B-148376, JUL. 24, 1962

B-148376: Jul 24, 1962

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TO SPECIALTY ELECTRONICS DEVELOPMENT CORPORATION: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 7. BIDS WERE RECEIVED FROM THREE FIRMS BUT YOU DID NOT SUBMIT A BID. YOU ADVISED THE AGENCY IN THIS LETTER THAT YOU WERE READY AND WILLING TO ENTER INTO SUCH NEGOTIATIONS AND ALSO THAT YOU WERE "REFRAINING FROM SUBMITTING A BID OURSELVES AGAINST THE IFB SINCE BY ITS TERMS. THAT THESE CONNECTOR PLUGS AND RECEPTACLES WERE PROPRIETARY ITEMS WHICH YOUR COMPANY HAD DEVELOPED ENTIRELY WITH ITS OWN FUNDS "SOME ASPECTS OF WHICH ARE PRESENTLY COVERED BY A PATENT APPLICATION WHICH IS PENDING. WHICH WAS INVENTED BY AN OFFICER OF THIS COMPANY.'. THAT YOU "HAVE NEVER SOLD THE DESIGNS OR DRAWINGS FOR THESE ITEMS.

B-148376, JUL. 24, 1962

TO SPECIALTY ELECTRONICS DEVELOPMENT CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 7, 1962, WITH ITS ENCLOSURE, AND SUPPLEMENTAL CORRESPONDENCE DATED MAY 14 AND APRIL 19, 1962, PROTESTING ANY POSSIBLE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. SC-36-039-62-1657-C4 ISSUED FEBRUARY 20, 1962, BY THE U.S. ARMY SIGNAL SUPPLY AGENCY, PHILADELPHIA, PENNSYLVANIA.

THE IFB SOLICITED BIDS ON ELECTRICAL PLUG CONNECTORS IN QUANTITIES RANGING FROM 1,000 TO 13,000 AND ELECTRICAL RECEPTACLE CONNECTORS IN QUANTITIES RANGING FROM 500 TO 5,000, IN ACCORDANCE WITH SIG DWG SC-A 46669A AND GOVERNMENT-FURNISHED MODELS SUBJECT TO CERTAIN EXCEPTIONS, TOGETHER WITH PRODUCTION DRAWINGS FOR BOTH TYPES OF CONNECTORS; GAGES AND GAGE CASES FOR BOTH TYPES OF CONNECTORS, AND DRAWINGS FOR THE GAGES AND GAGE CASES. BIDS WERE RECEIVED FROM THREE FIRMS BUT YOU DID NOT SUBMIT A BID. INSTEAD, YOU REQUESTED IN A LETTER DATED MARCH 7, 1962, THAT THE PROCURING AGENCY "RECOGNIZE OUR COMPANY'S PROPRIETARY RIGHT TO THE ITEMS IN THIS IFB, AND THAT IT REFRAIN FROM ENDEAVORING TO BUY THESE ITEMS ELSEWHERE UNLESS IT HAS NEGOTIATED WITH US AND ARRIVED AT A FAIR AGREEMENT TO COMPENSATE US FOR THE USE OF OUR PROPRIETARY PRODUCTS.' YOU ADVISED THE AGENCY IN THIS LETTER THAT YOU WERE READY AND WILLING TO ENTER INTO SUCH NEGOTIATIONS AND ALSO THAT YOU WERE "REFRAINING FROM SUBMITTING A BID OURSELVES AGAINST THE IFB SINCE BY ITS TERMS, IN SUPPLYING DRAWINGS, WE WOULD BE LOSING OUR PROPRIETARY RIGHTS ON THESE ITEMS.'

IN YOUR LETTER OF PROTEST OF THE SAME DATE TO OUR OFFICE YOU STATED THAT THE SPECIAL NOTES ON PAGE 10 OF THE IFB PROVIDED THAT THE GOVERNMENT WOULD FURNISH A SUCCESSFUL BIDDER WITH NINE PLUGS AND ONE RECEPTACLE TO MEASURE AND DETERMINE THE DIMENSIONS AND TOLERANCES AND WOULD ALSO FURNISH ONE OF EACH OF THESE ITEMS AS A PROCUREMENT MODEL. YOU ALLEGED THAT THIS PROCUREMENT VIOLATES PARAGRAPH 9-202.3, PAGE 921, OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) DATED JULY 1, 1960; THAT THESE CONNECTOR PLUGS AND RECEPTACLES WERE PROPRIETARY ITEMS WHICH YOUR COMPANY HAD DEVELOPED ENTIRELY WITH ITS OWN FUNDS "SOME ASPECTS OF WHICH ARE PRESENTLY COVERED BY A PATENT APPLICATION WHICH IS PENDING, WHICH WAS INVENTED BY AN OFFICER OF THIS COMPANY.' YOU ALSO ALLEGED IN THIS LETTER THAT YOUR COMPANY HAS SOLD ITS CONNECTORS AND RECEPTACLES TO THE SIGNAL CORPS SUPPLY AGENCY AS WELL AS TO PRIME CONTRACTORS WHO USE THESE ITEMS ON SIGNAL CORPS EQUIPMENT; THAT YOU "HAVE NEVER SOLD THE DESIGNS OR DRAWINGS FOR THESE ITEMS, AND NEITHER HAVE WE EVER SOLD OR GIVEN THE RIGHT TO THE GOVERNMENT TO COPY OR USE OUR PROPRIETARY DESIGNS.' YOU ALLEGED FURTHER THAT YOUR COMPANY HAS "IN FACT EXPRESSLY STATED WHEN WE HAVE SOLD THESE TO THE GOVERNMENT THAT THESE WERE PROPRIETARY ITEMS, AND THAT THEIR SALE BY US DID NOT GIVE THE GOVERNMENT ANY LICENSE OR RIGHTS TO COPY THEM.' FOR THESE REASONS YOU REQUESTED THAT OUR OFFICE "SHOULD THEREFORE NOT PERMIT THIS PROCUREMENT TO GO FORWARD EXCEPT IF IT IS DONE ON THE BASIS WHERE OUR PROPRIETARY RIGHT IS RECOGNIZED AND ARRANGEMENTS MADE TO COMPENSATE US IN A FAIR MANNER.'

BY LETTER DATED APRIL 17, 1962, THE CONTRACTING OFFICER OF THE U.S. ARMY SIGNAL SUPPLY AGENCY, PHILADELPHIA, PENNSYLVANIA, ADVISED YOU THAT A LETTER CONTRACT HAD BEEN ISSUED APRIL 12, 1962, TO PIASECKI AIRCRAFT CORPORATION (NOT A BIDDER ON THE IFB), CALLING FOR INITIAL DELIVERY 35 DAYS AFTER AWARD OF 7,000 CONNECTORS AND 4,000 RECEPTACLES OF THE TYPE SOLICITED UNDER IFB 1657-62-C4; THAT THE EXTREME URGENCY OF THE MILITARY REQUIREMENT WAS SUCH THAT INITIAL DELIVERIES START MAY 15, 1962, IN SUPPORT OF A VERY HIGH PRIORITY PROGRAM, AND THAT A COPY OF THIS LETTER WAS BEING FORWARDED TO OUR OFFICE. YOU THEREAFTER RENEWED YOUR PROTEST TO US BY LETTER DATED APRIL 19, 1962, WHEREIN YOU REQUESTED AN OPPORTUNITY TO PRESENT EVIDENCE TO SUPPORT YOUR POSITION THAT THIS ORDER WAS UNFAIR TO YOUR COMPANY AND IN VIOLATION OF APPLICABLE PROCUREMENT REGULATIONS, AND THAT ,ARRANGEMENTS BE MADE TO FAIRLY REIMBURSE OUR COMPANY FOR THE USE OF THESE PROPRIETARY DESIGNS AND MODELS.'

THE RULE IS WELL ESTABLISHED THAT, INDEPENDENTLY OF THE LAW APPLICABLE TO PATENTS AND COPYRIGHTS, THE OWNER OF PROPRIETARY INFORMATION OR TRADE SECRETS CONSISTING OF ANY FORMULA OR PATTERN, ANY MACHINE OR PROCESS OF MANUFACTURE, OR OF ANY DEVICE OR COMPILATION OF INFORMATION USED IN HIS BUSINESS WHICH MAY GIVE TO HIM AN OPPORTUNITY TO OBTAIN AN ADVANTAGE OVER COMPETITORS WHO DO NOT KNOW OR USE IT, MAY PROTECT HIMSELF BY CONTRACT AGAINST ITS DISCLOSURE BY ONE TO WHOM IT IS COMMUNICATED IN CONFIDENCE OR MAY RESTRICT ITS USE BY SUCH PERSON. SEE JOHN D. PARK AND SONS CO. V. HARTMAN, 6 C.C.A. 1907, 153 F. 24, CERT.DEN. 1908, 212 U.S. 588; VULCAN DETINNING CO. V. AMERICAN CAN CO., CT. OF ERRORS AND APPEALS N.J. 1907, 67 A. 339; DU PONT POWDER CO. V. MASLAND, 1917, 244 U.S. 100; UNITED LENS CORPORATION V. DORAY LAMP CO., 7 C.C.A. 1937, 93 F.2D 969; SMITH V. DRAVO CORPORATION, 7 C.C.A. 1953, 203 F.2D 369, 376; AND VITRO CORPORATION OF AMERICA V. HALL CHEMICAL CO., 6 C.C.A. 1958, 254 F.2D 787. AND, UNDER CERTAIN CIRCUMSTANCES A NONDISCLOSURE AGREEMENT OR CONTRACT MAY BE IMPLIED. CF. HOELTKE V. C. M. KEMP MFG.CO., 4 C.C.A. 1936, 80 F.2D 912, CERT.DEN. 1936, 298 U.S. 673, AND DE FILIPPIS V. CHRYSLER CORPORATION, D.C.N.Y. 1944, 53 F.SUPP. 977, AFFIRMED 2 C.C.A. 1947, 159 F.2D. 478; INTERNATIONAL INDUSTRIES V. WARREN PETROLEUM CORP., D.C.DEL. 1956, 146 F.SUPP. 157, 177; AND AMERICAN GAGE AND MANUFACTURING CO. V. MAASDAM, 6 C.C.A. 1957, 245 F.2D 62.

IT SEEMS WELL ESTABLISHED ALSO THAT A CONTRACTUAL OBLIGATION TO RESPECT THE OWNER'S RIGHT IN A TRADE SECRET USUALLY TERMINATES WITH THE PUBLIC DISCLOSURE OF THE SECRET BY THE OWNER IN THE ABSENCE OF A SPECIFIC CONTRACT PROVISION REQUIRING THE PROMISOR TO ADHERE TO HIS CONTRACTUAL OBLIGATION AFTER SUCH DISCLOSURE, AND HIS RIGHT TO FURTHER SECRECY ORDINARILY IS TERMINATED BY THE ISSUANCE OF A PATENT. SEE PICARD V. UNITED AIRCRAFT CORPORATION, 2 C.C.A. 1942, 128 F.2D 632; SANDLIN V. JOHNSON, 8 C.C.A. 1944, 141 F.2D 660; CONMAR PRODUCTS CORP. V. UNIVERSAL SLIDE FASTENER CO; 2 C.C.A. 1949, 172 F.2D 150; SKOOG V. MCCRAY REFRIGERATOR CO., 7 C.C.A. 1954, 211 F.2D 254; AND DOLLAC CORPORATION V. MARGON CORPORATION, D.C.N.J. 1958, 164 F.SUPP. 41. IT HAS BEEN CONSISTENTLY HELD BY THE COURTS, HOWEVER, THAT A SINGLEUSE OR SALE WITHOUT RESTRICTION OR INJUNCTION OF SECRECY BY THE INVENTOR MAY BE SUFFICIENT TO DENY THE PROTECTION OF A PATENT TO THE INVENTOR. METALIZING ENGINEER.CO. V. KENYON BEARING AND A.P.CO., 2 C.C.A. 1946, 153 F.2D. 516, CERT.DEN. 328 U.S. 840., NATIONAL WELDING E.CO. V. HAMMON PRECISION E.CO., D.C.CALIF. 1958, 165 F.SUPP. 788; AND PIET V. UNITED STATES, D.C.CALIF. 1959, 176 F.SUPP. 576, AFFIRMED 9 C.C.A. 1960, 283 F.2D 693. CF. OUR DECISION OF AUGUST 28, 1961, B-136916, 41 COMP. GEN. 148, AND APRIL 30, 1962, B-148135; ALSO THE AUTHORITIES COLLECTED IN THE ANNOTATION 170 A.L.R. 449-500.

YOU HAVE FURNISHED NO EVIDENCE TO SUPPORT THE ALLEGATIONS AND CONTENTIONS ADVANCED IN THE CORRESPONDENCE CONCERNING YOUR PROTEST. THE PROCURING AGENCY HAS ADVISED US THAT YOU HAVE SOLD THOUSANDS OF THESE CONNECTORS TO THE SIGNAL CORPS WITHOUT RESTRICTIONS OF ANY KIND; THAT THIS WAS DONE UNDER SEVERAL PRIME CONTRACTS PLACED BY THE U.S. ARMY TOBYHANNA SIGNAL DEPOT AS WELL AS THROUGH A SUBCONTRACT UNDER A STROMBERG-CARLSON PRIME CONTRACT AND A SUB-SUBCONTRACT WITH ADLER ELECTRONICS UNDER THAT CONTRACT. ONE OF THESE PROCUREMENTS IS EVIDENCED BY COPY OF CONTRACT NO. DA 36-237-SC-605, DATED MAY 4, 1961, BASED ON YOUR BIDS DATED MARCH 10, 1961, UNDER RFP SC-36-237-41355-61 AND SC-36-237-41654-61 FOR 890 CONNECTORS, YOUR PART NO. 6-60P AT $21 EACH AND 2,730 CONNECTORS, YOUR PART NO. 6-60CS AT $34 EACH, OR A NET OF $111,398.49 AFTER DISCOUNT. RESTRICTIONS ON THE USE OF THE ITEMS PROCURED THEREUNDER WERE NOT STIPULATED IN THE BIDS NOR IN THE CONTRACT. APPLYING THE AFOREMENTIONED PRINCIPLES BELIEVED TO BE CONTROLLING, IT THEREFORE SEEMS ABUNDANTLY CLEAR THAT THE GOVERNMENT PROCURED AND RECEIVED THE ITEMS DELIVERED UNDER THIS CONTRACT FREE OF ANY RESTRICTION ON THEIR USE.

EXAMINATION OF THE AVAILABLE FILE DISCLOSES THAT A SMALL QUANTITY OF 12 CONNECTORS AMOUNTING TO APPROXIMATELY $352 WAS ORDERED ON MARCH 7, 1961, BY THE ARMY SIGNAL CORPS FORT MONMOUTH PROCUREMENT OFFICE AS EVIDENCED BY COPY OF PURCHASE ORDER NO. 37576-PM-61-92 DATED MARCH 8, 1961. PAGE 2 OF THE PURCHASE ORDER BEARS A NOTATION "CONFIRMING ORDER OF 7 MARCH 1961--- DO NOT DUPLICATE.' HOWEVER, THIS PURCHASE ORDER CONTAINS NO RESTRICTIONS ON THE USE OF THE ITEMS PURCHASED. THE FILE ALSO CONTAINS A COPY OF YOUR LETTER DATED MARCH 7, 1961, WHICH STATED IN MATERIAL PART:

"THIS WILL SERVE TO CONFIRM OUR VERBAL QUOTATION OF THIS DATE AS FOLLOWS:

TABLE

"10 EACH - CONNECTOR, POWER, CABLE $31.00 EA.

SPECIALTY TYPE NO. 6-60CS

"2 EACH - CONNECTOR, POWER, PANEL $21.00 EA.

SPECIALTY 6-60P

"TERMS: 1/10 PERCENT - 20 DAYS. THIS

MATERIAL IS SOLD AS PROPRIETARY

EQUIPMENT AND MAY NOT BE COPIED.

"DELIVERY: COMPLETE 75 DAYS AFTER

RECEIPT OF ORDER.

"F.O.B. SYOSSET, N.Y.

"WE THANK YOU FOR THE OPPORTUNITY OF QUOTING ON YOUR REQUIREMENTS.'

THE PROCURING AGENCY HAS ADVISED US THAT THIS SMALL QUANTITY PURCHASE WAS BASED ON A QUOTATION MADE BY YOUR COMPANY BY TELEPHONE IN WHICH YOU DID NOT MENTION ANY RESTRICTIONS ON THE USE OF THE CONNECTORS BY OR ON BEHALF OF THE GOVERNMENT; THAT TO THE BEST RECOLLECTION OF THE CONTRACTING OFFICER YOUR LETTER OF MARCH 7, 1961 TO THE FORT MONMOUTH PROCUREMENT OFFICE ARRIVED AFTER THE PURCHASE ORDER HAD BEEN MAILED; ALSO THAT THE CONTRACTING OFFICER DID NOT QUESTION THE STATEMENT IN THE LETTER READING "THIS MATERIAL IS SOLD AS PROPRIETARY EQUIPMENT AND MAY NOT BE COPIED" BECAUSE HE DID NOT CONSIDER ANY COPYING WOULD BE INVOLVED. IT IS THE PROCURING AGENCY'S POSITION, WHICH SEEMS REASONABLE UNDER THE EXISTING FACTS AND CIRCUMSTANCES, THAT INASMUCH AS NO RESTRICTION WAS MENTIONED WHEN YOUR TELEPHONE QUOTATION WAS MADE AND THE PURCHASE ORDER DID NOT CONTAIN A RESTRICTION NOR MENTION YOUR LETTER DATED MARCH 7, 1961, IT WAS INCUMBENT UPON YOU IF YOU WANTED THE RESTRICTION TO BECOME A PART OF THE PURCHASE ORDER CONTRACT TO SO ADVISE THE GOVERNMENT OR REJECT THE ORDER; THAT SINCE YOU DID NOT OBJECT TO THE ORDER IN ANY WAY, DELIVERY OF THE CONNECTORS AS CALLED FOR BY THE PURCHASE ORDER CONSTITUTED THE CONTRACT WITHOUT THE RESTRICTION AND THE CONNECTORS COULD BE USED FOR PROCUREMENT MODELS OR ANY OTHER PURPOSE DESIRED BY OR ON BEHALF OF THE GOVERNMENT. HOWEVER THIS MAY BE, WE HAVE BEEN ADVISED THAT CONNECTORS RECEIVED UNDER THIS CONTRACT WERE NOT COPIED OR USED AS PROCUREMENT MODELS.

INCLUDED IN THE AVAILABLE FILES IS A COPY OF A BROCHURE DESCRIBING AND ILLUSTRATING YOUR CONNECTORS AND LISTING DOMESTIC AND FOREIGN DISTRIBUTORS. IT SEEMS REASONABLE TO CONCLUDE, THEREFORE, THAT THEY HAVE BEEN PLACED ON THE MARKET AND MAY BE SO PURCHASED.

YOUR CONTENTIONS THAT THE PROCUREMENT VIOLATES PARAGRAPH 9-202.3 OF ASPR, IN OUR OPINION, ARE WITHOUT MERIT AS THIS REGULATION DEALS WITH "PROPRIETARY DATA" AND YOU ALLEGE THAT NO DRAWINGS, DESIGNS, OR PROPRIETARY DATA HAVE BEEN SOLD TO THE GOVERNMENT. FURTHERMORE, WE ARE ADVISED THAT SUCH DATA HAS NOT BEEN MADE AVAILABLE TO THE GOVERNMENT ON ANY OTHER BASIS. THE TERM "DATA" IS DEFINED IN ASPR 9 201 (A) TO MEAN "WRITINGS, SOUND RECORDINGS, PICTORIAL REPRODUCTIONS, DRAWINGS, OR OTHER GRAPHIC REPRESENTATIONS AND WORKS OF ANY SIMILAR NATURE WHETHER OR NOT COPYRIGHTED," WHICH CLEARLY WOULD EXCLUDE EQUIPMENT, SUCH AS THE CONNECTORS FOR PROCUREMENT HERE. AND, THE TERM "PROPRIETARY DATA" DEFINED IN ASPR 9-201 (B) TO MEAN "DATA PROVIDING INFORMATION CONCERNING THE DETAILS OF A CONTRACTOR'S SECRETS OF MANUFACTURE, SUCH AS MAY BE CONTAINED IN BUT NOT LIMITED TO HIS MANUFACTURING METHODS OR PROCESSES, TREATMENT AND CHEMICAL COMPOSITION OF MATERIALS, PLANT LAYOUT AND TOOLING, TO THE EXTENT THAT SUCH INFORMATION IS NOT DISCLOSED BY INSPECTION OR ANALYSIS OF THE PRODUCT ITSELF AND TO THE EXTENT THAT THE CONTRACTOR HAS PROTECTED SUCH INFORMATION FROM UNRESTRICTED USE BY OTHERS" LIKEWISE WOULD NOT PREVENT THE GOVERNMENT FROM USING AS PROCUREMENT MODELS THE CONNECTORS OBTAINED UNDER THE AFOREMENTIONED CONTRACT SC-605 IN VIEW OF THE TWO CONDITIONS UNDERSCORED. IN DOING SO THE GOVERNMENT OR ITS CONTRACTORS WOULD MERELY BE USING THE INFORMATION OBTAINED BY INSPECTION AND ANALYSIS OF THE PRODUCT ITSELF WHICH WAS NOT RESTRICTED UNDER THE TERMS OF THE CONTRACT. PARAGRAPH 9-202.3 OF ASPR CONTAINS A SHORT RESUME RELATING TO PRESCRIBED POLICIES FOR THE ESTABLISHMENT OF MULTIPLE SOURCES OF SUPPLY INCLUDING THE STATEMENT THAT THESE POLICIES "PROVIDE ONE MEANS FOR ACCOMPLISHING THIS OBJECTIVE AND ARE PARTICULARLY EFFECTIVE WHERE DATA, OTHER THAN "PROPRIETARY DATA," ACQUIRED BY THE GOVERNMENT, IS USEABLE, WITHOUT MORE, TO OBTAIN MULTIPLE SOURCES.' WE BELIEVE THE PROVISIONS FOR FURNISHING PRODUCTION DRAWINGS AND DATA INCLUDED IN THE INVITATIONS COVERING THE PROCUREMENT HERE INVOLVED ARE CONSISTENT WITH THESE REGULATORY REQUIREMENTS. THE CORRESPONDENCE SUBMITTED BY YOU INDICATES THAT PATENT APPLICATIONS ON THESE CONNECTORS HAVE BEEN FILED BY YOUR COMPANY WHICH ARE STILL PENDING. IT SEEMS EVIDENT, THEREFORE, THAT UNLESS AND UNTIL YOU ARE GRANTED A PATENT YOUR CLAIM FOR COMPENSATION FOR THE USE OF PATENT RIGHTS IS PREMATURE. THE PROCUREMENT AGENCY HAS ADVISED US HOWEVER, THAT IF A PATENT IS ISSUED AND YOUR COMPANY FILES A CLAIM FOR PATENT INFRINGEMENT, IT WILL BE CONSIDERED IN ACCORDANCE WITH PARAGRAPH 9- 105 OF ASPR AND THE ESTABLISHED PROCEDURE FOR HANDLING SUCH CLAIMS. YOUR ATTENTION IS INVITED ALSO TO THE PROVISIONS OF 28 U.S.C. 1498 WHEREBY YOU MAY BE PRIVILEGED TO FILE A SUIT IN THE COURT OF CLAIMS TO RECOVER REASONABLE COMPENSATION FOR PATENT INFRINGEMENT BY CONTRACTORS WHEN SUPPLYING GOVERNMENT REQUIREMENTS. SEE IN THIS CONNECTION OUR DECISIONS OF AUGUST 25, 1958, B-136916, AND OCTOBER 6, 1958, B-136916, 38 COMP. GEN. 276.

A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES UPON WHICH THE ADMINISTRATIVE DETERMINATIONS HAVE BEEN MADE IN THIS MATTER, IN OUR OPINION, REVEALS NO REASONABLE BASIS ON WHICH YOUR PROTEST MIGHT BE SUSTAINED AND IT IS THEREFORE DENIED.

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