B-165893, MAR. 17, 1969

B-165893: Mar 17, 1969

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TO PAULI AND GRIFFIN CO: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 19. KELCO SUBMITTED WITH ITS BID A KELCO CATALOG EXCERPT AND A SPECIFIC DESCRIPTION OF THE REMOTE CONTROL SYSTEM ON WHICH IT WAS QUOTING. AFTER EVALUATING THE BIDS THE AWARD WAS PLACED TELEPHONICALLY ON DECEMBER 16. YOU ALSO CONTEND THAT A PATENT INDEMNITY CLAUSE SHOULD HAVE BEEN INCLUDED IN THE CONTRACT. IT IS REPORTED BY THE ADMINISTRATIVE OFFICE THAT THE ACCEPTANCE OF THE BID OF KELCO WAS BASED ON THE DATA SUPPLIED WITH ITS BID AND WITH THE STIPULATION THAT INSPECTION AND ACCEPTANCE OF THE EQUIPMENT WOULD BE MADE AT DESTINATION BY THE REQUISITIONING ACTIVITY. IT IS FURTHER REPORTED THAT AT NO TIME. HAD THERE BEEN ANY QUESTION OF PATENT RIGHTS AND THAT KELCO NOW HAS COMPLETED DELIVERY OF THE CONTRACT ITEMS WHICH HAVE BEEN ACCEPTED BY THE REQUISITIONING ACTIVITY AS MEETING THE GOVERNMENT'S REQUIREMENTS.

B-165893, MAR. 17, 1969

TO PAULI AND GRIFFIN CO:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 19, 1968, PROTESTING AGAINST THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER REQUEST FOR QUOTATIONS NO. QZ241 ISSUED BY THE NAVAL SUPPLY CENTER, LONG BEACH, CALIFORNIA, ON NOVEMBER 21, 1968.

THE CITED REQUEST FOR QUOTATIONS SOLICITED BIDS FOR FURNISHING 40 REMOTE CONTROL SYSTEMS TO BE EQUAL TO PAULI AND GRIFFIN CO. MODEL LBNS 100 AND IN ACCORDANCE WITH CERTAIN SPECIFIED CHARACTERISTICS. YOUR COMPANY SUBMITTED A BID IN THE AMOUNT OF $10,000 AND KELCO SALES AND ENGINEERING COMPANY (KELCO) SUBMITTED THE LOW BID IN THE AMOUNT OF $7,000. KELCO SUBMITTED WITH ITS BID A KELCO CATALOG EXCERPT AND A SPECIFIC DESCRIPTION OF THE REMOTE CONTROL SYSTEM ON WHICH IT WAS QUOTING. AFTER EVALUATING THE BIDS THE AWARD WAS PLACED TELEPHONICALLY ON DECEMBER 16, 1968, WITH KELCO AND CONFIRMED BY PURCHASE ORDER NO. N00638-69-C-Z041.

YOU CONTEND THAT KELCO CANNOT FURNISH THE EQUIPMENT SPECIFIED WITHOUT INFRINGEMENT OF YOUR PATENT NO. 3201901. YOU ALSO CONTEND THAT DELIVERY OF EQUIPMENT OTHER THAN YOUR DESIGN WOULD NOT MEET THE NAVY REQUIREMENTS AND WOULD RESULT IN SUBSEQUENT REJECTION OF THE EQUIPMENT BY THE NAVY. YOU ALSO CONTEND THAT A PATENT INDEMNITY CLAUSE SHOULD HAVE BEEN INCLUDED IN THE CONTRACT.

IT IS REPORTED BY THE ADMINISTRATIVE OFFICE THAT THE ACCEPTANCE OF THE BID OF KELCO WAS BASED ON THE DATA SUPPLIED WITH ITS BID AND WITH THE STIPULATION THAT INSPECTION AND ACCEPTANCE OF THE EQUIPMENT WOULD BE MADE AT DESTINATION BY THE REQUISITIONING ACTIVITY. IT IS FURTHER REPORTED THAT AT NO TIME, PRIOR TO AWARD, HAD THERE BEEN ANY QUESTION OF PATENT RIGHTS AND THAT KELCO NOW HAS COMPLETED DELIVERY OF THE CONTRACT ITEMS WHICH HAVE BEEN ACCEPTED BY THE REQUISITIONING ACTIVITY AS MEETING THE GOVERNMENT'S REQUIREMENTS.

REGARDING YOUR CONTENTION THAT KELCO NECESSARILY MUST INFRINGE YOUR PATENT TO MEET THE NAVY REQUIREMENTS WE, OF COURSE, HAVE NO FIRSTHAND KNOWLEDGE AS TO THE ACCURACY OF YOUR CONTENTION. HOWEVER, THE ADMINISTRATIVE OFFICE ADVISES THAT KELCO IS OPENLY MARKETING A PRODUCT SIMILAR TO YOUR MODEL CONTRACT SYSTEM WHICH MEETS NAVY REQUIREMENTS. THE MODEL KELCO DELIVERED TO THE GOVERNMENT DOES, IN FACT, INFRINGE YOUR PATENT THAT WOULD BE A MATTER BETWEEN YOU AND KELCO. WHILE NO PATENT INDEMNITY CLAUSE WAS INCLUDED IN THE CONTRACT THAT FACT AFFORDS NO LEGAL BASIS FOR CANCELING THE CONTRACT AWARDED TO KELCO.

IT MAY BE OBSERVED THAT THERE IS NO PROVISION IN THE ARMED SERVICES PROCUREMENT REGULATION WHICH MAKES IT MANDATORY THAT A PATENT INDEMNITY CLAUSE BE INCLUDED IN NEGOTIATED CONTRACTS. UNDER ASPR 9-103.1 AND 9 103.3, SUCH INDEMNITY CLAUSES ARE REQUIRED ONLY IN FORMALLY ADVERTISED PROCUREMENTS. FURTHERMORE, WE HAVE HELD THAT THE OMISSION FROM A SOLICITATION OF PROVISIONS FOR PATENT INDEMNIFICATION AND THE EVALUATION OF PATENT INFRINGEMENT LIABILITY DOES NOT INVALIDATE THE SOLICITATION. COMP. GEN. 13.