B-165111, FEB. 26, 1969

B-165111, FEB. 26, 1969

TO MCNENNY, FARRINGTON, PEARNE AND GORDON:

THIS IS IN REPLY TO YOUR LETTER OF AUGUST 19, 1968, AND SUBSEQUENT CORRESPONDENCE, ON BEHALF OF REGENT JACK MANUFACTURING COMPANY, INC., IN WHICH YOU REQUEST THIS OFFICE TO DIRECT THE DEPARTMENT OF THE NAVY TO MAKE NO FURTHER USE FOR PROCUREMENT PURPOSES OF CERTAIN DATA PROPRIETARY TO YOUR CLIENT.

THE RECORD INDICATES THAT THE DRAWINGS IN QUESTION WERE FURNISHED TO THE NAVY BY AMERICAN-ASTRO SYSTEMS, INC., UNDER MARINE CORPS CONTRACT NO. NOM- 72420, WHICH CALLED FOR THE DESIGN, DEVELOPMENT, AND CONSTRUCTION OF A QUANTITY OF TRANSPORTING AND LOADING TRAILERS AND FOR MANUFACTURING DRAWINGS WITH UNLIMITED RIGHTS FOR USE BY THE GOVERNMENT. AMERICAN-ASTRO SUBCONTRACTED FOR THE HYDRAULIC CYLINDER ACTUATING MECHANISMS TO REGENT.

YOUR LETTER OF AUGUST 19 STATES THAT WHILE THE SUBCONTRACT REQUIRED REGENT TO SUPPLY DRAWINGS OF THE ACTUATING MECHANISM, THERE WAS NO INDICATION OF ANY REQUIREMENT OF THE PRIME CONTRACT, THAT REGENT GRANT TO AMERICAN-ASTRO OR THE GOVERNMENT ANY RIGHT TO USE THE DRAWINGS FOR FUTURE PROCUREMENT PURPOSES. YOU STATE REGENT SUPPLIED AMERICAN-ASTRO WITH DRAWINGS BEARING AN APPROPRIATE LEGEND RESTRICTING REPRODUCTION AND USE OF THE DATA. IT IS ALSO YOUR BELIEF THAT AMERICAN-ASTRO APPARENTLY REDREW THE DRAWINGS SUPPLIED BY YOUR CLIENT OMITTING THE RESTRICTIVE LEGEND AND WITH THE EXCEPTION OF ONE DRAWING SUPPLIED BY AMERICAN-ASTRO TO THE MARINE CORPS (BUWEPS DWG. NO. 62-A143-B-106), WHICH SHOWED A NAME PLATE IDENTIFYING "REGENT JACK MANUFACTURING COMPANY, INC., DOWNEY, CALIFORNIA," THE NAVY RECEIVED THE DRAWINGS WITHOUT NOTICE OF THE COMPANY'S PROPRIETARY RIGHTS TO THE DRAWINGS.

ESSENTIALLY, IT IS YOUR POSITION THAT THE GOVERNMENT IS OBLIGATED TO REFRAIN FROM FURTHER USE OF THE DATA SINCE IT IS ON NOTICE OF THE COMPANY'S INTERESTS. MOREOVER, YOU STATE THAT SUCH AN OBLIGATION IS PARTICULARLY JUSTIFIABLE WHERE, AS HERE, THE PARTY INITIALLY CAUSING THE INJURY, AMERICAN-ASTRO, IS NO LONGER IN EXISTENCE AND, FURTHER, THE GOVERNMENT HAS ALREADY RECEIVED AND BENEFITED FROM WHATEVER VALUE WAS PURCHASED FROM AMERICAN-ASTRO.

IN A REPORT TO THIS OFFICE THE CHIEF OF NAVAL RESEARCH STATES THAT THE DEPARTMENT PURCHASED THE INFORMATION IN GOOD FAITH WITHOUT NOTICE OF REGENT'S ADVERSE RIGHTS. HE FURTHER STATES:

"IT SHOULD ALSO BE NOTED THAT NO INFERENCE THAT THE UNMARKED DRAWINGS FURNISHED TO THE NAVY INCLUDED PROPRIETARY INFORMATION, OR WERE COPIED FROM REGENT DRAWINGS HAVING A LEGEND LIMITING THEIR USE, CAN BE DRAWN FROM THE INCLUSION OF A DRAWING ILLUSTRATING A REGENT NAME-PLATE. THE INCLUSION OF THAT DRAWING IS CONSISTENT WITH THE ADMITTED FACTS; NAMELY, THAT REGENT JACK MFG. O., INC. FURNISHED TO AMERICAN-ASTRO, UNDER SUBCONTRACT, BOTH THE HYDRAULIC CYLINDERS AND THE DRAWINGS. SINCE AMERICAN-ASTRO CONTRACTED TO FURNISH THE DRAWINGS TO THE MARINE CORPS, WITHOUT LIMITATION AS TO THEIR USE, IT WOULD NOT BE UNREASONABLE TO ASSUME THAT THEY HAD CONTRACTED FOR RIGHTS COEXTENSIVE WITH THEIR OBLIGATIONS.'

WHILE THIS OFFICE HAS ACTED IN SEVERAL CASES TO DIRECT CANCELLATION OF PENDING SOLICITATIONS OF BIDS OR PROPOSALS WHERE THE SOLICITATIONS INCLUDED PROPRIETARY DATA SUPPLIED BY GOVERNMENT CONTRACTORS, IN ALL OF THOSE INSTANCES THE USE OF SUCH DATA WAS A CLEAR VIOLATION OF CONTRACTUAL RELATIONS BETWEEN THE GOVERNMENT AND THE PROPRIETOR. IN THE PRESENT SITUATION NO CONTRACTUAL RELATIONS HAVE EVER EXISTED BETWEEN THE GOVERNMENT AND YOUR CLIENT, AND WE SEE NO BASIS FOR CONCLUDING THAT AS A MATTER OF LAW THE GOVERNMENT IS OBLIGATED TO REFRAIN FROM USING THE DATA IN QUESTION. IT IS A GENERAL PRINCIPLE OF LAW THAT ONE WHO LEARNS ANOTHER'S TRADE SECRET FROM A THIRD PERSON WITHOUT NOTICE THAT IT IS SECRET AND THAT THE THIRD PERSON'S DISCLOSURE IS A BREACH OF HIS DUTY TO THE OTHER, IS LIABLE TO THE OTHER FOR A DISCLOSURE OR USE OF THE SECRET AFTER THE RECEIPT OF NOTICE, UNLESS PRIOR THERETO HE HAS IN GOOD FAITH PAID VALUE FOR THE SECRET OR HAS SO CHANGED HIS POSITION THAT TO SUBJECT HIM TO LIABILITY WOULD BE INEQUITABLE. SEE RESTATEMENT, TORTS, SECTION 758.

SINCE FROM THE RECORD BEFORE US IT IS CLEAR THAT THE GOVERNMENT BARGAINED AND PAID FOR UNLIMITED RIGHTS TO THE DATA IN GOOD FAITH, WE DO NOT FEEL THAT WE WOULD BE JUSTIFIED IN UNDERTAKING TO INTERFERE WITH ITS USE. ASIDE FROM OUR AUTHORITY TO SETTLE AND ADJUST CLAIMS BY OR AGAINST THE GOVERNMENT, WHICH IS EXERCISED ON A LEGAL RATHER THAN AN EQUITABLE BASIS, AND WHICH IS NOT APPLIED TO THE SETTLEMENT OF TORT CLAIMS, THE BASIC FUNCTION OF OUR OFFICE IS TO INSURE THAT LIMITATIONS AND RESTRICTIONS IMPOSED BY LAW UPON THE AUTHORITY OF OFFICERS OF THE GOVERNMENT TO INCUR OBLIGATIONS AGAINST APPROPRIATED FUNDS ARE OBSERVED. WHILE WE MAY IN SOME INSTANCES UNDERTAKE TO PREVENT ACTION WHICH WOULD CLEARLY SUBJECT THE GOVERNMENT TO LEGAL LIABILITY FOR VIOLATION OF CONTRACTUAL OBLIGATIONS, WE DO NOT CONSIDER IT TO BE WITHIN THE PROPER SCOPE OF OUR AUTHORITY TO BASE ANY ACTION UPON SUCH A JUDICIAL BALANCING OF EQUITIES AS WOULD BE REQUIRED IN THIS CASE.