B-158790, APR. 15, 1966

B-158790: Apr 15, 1966

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DEPARTMENT OF COMMERCE: REFERENCE IS MADE TO YOUR LETTER 161.40 OF MARCH 24. WAS THE LOWEST RESPONSIVE BIDDER. 995 IS ONLY $180 MORE THAN THE BID OF MOORE AND HANKS. YOU INDICATE THAT IF ANY INFRINGEMENT RESULTS IT WOULD BE WHEN ANY OTHER BIDDER BUT SHEFFIELD FABRICATED THE WALL SECTIONS OF THE ENCLOSURE ACCORDING TO THE INVITATION SPECIFICATIONS WHICH ARE IN DETAIL ON THIS POINT. YOU HAVE ADVISED INFORMALLY THAT YOUR PATENT COUNSEL DOES NOT BELIEVE THAT THE PATENT IS VALID. SHEFFIELD ALSO POINTS OUT THAT THE INVITATION DOES NOT INCLUDE AN AUTHORIZATION AND CONSENT CLAUSE NOR A PATENT INDEMNITY CLAUSE AND SUGGESTS THAT IN THE CIRCUMSTANCES OF THE CASE THE INTERESTS OF THE GOVERNMENT ARE BEST SERVED BY AN AWARD TO SHEFFIELD.

B-158790, APR. 15, 1966

TO CONTRACTING OFFICER, NATIONAL BUREAU OF STANDARDS, DEPARTMENT OF COMMERCE:

REFERENCE IS MADE TO YOUR LETTER 161.40 OF MARCH 24, 1966, REQUESTING A DECISION AS A RESULT OF A PROTEST RECEIVED FROM THE SHEFFIELD CORPORATION AGAINST THE AWARD OF A CONTRACT TO THE MOORE AND HANKS CO. UNDER INVITATION FOR BIDS 64-66.

THE SUBJECT INVITATION SOLICITED BIDS TO:

"DESIGN, FABRICATE AND INSTALL CONSTANT TEMPERATURE TOOL AND GAGE LABORATORY IN ACCORDANCE WITH THE FOLLOWING AND ATTACHED SPECIFICATIONS AND DRAWINGS: "

THE SPECIFICATIONS ATTACHED TO THE INVITATION PROVIDED IN PARAGRAPH 1.01A THAT---

"THE CONTRACTOR SHALL BE RESPONSIBLE FOR THE DESIGN, FABRICATION AND INSTALLATION OF A FREE STANDING, SELF CONTAINED, ENVIRONMENTALLY CONTROLLED TOOL AND GAGE INSPECTION LABORATORY UNIT AS HEREINAFTER SPECIFIED AND AS INDICATED ON NATIONAL BUREAU OF STANDARDS" DRAWING NO. B- 20012GC, SHEETS ONE AND TWO OF TWO.'

MOORE AND HANKS, HAVING BID $39,815 AND NOT HAVING STATED ANY EXCEPTIONS TO THE INVITATION, WAS THE LOWEST RESPONSIVE BIDDER, THE LOW BIDDER WHICH BID $30,558 HAVING BEEN DETERMINED TO BE NONRESPONSIVE IN OFFERING AN ENCLOSURE FABRICATED FROM WOOD WHEN THE SPECIFICATION REQUIRED METAL.

THE SHEFFIELD CORPORATION, WHOSE BID OF $39,995 IS ONLY $180 MORE THAN THE BID OF MOORE AND HANKS, HAS PROTESTED AGAINST AN AWARD TO MOORE AND HANKS ON THE BASIS THAT ANYONE FOLLOWING THE INVITATION SPECIFICATIONS WOULD INFRINGE PATENT 3,115,819 ASSIGNED TO SHEFFIELD BY THE INVENTORS. YOU INDICATE THAT IF ANY INFRINGEMENT RESULTS IT WOULD BE WHEN ANY OTHER BIDDER BUT SHEFFIELD FABRICATED THE WALL SECTIONS OF THE ENCLOSURE ACCORDING TO THE INVITATION SPECIFICATIONS WHICH ARE IN DETAIL ON THIS POINT. HOWEVER, YOU HAVE ADVISED INFORMALLY THAT YOUR PATENT COUNSEL DOES NOT BELIEVE THAT THE PATENT IS VALID. SHEFFIELD ALSO POINTS OUT THAT THE INVITATION DOES NOT INCLUDE AN AUTHORIZATION AND CONSENT CLAUSE NOR A PATENT INDEMNITY CLAUSE AND SUGGESTS THAT IN THE CIRCUMSTANCES OF THE CASE THE INTERESTS OF THE GOVERNMENT ARE BEST SERVED BY AN AWARD TO SHEFFIELD. IN THIS CONNECTION, IT MAY BE OBSERVED THAT THERE IS NO PROVISION IN THE FEDERAL PROCUREMENT REGULATIONS THAT AUTHORIZATION AND CONSENT OR PATENT INDEMNITY CLAUSES BE UTILIZED. THE ONLY PROVISION WITH RESPECT TO PATENT INFRINGEMENT, WHICH ALL BIDS WERE SUBJECT TO BY THE EXPRESS TERMS OF THE INVITATION, IS THE "NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT" CLAUSE WHICH IS A PART OF STANDARD FORM 32, JUNE 1964. THAT CLAUSE PROVIDES:

"THE PROVISIONS OF THIS CLAUSE SHALL BE APPLICABLE ONLY IF THE AMOUNT OF THE CONTRACT EXCEEDS $10,000.

"/A) THE CONTRACTOR SHALL REPORT TO THE CONTRACTING OFFICER, PROMPTLY AND IN REASONABLE WRITTEN DETAIL, EACH NOTICE OR CLAIM OF PATENT OR COPYRIGHT INFRINGEMENT BASED ON THE PERFORMANCE OF THIS CONTRACT OF WHICH THE CONTRACTOR HAS KNOWLEDGE.

"/B) IN THE EVENT OF ANY CLAIM OR SUIT AGAINST THE GOVERNMENT ON ACCOUNT OF ANY ALLEGED PATENT OR COPYRIGHT INFRINGEMENT ARISING OUT OF THE PERFORMANCE OF THIS CONTRACT OR OUT OF THE USE OF ANY SUPPLIES FURNISHED OR WORK OR SERVICES PERFORMED HEREUNDER, THE CONTRACTOR SHALL FURNISH TO THE GOVERNMENT, WHEN REQUESTED BY THE CONTRACTING OFFICER, ALL EVIDENCE AND INFORMATION IN POSSESSION OF THE CONTRACTOR PERTAINING TO SUCH SUIT OR CLAIM. SUCH EVIDENCE AND INFORMATION SHALL BE FURNISHED AT THE EXPENSE OF THE GOVERNMENT EXCEPT WHERE THE CONTRACTOR HAS AGREED TO INDEMNIFY THE GOVERNMENT.'

ORDINARILY WHERE THERE IS NO AUTHORIZATION AND CONSENT CLAUSE IN THE CONTRACT, THE CONTRACTOR ASSUMES THE LIABILITY FOR ANY DELAY OR DAMAGES RESULTING FROM INFRINGEMENT OF PATENTS IN THE PERFORMANCE OF THE CONTRACT. WHERE THERE IS AN AUTHORIZATION AND CONSENT CLAUSE IN A CONTRACT, IT GENERALLY INSURES THAT THE CONTRACTOR WILL NOT BE ENJOINED FROM PATENT INFRINGEMENT UNDER 35 U.S.C. 283 AND THE CLAUSE SHIFTS LIABILITY UNDER 28 U.S.C. 1498 TO THE GOVERNMENT IN THE EVENT IT IS NECESSARY THAT THE CONTRACTOR INFRINGE A PATENT TO PERFORM FOR THE UNITED STATES.

IN THE IMMEDIATE CASE, SINCE THERE IS NO AUTHORIZATION AND CONSENT CLAUSE IN THE CONTRACT, IT MAY BE THAT IF THERE IS ANY PATENT INFRINGEMENT IT WILL BE A LIABILITY WHICH THE CONTRACTOR MAY HAVE TO BEAR. IT IS QUITE POSSIBLE, HOWEVER, THAT IN VIEW OF THE CLAUSE ABOVE QUOTED FROM STANDARD FORM 32, THE FACT THAT THE INVITATION AND SPECIFICATIONS REQUIRE THAT THE CONTRACTOR SHALL FABRICATE THE LABORATORY UNIT AS SPECIFIED IN THE SPECIFICATIONS, AND THE FACT THAT THE GOVERNMENT IS ON NOTICE OF POSSIBLE INFRINGEMENT, A COURT MIGHT INTERPRET THESE CIRCUMSTANCES AS AN IMPLIED AUTHORIZATION AND CONSENT BY THE GOVERNMENT TO THE CONTRACTOR'S INFRINGEMENT OF THE PATENT. SEE CONSOLIDATED VACUUM CORP. V. MACHINE DYNAMICS, INC., 230 F.SUPP. 70. IN THAT EVENT, ANY LIABILITY FOR PATENT INFRINGEMENT WOULD FALL UPON THE GOVERNMENT AND, IN THE ABSENCE OF A PATENT INDEMNITY CLAUSE, WOULD NOT BE REIMBURSABLE BY THE CONTRACTOR. HOWEVER, IN A SIMILAR CASE WHERE A PATENT INDEMNITY CLAUSE WAS NOT INCLUDED IN THE INVITATION, OUR OFFICE HELD THAT THE POSSIBILITY OF PATENT INFRINGEMENT LIABILITY WAS NOT FOR EVALUATION IN THE CONSIDERATION OF BIDS. B-156692, JULY 2, 1965. AS WAS STATED IN THAT DECISION, THE MATTER OF INFRINGEMENT AND THE ULTIMATE FIXING OF A REASONABLE COMPENSATION THEREFOR SHOULD PROPERLY BE RESOLVED BY THE COURT OF CLAIMS AS PROVIDED BY 28 U.S.C. 1498, WITH THE POSSIBLE EXCEPTION OF ADMINISTRATIVE SETTLEMENT WHERE SPECIFICALLY AUTHORIZED BY STATUTE. UNTIL THE MATTER IS FINALLY RESOLVED IN SUCH A MANNER IT REMAINS SPECULATIVE WHETHER ANY INFRINGEMENT COSTS WILL BE INCURRED.

ACCORDINGLY, THERE DOES NOT APPEAR TO BE ANY VALID OBJECTION TO AN AWARD TO MOORE AND HANKS. HOWEVER, YOU HAVE ADVISED INFORMALLY THAT SINCE THE SUBMISSION OF THIS CASE TO OUR OFFICE, MOORE AND HANKS HAS OFFERED TO FURNISH A PATENT INDEMNITY LIMITED TO $1,000 LIABILITY WITHOUT ANY INCREASE IN ITS BID PRICE. THERE IS NO LEGAL OBJECTION TO ACCEPTANCE OF THIS GUARANTEE, SINCE IT WOULD BE IN THE INTERESTS OF THE GOVERNMENT. 156802, JULY 12, 1965.