B-147509, JUL. 27, 1962

B-147509: Jul 27, 1962

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INCORPORATED: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 27. DURING THAT PERIOD YOU WERE THE SOLE PRODUCER OF THIS EQUIPMENT. FOUR FIRMS WERE CONSIDERED AS MEETING THESE QUALIFICATIONS. A DETERMINATION WAS MADE BY THE ASSISTANT SECRETARY OF THE NAVY THAT (1) THE SUPPLIES TO BE PROCURED UNDER THE PROPOSAL WERE OF A TECHNICAL OR SPECIALIZED NATURE. (2) THE SUPPLIES WERE SUCH AS TO REQUIRE AN EXTENDED PERIOD OF PREPARATION FOR MANUFACTURE. WAS IN THE AMOUNT OF $7. THE NEXT LOWEST OFFER WAS SUBMITTED BY REEVES INSTRUMENTS CORPORATION AND WAS IN THE AMOUNT OF $7. YOUR OFFER WAS IN THE AMOUNT OF $8. THE REMOVAL OF WHICH WOULD PRESUMABLY HAVE BEEN POSSIBLE ONLY BY AN UPWARD PRICE ADJUSTMENT FOR THE CONTINGENCIES IN QUESTION.

B-147509, JUL. 27, 1962

TO LEAR, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 27, 1961, AND SUBSEQUENT CORRESPONDENCE, FROM YOUR ATTORNEY, PROTESTING THE AWARD OF A CONTRACT TO TEXAS INSTRUMENTS, INCORPORATED, UNDER REQUEST FOR PROPOSAL NO. 0860-62 ISSUED SEPTEMBER 1, 1961, BY THE BUREAU OF NAVAL WEAPONS.

THE REQUEST FOR PROPOSAL COVERED THE CONTEMPLATED PROCUREMENT OF 450 AN/AJB-3 AND AN/AJB-3A LOFT BOMB COMPUTER SYSTEMS. THE EQUIPMENT HAD BEEN DEVELOPED AND PRODUCED BY YOU UNDER A SUCCESSION OF NAVY CONTRACTS OVER A PERIOD OF APPROXIMATELY FIVE YEARS BEGINNING IN 1955. DURING THAT PERIOD YOU WERE THE SOLE PRODUCER OF THIS EQUIPMENT. PRIOR TO SEPTEMBER 1, 1961, THE BUREAU OF NAVAL WEAPONS (BUWEPS) CAREFULLY SCREENED AND EVALUATED A NUMBER OF FIRMS TO DETERMINE THEIR ABILITY TO PRODUCE THIS EQUIPMENT IN A TIMELY MANNER AND OF A REQUISITE QUALITY. FOUR FIRMS WERE CONSIDERED AS MEETING THESE QUALIFICATIONS. PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (A) (14) AND IN ACCORDANCE WITH PARAGRAPH 3-214, ARMED SERVICES PROCUREMENT REGULATION, A DETERMINATION WAS MADE BY THE ASSISTANT SECRETARY OF THE NAVY THAT (1) THE SUPPLIES TO BE PROCURED UNDER THE PROPOSAL WERE OF A TECHNICAL OR SPECIALIZED NATURE; (2) THE SUPPLIES WERE SUCH AS TO REQUIRE AN EXTENDED PERIOD OF PREPARATION FOR MANUFACTURE; AND (3) PROCUREMENT BY FORMAL ADVERTISING AND COMPETITIVE BIDDING MIGHT REQUIRE DUPLICATION OF PREPARATION ALREADY MADE OR WOULD UNDULY DELAY PROCUREMENT OF THE SUPPLIES.

FOLLOWING THE RECEIPT OF PROPOSALS FROM FOUR FIRMS BUWEPS AWARDED A CONTRACT TO THE LOWEST OFFEROR, TEXAS INSTRUMENTS, INCORPORATED, ON DECEMBER 11, 1961, AFTER BRIEF ORAL DISCUSSIONS WITH THAT COMPANY.

THE OFFER TENDERED BY TEXAS INSTRUMENTS, INCORPORATED, WAS IN THE AMOUNT OF $7,521,730. THE NEXT LOWEST OFFER WAS SUBMITTED BY REEVES INSTRUMENTS CORPORATION AND WAS IN THE AMOUNT OF $7,962,473, PLUS $290,000 FOR SPECIAL TOOLING, PART OR ALL OF WHICH REEVES SUBSEQUENTLY INDICATED IT MIGHT BE WILLING TO ABSORB. YOUR OFFER WAS IN THE AMOUNT OF $8,805,508, REPORTED AS SUBJECT TO SEVERAL CONDITIONS, THE REMOVAL OF WHICH WOULD PRESUMABLY HAVE BEEN POSSIBLE ONLY BY AN UPWARD PRICE ADJUSTMENT FOR THE CONTINGENCIES IN QUESTION. SINCE NO PROPOSAL WAS WITHIN A COMPETITIVE PRICE RANGE OF TEXAS INSTRUMENTS, INCORPORATED, NO DISCUSSIONS WERE HELD WITH THE OTHER OFFERORS. IN THIS REGARD, PARAGRAPH 3-805.1 OF THE ARMED SERVICES PROCUREMENT REGULATION LISTS THE EXCEPTIONS TO THE REQUIREMENT FOR DISCUSSIONS WITH ALL RESPONSIBLE OFFERORS AFTER RECEIPT OF PROPOSALS. SUBPARAGRAPH (A) (V) OF THE EXCEPTIONS STATES THAT NO SUCH DISCUSSIONS NEED BE CONDUCTED WITH OFFERORS IN PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION, ETC., THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE, PROVIDED, HOWEVER,"THAT IN SUCH PROCUREMENTS, THE REQUEST FOR PROPOSALS SHALL NOTIFY ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION OF THE PROPOSALS RECEIVED AND HENCE, THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT.' AMPLE NOTICE OF THE POSSIBILITY OF MAKING AWARD WITHOUT ANY DISCUSSION AFTER OPENING OF PROPOSALS WAS CONTAINED IN THIS CASE IN PARAGRAPH 13 OF ,ADDITIONAL TERMS AND CONDITIONS AND INFORMATION TO BE FURNISHED" WHICH CAUTIONED OFFERORS THAT THEY SHOULD INITIALLY SUBMIT THEIR MOST FAVORABLE PRICE, WITHOUT EXPECTING AN OPPORTUNITY TO REDUCE IT IN SUBSEQUENT NEGOTIATIONS. SEE IN THIS CONNECTION, B-146415, AUGUST 21, 1961.

ACCOMPANYING THE INITIAL LETTER OF NOVEMBER 27, 1961, FROM YOUR ATTORNEY, WAS A COPY OF YOUR LETTER DATED NOVEMBER 13, 1961, ADDRESSED TO BUWEPS, PROTESTING THE THEN PROPOSED AWARD TO TEXAS INSTRUMENTS, INCORPORATED. YOUR PROTEST WAS BASED ON THREE GROUNDS: (1) THAT SINCE YOU DESIGNED, DEVELOPED AND PERFECTED THE AN/AJB-3 LOFT BOMB COMPUTER SYSTEM YOU WERE THE ONLY BIDDER QUALIFIED TO PRODUCE THE SYSTEM WITHIN THE TIME LIMIT SPECIFIED BY THE REQUEST FOR PROPOSAL AND THAT YOUR PRICE WAS IN EFFECT THE LOWEST PRICE TO THE GOVERNMENT; (2) THAT EIGHT OF THE SIXTEEN MODELS OF THE BOMBING SYSTEM CONTAINED COMPONENTS OWNED EXCLUSIVELY BY YOU; AND (3) THAT THERE WAS IN FACT NO NEGOTIATION AND IF NEGOTIATION WAS TO BE USED NO AUTHORITY EXISTED TO NEGOTIATE WITH ANY OTHER BIDDER THAN YOU.

IN ITS REPORT OF JANUARY 25, 1962, THE DEPARTMENT OF THE NAVY STRESSES THE FACT HEREINABOVE MENTIONED THAT PRIOR TO ISSUING THE REQUEST FOR PROPOSAL ON SEPTEMBER 1, 1961, TO FOUR FIRMS, INCLUDING YOUR FIRM, THE PERSONNEL OF BUWEPS HAD CAREFULLY SCREENED AND EVALUATED A NUMBER OF FIRMS TO DETERMINE THEIR ABILITY TO PRODUCE THIS EQUIPMENT IN A TIMELY MANNER AND OF THE REQUISITE QUALITY. IN THE PROCESS OF EVALUATION IT WAS NECESSARY TO DETERMINE WHICH FIRMS HAD TECHNICAL COMPETENCE AND EXPERIENCE IN THE DESIGN AND MANUFACTURE OF GYRO PLATFORMS, STABILIZER COMPASSES, SERVO AMPLIFIERS AND INDICATORS COMPARABLE IN NATURE AND COMPLEXITY TO THE COMPONENTS OF THE LOFT BOMB COMPUTER SYSTEM. EACH OF THE FIRMS TENTATIVELY SELECTED WAS FURTHER EVALUATED WITH RESPECT TO THEIR FINANCIAL STATUS, PAST HISTORY OF QUALITY,TIMELY PRODUCTION AND DELIVERIES, AND ENGINEERING BACKGROUND AND KNOW-HOW. THE ADMINISTRATIVE OFFICE ALSO FEELS THAT IT HAS SELECTED THE LOWEST QUALIFIED BIDDER, PRICE AND OTHER FACTORS CONSIDERED. IN ITS REPORT OF JANUARY 25, 1962, THE DEPARTMENT POINTS OUT THAT IT HAS GIVEN CONSIDERATION TO SUCH FACTORS AS MAINTENANCE OF DELIVERY SCHEDULES, RELIABILITY, INTERCHANGEABILITY OF PARTS AND POSSIBLE INCREASED ADMINISTRATIVE COSTS INVOLVING A NEW SOURCE FOR THIS EQUIPMENT AND HAS MADE THE DETERMINATION THAT THE AWARD TO TEXAS INSTRUMENTS, INCORPORATED, WAS DEFINITELY IN THE BEST INTEREST OF THE GOVERNMENT; THAT WHILE THE CONTRACTOR HAS NOT PREVIOUSLY MANUFACTURED THIS PARTICULAR EQUIPMENT, IT HAS DEMONSTRATED ITS COMPETENCE IN MANUFACTURING EQUIPMENT OF SIMILAR NATURE AND COMPLEXITY. THE DEPARTMENT ALSO HAS CONSIDERED THE DISADVANTAGE, IF ANY, WHICH MAY TEMPORARILY FOLLOW "FROM HAVING IN THE SUPPLY LINE" LOFT BOMB COMPUTER SYSTEMS MANUFACTURED BY TWO FIRMS. IN THE CONSIDERED JUDGMENT OF BUWEPS THIS DISADVANTAGE IS MORE THAN OFFSET BY THE PRICING ADVANTAGE IMMEDIATELY DERIVED FROM COMPETITION IN THIS AND ANTICIPATED FUTURE PROCUREMENTS. OF COURSE, WE HAVE NO FIRSTHAND KNOWLEDGE OF THE TECHNICAL ASPECTS OF THIS PROCUREMENT, SUCH AS THE QUALIFICATIONS OF THE CONTRACTOR. HOWEVER, THE DETERMINATION OF THE ADMINISTRATIVE OFFICE MAY NOT BE QUESTIONED BY US IN THE ABSENCE OF CONVINCING EVIDENCE THAT SUCH DETERMINATION IS CLEARLY ERRONEOUS. IN LIKE MANNER, THE FACTS OF RECORD AFFORD NO REASONABLE BASIS FOR DISTURBING THE DETERMINATION OF THE ADMINISTRATIVE OFFICE IN REGARD TO THE VARIOUS FACTORS TAKEN INTO ACCOUNT AS TO WHETHER A PARTICULAR OFFER OR BID WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

WITH REGARD TO YOUR CONTENTION THAT THE PROCEDURE USED IN THIS CASE IS NOT IN FACT NEGOTIATION AND THAT THERE WAS NOT DISCLOSED IN THE REQUEST FOR PROPOSAL THE EXCEPTION TO FORMAL ADVERTISING, THE REPORT OF THE DEPARTMENT OF THE NAVY DATED JANUARY 25, 1962, DISCLOSES, AS STATED HEREINABOVE, THAT A DETERMINATION WAS MADE BY THE ASSISTANT SECRETARY OF THE NAVY, IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 3-214 OF THE ARMED SERVICES PROCUREMENT REGULATION, THAT THE PROPOSED CONTRACT FOR FURNISHING 450 SETS OF COMPONENTS FOR THE AN/AJB-3/3A LOFT BOMB COMPUTER SYSTEMS MAY BE NEGOTIATED WITHOUT FORMAL ADVERTISING PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (A) (14). SUCH A DETERMINATION IS FINAL UNDER THE PROVISIONS OF 10 U.S.C. 2310 (B) AND ORDINARILY IS NOT OPEN TO QUESTION BY OUR OFFICE. AS TO YOUR CONTENTION THAT THIS PROCEDURE WAS AN ACCEPTANCE OF THE LOWEST BID RECEIVED RATHER THAN A NEGOTIATED PROCUREMENT, YOUR ATTENTION IS INVITED TO THE PROVISIONS OF PARAGRAPH 3- 805.1, ASPR, DISCUSSED HEREINABOVE, WHICH SANCTIONS, IN CERTAIN CASES, THE ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION.

YOU STRONGLY URGE THAT THE GOVERNMENT HAS VIOLATED YOUR PROPRIETARY RIGHTS IN CERTAIN PARTS OF THE EQUIPMENT BY IMPROPER USE OF CERTAIN DRAWINGS. IN A BRIEF SUBMITTED TO OUR OFFICE BY YOUR ATTORNEYS ON DECEMBER 15, 1961, IT IS POINTED OUT THAT UNDER CONTRACT NO. NOAS 57 801CENTERED INTO ON JULY 1, 1957, YOU WERE TO PRODUCE 19 AN/AJB-3 LOFT BOMB COMPUTER SETS. INCLUDED THEREIN AS ITEM 5 WAS A REQUIREMENT THAT YOU FURNISH A PRODUCTION DATA PACKAGE TO BE IN ACCORDANCE WITH SPECIFICATION MIL-P-17900A/AER) DATED FEBRUARY 15, 1956. THIS PACKAGE WAS TO INCLUDE COPIES OF MANUFACTURING DRAWINGS, A MASTER INDEX OF PARTS, TEST DATA, ETC., AS FOLLOWS:

"ITEM 5--- THE PRODUCTION DATA PACKAGE TO BE FURNISHED HEREUNDER SHALL BE IN ACCORDANCE WITH SPECIFICATION MIL-P-17900A/AER), DATED 15 FEBRUARY 1956, SHALL COVER THE EQUIPMENTS UNDER ITEM 1 AND 3 HEREOF, AND SHALL INCLUDE THE FOLLOWING ITEMS:

"A. ONE (1) REPRODUCIBLE MILITARY SPECIFICATION FOR ITEMS 1 AND 3.

"B. ONE (1) REPRODUCIBLE COPY OF THE FOLLOWING:

(1) MANUFACTURING DRAWINGS AND LISTS OF DRAWINGS FOR ITEM 1.

(2) PACKAGING DRAWINGS.

(3) TOOL DRAWINGS AND PHOTOGRAPHS.

"C. ONE (1) REPRODUCIBLE COPY AND ONE (1) REPRODUCTION COPY OF THE FOLLOWING:

(1) MASTER INDEX.

(2) PARTS AND MATERIALS LISTS.

(3) TEST DATA AND TEST EQUIPMENT LISTS (PRODUCTION TEST EQUIPMENT).

(4) PECULIAR TEST EQUIPMENT DESIGN DATA.

(5) SPECIFICATION WAIVERS AND AUTHORIZED DEVIATIONS GRANTED BY THE BUREAU OF AERONAUTICS.

"THE MATERIAL HEREUNDER IS NOT REQUIRED TO CONTAIN ANY INFORMATION WHICH WOULD DIVULGE THE DESIGN OR MANUFACTURING KNOW-HOW WHICH IS PROPRIETARY ON THE FOLLOWING COMPONENTS:

MODEL 2171--- TWO-GYRO MASTER REFERENCE

MODEL 5808--- PITCH ANGLE SELECTOR

MODEL 2159--- SWITCHING RATE GYRO

MODEL 5805--- "G" INDICATOR

MODEL 5806--- PROGRAMMER"

THE SCHEDULE ALSO INCLUDED THE FOLLOWING PERTINENT PROVISIONS:

"SECTION AA--- REPRODUCTION AND USE OF TECHNICAL DATA.

"THE CONTRACTOR AGREES TO AND DOES HEREBY GRANT TO THE GOVERNMENT, TO THE FULL EXTENT OF THE CONTRACTOR'S RIGHT TO DO SO WITHOUT PAYMENT OF COMPENSATION TO OTHERS, THE RIGHT TO REPRODUCE, USE, AND DISCLOSE FOR GOVERNMENTAL PURPOSES (INCLUDING THE RIGHT TO GIVE TO FOREIGN GOVERNMENTS FOR THEIR USE AS THE NATIONAL INTEREST OF THE UNITED STATES MAY DEMAND) ALL OR ANY PART OF THE REPORTS, DRAWINGS, BLUEPRINTS, DATA, AND TECHNICAL INFORMATION SPECIFIED TO BE DELIVERED BY THE CONTRACTOR TO THE GOVERNMENT UNDER THIS CONTRACT; PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN THIS PARAGRAPH SHALL BE DEEMED, DIRECTLY OR BY IMPLICATION, TO GRANT ANY LICENSE UNDER ANY PATENT NOW OR HEREAFTER ISSUED OR TO GRANT ANY RIGHT TO REPRODUCE ANYTHING ELSE CALLED FOR BY THIS CONTRACT.'

MODEL 2171 WAS DELETED FROM THE FIVE LISTED EXCEPTIONS BY AMENDMENT NO. 2 TO THE CONTRACT. MODEL 5805 WAS COMBINED WITH MODEL 5806. THE FOLLOW-ON PRODUCTION CONTRACTS PROVIDED THAT YOU SHOULD KEEP THE PRODUCTION DATA PACKAGE UP TO DATE BUT DID NOT REQUIRE YOU TO FURNISH PROPRIETARY DATA ON REQUIRED REVISION DRAWINGS.

IT SEEMS WELL ESTABLISHED AS YOU HAVE INDICATED THAT, INDEPENDENTLY OF THE LAW APPLICABLE TO PATENTS AND COPYRIGHTS, THE OWNER OF PROPRIETARY INFORMATION OR TRADE SECRETS CONSISTING OF ANY FORMULA OR PATTERN, ANY MACHINE OR PROCESS OF MANUFACTURE, OR OF ANY DEVICE OR COMPILATION OF INFORMATION USED IN HIS BUSINESS WHICH MAY GIVE TO HIM AN OPPORTUNITY TO OBTAIN AN ADVANTAGE OVER COMPETITORS WHO DO NOT KNOW OR USE IT, MAY PROTECT HIMSELF BY CONTRACT AGAINST ITS DISCLOSURE BY ONE TO WHOM IT IS COMMUNICATED IN CONFIDENCE OR MAY RESTRICT ITS USE BY SUCH PERSON. SEE JOHN D. PARK AND SONS CO. V. HARTMAN, 6 C.C.A. 1907, 153 F.24, CERT. DEN. 1908, 212 U.S. 588; VULCAN DETINNING CO. V. AMERICAN CAN CO., CT. OF ERRORS AND APPEALS N.J. 1907, 67 A. 339; DUPONT POWDER CO. V. MASLAND, 1917, 244 U.S. 100; UNITED LENS CORPORATION V. DORAY LAMP CO., 7 C.C.A. 1937, 93 F.2D 969; SMITH V. DRAVO CORP., 7 C.C.A. 1953, 203 F.2D 369, 376; AND VITRO CORPORATION OF AMERICA V. HALL CHEMICAL CO., 6 C.C.A. 1958, 254 F.2D 787. AND, UNDER CERTAIN CIRCUMSTANCES A NONDISCLOSURE AGREEMENT OR CONTRACT MAY BE IMPLIED. CF. HOELTKE V. C. M. KEMP MFG. CO., 4 C.C.A. 1936, 80 F.2D 912, CERT.DEN. 1936, 298 U.S. 673, AND DE FILIPPIS V. CHRYSLER CORPORATION, D.C.N.Y. 1944, 53 F.SUPP. 977, AFFIRMED 2 C.C.A. 1947, 159 F.2D. 478; INTERNATIONAL INDUSTRIES V. WARREN PETROLEUM CORP., D.C.DEL. 1956, 146 F.SUPP. 157, 177; AND AMERICAN GAGE AND MANUFACTURING CO. V. MAASDAM, 6 C.C.A. 1957, 245 F.2D 62. SEE, ALSO, OUR DECISION OF AUGUST 28, 1961, B-136916, 41 COMP. GEN. 148, AND THE MANY AUTHORITIES COLLECTED IN THE ANNOTATION 170 A.L.R. 449-500.

UNDER THE QUOTED PROVISIONS OF SECTION AA COVERING THE REPRODUCTION AND USE OF TECHNICAL DATA INCORPORATED INTO YOUR CONTRACT NO. NOAS 57-801C, YOU EXPRESSLY GRANTED TO THE GOVERNMENT THE RIGHT TO REPRODUCE, USE, AND DISCLOSE FOR GOVERNMENTAL PURPOSES ALL OR ANY PART OF THE REPORTS, DRAWINGS, BLUEPRINTS, DATA, AND TECHNICAL INFORMATION SPECIFIED TO BE DELIVERED AS A DATA PACKAGE UNDER ITEM 5. IT IS SEEN THAT THIS SECTION CONTAINS A PROVISO WHICH STIPULATES IN EFFECT THAT THE LICENSE GRANTED TO THE GOVERNMENT BY THIS CONTRACT PROVISION TO REPRODUCE THE TECHNICAL DATA CONTRACTED FOR UNDER ITEM 5 SHALL NOT BE REGARDED AS GRANTING A LICENSE TO THE GOVERNMENT UNDER ANY PATENT OR A LICENSE TO REPRODUCE ANY OTHER ITEM CONTRACTED FOR. TO THIS EXTENT, THE PROVISO LIMITS THE LICENSE GRANTED TO THE GOVERNMENT BY THE CONTRACT PROVISION. BUT, CONTRARY TO THE VIEWS INDICATED BY YOUR ATTORNEYS AT PAGE 16 OF THEIR FINAL SUMMATION OF YOUR PROTEST, THIS PROVISO APPARENTLY DOES NOT PURPORT TO LIMIT OR RESTRICT IN ANY WAY THE RIGHTS WHICH THE GOVERNMENT MAY OTHERWISE HAVE, INCLUDING SUCH RIGHTS AS MAY BE ACQUIRED UNDER THE REMAINING PROVISIONS OF THE INSTANT CONTRACT OR PURSUANT TO OTHER CONTRACTS WITH YOUR FIRM, TO USE PATENTED INVENTIONS AND TO REPRODUCE OR HAVE MANUFACTURED FOR ITSELF THE END ITEMS CONTRACTED FOR OTHER THAN THE DATA PACKAGE. ITEM 5, HOWEVER, DOES INCLUDE THE STIPULATION SET OUT ABOVE TO THE EFFECT YOU WOULD NOT BE REQUIRED TO FURNISH IN THE DATA PACKAGE ANY INFORMATION THAT WOULD DIVULGE THE DESIGN OR MANUFACTURING KNOW-HOW WHICH IS PROPRIETARY ON THE FIVE COMPONENTS DESIGNATED THEREIN. WE CONCUR WITH YOUR VIEW THIS CONTRACT PROVISION WAS CLEARLY INTENDED FOR YOUR PROTECTION AND APPLYING THE RULES HEREINBEFORE STATED IT AFFORDED YOU THE OPPORTUNITY TO WITHHOLD THE INFORMATION SPECIFIED AND OBLIGATED THE GOVERNMENT NOT TO DISCLOSE SUCH INFORMATION TO OTHERS. CF. 41 COMP. GEN. 148.

AT A MEETING BETWEEN GOVERNMENT REPRESENTATIVES AND YOUR REPRESENTATIVES THE MATTER OF PROPRIETARY RIGHTS ON CERTAIN COMPONENT MODELS WAS DISCUSSED, AND IN ORDER TO CLARIFY THIS MATTER YOU ADDRESSED A LETTER TO THE DEPARTMENT OF THE NAVY ON MAY 14, 1958, AS FOLLOWS:

"AT THE REFERENCE MEETING (C), THE MATTER OF PROPRIETARY RIGHTS ON CERTAIN COMPONENT MODELS WAS DISCUSSED. UNDER THE TERMS OF THE SUBJECT CONTRACT, LEAR WAS TO RETAIN PROPRIETARY RIGHTS ON FIVE (5) SPECIFIC MODELS (ITEM 5, PAGE 8). BUAER WISHES A CLARIFICATION FROM LEAR ON EXACTLY WHAT INFORMATION WILL BE FURNISHED AND WHAT MAY BE WITHHELD, SINCE UNDER THE BROADEST POSSIBLE INTERPRETATION, LEAR MIGHT ONLY FURNISH OUTLINE DRAWINGS OF THESE VARIOUS COMPONENTS.

"WE WISH TO ASSURE BUAER THAT SUCH A PROCEDURE IS NOT CONTEMPLATED AND THAT UNDER ITEM 5, THE PRODUCTION DATA PACKAGE TO BE FURNISHED ON THIS CONTRACT, VIRTUALLY 99 PERCENT OF ALL THE NECESSARY DRAWINGS AND INFORMATION WILL BE SUPPLIED ON THESE FIVE (5) SPECIFIC MODELS.

"THE ONLY DATA WHICH WILL BE WITHHELD ARE SIX (6) ITEMS OF INFORMATION WHICH LEAR CONSIDERS PROPRIETARY, IN THAT THEY WERE DEVELOPED PRIOR TO THIS PROGRAM AND GIVE LEAR A DEFINITE COMPETITIVE ADVANTAGE.

"THE PROPRIETARY DATA ON THESE RESPECTIVE MODELS IS OUTLINED BELOW:

A. MODEL 2171F, TWO GYRO MASTER REFERENCE

1. THE COMPOSITION OF THE SWITCH FLUID.

2. THE BASIC SWITCH INTERNAL RADIUS DIMENSION.

B. MODEL 5808C, PITCH ANGLE SELECTOR

IT HAS SINCE BEEN DETERMINED THAT DUE TO A REDESIGN OF THE UNIT, LEAR NO LONGER CONSIDERS ANY OF THIS DATA AS PROPRIETARY. THEREFORE, COMPLETE DRAWINGS WILL BE FURNISHED ON THIS MODEL.

C. MODEL 2159G, SWITCHING RATE GYRO

1. THE WHISKER PROBOSCIS CONTRACT ARRANGEMENT AND A FEW DETAIL DRAWINGS OF THOSE PARTS.

2. THE MATERIAL CALL OUT ON OUR DAMPING POT PISTONS.

D. MODEL 5805,"G" INDICATOR

THIS MODEL WAS LATER COMBINED WITH THE MODEL 5806E (BELOW), AND NO PRINTS WILL BE REQUIRED BY BUAER ON THE 5805.

E. MODEL 5806E "G" INDICATOR AND PROGRAMMER

1. THE MATERIAL CALL OUT OF THE PENDULUM SPRING.

2. DIMENSIONS GOVERNING THE SHAPE OF THE BOBBIN IN THE "G" TUBE.

"THEREFORE, WITH THE EXCEPTION OF THE SIX (6) ITEMS OF INFORMATION STATED ABOVE, ALL OTHER DATA AND DRAWINGS WILL BE FURNISHED UNDER ITEM 5.'

IT MAY BE POINTED OUT THAT UNDER ITEM 5 OF CONTRACT NOAS 57-801C THE PRODUCTION DATA PACKAGE TO BE FURNISHED BY YOU WAS TO INCLUDE A MASTER INDEX. THE PARTS OF THIS INDEX FURNISHED BY YOU RELATING TO MODELS 2159 AND 5806--- THE ONLY MODELS INVOLVED IN THE INSTANT PROCUREMENT--- DO NOT LIST THE FOUR PROPRIETARY ITEMS AND IT IS REPORTED THAT AN EXAMINATION OF THE PERTINENT DRAWINGS AND OTHER DATA FURNISHED BY YOU FAILS TO SHOW THE PRESENCE OF THE FOUR ALLEGED PROPRIETARY ITEMS ON THESE MODELS. SINCE THE TERMINOLOGY EMPLOYED IN THE REFERENCES TO THESE MODELS WAS YOUR OWN, IT SEEMS REASONABLE TO CONCLUDE THAT YOU DID NOT FURNISH ANY PROPRIETARY DATA TO THE GOVERNMENT, IN ACCORDANCE WITH THE RIGHT WHICH YOU HAD RESERVED IN THE CONTRACT. FURTHERMORE, TO THE EXTENT YOU INDICATE INFORMATION AND DATA OF A PROPRIETARY NATURE MAY HAVE BEEN FURNISHED THROUGH INADVERTENCE OR MISTAKE AND AS A RESULT MAY HAVE BEEN INCLUDED IN THE DATA PACKAGE, THE REPRODUCTION AND USE OF SUCH DATA BY THE GOVERNMENT WOULD NOT, IN OUR OPINION, CONSTITUTE A BREACH OF ITS NONDISCLOSURE OBLIGATIONS UNDER THE CONTRACT IN THE ABSENCE OF EVIDENCE, PRESENTLY NOT OF RECORD, CLEARLY ESTABLISHING THAT THE GOVERNMENT RECEIVED FROM YOU ADEQUATE NOTICE INCLUDING DETAILED INFORMATION IDENTIFYING THE SPECIFIC DATA INVOLVED OR OTHER FACTS SUFFICIENT TO CHARGE THE GOVERNMENT WITH KNOWLEDGE THAT SUCH PROPRIETARY DATA HAD BEEN SO FURNISHED.

WHEN FURNISHING DRAWINGS AND DATA REQUIRED BY THE CONTRACT YOUR REPORTED PRACTICE WAS TO WITHIN DATA PERTAINING TO PROPRIETARY RIGHTS. NEARLY ALL OF THE DRAWINGS FURNISHED BY YOU THEREUNDER, HOWEVER, WERE ON SPECIAL PAPER, SUCH AS THAT USED IN YOUR COMMERCIAL BUSINESS, ON WHICH A RESTRICTIVE LEGEND HAD BEEN PREPRINTED. BOTH PARTIES RECOGNIZED THAT THIS LEGEND SHOULD NOT HAVE BEEN PLACED ON THE DRAWINGS FURNISHED TO THE GOVERNMENT AND YOU ACKNOWLEDGED THAT IT WAS INAPPLICABLE TO THE GOVERNMENT'S RIGHTS IN SUCH DRAWINGS AS EVIDENCED BY YOUR LETTER OF JULY 21, 1961, IN PERTINENT PART AS FOLLOWS:

"PLEASE REGARD THIS LETTER AS A CONDITIONAL WAIVER OF THE FOLLOWING NOTE AS PRINTED IN THE UPPER LEFT HAND CORNER OF OUR ENGINEERING DRAWINGS:

"THE INFORMATION HEREON IS THE PROPERTY OF LEAR, INCORPORATED AND IS SUBMITTED IN CONFIDENCE FOR REFERENCE ONLY. UNAUTHORIZED USE BY ANYONE FOR ANY OTHER PURPOSE IS FORBIDDEN.'

"THE ONLY QUALIFICATION WE WOULD POINT OUT CONCERNING THE PRECEDING PARAGRAPH IS THAT IT SHALL NOT IN ANY WAY WAIVE ANY RIGHTS OF LEAR, INCORPORATED AS WRITTEN WITHIN A CONTRACT BETWEEN THE GOVERNMENT AND LEAR, INCORPORATED. IF SPECIFIC LEAR PART NUMBERS ARE DESIGNATED WITHIN THE TEXT OF THE CONTRACT AS BEING PROPRIETARY AND ARE AGREED UPON BY BOTH PARTIES ENTERING INTO THE CONTRACT AS BEING PROPRIETARY, THIS LETTER THEN WILL NOT WAIVE ANY LEAR INCORPORATED RIGHTS ON THESE PART NUMBERS.'

WE CONCUR WITH YOUR VIEW IN WHICH THE NAVY HAS EXPRESSED AGREEMENT THAT NONE OF YOUR CONTRACT RIGHTS WERE WAIVED BY THIS LETTER NOR WERE THEY, IN OUR OPINION, IN ANY WAY EXPANDED THEREBY AS APPARENTLY CONTENDED BY YOU. THUS, YOU URGE, IN EFFECT, THAT DISCLOSURE BY THE GOVERNMENT OF ANY PROPRIETARY DATA YOU MAY HAVE INCLUDED IN DRAWINGS BEARING THE AFOREMENTIONED RESTRICTIVE LEGEND, ALTHOUGH YOU WERE NOT REQUIRED BY THE CONTRACT TO FURNISH SUCH PROPRIETARY DATA AND ALTHOUGH SUCH DATA WAS NOT SPECIFICALLY IDENTIFIED ON THE MASTER INDEX OR OTHERWISE MADE KNOWN TO THE GOVERNMENT, SHOULD BE REGARDED AS A VIOLATION OF YOUR PROPRIETARY RIGHTS UNDER THE CONTRACT. WE DO NOT BELIEVE SUCH BROAD IMPLICATIONS CAN REASONABLY BE RECONCILED WITH THE UNDERTAKINGS AND OBLIGATIONS OF THE CONTRACTING PARTIES, PARTICULARLY IN VIEW OF THE SIGNIFICANT LIMITATION CONTAINED IN YOUR LETTER OF JULY 21, 1961, THAT "IF SPECIFIC LEAR PART NUMBERS ARE DESIGNATED WITHIN THE TEXT OF THE CONTRACT AS BEING PROPRIETARY AND ARE AGREED UPON BY BOTH PARTIES ENTERING INTO THE CONTRACT AS BEING PROPRIETARY, THIS LETTER THEN WILL NOT WAIVE ANY LEAR INCORPORATED RIGHTS ON THESE PART NUMBERS.'

PRIOR TO THE SOLICITATION OF PROPOSALS FOR THE INSTANT PROCUREMENT PERSONNEL OF THE NAVAL AVIONICS FACILITY AT INDIANAPOLIS ANALYZED AND EVALUATED THE DATA FURNISHED BY YOU FOR THE PURPOSE OF DETERMINING ITS ADEQUACY AND AVAILABILITY FOR COMPETITIVE PROCUREMENT. IN AUGUST 1960 FIVE OF YOUR REPRESENTATIVES MET WITH REPRESENTATIVES OF THE BUREAU OF NAVAL WEAPONS TO ARRANGE FOR THE IDENTIFICATION OF ITEMS WHICH YOU CONSIDERED TO BE PROPRIETARY. THE NOTES OF THAT MEETING STATE THAT PROPRIETARY ITEMS AS ESTABLISHED BY CONTRACTOR'S DRAWINGS WOULD BE DESIGNATED BY YOU ON THE MASTER INDEX LIST FOR BOTH THE AJB-3 AND AJB 3A SYSTEMS, THE MASTER INDEX LIST BEING A REQUIREMENT OF CONTRACT NO. NOAS 57 -801C. IT IS STATED ON PAGE 5 OF THE LATEST BRIEF SUBMITTED BY YOUR ATTORNEYS THAT YOU DISPUTE THE CORRECTNESS OF THE REPORT OF THE ADMINISTRATIVE OFFICE IN REGARD TO YOUR AGREEMENT TO DESIGNATE THE PROPRIETARY ITEMS ON THE MASTER INDEX BUT NO EVIDENCE HAS BEEN FURNISHED TO SHOW THAT THE REPORTED FACTS ARE CLEARLY ERRONEOUS. FURTHERMORE, YOU AGREE WITH THE ADMINISTRATIVE OFFICE THAT YOU DID INDICATE THAT FIVE PART NUMBERS WERE PROPRIETARY. OF THE FIVE PART NUMBERS LISTED, FOUR PARTS PERTAINED TO MODEL 2171, ELIMINATED AS AN EXCEPTION UNDER ITEM 5 OF THE 801C CONTRACT. AS TO PART NO. 124778, THIS ITEM PERTAINS TO MODEL 4026, NOT MENTIONED AS AN EXCEPTION UNDER ITEM 5 OF THE 801C CONTRACT. HOWEVER, WHEN GOVERNMENT PERSONNEL DISCOVERED THAT DRAWINGS HAD BEEN FURNISHED FOR PART NO. 124778 THIS WAS CALLED TO YOUR ATTENTION. YOU THEN STATED THAT THE DRAWINGS HAD BEEN FURNISHED BY MISTAKE AND REQUESTED THAT THEY BE WITHHELD FROM THE DATA PACKAGE. ACCORDINGLY, THE DRAWINGS WERE THEN REMOVED FROM THE DATA PACKAGE AND WERE NOT USED IN THE PRESENT PROCUREMENT.

ASIDE FROM THE MATTERS SPECIFICALLY COVERED BY PATENTS THE VIOLATION OF YOUR RIGHTS IN PROPRIETARY DATA IS BASED UPON THE CONTENTION THAT BY YOUR LETTER OF JULY 21, 1961, YOU HAD INVITED ATTENTION TO THE FACT THAT YOU WERE NOT WAIVING ANY OF YOUR RIGHTS ON PART NUMBERS WHICH WERE DESIGNATED "WITHIN THE TEXT OF THE CONTRACT AS BEING PROPRIETARY.' AS STATED HEREINABOVE, THIS LETTER WAS WRITTEN AFTER YOU HAD ERRONEOUSLY PLACED A RESTRICTIVE LEGEND ON ALL YOUR DRAWINGS. YOU DID NOT POINT OUT, HOWEVER, THE PARTICULAR DRAWINGS AS TO WHICH YOU CLAIMED PROPRIETARY DATA RIGHTS. IT IS IMPLIED THAT ANY INFORMATION REGARDING THE FIVE MODELS ENUMERATED IN ITEM 5 OF CONTRACT NO. NOAS 57-801C IS PROPRIETARY WHEREAS DURING THE COURSE OF DEALING WITH THE DEPARTMENT OF THE NAVY YOU WERE REQUESTED TO DETAIL WHAT INFORMATION ON THESE SPECIFIC MODELS WAS PROPRIETARY AND ONLY CERTAIN ITEMS IN THESE MODELS WERE IDENTIFIED IN YOUR LETTER OF MAY 14, 1958. IN SEPTEMBER 1961 YOU WERE AFFORDED ANOTHER OPPORTUNITY TO ASSERT YOUR RIGHTS IN THIS MATTER WHEN THE PRODUCTION DATA PACKAGE WAS OPENLY AND COMPLETELY DISPLAYED AT THE NAVAL AVIONICS FACILITY BEFORE THE REPRESENTATIVES OF INTERESTED COMPANIES, BUT NO OBJECTION WAS RAISED BY YOUR REPRESENTATIVE WHO WAS PRESENT. IT SEEMS EVIDENT THAT YOU WERE FULLY ADVISED WITH RESPECT TO THE INTENDED USE OF THE PRODUCTION DATA PACKAGE. IN FACT THE SUBSEQUENT REVISION OF SPECIFICATION MIL-P-17900A/AER) BY THE ISSUANCE OF SPECIFICATION MIL-P-17900B/AER) ON MAY 29, 1958, REDEFINES THE PURPOSE OF THE PRODUCTION DATA PACKAGE AS "REQUIRED * * * FOR INITIATION OF A PRODUCTION PROGRAM FOR THE END ITEM INVOLVED FOR THE PURPOSES OF MOBILIZATION, MAINTENANCE AND MULTIPLE SOURCE PROCUREMENTS.' WE BELIEVE THE RECORD AMPLY ESTABLISHES THAT IT WAS INCUMBENT UPON YOU TO FURNISH TIMELY SUCH INFORMATION AS YOU BELIEVE NECESSARY FOR THE PROTECTION OF YOUR INTERESTS. FAILURE TO DO SO IS YOUR RESPONSIBILITY. IT IS ALSO YOUR RESPONSIBILITY TO ESTABLISH THE PARTICULAR PROPRIETARY RIGHTS CLAIMED TO HAVE BEEN VIOLATED WHICH, IN OUR OPINION, YOU HAVE NOT DONE. THE PART NUMBERS LISTED IN EXHIBIT A OF THE FINAL SUMMATION OF YOUR PROTEST BY YOUR ATTORNEYS WAS NOT "DESIGNATED WITHIN THE TEXT OF THE CONTRACT AS BEING PROPRIETARY" AND A SPECIFIC AGREEMENT THEREON HAS NOT BEEN INDICATED.

AS TO THE MATTER OF PATENTS YOU STATE THAT YOU OWN CERTAIN PATENTS RELATING TO THE COMPONENTS OF THE LOFT BOMB COMPUTER SYSTEMS TO BE FURNISHED UNDER THE INSTANT CONTRACT, THAT YOU HAVE NOT GRANTED ANY LICENSE TO THE GOVERNMENT UNDER SUCH PATENTS AND THAT THE GOVERNMENT SHOULD NOT BE PERMITTED TO PURCHASE ITEMS FROM OTHERS INFRINGING THESE PATENTS. CONCEDING THAT YOU OWN CERTAIN PATENTS RELATING TO THE COMPONENTS OF THE INVOLVED SYSTEMS AND THAT YOU HAVE NOT GRANTED ANY LICENSE TO THE GOVERNMENT UNDER SUCH PATENTS, BUWEPS PROCEEDED WITH THE THE EXECUTION OF THE INSTANT CONTRACT WITH TEXAS INSTRUMENTS, INCORPORATED, UPON AN AUTHORIZATION GRANTED UNDER ARTICLE 1265, NAVY REGULATIONS, ON NOVEMBER 22, 1961, TO UTILIZE TO THE EXTENT NECESSARY THE INVENTIONS OF YOUR PATENTS AND PATENT APPLICATIONS SET FORTH THEREIN IN THE PROCUREMENT UNDER REQUEST FOR PROPOSAL NO. 0860-62 HERE INVOLVED. THIS AUTHORIZATION WAS BASED ON (1) THE PRICE DIFFERENTIAL OF $1,283,778 BETWEEN THE BID OF TEXAS INSTRUMENTS, INCORPORATED, AND YOUR BID AND (2) OUR DECISION IN B-136916 (38 COMP. GEN. 276), IT BEING NOTED THAT A PATENT INDEMNITY CLAUSE WOULD BE INCLUDED IN THE RESULTING CONTRACT.

STATUTORY PROVISIONS CARRIED IN 28 U.S.C. 1498 PROVIDE, IN PERTINENT PART, THAT WHENEVER AN INVENTION COVERED BY A PATENT OF THE UNITED STATES IS USED OR MANUFACTURED BY OR FOR THE UNITED STATES WITHOUT LICENSE OF THE OWNER OR LAWFUL RIGHT TO USE OR MANUFACTURE THE INVENTION, WHICH INCLUDES USE OR MANUFACTURE FOR THE UNITED STATES BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION AND CONSENT OF THE GOVERNMENT, THE OWNER'S REMEDY SHALL BE BY ACTION AGAINST THE UNITED STATES IN THE COURT OF CLAIMS FOR THE RECOVERY OF HIS REASONABLE AND ENTIRE COMPENSATION FOR SUCH USE AND MANUFACTURE. IT HAS BEEN JUDICIALLY DETERMINED THAT THIS SECTION IS IN EFFECT AN EMINENT DOMAIN STATUTE; THAT ITS PROVISIONS RELIEVE THE CONTRACTOR ENTIRELY FROM LIABILITY OF EVERY KIND FOR THE INFRINGEMENT OF PATENTS IN MANUFACTURING ANYTHING FOR THE GOVERNMENT AND LIMITS THE OWNER OF THE PATENT TO A SUIT IN THE COURT OF CLAIMS FOR REASONABLE COMPENSATION, WHICH REMEDY IS EXCLUSIVE AND COMPREHENSIVE IN CHARACTER. ALSO, IT WAS HELD THAT IT WAS THE PURPOSE AND INTENT OF CONGRESS BY THE PROVISIONS OF THIS SECTION TO STIMULATE CONTRACTORS TO FURNISH GOVERNMENT NEEDS WITHOUT FEAR OF BECOMING LIABLE THEMSELVES FOR INFRINGEMENTS TO PATENT HOLDERS AND LICENSEES, AND TO MAKE IT POSSIBLE FOR THE GOVERNMENT TO PROCEED WITH ITS PROCUREMENT WITHOUT RESTRICTION OR DELAY CAUSED BY PATENT INFRINGEMENT CLAIMS OR CONTROVERSIES. FURTHER, IT WAS POINTED OUT THAT THE STATUTE WAS DESIGNED TO FURNISH PATENTEES AND LICENSEES AN ADEQUATE AND EFFECTIVE REMEDY AND TO SAVE THE GOVERNMENT FROM HAVING ITS PUBLIC WORKS TIED UP AND THWARTED WHILE PRIVATE PARTIES WERE CARRYING ON LONG DRAWN OUT LITIGATION. AND IT HAS BEEN REPEATEDLY EMPHASIZED BY THE SUPREME COURT OF THE UNITED STATES THAT IT IS THE PUBLIC INTEREST WHICH IS DOMINANT IN THE PATENT SYSTEM. SEE RICHMOND CO. V. UNITED STATES (1928), 275 U.S. 331, 343, AND THE OTHER AUTHORITIES CONSIDERED IN OUR DECISIONS OF AUGUST 25, 1958, B 136916, AND OCTOBER 6, 1958, 38 COMP. GEN. 276, AND THE CASES COLLECTED IN THE ANNOTATION 28 U.S.C.A. 1498.

IN OUR OPINION, TO REJECT THE LOW BID FOR THE PURPOSE OF ENFORCING AND PROTECTING YOUR ALLEGED PATENT RIGHTS WOULD CONSTITUTE AN IMPROPER RESTRICTION OF COMPETITION TO THE DETRIMENT OF THE INTERESTS OF THE UNITED STATES WHICH THE PROVISIONS OF 28 U.S.C. 1498 WERE INTENDED TO SECURE, AND WOULD, IN EFFECT, LIMIT THE APPLICATION OF THIS STATUTE. IT IS OUR VIEW, THEREFORE, THAT YOUR CONTENTION THAT AWARD TO THE LOW BIDDER MIGHT RESULT IN THE INFRINGEMENT OF CERTAIN PATENTS AFFORDS NO JUSTIFICATION FOR QUESTIONING THE ADMINISTRATIVE ACTION IN THIS CASE.

FROM A CAREFUL CONSIDERATION OF ALL THE INFORMATION AND EVIDENCE OF RECORD WE FIND NO BASIS ON WHICH YOUR PROTEST REASONABLY MIGHT BE SUSTAINED.