B-157541, B-157561, FEB. 10, 1966

B-157541,B-157561: Feb 10, 1966

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INC.: REFERENCE IS MADE TO YOUR LETTERS DATED AUGUST 18. BOTH IFBS WERE ISSUED BY THE U.S. YOU STATE: "SPECIFICALLY OUR PROTEST IS BASED ON THE FOLLOWING: "IT IS A POOR BUSINESS POLICY ON THE PART OF THE GOVERNMENT TO ATTEMPT TO PROCURE BY COMPETITIVE PROCUREMENT AN ITEM FOR WHICH ONE SOURCE HAS ACQUIRED MANUFACTURING KNOW HOW. YOU ALLEGE THAT BOTH IFBS WHEN AWARDED WILL BE IN VIOLATION OF YOUR PATENT RIGHTS IN PATENT NO. 3. AMC/Z/-01-021-65-1461 (HEREINAFTER REFERRED TO AS IFB-1461) WAS ISSUED APRIL 13. THE BID OPENING TIME WAS SET AT 1:30 P.M. TWO BIDS WERE RECEIVED. WAS SUBMITTED BY ELECTRO IMPULSE LABORATORY. WAS SUBMITTED BY YOUR COMPANY. AFTER A FAVORABLE PRE-AWARD SURVEY WAS CONDUCTED ON ELECTRO.

B-157541, B-157561, FEB. 10, 1966

TO PRD ELECTRONICS, INC.:

REFERENCE IS MADE TO YOUR LETTERS DATED AUGUST 18, 1965 (REF: PDS NO. 816) AND AUGUST 24, 1965 (REF: PDS NO. 820) PROTESTING AGAINST THE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS (IFB) AMC/Z/-01-021 65-1461 AND THE CONTEMPLATED AWARD OF A CONTRACT UNDER IFB AMC/Z/-01 021-66-591, RESPECTIVELY.

BOTH IFBS WERE ISSUED BY THE U.S. ARMY MISSILE COMMAND TO PROCURE CERTAIN QUANTITIES OF IDENTICAL CALORIMETERS BEARING ORDNANCE PART NUMBER 9157055.

IN YOUR LETTER OF AUGUST 18TH, YOU STATE:

"SPECIFICALLY OUR PROTEST IS BASED ON THE FOLLOWING:

"IT IS A POOR BUSINESS POLICY ON THE PART OF THE GOVERNMENT TO ATTEMPT TO PROCURE BY COMPETITIVE PROCUREMENT AN ITEM FOR WHICH ONE SOURCE HAS ACQUIRED MANUFACTURING KNOW HOW, A COMPLETE SET OF MANUFACTURING DRAWINGS, A QUALIFIED PRODUCT, AND A PATENT POSITION AT A TIME WHEN A COMPETITIVE PRODUCT HAS NOT BEEN DEVELOPED.

"IN FOLLOWING THIS BUSINESS PRACTICE, THE GOVERNMENT MAY ON OCCASION SUCCEED IN OBTAINING COMPETITION. HOWEVER, AS A GENERAL RULE BECAUSE OF THE URGENCY OF GOVERNMENT DELIVERY REQUIREMENTS THE PROCUREMENT ATTEMPT MUST FAIL.

"WE AGAIN REITERATE OUR WILLINGNESS TO DELIVER A QUALIFIED PRODUCT AT A REASONABLE PRICE ON A TIMELY BASIS AND WE ALSO REITERATE OUR WILLINGNESS TO SELL PROPRIETARY DATA TO THE GOVERNMENT ON A REASONABLE BASIS.'

YOU ALLEGE THAT BOTH IFBS WHEN AWARDED WILL BE IN VIOLATION OF YOUR PATENT RIGHTS IN PATENT NO. 3,081,430, MICROWAVE POWER METER OF THE CALORIMETER TYPE.

IFB NO. AMC/Z/-01-021-65-1461 (HEREINAFTER REFERRED TO AS IFB-1461) WAS ISSUED APRIL 13, 1965, FOR A TOTAL OF 8 CALORIMETERS (7 FOR ITEM 1 AND 1 FOR ITEM 1A) IN ACCORDANCE WITH DRAWING NUMBER 9157055, REV.D., MIL I- 45208 AND HAVING AN ORDNANCE PART NUMBER 9157055. THE BID OPENING TIME WAS SET AT 1:30 P.M., CST, MAY 14, 1965. IN RESPONSE THERETO, TWO BIDS WERE RECEIVED. THE LOW BID AT $875 FOR 7 UNITS, PLUS $1,500 FOR A PRE- PRODUCTION SAMPLE, WAS SUBMITTED BY ELECTRO IMPULSE LABORATORY, INC. (ELECTRO), RED BANK, NEW JERSEY, AND THE OTHER, AT $1,394 A UNIT FOR 7 UNITS PLUS $1,470 FOR ONE PRE-PRODUCTION SAMPLE, WAS SUBMITTED BY YOUR COMPANY. AFTER A FAVORABLE PRE-AWARD SURVEY WAS CONDUCTED ON ELECTRO, AWARD OF CONTRACT DA-01-021-AMC 12611/Z) ON JUNE 12, 1965, WAS MADE TO THAT COMPANY AT THE PRICES INDICATED.

YOUR PROTEST APPEARS TO BE BASED ON THE ASSUMPTION THAT THE DRAWINGS AND SPECIFICATIONS PREPARED BY THE MISSILE COMMAND ARE INADEQUATE FOR FABRICATION OF THE CALORIMETERS IN ACCORDANCE WITH THE GOVERNMENT'S NEEDS, OR IN THE EVENT THE DRAWINGS AND SPECIFICATIONS ARE ADEQUATE YOUR PATENT NO. 3,081,430 WOULD BE INFRINGED BY FABRICATION IN ACCORDANCE WITH SUCH DRAWINGS AND SPECIFICATIONS.

IN A RECENT UNPUBLISHED DECISION OF THIS OFFICE THE ADEQUACY OF GOVERNMENT SPECIFICATIONS WAS CONSIDERED (MAY 11, 1965, B-156357). STATED THAT THE GENERAL ACCOUNTING OFFICE HAS NEITHER THE ENGINEERING STAFF NOR THE TESTING LABORATORIES NECESSARY TO EVALUATE THE TECHNICAL ASPECTS OF SPECIFICATIONS. THE DRAFTING OF SPECIFICATIONS WAS SAID TO BE A MATTER PRIMARILY WITHIN THE DISCRETION OF THE PROCURING AGENCY.

WITH RESPECT TO THE ADEQUACY OF THE DRAWINGS AND SPECIFICATIONS, WE ARE INFORMED THAT THEY HAVE BEEN REVIEWED BY TECHNICAL PERSONNEL OF THE ARMY AND FOUND TO BE ACCEPTABLE FOR THE INTENDED PURPOSES. IN ADDITION, THE PRE-PRODUCTION SAMPLE TO BE DELIVERED BY ELECTRO UNDER CONTRACT DA-01-021- AMC-12611/Z) HAS NOW BEEN DELIVERED AND ACCEPTED BY THE GOVERNMENT. BASED ON THESE FACTS, AND THE ABSENCE OF ANY CONVINCING EVIDENCE TO THE CONTRARY, SO MUCH OF YOUR PROTEST AS IS CONCERNED WITH THE ADEQUACY OF THE TECHNICAL REQUIREMENTS MUST BE DENIED.

CONCERNING THE QUESTION OF WHETHER FABRICATION IN ACCORDANCE WITH THE SPECIFICATIONS WOULD INFRINGE YOUR PATENT NO. 3,081,430, BY A LETTER DATED JULY 2, 1965, YOUR COMPANY ADVISED THE CONTRACTING OFFICER AS FOLLOWS REGARDING THE AWARD OF IFB-1461:

"IN OUR OPINION THIS PROCUREMENT CONSTITUTES A CLEAR INFRINGEMENT OF OUR PATENT NO. 3,081,430. * * *

"WE ARE WILLING TO NEGOTIATE AN EQUITABLE LICENSE AGREEMENT WITH THE UNITED STATES GOVERNMENT.'

ON PAGE 11 OF IFB-1461 THERE IS SET FORTH THE AUTHORIZATION AND CONSENT ARTICLE (MAR. 1964) AND THE PATENT INDEMNITY (PREDETERMINED) ARTICLE (SEPT. 1964).

BOTH THE PATENT COUNSEL FOR THE ARMY MATERIEL COMMAND AND ELECTRO WERE INFORMED OF A POSSIBLE PATENT INFRINGEMENT. IN ITS LETTER OF JULY 16, 1965, ELECTRO ADVISED THE CONTRACTING OFFICER THAT ITS DESIGN WOULD NOT IN ANY WAY INFRINGE UPON YOUR PATENT. THE OFFICE OF THE GENERAL COUNSEL, PATENT LAW DIVISION, ARMY MATERIEL COMMAND HAS NOT AS YET DETERMINED WHETHER IT BELIEVES A PATENT INFRINGEMENT EXISTS.

WITH RESPECT TO THE PROTEST IN YOUR LETTER OF AUGUST 24, 1965, AGAINST THE CONTEMPLATED AWARD UNDER IFB AMC/Z/-01-021-66-591 (HEREINAFTER REFERRED TO AS IFB-591), IT APPEARS THAT THIS IFB WAS FOR 5 CALORIMETERS, ONE OF WHICH WAS AN INITIAL PRODUCTION SAMPLE, IN ACCORDANCE WITH THE SAME DRAWING AS IFB-1461 AND HAVING THE SAME ORDNANCE PART NUMBER. SINCE, THE PRE-PRODUCTION SAMPLE HAS BEEN ACCEPTED ON IFB-1461 IT CAN SAFELY BE ASSUMED THAT THE SPECIFICATIONS FOR IFB-591 ARE ADEQUATE TO CONSTRUCT THE CALORIMETER. IN ADDITION, THE SAME ARTICLES CONCERNING PATENTS AS IN IFB- 1461 ALSO APPEAR IN IFB 591, I.E., AUTHORIZATION AND CONSENT (MAR. 1964) AND PATENT INDEMNITY (PREDETERMINED) (SEPT. 1964). THE RECORD SHOWS THAT YOUR LETTER OF AUGUST 24 IS BASED ON THE SAME PREMISE AS THE ONE OF AUGUST 18, 1965.

YOU HAVE INDICATED FAMILIARITY WITH OUR DECISION OF OCTOBER 6, 1958, B- 136916, WHICH IS PUBLISHED AT AT 38 COMP. GEN. 276. THEREIN, ON PAGE 278, WE EXPRESSED THE VIEW THAT "SECTION 1498 (OF 28 UNITED STATES CODE) 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.' (SEE ALSO OUR DECISION OF NOVEMBER 26, 1965, B-157485.)

OUR DECISION IN 38 COMP. GEN. 276 WAS BASED IN PART UPON AN EARLIER UNPUBLISHED DECISION OF AUGUST 25, 1958, B-136916, IN WHICH WE STATED:

"THE AUTHORIZATION AND CONSENT CLAUSE APPARENTLY WAS INCLUDED IN THE INVITATION FOR THE PURPOSE OF INVOKING THE STATUTORY PROVISIONS OF 28 U.S.C. 1498, * * *. UNDER 28 U.S.C. 1498 IT IS PROVIDED, IN PERTINENT PART, THAT WHENEVER WITH THE AUTHORIZATION OR CONSENT OF THE GOVERNMENT 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 THE USE OR MANUFACTURE OF THE INVENTION, THE OWNER'S REMEDY SHALL BE BY ACTION AGAINST THE UNITED STATES IN THE COURT OF CLAIMS FOR THE RECOVERY OF REASONABLE AND ENTIRE COMPENSATION * * * WHICH REMEDY HAS BEEN HELD TO BE EXCLUSIVE AND COMPREHENSIVE IN CHARACTER. RICHMOND V. UNITED STATES (1928), 275 U.S. 331, 343. THE PURPOSE OF THESE PROVISIONS WAS TO MAKE IT POSSIBLE FOR THE GOVERNMENT TO PROCEED WITH ITS PROCUREMENT WITHOUT FEAR OF RESTRICTION OR DELAY CAUSED BY PATENT INFRINGEMENT CLAIMS AS CONTROVERSIES.'

IN THE CASE OF DEARBORN CHEMICAL CO. V. ARVEY CORP., 114 F.SUPP. 369 (1953), IT WAS SAID THAT 28 U.S.C. 1498 "WAS DESIGNED TO FURNISH THE PATENTEES AN ADEQUATE AND EFFECTIVE REMEDY WHILE SAVING THE GOVERNMENT FROM HAVING ITS PUBLIC WORKS TIED UP AND THWARTED WHILE PRIVATE PARTIES ARE CARRYING ON A LONG DRAWN OUT LITIGATION.'

WHETHER THERE IS OR IS NOT AN INFRINGEMENT OF A PATENT IS FOR THE COURT OF CLAIMS TO DECIDE BY VIRTUE OF THE REMEDY PROVIDED FOR BY 28 U.S.C. 1498. THIS OFFICE IS NOT EQUIPPED, NOR DOES IT HAVE THE AUTHORITY, TO DECIDE PATENT INFRINGEMENT CASES. IN FACT THE VERY PURPOSE OF 28 U.S.C. 1498 AS STATED IN THE DEARBORN CASE (SUPRA) WAS TO PREVENT THE TYING UP OF GOVERNMENT PROCUREMENT BY CONSTANTLY DETERMINING PATENT INFRINGEMENT ALLEGATIONS PRIOR TO AWARD OF A CONTRACT, AND TO LEAVE THE PATENTEE AN ADEQUATE REMEDY IN THE COURT OF CLAIMS. SHOULD THE REASONS YOU ASSERT BE ADOPTED THIS WOULD CLEARLY NOT BE THE CASE. THE GOVERNMENT WOULD BE REQUIRED TO FIRST ASCERTAIN THE VALIDITY OF EVERY ALLEGED PATENT INFRINGEMENT. CONGRESS CHOSE NOT TO DO THIS. INSTEAD IT ENACTED 28 U.S.C. 1498, SO AS TO ALLOW AS MUCH COMPETITION AS POSSIBLE.

CONSIDERING THE FOREGOING, WE SEE NO VALID BASIS UPON WHICH WE COULD QUESTION THE VALIDITY OF THE CONTRACT AWARDED UNDER IFB-1461, OR UPON WHICH WE WOULD BE JUSTIFIED IN PROHIBITING AN AWARD TO ELECTRO UNDER IFB- 591. ACCORDING, YOUR PROTEST MUST BE DENIED.