B-148135, APR. 30, 1962

B-148135, APR. 30, 1962

TO GLOBE INDUSTRIES, INCORPORATED:

YOUR TELEGRAM OF FEBRUARY 6, 1962, PROTESTS THE AWARD OF CONTRACT DSA2- 116, DATED FEBRUARY 8, 1962, WHICH WAS NEGOTIATED BY THE DEFENSE MEDICAL SUPPLY CENTER, BROOKLYN, NEW YORK, WITH AERO INDUSTRIES, INC., HEREINAFTER REFERRED AS TO AERO, UNDER REQUEST FOR QUOTATIONS (RFQ) NO. 8623.

THE ITEM PROCURED WAS A "RESUSCITATOR-INHALATOR-ASPIRATOR," AN INSTRUMENT INTENDED TO ASSIST A PERSON TO BREATHE WHEN SUCH PERSON CANNOT DO SO OF HIS OWN VOLITION BECAUSE OF SHOCK OR OTHER CAUSE. THIS RESUSCITATOR HAD BEEN THE SUBJECT OF AN 8-YEAR DEVELOPMENT PROGRAM CONDUCTED BY THE AEROSPACE MEDICAL LABORATORY OF WRIGHT-PATTERSON AIR FORCE BASE. SEELER, WHO IS THE CHIEF, SPECIAL PROJECTS SECTION OF THE LABORATORY, ATTEMPTED, WITHIN THE FOREGOING PROGRAM, TO DEVELOPA RESUSCITATOR KIT WHICH COULD BE UTILIZED IN AIRCRAFT AND ON THE GROUND.

MR. SEELER OBTAINED A PATENT IN 1952 ON A LOW PRESSURE CYCLING VALVE FOR THE RESUSCITATOR, AND THE GOVERNMENT ACQUIRED A ROYALTY FREE LICENSE ON THE PATENT. IN 1956, HE PATENTED CERTAIN IMPROVEMENTS ON THE LOW PRESSURE CYCLING VALVE, AND THE GOVERNMENT BECAME THE OWNER OF THE PATENT ON THESE IMPROVEMENTS BY VIRTUE OF AN ASSIGNMENT.

RESUSCITATOR "KITS" CONTAINING THE AFOREMENTIONED LOW PRESSURE CYCLING VALVE, WERE THEN OBTAINED FROM TWO PRIVATE COMPANIES FOR TESTING PURPOSES. YOU WERE THE SUBCONTRACTOR FOR ONE OF THESE TWO COMPANIES AND SUPPLIED TO IT THE SEELER LOW PRESSURE CYCLING VALVE. IN ADDITION A CERTAIN LOW PRESSURE OXYGEN REGULATOR WAS PURCHASED FOR THE KITS FROM A THIRD COMPANY. THE KITS ALSO CONTAINED CERTAIN OTHER COMPONENTS, APPARENTLY BRAND NAME ITEMS, NECESSARY TO THE OPERATION OF THE RESUSCITATOR BUT NOT HERE IMPORTANT.

THE RECORD SHOWS THAT AFTER THE KITS HAD BEEN TESTED, AND DURING THE COURSE OF DRAFTING SPECIFICATIONS FOR PROCUREMENT, THE DEFENSE MEDICAL SUPPLY CENTER QUESTIONED WHETHER THE RESUSCITATOR KITS SHOULD BE MODIFIED TO REQUIRE A HIGH PRESSURE CYCLING VALVE. IT APPEARED THAT THE LOW PRESSURE OXYGEN REGULATOR REQUIRED BY A LOW PRESSURE CYCLING VALVE WAS NOT AVAILABLE ON THE COMMERCIAL MARKET, AND HENCE ITS PRICE WAS EXCESSIVE. THE GOVERNMENT DRAWINGS OF THE RESUSCITATOR KIT DEPICTED THE ESSENTIAL DESIGN OF THE NEW CYCLING VALVE, EXCEPT FOR THE USE OF LOW PRESSURE CONFIGURATIONS OF THE VALVES.

IN ORDER TO BE ABLE TO DISCUSS, AT AN IMMINENT MEETING OF INTERESTED MILITARY PROCUREMENT AUTHORITIES, THE FEASIBILITY OF CONVERTING THE RESUSCITATOR TO A HIGH PRESSURE UNIT, THE AEROSPACE MEDICAL LABORATORY BORROWED FROM YOUR COMPANY SEVERAL ARTICLES, INCLUDING A HIGH PRESSURE CYCLING VALVE AND OXYGEN REGULATOR, WHICH WERE USED TO MODIFY THE EXISTING KIT. THESE ARTICLES, WHICH BECAME COMPONENT PARTS OF THE RESUSCITATOR KIT APPROVED AT THE MEETING OF THE MILITARY PROCUREMENT AUTHORITIES, WERE LOANED TO THE GOVERNMENT FOR THE PURPOSE OF INVESTIGATING THEM AND ESTABLISHING ENGINEERING SPECIFICATIONS FOR THEM. AFTER THE MEETING, THE KIT WAS SENT TO DEFENSE MEDICAL SUPPLY CENTER IN ORDER TO HAVE SPECIFICATIONS DRAWN.

THE SPECIFICATIONS, AS FINALLY WRITTEN, SET FORTH PERFORMANCE STANDARDS FOR THE VARIOUS COMPONENTS AND ADVISED THAT A GOVERNMENT OWNED PROTOTYPE MODEL WOULD BE FURNISHED TO THE CONTRACTOR FOR USE IN ASCERTAINING ENGINEERING DETAILS AND INSURING INTERCHANGEABILITY BETWEEN HIS PARTS, THE PARTS OF THE MODEL, AND THE PARTS OF SIMILAR ITEMS MANUFACTURED BY OTHER COMPANIES. HOWEVER, THE SPECIFICATIONS WARNED PROSPECTIVE BIDDERS THAT THE GOVERNMENT DID NOT REPRESENT THAT THE MODEL WAS STRICTLY IN ACCORDANCE WITH THE SPECIFICATIONS, AND IN ANY EVENT THE RESUSCITATOR FABRICATED MUST COMPLY WITH THE SPECIFICATION REQUIREMENTS. IN REGARD TO THE OXYGEN REGULATOR, THE SPECIFICATIONS NOTED THAT A CERTAIN ITEM MANUFACTURED BY ANY ONE OF THREE MENTIONED COMPANIES, INCLUDING YOUR OWN, WOULD BE SATISFACTORY.

THE RFQ, ISSUED ON SEPTEMBER 20, 1961, TO 13 SUPPLIERS, REQUESTED DRAWINGS AS WELL AS PRICES FOR THE RESUSCITATOR KIT THEY PROPOSED TO SUPPLY. THE SPECIFICATIONS REQUIRED THAT THESE DRAWINGS BE "BOTH ASSEMBLY AND DETAIL DRAWINGS IN SUFFICIENT DETAIL TO PERMIT INTERCHANGEABILITY OF PARTS IF MANUFACTURED BY ANOTHER SOURCE SKILLED IN THE FIELD.' THESE WERE REQUIRED SINCE THIS WAS TO BE THE FIRST PROCUREMENT OF THE RESUSCITATOR AND SUBSEQUENT PROCUREMENTS WERE ANTICIPATED. SINCE THIS WOULD BE THE FIRST PROCUREMENT OF THIS COMMODITY, THE GOVERNMENT DID NOT ESTABLISH ANY FIRM, FIXED DELIVERY. INSTEAD, IT STATED THAT DELIVERY WAS DESIRED DURING JANUARY 1962 AND THAT DELIVERY WOULD BE EXPECTED ON SUCH DATE UNLESS THE OFFEROR SPECIFIED OTHERWISE IN THE SPACE PROVIDED.

OF THE SEVERAL FIRMS WHICH RESPONDED, BOTH YOUR FIRM AND ROBERTSHAW FULTON CONTROLS COMPANY WERE UNWILLING, AT THE OFFERED QUOTATION PRICES, TO SUPPLY DETAILED DRAWINGS OF THE CYCLING VALVE OR OXYGEN REGULATOR FOR REMANUFACTURING PURPOSES, SINCE YOU BOTH CONSIDERED THESE TO BE PROPRIETARY TO YOUR RESPECTIVE FIRMS. IN ADDITION, YOUR COMPANY ALSO REFUSED TO FURNISH DETAILED DRAWINGS ON THE BRAND NAME ITEMS, EXCEPT FOR THE DETAILS OF ANY MODIFICATIONS YOU WOULD MAKE.

BASED ON THESE SEVEN PROPOSALS, NEGOTIATIONS WERE CONDUCTED WITH THE THREE SUPPLIERS WHICH WERE INTERESTED IN PRODUCING A RESUSCITATOR IN CONFORMANCE TO SPECIFICATIONS AND IN THE SMALL QUANTITIES DESIRED. DURING NEGOTIATIONS ROBERTSHAW-FULTON DECIDED TO OFFER TO SUPPLY A MODIFIED SEELER RESUSCITATOR AND THEREFORE WITHDREW ITS EXCEPTION TO THE REQUIREMENT FOR DETAILED DRAWINGS. YOU OFFERED TO GIVE COMPLETE DRAWINGS OF YOUR OXYGEN REGULATOR FOR AN ADDITIONAL $35,000, AND OF YOUR PATENTED MODIFICATION OF THE SEELER CYCLING VALVE, AT TERMS AND CONDITIONS TO BE AGREED UPON. HOWEVER, YOU DID NOT ALTER YOUR PROPOSAL AS TO THE REFUSAL TO GIVE DETAILED DRAWINGS OF THE COMPONENTS OTHER THAN THE CYCLING VALVE AND OXYGEN REGULATOR. THE THIRD PROSPECTIVE SUPPLIER, AERO, REVISED MINOR EXCEPTIONS TO CONFORM TO THE SPECIFICATIONS.

AS A RESULT OF THE NEGOTIATIONS, THE CONTRACTING OFFICER DETERMINED THAT THE LOWEST RESPONSIVE OFFER HAD BEEN RECEIVED FROM AERO INDUSTRIES, INC. A PREAWARD SURVEY OF AERO ESTABLISHED THAT THAT COMPANY WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR, WITH THE NECESSARY EXPERIENCE, KNOWLEDGE, SKILLS, FINANCES, FACILITIES AND OPEN PRODUCTION CAPACITIES TO PRODUCE THE ITEMS REQUIRED UNDER RFQ NO. 8623. THE AWARD WAS NOT CONSUMMATED UNTIL FEBRUARY 8, 1962, AND THE PROTOTYPE MODEL OF THE RESUSCITATOR WAS THEN TURNED OVER TO THE CONTRACTOR, AS PROVIDED FOR IN THE SPECIFICATIONS.

YOUR PROTEST AGAINST THIS AWARD IS BASED ON VARIOUS GROUNDS. IN THE FIRST OF THE ALLEGATIONS CONTAINED IN YOUR LETTERS TO THE CONTRACTING OFFICER, YOU SAY THAT YOU OWNED THE PROTOTYPE MODEL OF THE RESUSCITATOR WHICH WAS REPRESENTED TO BE GOVERNMENT-OWNED PROPERTY AND WHICH WAS TRANSFERRED TO AERO WITHOUT YOUR CONSENT OR KNOWLEDGE. YOU CONTEND THAT SUCH TRANSFER WAS A VIOLATION OF A CONFIDENTIAL DISCLOSURE, WHICH ABETTED UNFAIR COMPETITION, AND AN INFRINGEMENT OF A PROPRIETARY DESIGN.

THE RECORD SHOWS THAT UPON RECEIPT OF YOUR PROTEST THE DEFENSE MEDICAL SUPPLY CENTER INITIATED AN INVESTIGATION TO DETERMINE THE OWNERSHIP OF THE PROTOTYPE. IT DISCOVERED THAT SOME OF THE COMPONENTS MAKING UP THE PROTOTYPE MODEL WHICH IT HAD RECEIVED FROM AEROSPACE MEDICAL LABORATORY, AND WHICH IT LOANED TO AERO, WERE THE SAME COMPONENTS LOANED TO THE LABORATORY BY YOUR COMPANY FOR THE PURPOSE OF MODIFYING THE SEELER RESUSCITATOR TO A HIGH PRESSURE UNIT AND DRAWING ENGINEERING SPECIFICATIONS. THERE WAS NO RECORD OF YOUR GIVING PERMISSION TO TRANSFER ANY OF THESE COMPONENTS TO A THIRD PARTY, AND THE GOVERNMENT DOES NOT ALLEGE THAT IT ACQUIRED TITLE TO ANY OF SAID COMPONENTS, INCLUDING THE TWO MOST IMPORTANT ONES, THE HIGH PRESSURE CYCLING VALVE AND OXYGEN REGULATOR.

NOTWITHSTANDING THE APPARENTLY IMPROPER TRANSFER OF THESE COMPONENTS, WE CANNOT AGREE THAT THE GOVERNMENT VIOLATED OR ABETTED ANY VIOLATION OF ANY PROPRIETARY RIGHTS, NOR THAT AERO UNFAIRLY GAINED A COMPETITIVE ADVANTAGE AS A RESULT OF THE TRANSFER OF THE PROTOTYPE.

IN REGARD TO YOUR IMPLIED ALLEGATION OF POSSIBLE INFRINGEMENT OF YOUR PATENT ON A CYCLING VALVE WHICH CONFORMS TO THE REQUIREMENTS OF THE SPECIFICATIONS, THIS OFFICE HAS HELD THAT IN AN ADVERTISED PROCUREMENT INVOLVING A PATENTED ARTICLE, WHERE THE AGREEMENT BETWEEN THE GOVERNMENT AND THE CONTRACTOR CONTAINS THE STANDARD AUTHORIZATION AND CONSENT AND PATENT INDEMNITY CLAUSES, IT WOULD BE IMPROPER TO REJECT A RESPONSIVE LOW BID BECAUSE OF PROBABLE PATENT INFRINGEMENT. SEE 38 COMP. GEN. 276, 278, IN WHICH WE OBSERVED THAT THE AUTHORIZATION AND CONSENT CLAUSE WAS INCLUDED IN THE INVITATION TO INVOKE THE PROVISIONS OF SECTION 1498; TITLE 28, U.S.C., AND DREW THE FOLLOWING CONCLUSION THEREFROM:

"IT IS OUR VIEW, HOWEVER, THAT SECTION 1498 APPEARS CLEARLY TO CONSTITUTE A MODIFICATION OF THE PATENT LAW BY LIMITING THE RIGHTS OF PATENTEES INSOFAR AS PROCUREMENT OF SUPPLIES BY THE GOVERNMENT MAY BE CONCERNED, AND BY VESTING IN THE GOVERNMENT A RIGHT TO THE USE OF ANY PATENTS GRANTED BY IT UPON PAYMENT OF REASONABLE COMPENSATION FOR SUCH USE. WE BELIEVE THAT THE STATUTE IS NOT CONSISTENT WITH ANY DUTY ON THE PART OF A CONTRACTING AGENCY OF THE GOVERNMENT TO PROTECT THE INTERESTS OF PATENTEES OR LICENSEES WITH RESPECT TO ARTICLES WHICH IT PROPOSES TO PURCHASE, SINCE THE STATUTE ITSELF DEFINES AND PROVIDES AND EXCLUSIVE REMEDY FOR ENFORCEMENT OF THE PATENTEE'S RIGHTS AS TO THE GOVERNMENT. ANY OTHER INTERPRETATION WOULD APPEAR TO US TO IMPOSE AN IMPOSSIBLE BURDEN UPON GOVERNMENT PROCUREMENT OFFICIALS TO DETERMINE THE APPLICABILITY AND VALIDITY OF ANY PATENTS AFFECTING ANY ARTICLES DESIRED.'

A RATIONALE SIMILAR TO THE ONE OF 38 COMP. GEN. 276 IS APPLICABLE TO OBJECTIONS BASED ON ALLEGED PATENT INFRINGEMENT IN CONTRACTS AWARDED ON A NEGOTIATED BASIS. SEE 39 COMP. GEN. 760, WHERE WE HELD THAT IT WOULD BE IMPROPER TO REJECT A LOW OFFER SOLELY ON THE GROUNDS THAT THE OFFEROR WAS NOT LICENSED TO MANUFACTURE A PATENTED ARTICLE. IT WAS UNNECESSARY IN THAT CASE, AND WOULD APPEAR TO BE IMPROPER UNDER ASPR 9 103.3 IN THIS CASE, THAT THE CONTRACT INCLUDE A PATENT INDEMNITY CLAUSE. UNDER ASPR 9- 103.1 AND 9-103.2, SUCH INDEMNITY CLAUSES ARE REQUIRED ONLY IN FORMALLY ADVERTISED PROCUREMENTS.

FURTHERMORE, WE ARE ADVISED THAT AERO IS NOT SUPPLYING TO THE GOVERNMENT THE GLOBE RESUSCITATOR CYCLING VALVE. HOWEVER, EVEN IF AERO WERE TO INFRINGE UPON YOUR PATENT, IT WOULD HAVE RECEIVED NO SIGNIFICANT HELP IN DOING SO BY VIRTUE OF THE GOVERNMENT'S TRANSFER TO IT OF YOUR PATENTED ARTICLE, SINCE THE RECORD SHOWS THAT THAT ARTICLE COULD HAVE READILY BEEN PURCHASED BY AERO ON THE COMMERCIAL MARKET. THE GOVERNMENT LOANED TO AERO NOTHING WHICH IT COULD NOT HAVE LEGALLY PROCURED FOR ITSELF, AND APPARENTLY HAS GIVEN NO INFORMATION AS TO THE PATENTED METHOD OF CONSTRUCTION OF YOUR CYCLING VALVE, WHICH INFORMATION IS AVAILABLE AT THE U.S. PATENT OFFICE TO ANYONE WHO WISHES TO STUDY COPIES OF THE PATENT. THEREFORE, THE MEANS BY WHICH AERO OBTAINED THE CYCLING VALVE IS NOT RELEVANT TO THE ISSUE OF WHETHER THE GOVERNMENT HAS ABETTED UNFAIR COMPETITION.

IN REGARD TO THE CONTENTION THAT THE GOVERNMENT VIOLATED YOUR ALLEGED PROPRIETARY RIGHTS TO THE GLOBE OXYGEN REGULATOR BY TRANSFERRING THIS COMPONENT TO AERO, WE ARE ADVISED BY THE ADMINISTRATIVE AGENCY THAT THE GLOVE OXYGEN REGULATOR IS ALSO SOLD ON THE COMMERCIAL MARKET. IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT "THE RIGHT TO PROTECTION TERMINATES UPON PUBLIC DISCLOSURE OF TRADE SECRETS BY THE OWNER.' SEE DOLLAC CORPORATION V. MARGON CORPORATION, 164 F.SUPP. 41, 59, AND CASES CITED THEREIN. FOLLOWS THAT BY PLACING THIS ITEM ON THE COMMERCIAL MARKET, YOU LOST ANY PROPRIETARY RIGHTS IN THE ITEM ITSELF. ANY INFORMATION WHICH MIGHT BE DISCLOSED BY INSPECTION OR ANALYSIS OF THE PRODUCT ITSELF IS NOT PROPRIETARY. SEE ASPR 9-201.

FURTHERMORE, WE HAVE BEEN ADVISED BY THE ADMINISTRATIVE AGENCY THAT AERO HAS BEEN PROCEEDING WITH THE CONTRACT AND THAT IT DID NOT, AND DOES NOT, NEED THE PROTOTYPE MODEL IN ORDER TO PRODUCE AND DELIVER A RESUSCITATOR WHICH CONFORMS TO SPECIFICATIONS. WE ARE ALSO ADVISED THAT DEFENSE MEDICAL SUPPLY CENTER HAS SHIPPED THE PROTOTYPE MODEL TO WRIGHT-PATTERSON AIR FORCE BASE SO THAT THOSE COMPONENTS BELONGING TO YOU MAY BE RETURNED.

YOUR LETTERS ALSO PRESENT SEVERAL OTHER ARGUMENTS, NONE OF WHICH APPEARS TO BE OF ANY SUBSTANCE. YOU SHOW THAT IN THE INITIAL RFQ YOU PROPOSED A LOWER PRICE THAN AERO AND, THEREFORE, SAY YOU WERE THE LOW OFFEROR. HOWEVER, THE RECORD CLEARLY SHOWS THAT THE PROPOSAL YOU INITIALLY SUBMITTED WAS INADEQUATE, SINCE YOU OFFERED NO DETAILED DRAWINGS. FURTHERMORE, THE PRICE YOU LATER ASKED FOR THE OXYGEN REGULATOR DRAWINGS ALONE MADE YOUR PROPOSAL MORE THAN TWICE THE PRICE OFFERED BY AERO. ALSO CONTEND THAT AERO DOES NOT HAVE THE NECESSARY QUALIFICATIONS TO MANUFACTURE THE RESUSCITATOR, BUT A PREAWARD SURVEY INDICATED THAT AERO WAS FULLY QUALIFIED, AND THIS OFFICE WILL NOT QUESTION SUCH DETERMINATION IN THE ABSENCE OF ANY SHOWING OF BAD FAITH OR LACK OF A REASONABLE FACTUAL BASIS FOR THE DETERMINATION MADE. YOU ALLEGE THAT AERO IS NOT A QUALIFIED PRODUCTS SUPPLIER, BUT THIS APPEARS TO BE IRRELEVANT, SINCE WE ARE INFORMED THAT THE ITEM BEING PROCURED HAS NEVER BEEN AND IS NOT PRESENTLY ON ANY QUALIFIED PRODUCTS LIST. YOU ARGUE THAT THE RFQ REQUIRED A CERTAIN DELIVERY DATE, AND THAT YOU SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO FURTHER NEGOTIATE PRICES IF THAT DATE WAS EXTENDED. THE RFQ STATED A "DESIRED," NOT A REQUIRED DATE, YOUR LAST OFFER WAS NONRESPONSIVE FOR UNWILLINGNESS TO SUPPLY DETAILED DRAWINGS ON THE BRAND NAME ITEM, AND YOUR PRICE WAS FAR OUT OF LIFE IN RELATION TO THE LOW BIDDER, AERO. CONSEQUENTLY, THERE WAS NO NECESSITY TO "FURTHER NEGOTIATE.'

FINALLY, YOU PROTEST THE AWARD ON THE BASIS OF ASPR 3-108. EVEN ASSUMING THAT ASPR 3-108, WHICH DEALS WITH PROCUREMENT OF SPECIFICALLY DESIGNATED MILITARY SUPPLIES IN THE NATURE OF WEAPONS, APPLIES TO PROCUREMENT OF MEDICAL SUPPLIES, AND ACCEPTING ARGUENDO YOUR STATEMENT THAT YOU WERE "RESPONSIBLE FOR THE DESIGN AND DEVELOPMENT OF THE IMPORTANT COMPONENTS OF THIS PROCUREMENT," AN ALLEGATION NOT SUPPORTED BY THE RECORD, YOUR PROTEST ON THIS BASIS IS WITHOUT MERIT. THAT SECTION STATES THAT PLACING A CONTRACT WITH THE DESIGNER OF THE SUPPLIES "MAY BE IN THE BEST INTERESTS OF THE GOVERNMENT.' THE ADMINISTRATIVE AGENCY HAS DETERMINED THAT THE SPECIFICATIONS AS WRITTEN AND FURNISHED TO THE SUPPLIERS ARE SUCH THAT ANYONE SKILLED IN THE FIELD OF RESUSCITATORS AND SIMILAR ITEMS COULD PRODUCE THE ITEM REQUIRED, AND THAT A SOLE SOURCE PROCUREMENT OF THE RESUSCITATOR WAS DEFINITELY NOT IN THE BEST INTERESTS OF THE GOVERNMENT. ACCORDINGLY, WE FIND NO REASON TO QUESTION THIS FINDING.