B-166071, SEP 18, 1969

B-166071: Sep 18, 1969

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FACT THAT LAOD'S HAD BEEN SOLD TO GOVERNMENT FOR TEST AND EVALUATION PURPOSES IS NOT SUFFICIENT. STASSEN & KEPHART: FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF THE BREED CORPORATION THAT A TWO-STAGE DASHPOT SAMPLE INCLUDED AS AN ENCLOSURE TO REQUEST FOR QUOTATIONS (RFQ) DAAA-21-69-Q-0156(REQ-0156). IT IS REQUESTED. THE NATURE OF THE SUBJECT RFQ IS DESCRIBED AS FOLLOWS IN THE CONTRACTING OFFICER'S STATEMENT: " *** ANTICIPATING A COST-PLUS-INCENTIVE-FEE CONTRACT WITH THE INCENTIVE PROVISION BASED ON COSTS. THE COMPANIES SOLICITED WERE EXPECTED TO READ THE SCOPE OF WORK. IS CONVEYED TO THE GOVERNMENT WITH UNLIMITED RIGHTS. AN ESSENTIAL COMPONENT OF THE XM43 MINE DESCRIBED BY THE STATEMENT OF WORK IS A TIMING DEVICE DESIGNATED BY BREED AS THE LIQUID ANNULAR ORIFICE DASHPOT (LAOD).

B-166071, SEP 18, 1969

BID PROTEST - PROPRIETARY RIGHTS - SAMPLES DECISION DENYING PROTEST OF BREED CORPORATION THAT SAMPLE ENCLOSED WITH REQUEST FOR QUOTATIONS ISSUED BY PICATINNY ARSENAL CONTAINS PROPRIETARY DATA REQUIRING CANCELLATION OF REQUEST FOR DEVICE DESIGNATED AS LIQUID ANNULAR ORIFICE DASHPOT (LAOD). ON A REVIEW OF THE PROCUREMENT THE DISSEMINATION OF OF LAOD SAMPLES AND THE REQUEST SCOPE OF WORK FOR COMPETITIVE PROCUREMENT MAY NOT BE REGARDED AS A VIOLATION OF THE PROPRIETARY RIGHTS OF THE PROTESTANT SO AS TO REQUIRE CORRECTIVE ACTION. FACT THAT LAOD'S HAD BEEN SOLD TO GOVERNMENT FOR TEST AND EVALUATION PURPOSES IS NOT SUFFICIENT, WITHOUT MORE, TO PRECLUDE UNLIMITED USE BY GOVERNMENT OF LAOD'S PROCURED FOR COMPETITIVE MANUFACTURING FEASIBILITY STUDY.

STASSEN & KEPHART:

FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF THE BREED CORPORATION THAT A TWO-STAGE DASHPOT SAMPLE INCLUDED AS AN ENCLOSURE TO REQUEST FOR QUOTATIONS (RFQ) DAAA-21-69-Q-0156(REQ-0156), ISSUED BY PICATINNY ARSENAL, DOVER, NEW JERSEY, CONTAINS INFORMATION PROPRIETARY TO THAT CORPORATION. IT IS REQUESTED, THEREFORE, THAT THE RFQ BE CANCELED.

THE NATURE OF THE SUBJECT RFQ IS DESCRIBED AS FOLLOWS IN THE CONTRACTING OFFICER'S STATEMENT:

" *** ANTICIPATING A COST-PLUS-INCENTIVE-FEE CONTRACT WITH THE INCENTIVE PROVISION BASED ON COSTS, THE RFQ INCLUDED A PERFORMANCE REQUIREMENT SCOPE OF WORK AND DASHPOT SAMPLES. THE COMPANIES SOLICITED WERE EXPECTED TO READ THE SCOPE OF WORK, ANALYZE THE DASHPOT SAMPLES, AND SUBMIT QUOTATIONS FOR A 2-PHASE, 22-WEEK NEGOTIATED CONTRACT: (A) FOR THE STUDY OF THE FEASIBILITY OF MASS PRODUCTION OF A DASHPOT SIMILAR TO THE SAMPLES; (B) FOR FABRICATION OF MODULES OF MASS PRODUCTION MACHINERY; (C) FOR MASS PRODUCTION OF 50,000 UNITS OF DASHPOTS; AND (D) FOR PREPARATION AND DELIVERY OF A COMPLETE TECHNICAL DATA PACKAGE FOR MASS PRODUCTION OF DASHPOTS, WITH THAT PACKAGE TO BE SUITABLE FOR COMPETITIVE PROCUREMENT OF DASHPOTS."

THE DASHPOT SAMPLES ISSUED WITH THE SUBJECT RFQ HAD BEEN PROCURED FROM THE BREED CORPORATION UNDER CONTRACT NO. DAAA-21-69-C-0002, A COST PLUS- INCENTIVE-FEE (CPIF) RESEARCH AND DEVELOPMENT CONTRACT, NEGOTIATED PURSUANT TO 10 U.S.C. 2304 (A) (2), THE PUBLIC EXIGENCY EXCEPTION TO THE FORMAL ADVERTISING REQUIREMENT. THE STATEMENT OF WORK FOR CONTRACT-0002 CALLED FOR "DESIGN AND DEVELOPMENT OF THE XM43 ASPERS MINE AND SUB-PACK SYSTEM," AND THE CONTRACT CONTAINED THE STANDARD RIGHTS IN TECHNICAL DATA CLAUSE SET OUT IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 9-203(B), TO THE EFFECT THAT TECHNICAL DATA GENERATED UNDER THE CONTRACT, AS OPPOSED TO THAT GENERATED AT PRIVATE EXPENSE, IS CONVEYED TO THE GOVERNMENT WITH UNLIMITED RIGHTS. AN ESSENTIAL COMPONENT OF THE XM43 MINE DESCRIBED BY THE STATEMENT OF WORK IS A TIMING DEVICE DESIGNATED BY BREED AS THE LIQUID ANNULAR ORIFICE DASHPOT (LAOD), THE TWO-STAGE DASHPOT REFERENCED IN YOUR INITIAL PROTEST LETTER. IN A LETTER TO THE CONTRACTING OFFICER SIGNED BY ALLEN BREED, PRESIDENT OF BREED CORPORATION, AND ATTACHED TO THE COPY OF CONTRACT 0002 EXECUTED BY BREED, THE FOLLOWING STATEMENT WAS MADE:

"IT IS TO BE UNDERSTOOD THAT WE HAVE EXECUTED THIS CONTRACT ON THE CONDITION THAT IN THE PERFORMANCE THEREOF THE FOLLOWING DEVICES, COMPONENTS OR PROCESSES DEVELOPED AT PRIVATE EXPENSE WILL BE USED:

"LAOD

"DISTURBANCE DEVICE

"WITH RESPECT TO THE ABOVE THE GOVERNMENT SHALL BE ENTITLED TO LIMITED RIGHTS THEREIN, AS DEFINED IN ASPR 9-203(B)(A)(2)."

THIS LETTER WAS UNACCEPTABLE TO THE CONTRACTING OFFICER, AS WAS A SECOND LETTER TO THE SAME GENERAL EFFECT. FINALLY, A LETTER WITH RESPECT TO BREED'S ALLEGED PROPRIETARY RIGHTS, REPORTEDLY DICTATED BY CONTRACTING OFFICIALS, WAS DETERMINED TO BE ACCEPTABLE AND WAS INCORPORATED INTO CONTRACT-0002. THE BODY OF THIS FINAL LETTER, DATED JULY 31, 1968, IS SET OUT BELOW:

"THE PURPOSE OF OUR LETTER OF JULY 24, 1968, WITH WHICH WE TRANSMITTED THE ABOVE CONTRACT WAS TO PLACE THE GOVERNMENT ON NOTICE THAT WE ARE OF THE OPINION THAT THE LAOD WHICH WE MAY USE IN THE COURSE OF THE CONTRACT IS CONSIDERED TO BE PROPRIETARY TO BREED. WE ARE OF THE OPINION THAT THE LAOD WAS DEVELOPED AT PRIVATE EXPENSE AND, IF SO, DATA RELATING THERETO WILL BE GIVEN TO THE GOVERNMENT WITH LIMITED RIGHTS AS DEFINED IN ASPR 9- 203(B)."

IN ACCORDANCE WITH THE ABOVE LETTER, ALL DRAWINGS OF THE XM43 MINE AND/OR THE LAOD DEVICE THEREAFTER SUPPLIED UNDER CONTRACT-0002 REPORTEDLY CONTAINED A RESTRICTIVE LEGEND LIMITING THE GOVERNMENT'S RIGHTS THEREIN.

AT APPROXIMATELY THE SAME TIME THAT PICATINNY WAS NEGOTIATING CONTRACT - 0002, HEADQUARTERS, ARMY MATERIEL COMMAND, ENTERED INTO NEGOTIATIONS WITH RESPECT TO BREED'S PROPRIETARY RIGHTS IN THE LAOD AS WELL AS BREED'S PROPRIETARY RIGHTS AND PATENT RIGHTS IN A SIMILAR BUT NOT IDENTICAL DEVICE DESIGNATED AS A PNEUMATIC ANNULAR ORIFICE DASHPOT (PAOD). THESE NEGOTIATIONS HAVE CONTINUED FROM TIME TO TIME BUT AT THE PRESENT TIME IT APPEARS THAT THE PARTIES ARE UNABLE TO AGREE AS TO EXACTLY WHAT BREED'S PROPRIETARY RIGHTS ARE IN THE LAOD DATA OR AS TO WHAT A FAIR AND REASONABLE ROYALTY FOR THOSE RIGHTS WOULD BE WITH THE RESULT THAT NEGOTIATIONS HAVE APPARENTLY REACHED AN IMPASSE.

ALSO, IN ADDITION TO THE LAOD'S PROCURED UNDER CONTRACT-0002, LAOD'S WERE ALSO PROCURED FROM BREED UNDER SEVERAL PRIOR FIXED-PRICE SUPPLY CONTRACTS, THE PURPOSE OF WHICH CONTRACTS WAS REPORTEDLY FOR "TEST AND EVALUATION" OF THE LAOD.

THE SUBSTANCE OF YOUR PROTEST IS SUCCINCTLY STATED ON PAGE 1 OF YOUR INITIAL BRIEF RECEIVED IN OUR OFFICE ON MAY 12, 1969:

"THE QUESTION RAISED BY THIS PROTEST IS WHETHER PICATINNY ARSENAL MAY PASS ON TO PROSPECTIVE COMPETITORS OF BREED, THE INNOVATOR AND INVENTOR OF THE LIQUID ANNULAR ORIFICE DASHPOT (LAOD), THE LATTER'S PRODUCT, EMBODYING PRIVATELY DEVELOPED TECHNICAL DATA FOR THE PURPOSE OF HAVING THEM ANALYZE AND REVERSE-ENGINEER THE TRADE SECRETS OF BREED IN DEROGATION OF ASPR 1- 304 AND 9-202.1(C) AND IN VIOLATION OF EXPRESS AND IMPLIED CONTRACTUAL AGREEMENTS BETWEEN THE GOVERNMENT AND BREED."

A COROLLARY QUESTION PRESENTED IS WHETHER, NOTWITHSTANDING THE USE OF THE LAOD AS A SAMPLE, THE SCOPE OF WORK SET OUT IN THE RFQ DIVULGES BREED'S PROPRIETARY INFORMATION INCORPORATED INTO THE LAOD.

IT IS YOUR POSITION THAT THE LAOD WAS PRIVATELY DEVELOPED BY BREED AND THAT ALL DRAWINGS AND OTHER TECHNICAL DATA WITH RESPECT TO THE LAOD SUPPLIED THE GOVERNMENT UNDER THE EARLIER FIXED-PRICE SUPPLY CONTRACTS, AS WELL AS UNDER CONTRACT-0002, WERE FURNISHED WITH LIMITED RIGHTS ONLY. YOU STATE THAT THE LAOD CALLED OUT BY RFQ-0156 HAS BEEN SOLD ONLY TO THE GOVERNMENT FOR TEST AND EVALUATION, NEVER ON THE OPEN MARKET, AND YOU CONTEND THEREFORE THAT THE RESTRICTIVE MARKINGS ON THE BREED DRAWINGS, COUPLED WITH THE "MILIEU OF CONFIDENTIALITY" UNDER WHICH THE LAOD'S THEMSELVES WERE FURNISHED THE GOVERNMENT, PRECLUDE THE USE OF THE CONTRACT - 0002 LAOD'S AS SAMPLES UNDER RFQ-0156. IN ADDITION, YOU ALLEGE THAT THE SCOPE OF WORK SET OUT IN RFQ-0156, WITH REGARD TO WHICH THE CONTRACTING OFFICIALS CONTEND THAT GREAT CARE WAS TAKEN "TO OMIT ANY DETAIL WHICH MIGHT BE ALLEGED TO CONSTITUTE A DISCLOSURE OF BREED CORPORATION ALLEGEDLY PROPRIETARY DATA," DID, IN FACT, DISCLOSE LIMITED RIGHTS LAOD DATA.

ON THE QUESTION OF THE PROPRIETY OF THE USE OF THE LAOD'S AS SAMPLES ATTACHED TO THE INSTANT RFQ, YOU CONTEND THAT ASPR 1-304.2 AND ASPR 9 202.1(C), WHICH STATE THAT THE RIGHTS OF INNOVATIVE CONTRACTORS IN "ITEMS" OF MILITARY USEFULNESS DEVELOPED AT PRIVATE EXPENSE SHOULD BE "SCRUPULOUSLY PROTECTED," BOTH PRECLUDE THE USE OF LAOD'S BY THE GOVERNMENT AS SAMPLES FOR THE PURPOSE OF REVERSE ENGINEERING BY CONTRACTORS OTHER THAN BREED. ASPR 1-304.2, ON WHICH YOUR GREATEST RELIANCE IS PLACED, IS SET OUT BELOW:

"1-304.2 SPECIFIC PROCUREMENT METHODS.

"(A) WHERE DEFENSE REQUIREMENTS ARE FOR ITEMS WHICH ARE AVAILABLE FROM MORE THAN ONE SOURCE AS A RESULT OF EITHER LICENSING, COMPETITIVE COPYING, OR INDEPENDENT DEVELOPMENT, THE CONTRACTING OFFICER SHALL SEEK FULL AND FREE COMPETITION FOR SUCH ITEMS.

" (B) WHERE THE GOVERNMENT DESIRES TO PURCHASE PRIVATELY DEVELOPED ITEMS BUT DOES NOT HAVE NECESSARY DATA WITH UNLIMITED RIGHTS FOR USE IN A SPECIFICATION FOR COMPETITIVE PROCUREMENT, THE CONTRACTING OFFICER SHALL USE ONE OF THE FOLLOWING ALTERNATIVE PROCEDURES WITH PREFERENCE IN THE ORDER OF THIS LISTING (SEE ALSO 1-313).

" (1) WHERE PRACTICAL, PROCUREMENT SHALL BE COMPETITIVE USING PERFORMANCE OR OTHER SPECIFICATIONS, INCLUDING PURCHASE DESCRIPTIONS, WHICH DO NOT CONTAIN DATA DEVELOPED AT PRIVATE EXPENSE TO WHICH THE GOVERNMENT DOES NOT HAVE UNLIMITED RIGHTS. PROCUREMENT ON THIS BASIS WILL NORMALLY NOT PROVIDE ITEMS OF IDENTICAL DESIGN. HOWEVER, IT FREQUENTLY IS NOT NECESSARY THAT ITEMS OF IDENTICAL DESIGN BE PURCHASED. THERE ARE TWO METHODS OF COMPETITIVE PROCUREMENT WHICH MAY PROVIDE ITEMS OF THE SAME OR OF SIMILAR DESIGN AND SUITABLE PERFORMANCE. ONE OF THESE IS PURCHASE BY TWO-STEP FORMAL ADVERTISING. THE OTHER IS BY THE USE OF "BRAND NAME OR EQUAL" PURCHASE DESCRIPTIONS. TO ENCOURAGE PARTICIPATION BY TECHNICALLY ORIENTED FIRMS THAT ARE DESIROUS OF OFFERING THEIR PRIVATELY DEVELOPED PRODUCTS IN COMPETITION WITH SIMILAR ARTICLES, PROCURING ACTIVITIES SHOULD CONSIDER INCORPORATING A REQUIREMENT IN THE IFB OR RFP FOR A BID SAMPLE TO BE USED FOR EVALUATION PURPOSES ONLY (SEE 1-1206.2 THROUGH 1-1206.4 AND 2 202.4).

" (2) WHERE ITEMS OF DESIGN OR COMPOSITION SIMILAR OR IDENTICAL TO A PRIVATELY DEVELOPED ITEM ARE REQUIRED AND IT IS DETERMINED THAT COMPETITIVE PROCUREMENT IS NOT PRACTICABLE, PROCUREMENT SHOULD BE ON A NON -COMPETITIVE BASIS FROM THE FIRM WHICH DEVELOPED OR DESIGNED THE ITEM OR PROCESS OR ITS LICENSEES, PROVIDED PRODUCTIVE CAPACITY AND QUALITY ARE ADEQUATE AND PRICE IS FAIR AND REASONABLE.

" (3) WHERE ADDITIONAL SOURCES ARE REQUIRED FOR ITEMS OF DESIGN OR COMPOSITION SIMILAR OR IDENTICAL TO A PRIVATELY DEVELOPED ITEM IN ORDER TO MEET TOTAL CURRENT OR MOBILIZATION REQUIREMENTS, AND THE PROCEDURES IN (1) ABOVE CANNOT PRACTICABLY BE USED TO CREATE ADDITIONAL SOURCES, THE DEVELOPER SHOULD BE ENCOURAGED TO LICENSE OTHERS TO MANUFACTURE SUCH ITEMS. PROCURING ACTIVITIES SHOULD ALSO CONSIDER THE SPECIFIC ACQUISITION BY THE GOVERNMENT OF THE NECESSARY RIGHTS IN DATA. WHERE COMPLEX TECHNICAL EQUIPMENT IS INVOLVED AND THE ESTABLISHMENT OF SATISFACTORY ADDITIONAL SOURCES WILL REQUIRE, IN ADDITION TO DATA, TECHNICAL ASSISTANCE FROM THE PRIMARY SOURCE, CONSIDERATION SHOULD BE GIVEN TO THE USE OF THE LEADER COMPANY PROCUREMENT TECHNIQUE (SEE SECTION IV, PART 7).

" (4) AS A LAST ALTERNATIVE, A DESIGN SPECIFICATION MAY BE DEVELOPED BY THE GOVERNMENT THROUGH INSPECTION AND ANALYSIS OF THE PRODUCT (I.E., REVERSE ENGINEERING) AND USED FOR COMPETITIVE PROCUREMENT. REVERSE ENGINEERING SHALL NOT BE USED UNLESS SIGNIFICANT COST SAVINGS CAN BE REASONABLY DEMONSTRATED AND THE ACTION IS AUTHORIZED BY THE HEAD OF THE PROCURING ACTIVITY. IN THE CASE OF THE AIR FORCE THIS AUTHORITY MAY BE DELEGATED TO THE COMMANDERS OF THE AIR FORCE SYSTEMS COMMAND DIVISIONS AND CENTERS AND THE AIR FORCE LOGISTICS COMMAND AIR MATERIEL AREAS."

IT IS YOUR POSITION THAT SUBSECTION (A) OF ASPR 1-304.2 IS NOT FOR APPLICATION BECAUSE THE LAODS ARE NOT AVAILABLE FROM MORE THAN ONE SOURCE AS A RESULT OF EITHER LICENSING OR INDEPENDENT DEVELOPMENT, AS REQUIRED BY THAT SUBSECTION, AND THAT THE TERM "COMPETITIVE COPYING" USED THEREIN HAS REFERENCE TO SITUATIONS WHERE PRODUCTS ARE AVAILABLE ON THE OPEN MARKET FOR COPYING BY COMPETITORS, NOT TO SITUATIONS WHERE, AS HERE, ITEMS WHICH HAVE BEEN SUPPLIED ONLY TO THE GOVERNMENT FOR LIMITED USE ARE RELEASED TO OTHER CONTRACTORS FOR REVERSE ENGINEERING. IT IS YOUR FURTHER POSITION THAT THE CONTRACTING OFFICIALS IGNORED THE ORDER OF PRIORITIES OUTLINED IN SUBSECTION (B) OF ASPR 1-304.2 BY UTILIZING THE PROCUREMENT METHOD DESIGNATED AS A "LAST ALTERNATIVE" BEFORE ATTEMPTING TO OBTAIN COMPETITION BY THE METHODS LISTED AS BEING RELATIVELY MORE DESIRABLE, AND THAT, IN ANY EVENT, ALTERNATIVE (B) (4) IS SPECIFICALLY LIMITED TO REVERSE ENGINEERING BY THE GOVERNMENT AND DOES NOT CONTEMPLATE THE CONTRACTING OUT BY THE GOVERNMENT FOR REVERSE ENGINEERING.

ON THE QUESTION OF THE DIVULGENCE OF ALLEGEDLY PROPRIETARY INFORMATION IN THE NARRATIVE SCOPE OF WORK SET OUT IN THE RFQ, YOU STATE THAT:

"THE DESCRIPTION OF THE 'PRODUCTION MODULES' CALLED FOR IN THE SCOPE OF WORK DEPICTS PRECISELY THE PRODUCTION PROCESS DEMONSTRATED BY BREED TO PICATINNY ENGINEERS TO PICATINNY ENGINEERS TO SUBSTATIATE BREED'S CONTENTION THAT THE LAOD'S ARE MASS PRODUCIBLE. FURTHER, THE FILTERING OF HIGH VISCOSITY FLUIDS AND MAINTENANCE OF CLEANLINESS TO .5 MICRONS, AND THE BALL, HOUSING CLEARANCE CHECK TO 50 MILLIONTHS OF AN INCH, BOTH MENTIONED IN THE RFQ ARE DIRECT DISCLOSURES OF BREED'S CURRENT PROPRIETARY MANUFACTURING TECHNIQUES."

IN ADDITION TO THE ELEMENTS OF YOUR PROTEST SUMMARIZED ABOVE, THERE IS DISAGREEMENT BETWEEN YOU AND THE CONTRACTING OFFICIALS AS TO WHAT ELEMENTS, IF ANY, OF THE LAOD WERE ACTUALLY DEVELOPED AT BREED'S PRIVATE EXPENSE - POSSIBLY COMPRISING DATA AS TO WHICH THE GOVERNMENT HAD LIMITED RIGHTS - AS OPPOSED TO THOSE LAOD ELEMENTS JOINTLY DEVELOPED BY BREED AND THE GOVERNMENT IN CONNECTION WITH PRIOR CONTRACTS. THIS DISPUTE IS EVIDENCED BY AFFIDAVITS AND REBUTTAL AFFIDAVITS OF GOVERNMENT ENGINEERS AND BREED EMPLOYEES SUBMITTED BY THE PARTIES FOR OUR CONSIDERATION. THE QUESTION OF THE EXTENT OF PRIVATE DEVELOPMENT OF THE LAOD IS ONE OF THE STUMBLING BLOCKS TO THE NEGOTIATION OF A LICENSE AGREEMENT FOR THE USE OF CERTAIN LAOD DATA.

ALSO, DN RELIANCE ON THE GOVERNMENT POSITION THAT BREED'S PROPRIETARY DATA WITH REGARD TO THE LAOD RELATES ONLY TO DATA OTHER THAN THE LAOD DRAWINGS, THE RESTRICTIVE MARKINGS PLACED BY BREED ON THE CONTRACT 0002 DRAWINGS HAVE BEEN REMOVED BY THE CONTRACTING OFFICIALS AND BREED HAS APPEALED THE REMOVAL OF THE LEGENDS TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA). HOWEVER, THE DISPUTE WITH REGARD TO PRIVATE DEVELOPMENT OF THE LAOD NEED NOT NOW BE RESOLVED BY OUR OFFICE, SINCE THE BOARD HAS ASSUMED JURISDICTION OF THAT QUESTION. BUT THERE STILL REMAINS FOR OUR CONSIDERATION THE QUESTIONS WHETHER THE RFQ LAOD SAMPLES AND/OR THE NARRATIVE SCOPE OF WORK DISCLOSE INFORMATION PROPRIETARY TO BREED. FOR THE REASONS SET OUT BELOW, WE CANNOT CONCLUDE THAT, ON THE BASIS OF THE RECORD BEFORE US, THE DISSEMINATION OF THE LAOD SAMPLES AND THE RFQ- 0156 SCOPE OF WORK FOR COMPETITIVE PROCUREMENT VIOLATED THE PROPRIETARY RIGHTS OF BREED SO AS TO REQUIRE CORRECTIVE ACTION BY THE ARMY. IN OUR OPINION, THE RESOLUTION OF THE QUESTION OF WHETHER THE LAOD'S ACQUIRED UNDER CONTRACT-0002 MAY PROPERLY BE USED AS SAMPLES UNDER RFQ-0156 DEPENDS ON AN INTERPRETATION OF CONTRACT-0002, PARTICULARLY THE SEQUENCE OF LETTERS, REFERRED TO ABOVE, THE LAST OF WHICH WAS ATTACHED TO THE CONTRACT, RATHER THAN ON THE ASPR 1-304.2 AND 9-201.1 (C) RELIED ON IN YOUR BRIEFS. IT IS A GENERAL PRINCIPLE WITH REGARD TO PROPRIETARY RIGHTS THAT IF THE PROPRIETARY ELEMENTS OF A PRODUCT CAN BE DETERMINED BY INSPECTION AND ANALYSIS OF THE PRODUCT, THEN THE PRODUCT LOSES ITS PROPRIETARY CHARACTER. SEE SECTION 24, TRADE SECRETS, BY RIDSDALE ELLIS. IN SPEEDRY CHEMICAL PRODUCTS, INC. V. THE CARTER'S INK COMPANY, 306 F.2D 328, THE COURT HELD AT PAGE 330:

" *** THERE IS A 'PROPERTY RIGHT' IN TRADE SECRETS, WHICH MAY BE PROTECTED AGAINST THOSE WHO ACQUIRE AND USE THE KNOWLEDGE THEREOF WRONGFULLY. FERROLINE V. GENERAL ANILINE & FILM CORP., 207 F.2D 912 (7 CIR. 1953), CERT. DENIED 347 U.S. 953, 74 S. CT. 678, 98 L. ED. 1098 (1954). HOWEVER, THE DISCOVERER OF SUCH SECRETS HAS NO EXCLUSIVE RIGHT AGAINST ANOTHER WHO UNCOVERS THE SECRET BY FAIR MEANS, OR AGAINST THOSE WHO ACQUIRE KNOWLEDGE OF IT WITHOUT A BREACH OF CONTRACT OR OF A CONFIDENTIAL RELATIONSHIP WITH THE DISCOVERER, AMERICAN DIRIGOLD CORP, V. DIRIGOLD METALS CORP., 125 F.2D 446 (6 CIR. 1942); NIMS, UNFAIR COMPETITION AND TRADEMARKS, 4TH ED. P. 418."

SEE ALSO, B-163445, JULY 27, 1968; B-157652, JUNE 29, 1966, RESTATEMENT OF TORTS, SECTION 757. ACCORDINGLY, WHERE TRADE SECRETS OF A GOVERNMENT CONTRACTOR CAN BE DETERMINED BY INSPECTION AND ANALYSIS, IT IS INCUMBENT ON THE CONTRACTOR TO EXPLICITLY RESTRICT SUCH USE OF ANY ITEMS SOLD TO THE GOVERNMENT OR ELSEWHERE, AS WITHOUT SUCH EXPLICIT CONTRACTUAL RESTRICTION, THE PURCHASER OF AN ITEM ACQUIRES TITLE TO THE ITEM AND THE RIGHT TO USE IT HOWEVER HE WISHES. SEE SPEEDRY, SUPRA. SIMILARLY, THE INCLUSION OF THE ASPR 9-203 (B) DATA CLAUSE IN A CONTRACT IS NOT SUFFICIENT TO RESTRICT THE USE OF A CONTRACT END ITEM SINCE THAT CLAUSE LIMITS THE DEFINITION OF TECHNICAL DATA (TRADE SECRETS) TO "TECHNICAL WRITING, SOUND RECORDINGS, PICTORIAL REPRODUCTIONS, DRAWINGS, OR OTHER GRAPHIC REPRESENTATIONS ***;" THAT IS, DATA PERTINENT TO THE END ITEM ITSELF WHICH REVEALS THE SECRETS AND DETAILS OF MANUFACTURE. SEE 32 C.F.R. 9.201 (B) (JANUARY 1, 1960 REVISION).

WE HAVE HELD THAT THE USE OF A MODEL OR SAMPLE OF AN ITEM PROCURED BY THE GOVERNMENT FREE OF RESTRICTION UNDER A CONTRACT IN A COMPETITIVE PROCUREMENT OF THE SAME ITEM IS ENTIRELY PROPER. SEE B-148376, JULY 24, 1962; B-148135, APRIL 30, 1962; CF. SEARS, ROEBUCK & CO. V. STIFFEL COMPANY, 376 U.S. 225; COMPCO CORPORATION V. DAY-BRITE LIGHTING, INC., ID. 234.

WE CANNOT AGREE WITH YOUR CONTENTION THAT THE FACT THAT LAOD'S HAD BEEN SOLD TO THE GOVERNMENT FOR TEST AND EVALUATION PURPOSES ONLY IS SUFFICIENT, WITHOUT MORE, TO PRECLUDE THE UNLIMITED USE BY THE GOVERNMENT OF THE LAOD'S IT PROCURED FOR THE PURPOSE OF A COMPETITIVE MANUFACTURING FEASIBILITY STUDY. IN FACT, THE QUESTION OF THE GOVERNMENT'S RIGHT TO UNLIMITED USE OF THE LAOD'S, AS OPPOSED TO THE LAOD TECHNICAL DATA, WAS THE SUBJECT OF THE SEQUENCE OF LETTERS QUOTED ABOVE. WHILE THE LETTERS WRITTEN BY BREED CONCERNING ITS PROPRIETARY RIGHTS IN THE LAOD, BUT REJECTED BY THE CONTRACTING OFFICIALS, ATTEMPTED TO RESTRICT THE GOVERNMENT'S USE OF THE LAOD'S IT HAD PURCHASED, THE JULY 31, 1968, LETTER - WHICH WAS A PART OF CONTRACT 0002 - WAS SPECIFICALLY LIMITED TO THE DATA RIGHTS EMBODIED IN THE LAOD. ALTHOUGH BREED WAS INFORMED THAT NO CONTRACT WOULD BE AWARDED IF GREATER RIGHTS THAN THOSE CONTAINED IN THE FINAL LETTER WERE CLAIMED, THE FACT REMAINS THAT BREED WAS UNDER NO OBLIGATION TO ACCEPT SUCH A CONTRACT AND THEREBY JEOPARDIZE ITS PROPRIETARY RIGHTS IN THE LAOD, HENCE, WE WOULD NOT BE WARRANTED IN FAILING TO GIVE EFFECT TO THE CLEAR MEANING AND LEGAL EFFECT OF THE JULY 31, 1968 LETTER. ACCORDINGLY, WE HOLD THAT THE ARMY WAS NOT LEGALLY ESTOPPED FROM DISSEMINATING IT LOAD'S FOR COMPETITIVE PROCUREMENT PURPOSES.

ON THE QUESTION OF THE DIVULGENCE OF DATA PROPRIETARY TO BREED IN THE RFQ -0156 SCOPE OF WORK, YOU SUBMITTED, IN ADDITION TO THE CONTENTIONS FROM YOUR BRIEF QUOTED EARLIER, AN AFFIDAVIT FROM ALLEN K. BREED, PRESIDENT OF BREED CORPORATION, THE IMPORT OF WHICH IS THAT THE ENTIRE SCOPE OF WORK CONTAINED IN THE RFQ FROM THE CONCEPT OF A LIQUID DASHPOT TO THE SPECIFIC CLEARANCES AND CLEANLINESS REQUIREMENTS SET OUT IN YOUR BRIEF AND QUOTED EARLIER, IS A DISCLOSURE OF BREED'S PROPRIETARY DATA EITHER AS CONTAINED IN THE BREED DRAWINGS OR AS CONFIDENTIALLY DIVULGED BY BREED EMPLOYEES TO GOVERNMENT PERSONNEL IN DISCUSSIONS CONCERNING THE LAOD. HOWEVER, WITH THE EXCEPTION OF THE CLEARANCES AND TOLERANCES MENTIONED IN YOUR BRIEF, MOST OF THE CLAIMS APPEAR TO CONSIST OF UNSUBSTANTIATED STATEMENTS THAT VARIOUS TECHNIQUES AND APPROACHES WERE PROVIDED TO THE GOVERNMENT BY BREED. WITH RESPECT TO THE BALL-HOUSING CLEARANCE OF .000050 INCHES, THE AFFIDAVIT REFERS TO BREED DRAWINGS 508022 AND 508023 AS EVIDENCE THAT THAT CLEARANCE FIGURE WAS FIRST DEVELOPED BY BREED AND IS THEREFORE PROPRIETARY TO BREED.

THE POSITION TAKEN BY THE ARMY MATERIEL COMMAND ON THIS QUESTION IS THAT THE SCOPE OF WORK IN ITS DEPICTION OF PRODUCTION PROCESSES, ETC., USES GENERAL TERMS AND PERFORMANCE REQUIREMENTS SO THAT OFFERORS ARE LEFT FREE TO CHOOSE AMONG ALTERNATIVE METHODS OF ACHIEVING THE PERFORMANCE REQUIREMENTS. WITH SPECIFIC REFERENCE TO THE STATEMENT IN YOUR BRIEF CONCERNING THE FILTERING OF HIGH VISCOSITY FLUIDS, THE MAINTENANCE OF CLEANLINESS TO .5 MICRONS, AND THE .000050 INCH BALL HOUSING CLEARANCE, AN AFFIDAVIT FROM THE CHIEF, AERIAL MINE LABORATORY, PICATINNY ARSENAL STATES:

"THAT THERE WAS CONSIDERABLE CONCERN ABOUT THE ABILITY OF INDUSTRY TO ACCURATELY AUTOMATICALLY MEASURE THE CLEARANCE OF THE MATING PARTS (THAT IS PISTON AND CYLINDER) IN MASS PRODUCTION. THIS FACTOR IS OF IMPORTANCE BECAUSE A BASIC PRINCIPLE OF THE FLUID DYNAMICS OF THIS ITEM IS THAT SMALL CHANGES IN CLEARANCE BETWEEN THE CYLINDER AND PISTON WILL CAUSE RELATIVELY LARGE VARIATIONS IN THE RATE OF TRAVEL OF THE PISTON. ESTABLISHED GAGING INDUSTRIAL COMPANIES WERE CONSULTED WITH REGARD TO THEIR STATE-OF-THE-ART ABILITY TO GAGE THE CLEARANCE OF ASSEMBLED COMPONENTS. (IT IS IMPORTANT TO MEASURE THE ASSEMBLED COMPONENTS TO ASSURE THE DESIRED RATE OF TRAVEL WILL BE ACHIEVED). THE GAGING COMPANIES ADVISED THAT IT MIGHT BE POSSIBLE WITHIN THE STATE-OF-THE-ART TO GAGE THE ASSEMBLIES' CLEARANCE TOLERANCE TO .000050 (50 MILLIONTHS) OF AN INCH AS A MINIMUM. AT THIS TIME THE BREED CORPORATION WAS UNDER THE IMPRESSION THAT .000020 (20 MILLIONTHS) OF AN INCH WAS REQUIRED FOR PROPER FUNCTIONING. HOWEVER, IN VIEW OF THE APPARENT UNECONOMICAL MANUFACTURING CAPABILITIES THAT WOULD BE PRESENT WITH THE IMPOSITION OF THE .000020 OF AN INCH CLEARANCE TOLERANCE IN VIEW OF THE STATE OF THE GAGING ART - IT WAS DECIDED THAT A STUDY MUST BE CONDUCTED TO DETERMINE WHETHER IT WAS POSSIBLE TO GAGE THESE ITEMS TO THE QUOTED INDUSTRY CAPABILITY OF .000050 OF AN INCH AND WHETHER THE .000050 INCH TOLERANCE WOULD BE FUNCTIONALLY ACCEPTABLE.

"PICATINNY ARSENAL WAS THE FIRST TO REQUEST .000050 OF AN INCH CLEARANCE TOLERANCE. TO DETERMINE FUNCTIONING SUITABILITY, ON 8 NOVEMBER 1968, BY TEST PROGRAM AGREEMENT, PICATINNY ARSENAL REQUESTED THE BREED CORPORATION TO FABRICATE ITEMS IN THE 'BEST POSSIBLE BREED MANNER' AND OTHERS TO '50X10 TOLERANCE SPREAD.' SATISFACTORY FUNCTIONING WAS OBTAINED WITH THE 50X10 (.000050) OF AN INCH TOLERANCE SPREAD ITEMS.

"THAT FROM MY EXPERIENCE THE TIMER INVOLVED IN THE PROTESTED PROCUREMENT ACTION FALLS WITHIN A CLASS OF ITEMS REQUIRED TO BE ASSEMBLED UNDER CONTROLLED CONDITIONS BY THE NATURE OF THE SIZES OF THE COMPONENTS AND THE CLEARANCE INVOLVED.

"A MICRON IS DEFINED (PARA. 3.4, FED. STD. 209A) AS .000001 (ONE MILLIONTH) OF A METER OR .00003937 (39 MILLIONTHS) OF AN INCH. AS FED. STD. 209A PROVIDES A CHOICE OF EITHER .5 MICRON (CLASS 100, PARA. 5.1.1, FED. STD. 209A) OR THE POSSIBILITY OF 5 MICRON PARTICLES UNDER CLASS 10,000 OR 100,000 (PARAS. 5.1.2 AND 5.1.3 FED. STD. 209A), IT IS OBVIOUS THAT .5 MICRON (THE SMALLEST FED. STD. 209A PARTICLE SIZE) MUST BE SELECTED, AS THE ALLOWABLE PRESENCE OF ANY SPECIFIC 5 MICRON PARTICLES (APPROXIMATELY .000200 INCH) WOULD BE FOUR (4) TIMES THE MAXIMUM CLEARANCE TOLERANCE AND SUBSTANTIALLY EFFECT THE FLUID FLOW, AND HENCE THE TIMING."

WE HAVE READ THE SCOPE OF WORK AND WITH THE EXCEPTION OF THE SPECIFIC REFERENCE TO CLEARANCES AND CLEANLINESS REQUIREMENTS AND CONCLUDE THAT GENERAL TERMS AND PERFORMANCE REQUIREMENTS APPEAR TO BE USED. WITH RESPECT TO THE .000050 INCH BALL-HOUSING CLEARANCE, WE HAVE INSPECTED THE REFERENCED BREED DRAWINGS BUT DUE TO OUR LACK OF ENGINEERING EXPERTISE, WE HAVE BEEN UNABLE TO VERIFY THAT THOSE DRAWINGS DO, IN FACT, CLEARLY ESTABLISH BREED'S PROPRIETARY RIGHT IN THE CLEARANCE FIGURE. BECAUSE WHAT IS INVOLVED IN THIS ASPECT OF YOUR PROTEST IS ESSENTIALLY A FACTUAL DISPUTE ON A TECHNICAL QUESTION, OUR OFFICE IS REQUIRED TO ACCEPT THE AGENCY'S POSITION UNLESS IT IS CLEARLY SHOWN TO BE IN ERROR. ON THE BASIS OF THE PRESENT RECORD, WE CANNOT CONCLUDE THAT THE AGENCY POSITION TO THE EFFECT THAT THE PERFORMANCE REQUIREMENT TYPE SCOPE OF WORK DID NOT DIVULGE DATA ALLEGED TO BE PROPRIETARY TO BREED IS ERRONEOUS.

WITH RESPECT TO YOUR CONTENTION THAT PICATINNY ARSENAL PERSONNEL ACTUALLY RELEASED LAOD DRAWINGS CONTAINING RESTRICTIVE LEGENDS TO THE EASTMAN KODAK COMPANY IN AN EFFORT TO GENERATE A PROPOSAL FROM THAT COMPANY FOR A LAOD PRODUCTION FEASIBILITY STUDY, THE AGENCY REPORT STATES AS FOLLOWS:

" *** A MEETING OF PICATINNY ARSENAL PERSONNEL WITH EASTMAN KODAK ENGINEERS DID TAKE PLACE AT PICATINNY ARSENAL ON 12 SEPTEMBER 1968. THERE WERE NO DRAWINGS IN THE MEETING ROOM, AND INFORMATION WAS CONVEYED ONLY ORALLY AND BY MEANS OF A ROUGH BLACKBOARD SKETCH LACKING DIMENSIONS. THE PICATINNY PERSONNEL EXERCISED THIS RESTRAINT, NOT BECAUSE THEY ADMITTED THE VALIDITY OF BREED'S CLAIM, BUT BECAUSE THEY WERE AWARE THAT THE CLAIMS WERE BEING MADE. AFTER RETURN TO THEIR PLANT, THE EASTMAN KODAK ATTENDEES ARE UNDERSTOOD TO HAVE MADE THE DRAWING THAT WAS LATER SUBMITTED TO THE WILMAD GLASS CO. THE DRAWING SUBMITTED AS INCL. 11 TO THE PROTESTANT'S BRIEF IS NOT A DUPLICATE OF ANY DRAWING EVER RECEIVED AT PICATINNY ARSENAL FROM THE BREED CORPORATION AND WAS NOT SUPPLIED BY PICATINNY ARSENAL PERSONNEL TO THE EASTMAN KODAK COMPANY."

WE FEEL THAT THE FOREGOING IS DISPOSITIVE OF THE ABOVE CONTENTION.

WITH RESPECT TO YOUR CONTENTION THAT BREED WAS IN EFFECT REJECTED AS NONRESPONSIBLE UNDER RFQ-0156 BEFORE BEING SOLICITED IN VIEW OF THE ADMINISTRATIVE REPORT STATEMENT THAT "THE COMPANY WAS A SMALL RESEARCH AND DEVELOPMENT FIRM LACKING CAPACITY AND EXPERIENCE FOR A MASS PRODUCTIBILITY STUDY," THE PROCUREMENT ACTIVITY POINTS OUT THAT THE QUOTED STATEMENT HAD REFERENCE TO A DETERMINATION THAT COMPETITION FOR THE DESIRED STUDY SHOULD BE SECURED WITH BREED AS ONE OF THE COMPETITORS. THE REASON FOR REJECTION OF THE BREED PROPOSAL UNDER RFQ 0156, AS STATED IN A LETTER DATED MARCH 10, 1969, FROM THE CONTRACTING OFFICER TO BREED, WAS BREED'S UNWILLINGNESS TO PROVIDE THE GOVERNMENT WITH UNLIMITED RIGHTS DATA IN ACCORDANCE WITH THE RFQ REQUIREMENTS.

WITH RESPECT TO YOUR FINAL CONTENTION THAT PORTIONS OF THE CONTRACTING OFFICER'S STATEMENT WERE IMPROPERLY DELETED IN THE COPIES PROVIDED YOU FOR COMMENT, YOU ARE ADVISED THAT THOSE DELETION WERE MADE IN ACCORDANCE WITH ASPR 3-507.2 WHICH PROVIDES FOR THE PROTECTION OF PROCUREMENT INFORMATION ADDUCED DURING THE NEGOTIATION OF THE CONTEMPLATED CONTRACT UNDER RFQ- 0156.

IN ACCORDANCE WITH THE ABOVE CONSIDERATIONS, YOUR PROTEST IS DENIED.