OF THE DEVELOPMENT PROGRAM, AND THE TEST AND EVALUATION EFFORT, THE COMPANY MET AND SUCCESSFULLY SOLVED THE DIFFICULT TECHNICAL PROBLEMS INVOLVED IN IMPARTING IMMEDIATE DUAL RUNWAY AND ON LOCATION CALIBRATION CAPABILITIES TO THE MECHANISM; THAT THE CONCEPT OF THE H204 DIGITAL VOLTMETER ASSEMBLY, AND THE END PRODUCT, ITSELF, CONSTITUTE TRADE SECRETS WHICH WERE CAREFULLY GUARDED FROM PUBLIC DISCLOSURE BY THE COMPANY AND WHICH WERE ENTRUSTED TO THE AIR FORCE, AS AIR FORCE PERSONNEL KNEW AND ACKNOWLEDGED, FOR TEST AND EVALUATION PURPOSES ONLY LOOKING TOWARD FUTURE SALES OF THE ITEM IN THE EVENT IT PROVED ACCEPTABLE; THAT THE ASSEMBLY DID PROVE ACCEPTABLE BUT THAT INSTEAD OF PURCHASING IT FROM HOWELL, THE AIR FORCE VIOLATED THE CONFIDENCE REPOSED IN IT AND DISCLOSED THESE TRADE SECRETS WITHOUT AUTHORITY TO HOWELL'S COMPETITORS BY EMBODYING THEM IN THE INVITATION FOR BIDS. YOU MAKE MENTION OF THE PRESENCE IN THE SUPPLEMENTAL HANDOUT TO BIDDERS OF SUCH DATA (DESCRIPTIVE OF THE HOWELL PROTOTYPE) AS THAT THE MODIFICATION KITS WERE TO BE PROVIDED WITH TWELVE ADJUSTABLE FIXED ALIGNMENT VOLTAGES, A VERNIER ADJUSTMENT POTENTIOMETER FOR FINE (PLUS OR MINUS 1 VOLT) ADJUSTMENTS OF THE ALIGNMENT VOLTAGES, AND TEN TURN, 50,000 OHM POTENTIOMETERS.

THE DEPARTMENT OF THE AIR FORCE CONTENDS, ON THE OTHER HAND, THAT HOWELL SUBMITTED THE ASSEMBLY, THE E.C.P., AND THE TECHNICAL PROPOSAL AT NO COST TO THE GOVERNMENT AND UNDER NO CONTRACTUAL ARRANGEMENT; THAT THE ASSEMBLY REPRESENTS NO ADVANCE IN THE STATE OF THE ART AND IS WITHIN THE CAPABILITY OF MANY CONCERNS TO DEVISE; AND THAT THERE COULD BE NO JUSTIFICATION FOR AWARDING A SOLE SOURCE PROCUREMENT TO HOWELL INSTRUMENTS, INCORPORATED, UNDER THE CIRCUMSTANCES. THE AIR FORCE MAINTAINS THAT THE TECHNICAL DATA OF THE SUPPLEMENT TO THE WORK STATEMENT IS MORE COMPREHENSIVE THAN THE HOWELL DATA.

A REPORT OF THE ROME AIR MATERIEL AREA DATED MARCH 9, 1964, READS AS FOLLOWS:

"1. ROAMA DOES DENY THAT HOWELL ORIGINATED AND DEVELOPED THE CONCEPT FOR USE OF THE 10 TURN ARTIFICIAL ANGLE POTENTIOMETER.

"/A) THE CONCEPT FOR REPLACING COURSE ONE-TURN POTENTIOMETERS WITH MULTI- TURN POTENTIOMETERS HAS LONG BEEN KNOWN AND THE CONCEPT UNDOUBTEDLY ORIGINATED WITH SOME POTENTIOMETER MANUFACTURER SUCH AS BECKMAN, SPECTROL OR CLAROSTAT. THESE COMPANIES CONTINUALLY RECOMMEND REPLACEMENT OF SINGLE TURN POTENTIOMETERS WITH MULTI-TURN POTENTIOMETERS WHEREVER GREATER RESOLUTION OR EASE OF SETTING IS REQUIRED. THE SELECTION OF A 10 TURN POTENTIOMETER RATHER THAN A 5 OR 20 TURN IS AGAIN OBVIOUS SINCE 10 TURN POTENTIOMETERS ARE THE MOST COMMON AND MOST ECONOMICAL AMONG OFF THE SHELF MULTI-TURN POTENTIOMETERS.

"2. THE TWO SETS OF FIXED VOLTAGES FOR INDICATOR ALIGNMENT FOR DUAL RUNWAY CAPABILITIES ARE NOT CONSIDERED TO BE A HOWELL CONCEPT.

"/A) SIX DISTINCT VOLTAGES HAVE ALWAYS BEEN REQUIRED TO ALIGN AN INDICATOR FOR ONE RUNWAY. THIS NUMBER IS ESTABLISHED BY THE ORIGINAL DESIGN CHARACTERISTICS OF THE RADAR SYSTEM. MANY OF THESE RADARS ARE MOUNTED ON TURNTABLES TO ALLOW THE RADAR TO BE TURNED TO COVER OTHER RUNWAYS. AFTER A TURN AROUND ACTION ANOTHER 6 VOLTAGES ARE REQUIRED THAT DIFFER SLIGHTLY FROM THE ORIGINAL 6 DUE TO A NOW NEW ORIENTATION WITH RESPECT TO THE RUNWAY. THIS NOW ESTABLISHES THE NECESSITY OF 12 DISTINCT VOLTAGES. THE VOLTAGES ARE NOW PRESET INDIVIDUALLY FROM THE SAME POTENTIOMETER. THE IDEA TO USE MULTIPLE PRESET POTENTIOMETERS WITH A SWITCHING ARRANGEMENT CANNOT BY ANY STRETCH OF THE IMAGINATION BE CONSIDERED A NEW INNOVATION TO THE ELECTRONICS INDUSTRY NOR IS IT IN ANY WAY AN ADVANCE IN THE STATE OF THE ART.

"3. THE TWO SWITCH POSITIONS FOR USE IN CHECKING THE DIGITAL VOLTMETER ON LOCATION ARE ONLY TWO OF THE PRESET VOLTAGES (2 AND 52 VOLTS) DESIGNATED BY HOWELL AS CHECK POINTS. THESE VOLTAGES ARE PRESET VOLTAGES USED IN NORMAL INDICATOR ALIGNMENT PROCEDURES. FURTHER, THE USE OF TWO CHECK POSITIONS HAS NEVER BEEN ESTABLISHED AS A REQUIREMENT AND AS SUCH HAS NEVER BEEN INCLUDED IN THE WORK STATEMENT RON-24 OR THE SUPPLEMENT.

"4. ROAMA CONTENDS THAT ALL OF THE SO CALLED CONCEPTS THAT HOWELL CLAIMS ARE PROPRIETARY ARE ACTUALLY DICTATED BY THE OPERATING CHARACTERISTICS OF THE RADAR SYSTEM. THE USE OR CONSIDERATION OF THESE ITEMS IS NO MORE THAN STANDARD ENGINEERING PRACTICES THAT WOULD BE CONSIDERED BY THE GOVERNMENT OR ANY CONTRACTOR DESIGNING THIS MODIFICATION KIT TO MEET THE USING COMMANDS REQUIREMENTS.

"5. ROAMA FURTHER CONTENDS THAT THE SUPPLEMENTAL WORK STATEMENT DOES NOT CONTAIN CONCEPTS OF A PROPRIETARY NATURE TO HOWELL. THE PURPOSE OF THE SUPPLEMENT WAS TO ASSURE ROAMA THAT ALL BIDDERS WERE SUPPLYING THE SAME NUMBER OF POTENTIOMETERS SINCE THE QUANTITIES WOULD HAVE A SIGNIFICANT EFFECT UPON THE PRICING OF THIS MODIFICATION KIT.

"6. IT MIGHT BE OF INTEREST TO NOTE THAT THE CONCEPTS THAT HOWELL CLAIMS ARE PROPRIETARY HAVE BEEN DELETED AS A RESULT OF PRELIMINARY TESTING WITH THE SUCCESSFUL CONTRACTOR THAT IS NOW BUILDING THE KITS.

"/A) THE VERNIER ADJUSTMENT POTENTIOMETER (PLUS OR MINUS 1 VOLT) HAS BEEN DELETED SINCE IT IS NOT REQUIRED IN THE PRESENT KIT CONFIGURATION.

"/B) ALL OF THE 10 TURN POTENTIOMETERS, BOTH THOSE USED FOR PRESENTING THE VOLTAGES AND FOR REPLACING THE PRESENT POTENTIOMETERS IN THE RADAR SYSTEM HAVE BEEN DELETED IN PREFERENCE TO A MORE ACCEPTABLE AND ECONOMICAL APPROACH TO THE AIR FORCE.

"7. IN CONCLUSION, IT IS STRONGLY FELT THAT HOWELL HAS NO BASIS FOR CLAIM AGAINST THE GOVERNMENT FOR BREACH OF AN IMPLIED CONTRACT TO PURCHASE THEIR VOLTMETER ASSEMBLY SINCE SUCH AN IMPLICATION WAS NEVER OFFERED BY ROAMA OR AFCS. ROAMA FURTHER FAILS TO RECOGNIZE WHERE ANY CONFIDENTIAL OR PROPRIETARY INFORMATION WAS EVER OFFERED TO OR DISCLOSED BY THE AIR FORCE.'

THE EXISTENCE OF A LEGALLY PROTECTIBLE INTEREST IN TRADE SECRETS HAS FOR A LONG TIME BEEN RECOGNIZED IN THE LAW. MORISON V. MOAT, 9 HARE 241, 68 ENG.REP. 492; E. I. DUPONT DENEMOURS POWDER COMPANY, ET AL. V. MASLAND, ET AL., 244 U.S. 100. FURTHERMORE AN AGENCY OF THE UNITED STATES GOVERNMENT MAY BE HELD RESPONSIBLE FOR THE MISAPPROPRIATION OF TRADE SECRETS ON A CONTRACTUAL BASIS DESPITE CONGRESSIONAL FAILURE TO WAIVE THE SOVEREIGN'S IMMUNITY FROM SUIT IN TORT. AKTIEBOLAGET BOFORS V. UNITED STATES, 194 F.2D 145; THE PADBLOC COMPANY, INC. V. UNITED STATES, CT.CL.NO. 523-57, DECIDED APRIL 5, 1963. THIS OFFICE, UPON THE LODGING OF PROTEST AGAINST THE PROPOSED AWARD OF A CONTRACT BASED ON A TRADE SECRET BY THE ORIGINATOR OF THE SECRET IDEA, PROCESS, OR INVENTION, WHICH HAS BEEN DISCLOSED TO A PROCURING AGENCY OF THE GOVERNMENT IN CONFIDENCE, WHEN CONVINCED OF THE MERITS OF THE COMPLAINT HAS SEEN FIT TO RECOMMEND THAT AWARD NOT BE MADE TO ANOTHER SOURCE. SEE B-143711, DECEMBER 22, 1960, AND JUNE 21, 1961, B-150369, AUGUST 22, 1963. IN THE PRESENT CASE AN AWARD HAD ALREADY BEEN MADE BEFORE COMPLAINT WAS MADE TO OUR OFFICE. WE ARE THEREFORE FACED WITH THE PROBLEM OF A CLAIM BY THE HOWELL COMPANY FOR BREACH OF AN IMPLIED CONTRACT NOT TO DISCLOSE DATA ALLEGED TO BE PROPRIETARY, AND A PROBABLE CLAIM BY THE COMPANY TO WHOM AWARD WAS MADE FOR BREACH OF CONTRACT IN THE EVENT ITS CONTRACT SHOULD BE CANCELLED. CONSIDERATION MUST ALSO BE GIVEN TO THE POSITIVE VIEWS OF THE ADMINISTRATIVE OFFICE THAT NO PROPRIETARY DATA ARE INVOLVED AND THAT THERE WAS NO SUCH BREACH OF AN IMPLIED CONTRACT WITH HOWELL.

IT SEEMS TO US THAT EVEN IF WE SHOULD CONCLUDE, WHICH WE DO NOT, THAT AN IMPROPER USE OF PROPRIETARY DATA OCCURRED, THIS WOULD NOT NECESSARILY AFFECT THE LEGALITY OF THE RESULTANT CONTRACT. THE CLAIM BY HOWELL IS, IN EFFECT, ONE FOR UNLIQUIDATED DAMAGES FOR BREACH OF AN IMPLIED CONTRACT, WHICH INVOLVES A QUESTION SEPARATE FROM THAT OF THE LEGALITY OF THE EXISTING CONTRACT. THE CANCELLATION OF THE CONTRACT ALREADY MADE WOULD NOT, IPSO FACTO, PUT AN END TO HOWELL'S CLAIM OF IMPROPER DISCLOSURE. FOR EXAMPLE, IF SOMEONE TO WHOM THE ALLEGED DISCLOSURE WAS MADE SHOULD UTILIZE IT IN THE FUTURE, WHATEVER IN CONNECTION WITH COMMERCIAL OR GOVERNMENT BUSINESS, HOWELL WOULD HAVE A CLAIM ON THE SAME BASIS AS NOW.

UNDER ALL THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT WHATEVER REMEDY HOWELL MAY HAVE IS FOR RESOLUTION BY THE COURT OF CLAIMS RATHER THAN OUR OFFICE.