B-149295, SEP. 6, 1962

B-149295, SEP. 6, 1962

TO LEWIS, MACDONALD AND VARIAN:

BY LETTER OF JULY 5, 1962, WITH ENCLOSURE AND RELATED PAPERS, YOU HAVE ON BEHALF OF BERISH ASSOCIATES, INC., PROTESTED THE AWARD BY THE AIR FORCE OF CONTRACT NO. AF 33/657/-9187, ON JUNE 20, 1962, TO THE KELLETT AIRCRAFT CORPORATION ON THE GROUNDS THAT THE SPECIFICATIONS INCLUDED THEREIN AND IN THE PRECEDING REQUEST FOR PROPOSALS CONTAINED DATA PROPRIETARY TO BARISH.

EFFECTIVE JANUARY 2, 1961, THE AIR FORCE ENTERED INTO CONTRACT NO. AF 33/616/-7613 WITH VIDYA, INC., FOR A FLEXIBLE ROTOR INVESTIGATION TO RESULT IN THE FURNISHING TO THE AIR FORCE OF A TECHNICAL REPORT. BY A RELATED AGREEMENT BETWEEN VIDYA AND DAVID BARISH, ENTERED INTO WITH THE KNOWLEDGE AND APPROVAL OF THE DEPARTMENT OF THE AIR FORCE, VIDYA OBTAINED THE SERVICES OF BARISH AS A CONSULTANT IN CONNECTION WITH WORK UNDER THE AIR FORCE CONTRACT. BARISH HAD ALREADY APPLIED FOR A PATENT ON AN INVENTION RELATING TO A FLEXIBLE ROTOR SYSTEM. BY PARAGRAPH 19 OF THE GENERAL PROVISIONS TO THE AIR FORCE CONTRACT THE CONTRACTOR AGREED TO GRANT TO THE GOVERNMENT A ROYALTY FREE LICENSE FOR THE USE OF DATA DEVELOPED THEREUNDER. IT WAS FURTHER PROVIDED THAT WHERE DATA HAD NOT ORIGINATED IN THE PERFORMANCE OF THE CONTRACT, THE LICENSE WOULD BE GRANTED ONLY TO THE EXTENT THAT THE CONTRACTOR HAD ACQUIRED THE RIGHT TO GRANT SUCH LICENSE WITHOUT BECOMING LIABLE FOR PAYMENT OF COMPENSATION THEREFOR. IN ADDITION THE AIR FORCE CONTRACT PROVIDED IN PART VI, PARAGRAPH E, SUBPARAGRAPH 2, THAT THE INVENTION DISCLOSED IN PATENT APPLICATION 12011 WOULD BE EXCLUDED FROM THE LICENSE GRANTED PURSUANT TO THE DATA CLAUSE.

THE CONTRACT WAS FULLY PERFORMED BY THE VIDYA, INC., AND RESULTED IN THE DELIVERY TO THE AIR FORCE OF ASD TECHNICAL REPORT NO. 61-660. THE AIR FORCE, EMPLOYING THE INFORMATION CONTAINED IN THE REPORT, PROCEEDED TO DEVELOP SPECIFICATIONS FOR THE INVESTIGATION OF A FLEXIBLE ROTOR BLADE DECELERATOR FOR THE RETARDATION AND RECOVERY OF AEROSPACE PAYLOADS. REQUEST FOR PROPOSALS NO. 08476, ISSUED APRIL 26, 1962, BY THE AERONAUTICAL SYSTEMS DIVISION FOR THE PERFORMANCE OF THE WORK SOLICITED PROPOSALS TO BE FURNISHED NOT LATER THAN MAY 28, 1962, IN ANTICIPATION OF A CONTRACT TO BE AWARDED ABOUT JUNE 30, 1962. BARISH ASSOCIATES, INC., RECEIVED A COPY OF THE REQUEST AND SUBMITTED A PROPOSAL UNDER LETTER OF MAY 25, 1962. ACCEPTABLE PROPOSALS WERE ALSO RECEIVED FROM VIDYA, INC., AND KELLETT. THE PROPOSAL SUBMITTED BY KELLETT OFFERED THE LOWEST PRICE AND ITS ACCEPTANCE WAS CONSIDERED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT. ACCORDINGLY, CONTRACT NO. AF 33/657/-9187 WAS AWARDED TO THAT FIRM ON JUNE 20, 1962.

IT IS YOUR CONTENTION THAT THE SPECIFICATIONS MADE PART OF THE KELLETT CONTRACT INCLUDED INFORMATION COVERED BY PATENT APPLICATION 12011 WHICH WAS EXCLUDED FROM THE RIGHTS-IN-DATA PROVISION OF THE VIDYA CONTRACT. YOU ALLEGE, THEREFORE, THAT THIS INFORMATION REMAINS PROPRIETARY TO BARISH AND THAT ITS USE IN A REQUEST FOR PROPOSALS ISSUED TO ALL INTERESTED PRODUCERS RENDERS THE REQUEST FOR PROPOSALS IMPROPER UNDER OUR DECISION B-143711, DECEMBER 22, 1960, RECONSIDERED AND AFFIRMED MAY 15, 1961. IN THE DECISION OF DECEMBER 22, 1960, WE STATED THAT THE UNAUTHORIZED INCLUSION OF PROPRIETARY DATA IN AN INVITATION FOR BIDS IS IMPROPER AND REQUIRES CANCELLATION OF THE INVITATION.

IT IS THE POSITION OF THE AIR FORCE THAT THE SPECIFICATIONS INCLUDED IN THE KELLETT CONTRACT WERE OBTAINED BY UTILIZING THE TECHNICAL REPORT OBTAINED UNDER THE VIDYA CONTRACT TOGETHER WITH THE PROJECTENGINEER'S GENERAL KNOWLEDGE OF THE FIELD. IN BRIEF, THE AIR FORCE DOES NOT CONCEDE THAT THE INFORMATION CONTAINED IN THE SPECIFICATION IS IN FACT PROPRIETARY. HOWEVER, FOR PURPOSES OF OUR CONSIDERATION OF THE MATTER WE ASSUME WITHOUT CONCEDING THAT, AS ALLEGED BY YOU AND BY THE PATENT ATTORNEY FOR BARISH IN A LETTER OF AUGUST 10, 1962, THE SECOND PARAGRAPH OF THE INTRODUCTION DESIGNATED AS CLAUSE NO. 1 INCLUDED UNDER THE HEADING "STATEMENT OF WORK" MADE PART OF THE KELLETT CONTRACT IS IN FACT PROPRIETARY TO MR. BARISH OR BARISH ASSOCIATES, INC.

IT IS NOW RECOGNIZED THAT A PROPERTY RIGHT EXISTS IN INFORMATION USEFUL IN THE DEVELOPMENT OR FABRICATION OF AN INDUSTRIAL AND ITEM SO LONG AS ITS SECRECY IS MAINTAINED, AND AN ACTION FOR DAMAGES WILL LIE FOR THE WRONGFUL DISCLOSURE OF SUCH INFORMATION. DOLLAR CORP. V. MARGON CORP., 164 F.SUPP. 41 (D.C.N.J. 1958). IT IS ALSO WELL RECOGNIZED THAT A PATENT APPLICATION IS PROTECTED UNDER THE SAME THEORY OF LAW. SEE ELLIS ON TRADE SECRETS, SECTION 145. THE ISSUE HERE, HOWEVER, IS NOT WHETHER BARISH MAY RECOVER DAMAGES FOR DISCLOSURE OF THE INFORMATION IN QUESTION BUT WHETHER, ASSUMING AS WE DO FOR PURPOSES OF THIS INQUIRY THAT THE INFORMATION IS PROPRIETARY, THE AWARD TO KELLETT IS THEREBY RENDERED INVALID. IN SUPPORT OF YOUR PROPOSITION THAT THE KELLETT AWARD IS INVALID FOR THE REASON STATED YOU HAVE RELIED ON OUR DECISION B-143711, DECEMBER 22, 1960. HOWEVER, WE DO NOT AGREE THAT THE CIRCUMSTANCES THERE CONTROL THE INSTANT CASE, THE EARLIER CASE INVOLVED A SITUATION WHERE AN INVITATION FOR BIDS WAS ISSUED UNDER A TWO-STEP PROCUREMENT WHICH INCLUDED INFORMATION ALLEGED BY THE CLAIMANT TO BE PROPRIETARY TO HIS FIRM. THE INVITATION ISSUED AS PART OF THE FIRST STEP WAS NOT FURNISHED TO THE CLAIMANT. UPON LEARNING OF ITS DISSEMINATION HE TOOK PROMPT ACTION TO ASCERTAIN HIS LEGAL POSITION AND IMMEDIATELY THEREAFTER BROUGHT TO THE ATTENTION OF THE GOVERNMENT AGENCY CONCERNED HIS CLAIM THAT THE DATA WAS PROPRIETARY. NOTWITHSTANDING HIS ACTION, THE CONTRACTING AGENCY PROCEEDED WITH THE PROCUREMENT UNTIL THE MATTER WAS PRESENTED TO OUR OFFICE BY THE CLAIMANT PRIOR TO AWARD. ARRIVING AT OUR DECISION WE RELIED GREATLY ON THE FACTS THAT THE CLAIMANT HAD ACTED REASONABLY TO PROTECT THE DATA AND HAD OBJECTED TO ITS DISSEMINATION PROMPTLY AFTER LEARNING OF THE ISSUANCE OF THE INVITATION. ADDITIONALLY, IN THAT CASE NO AWARD HAD BEEN MADE AND, THEREFORE, THE EFFECT OF CANCELLATION ON RIGHTS OF PARTIES TO AN EXISTING CONTRACT WAS NOT INVOLVED.

IN THIS CASE THE DATA IN QUESTION WAS INCLUDED IN THE REQUEST FOR PROPOSALS ISSUED APRIL 26, 1962. THE FACT THAT BARISH SUBMITTED A PROPOSAL BASED ON THE REQUEST INDICATES THAT THE FIRM RECEIVED A COPY OF THE REQUEST AND HAD OCCASION TO STUDY IT WITH SUFFICIENT THOROUGHNESS TO PREPARE AN OFFER FOR THE PERFORMANCE OF THE WORK. THE LETTER OF MAY 25, 1962, TRANSMITTING THE BARISH PROPOSAL CONTAINS NO INDICATION THAT THE FIRM TOOK EXCEPTION TO THE PUBLICATION OF THE REQUEST FOR PROPOSALS OR ANY PART THEREOF. INDEED THERE IS NO INDICATION OF ANY PROTEST UNTIL ANOTHER FIRM WAS ABOUT TO RECEIVE AN AWARD. THE COURTS HAVE TAKEN THE POSITION THAT A PARTY TO MAINTAIN HIS PROPRIETARY RIGHT IN DATA MUST TAKE REASONABLE ACTION TO PREVENT OR SUPPRESS ITS UNAUTHORIZED USE. SEE, FOR EXAMPLE, FERROLINE CORP. V. GENERAL ANILINE AND FILM CORP., 207 F.2D 912, 924 (C.C.A. 7, 1953); GLOBE TICKET CO. V. INTERNATIONAL TICKET CO., 104 A 92 (N.J. 1918). IN THIS INSTANCE IT APPEARS THAT BARISH MADE NO ATTEMPT, AND HAD NO INTENTION, TO PREVENT DISCLOSURE. ITS ONLY PURPOSE SEEMS TO BE TO PROTECT THE INFORMATION ALLEGED TO BE PROPRIETARY FROM UNAUTHORIZED USE WITHOUT ADEQUATE COMPENSATION.

WE DO NOT MEAN TO SUGGEST THAT THE CASES CITED IN THE FOREGOING PARAGRAPH WOULD SUPPORT A CONCLUSION THAT BARISH COULD NOT PREVAIL IN A COURT OF LAW ON AN ACTION FOR DAMAGES FOR WRONGFUL PUBLICATION OF TRADE SECRETS BECAUSE OF FAILURE TO PROMPTLY OBJECT TO PUBLICATION IN THE REQUEST FOR PROPOSALS OF THE DATA IN QUESTION. HOWEVER, OUR DECISIONS TO NULLIFY AWARDS ALREADY MADE FIND THEIR BASIS IN SUCH FAILURE TO OBSERVE THE LAW GOVERNING PROCUREMENTS AS TO RENDER THE CONTRACT INVALID. IN THE VAST MAJORITY OF INSTANCES THE ACTION IS BASED ON THE CONCLUSION THAT THE GOVERNMENT WAS DEPRIVED OF THE BENEFITS OF FULL AND FREE COMPETITION INTENDED IN ENACTMENTS SUCH AS 10 U.S.C. 2304 (A), WHICH IS APPLICABLE HERE. IN THIS CASE THE ADVERTISING PROVISIONS OF THE LAW ARE INAPPLICABLE SINCE THE CONTRACT WAS AWARDED UNDER THE BROADER NEGOTIATING AUTHORITY; IN ADDITION THERE CAN BE NO QUESTION OF A LOSS OF COMPETITION BECAUSE OF THE CONTRACTING AGENCY'S ACTION. THUS, THE SOLE BASIS FOR RENDERING THE AWARD INVALID WOULD BE THE PRECEDENT ESTABLISHED IN B-143711 WHICH, UNLIKE THE PRESENT CASE, INVOLVED AN ADVERTISED PROCUREMENT AND IN WHICH THE PROMPT ACTION TAKEN BY PROTESTING PARTY PERMITTED US TO CONSIDER THE MATTER PRIOR TO AWARD.

IN OUR JUDGMENT, THE FAILURE OF BARISH TO TAKE PROMPT ACTION PRIOR TO AWARD TO PROTECT HIS INTERESTS, TOGETHER WITH THE OTHER DISTINCTIONS BETWEEN THE INSTANT SITUATION AND THE PRECEDENT RELIED UPON, NEGATES ANY ACTION ON OUR PART TO NULLIFY THE AWARD TO KELLETT.