A-57619, NOVEMBER 22, 1934, 14 COMP. GEN. 406

A-57619: Nov 22, 1934

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THE CONTRACTOR WILL BE REQUIRED TO PERFORM IT TO THE BEST OF HIS ABILITY AS DETERMINED BY THE CONTRACTING OFFICER. SUCH INTEREST MAY BE PROTECTED BY INCLUDING IN THE ADVERTISED SPECIFICATIONS FOR THE EXPERIMENTAL AIRPLANE A STIPULATION THAT THE UNITED STATES SHALL HAVE A NONEXCLUSIVE LICENSE TO MANUFACTURE OR CAUSE TO BE MANUFACTURED FOR ITS OWN USE SIMILAR AIRPLANES WITHOUT THE PAYMENT OF A ROYALTY ON ANY PATENT DEVELOPED AS A RESULT OF THE EXPERIMENT. AS FOLLOWS: THERE IS ENCLOSED HEREWITH A PROPOSED CONTRACT FOR AN EXPERIMENTAL AIRPLANE TO BE NEGOTIATED WITHOUT COMPETITIVE BIDDING IN ACCORDANCE WITH THE DECISION CONTAINED IN THE COMPTROLLER'S LETTER A57619 DATED OCTOBER 18. IT IS PROPOSED TO CHARGE THIS CONTRACT TO FUNDS ALLOTTED TO THE BUREAU OF AIR COMMERCE BY THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS OR IN LIEU THEREOF TO THE ALLOTMENT MADE TO THE BUREAU BY THE PRESIDENT.

A-57619, NOVEMBER 22, 1934, 14 COMP. GEN. 406

CONTRACTS - PATENTS - EXPERIMENTAL AIRPLANES THERE MAY BE INCLUDED IN THE ADVERTISED SPECIFICATIONS AND MADE A PART OF THE GOVERNMENT CONTRACT FOR MANUFACTURE OF AN EXPERIMENTAL AIRPLANE, A PROVISION TO THE EFFECT THAT IN VIEW OF THE EXPERIMENTAL NATURE OF THE CONTRACT, THE CONTRACTOR WILL BE REQUIRED TO PERFORM IT TO THE BEST OF HIS ABILITY AS DETERMINED BY THE CONTRACTING OFFICER. THE INTEREST OF THE PUBLIC AGAINST EXCESSIVE PRICES FOR SIMILAR AIRPLANES PURCHASED BY THE GOVERNMENT INVOLVING THE USE OF PATENTS DEVELOPED BY A CONTRACTOR DURING THE MANUFACTURE OF AN EXPERIMENTAL PLANE, MAY NOT BE PROTECTED BY A STIPULATION IN THE CONTRACT FOR THE MANUFACTURE OF EXPERIMENTAL PLANES THAT THE UNITED STATES SHALL ACQUIRE A FRACTIONAL INTEREST IN ALL SUCH PATENTS, BUT SUCH INTEREST MAY BE PROTECTED BY INCLUDING IN THE ADVERTISED SPECIFICATIONS FOR THE EXPERIMENTAL AIRPLANE A STIPULATION THAT THE UNITED STATES SHALL HAVE A NONEXCLUSIVE LICENSE TO MANUFACTURE OR CAUSE TO BE MANUFACTURED FOR ITS OWN USE SIMILAR AIRPLANES WITHOUT THE PAYMENT OF A ROYALTY ON ANY PATENT DEVELOPED AS A RESULT OF THE EXPERIMENT.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF COMMERCE, NOVEMBER 22, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 12, 1934, AS FOLLOWS:

THERE IS ENCLOSED HEREWITH A PROPOSED CONTRACT FOR AN EXPERIMENTAL AIRPLANE TO BE NEGOTIATED WITHOUT COMPETITIVE BIDDING IN ACCORDANCE WITH THE DECISION CONTAINED IN THE COMPTROLLER'S LETTER A57619 DATED OCTOBER 18, 1934. IT IS PROPOSED TO CHARGE THIS CONTRACT TO FUNDS ALLOTTED TO THE BUREAU OF AIR COMMERCE BY THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS OR IN LIEU THEREOF TO THE ALLOTMENT MADE TO THE BUREAU BY THE PRESIDENT. SPECIFIC AUTHORITY FOR EXPENDITURES OF THIS TYPE HAS BEEN REQUESTED FROM THE PRESIDENT AS INSTRUCTED IN THE COMPTROLLER'S LETTER OF OCTOBER 18, ABOVE REFERRED TO. APPROVAL OF THE USE OF FEDERAL EMERGENCY ADMINISTRATION FUNDS FOR THIS PURCHASE IS CONTAINED IN THE ENCLOSED LETTERS.

MR. WATTERMAN, TO WHOM IT IS PROPOSED THAT THE CONTRACT BE GIVEN, HAS CONSTRUCTED AND FLOWN ONE TAILLESS AIRPLANE AND HE SUBMITTED A BID ON A TAILLESS AIRPLANE IN OUR RECENT COMPETITION. HIS BID WAS REJECTED AS IT WAS EVIDENT THE PLANE HE PROPOSED WOULD NOT MEET THE SPECIFICATIONS. HOWEVER, IT DID APPEAR TO HAVE CERTAIN ADVANTAGES OVER PRESENT TYPES AND IT IS DESIRED TO INVESTIGATE THEIR POSSIBILITIES BY THE PROCUREMENT OF A MODIFIED AIRPLANE TO MEET THE SPECIFICATIONS MADE A PART OF THE CONTRACT.

ATTENTION IS CALLED TO PARAGRAPH 9 OF THE SPECIFICATIONS REQUIRING THE CONTRACTOR TO ASSIGN TO THE GOVERNMENT 1/10 INTEREST IN ALL PATENTS OWNED OR ACQUIRED BY HIM RELATING TO THE SUBJECT AIRPLANE. THE DEVELOPMENT WORK CARRIED ON BY THE BUREAU OF AIR COMMERCE HAS FOR ITS OBJECTIVE THE STIMULATION OF PRIVATE FLYING PARTLY AS A MEANS OF CREATING EMPLOYMENT AND PARTLY AS A MEANS OF FURTHERING NATIONAL DEFENSE. IT IS NOT FOR THE PURPOSE OF SECURING A BETTER OR CHEAPER PRODUCT FOR GOVERNMENT USE. IT IS THEREFORE ESSENTIAL THAT THE GOVERNMENT IN ITS EXPERIMENTAL CONTRACTS PROTECT NOT ONLY ITS FUTURE PURCHASES OF, BUT ALSO THE INTERESTS OF THE PUBLIC IN, THE PRODUCT DEVELOPED WITH ITS ASSISTANCE. IT IS BELIEVED THAT THE PROVISION REFERRED TO WILL ACCOMPLISH THIS PURPOSE.

THE CONTRACTOR WILL BE REQUIRED TO PROVIDE A PERFORMANCE BOND IN THE AMOUNT OF $5,000.00 ON STANDARD FORM NO. 25 AS AMENDED AND ATTACHED HERETO. THIS PERFORMANCE BOND IS DESIRED TO PROTECT THE GOVERNMENT'S INTERESTS IN THE MATERIAL SUPPLIED TO THE CONTRACTOR AND TO INSURE THAT THE CONTRACTOR WILL MAKE A DILIGENT EFFORT TO MEET ALL THE TERMS OF THE CONTRACT. IN VIEW OF THE EXPERIMENTAL NATURE OF THE WORK TO BE UNDERTAKEN, IT IS NOT DESIRED TO MAKE THE CONTRACTOR OR THE SURETIES LIABLE FOR INABILITY TO PRODUCE AN AIRPLANE COMPLETELY FULFILLING THE REQUIREMENTS OF THE SPECIFICATIONS.

AS IT IS BELIEVED THAT THE PATENT PROVISION IS NEW IN GOVERNMENT CONTRACTS AND AS THIS IS THE FIRST CONTRACT PROPOSED BY THE DEPARTMENT OF COMMERCE UNDER ITS NEW AUTHORITY TO CARRY ON DEVELOPMENT WORK ON AIRPLANES AND ACCESSORIES, THE COMPTROLLER'S APPROVAL OF THIS CONTRACT BEFORE IT IS SUBMITTED TO THE CONTRACTOR IS DESIRED. AN EARLY DECISION IS REQUESTED.

THE REGULATIONS PROMULGATING THE STANDARD FORMS OF CONTRACTS AND STANDARD FORM OF PERFORMANCE BOND SPECIFICALLY PROHIBIT THE ADMINISTRATIVE DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT FROM MAKING ANY CHANGES THEREIN WITHOUT CERTAIN PRIOR APPROVAL, AND IN THE ABSENCE OF SUCH PRIOR APPROVAL THERE MAY NOT BE MADE THE SUGGESTED CHANGES IN THE STANDARD GOVERNMENT FORM OF PERFORMANCE BOND BY INSERTION OF THE PHRASE "TO THE BEST OF HIS ABILITY" AS PROPOSED IN THE BOND OBLIGATION. THE SAME RESULT MAY BE ACCOMPLISHED BY THE INCLUSION OF A PROVISION IN THE ADVERTISED SPECIFICATIONS, MADE A PART OF THE CONTRACT, TO THE EFFECT THAT IN VIEW OF THE EXPERIMENTAL NATURE OF THE CONTRACT THE CONTRACTOR WILL BE REQUIRED TO PERFORM IT TO THE BEST OF HIS ABILITY AS DETERMINED BY THE CONTRACTING OFFICER. SEE ARTICLE 12 OF THE STANDARD FORM OF CONTRACT FOR SUPPLIES PROPOSED TO BE USED IN THIS CASE AND PENN BRIDGE COMPANY V. UNITED STATES, 59 CT.CLS. 892.

THE PATENT PROVISION IN PARAGRAPH 8 OF THE SPECIFICATIONS SHOULD BE AMENDED TO CONFORM SUBSTANTIALLY WITH THE PATENT STIPULATION QUOTED IN MY RECENT DECISION OF OCTOBER 29, 1934, A-57194, 14 COMP. GEN. 340.

PARAGRAPH 9 OF THE PROPOSED SPECIFICATIONS TO WHICH YOU HAVE INVITED ATTENTION IS AS FOLLOWS:

9. THE CONTRACTOR SHALL AND HEREBY AGREES TO ASSIGN TO THE GOVERNMENT AN UNDIVIDED ONE-TENTH ( 1/10 ( INTEREST IN AND TO ANY PATENTS HE MAY NOW OWN OR HEREAFTER ACQUIRE COVERING ANY DEVICE, ARTICLE, APPLIANCE, OR DESIGN USED IN THE SUBJECT AIRPLANE OR EMPLOYED IN THE CONSTRUCTION THEREOF.

APPARENTLY, IT IS THE INTENDED PURPOSE OF THIS STIPULATION TO ATTEMPT IN SOME DEGREE TO PROTECT THE PUBLIC AGAINST EXCESSIVE PRICES FOR SIMILAR AIRPLANES SHOULD THE EXPERIMENTAL ONE PROVE TO BE A SUCCESS AND SHOULD THERE DEVELOP A COMMERCIAL DEMAND THEREFOR, BUT IT IS NOT UNDERSTOOD HOW ANY SUCH PROTECTION COULD BE MADE EFFECTIVE BY THE UNITED STATES ACQUIRING ONE-TENTH INTEREST IN ALL PATENTS OWNED OR ACQUIRED BY THE CONTRACTOR RELATING TO THE SUBJECT AIRPLANE, AND ESPECIALLY IN THE ABSENCE OF ASSURANCES THAT THIS CONTRACTOR OR HIS ASSIGNEES OF THE PATENTS WOULD CONTINUE IN THE BUSINESS OF MANUFACTURING AIRPLANES. HOWEVER, ASIDE FROM THIS FEATURE OF THE MATTER, APPROPRIATIONS ARE MADE FOR THE PURPOSE OF SUPPLYING THE NEEDS OF THE UNITED STATES, AND THERE IS NO PROVISION IN THE APPROPRIATIONS PROPOSED TO BE CHARGED IN THIS CASE WHICH WOULD AUTHORIZE THE DEPARTMENT OF COMMERCE TO ACQUIRE A ONE-TENTH OR OTHER FRACTIONAL INTEREST IN ALL PATENTS OWNED OR DEVELOPED BY THE CONTRACTOR RELATING TO THE SUBJECT AIRPLANE TO HOLD IN TRUST FOR THE BENEFIT OF THE CONSUMING PUBLIC. THE APPROPRIATIONS DO NOT CONTEMPLATE THAT THE UNITED STATES SHALL BECOME A PARTNER WITH PRIVATE INDIVIDUALS IN THE OWNERSHIP OF PATENTS. THE UNITED STATES MAY PROVIDE IN A CONTRACT THAT IT SHALL HAVE A NONEXCLUSIVE LICENSE TO MANUFACTURE OR CAUSE TO BE MANUFACTURED FOR ITS OWN USE SIMILAR AIRPLANES WITHOUT THE PAYMENT OF ROYALTY ON ANY PATENTS WHICH MAY BE DEVELOPED AS THE RESULT OF THE EXPERIMENT, AND, IN FACT, THE ADVERTISED SPECIFICATIONS SHOULD CONTAIN SUCH A STIPULATION FOR THE PROTECTION OF THE GOVERNMENT IN EVENT IT SHOULD BE DETERMINED AS A RESULT OF THE EXPERIMENT THAT THE AIRPLANE OF SUCH DESIGN IS A FEASIBLE AND PRACTICABLE ONE FOR PUBLIC USE.

OTHER THAN THE FOREGOING THERE APPEAR NO LEGAL OBJECTIONS TO THE PROPOSED CONTRACT AND PERFORMANCE BOND FOR THE PURCHASE OF AN EXPERIMENTAL TAILLESS AIRPLANE. YOU ARE ADVISED ACCORDINGLY.

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