B-154079, SEP. 13, 1965

B-154079, SEP. 13, 1965

TO SECRETARY OF THE ARMY:

FURTHER REFERENCE IS MADE TO LETTER DATED APRIL 2, 1965, FROM THE DIRECTOR OF PROCUREMENT, OFFICE OF THE ASSISTANT SECRETARY, DEPARTMENT OF THE ARMY, REQUESTING RECONSIDERATION OF OUR DECISION OF OCTOBER 14, 1964, B-154079, RELATING TO THE NEGOTIATION AND AWARD OF A CONTRACT FOR HELICOPTER TRANSPORTABLE MAINTENANCE SHELTERS BY THE UNITED STATES ARMY AVIATION MATERIEL COMMAND, ST. LOUIS, MISSOURI. THE BASIS STATED FOR THE REQUEST IS THAT THE ADMINISTRATIVE REPORT FURNISHED AT THE TIME OF THE DECISION DID NOT CONVEY ALL THE CIRCUMSTANCES REGARDING THE PROTEST.

A COPY OF THE REQUEST FOR RECONSIDERATION WAS TRANSMITTED TO HUDSON AND CREYKE, WASHINGTON, C., COUNSEL FOR COUSE, IN ACCORDANCE WITH THEIR INFORMAL REQUEST, INVITING ATTENTION PARTICULARLY TO THE LICENSE ENTERED INTO FEBRUARY 5, 1959, BETWEEN COUSE AND THE DEPARTMENT OF THE ARMY NOT PREVIOUSLY MENTIONED BY EITHER YOUR DEPARTMENT OR COUSE. SUPPLEMENTAL DOCUMENTS AND INFORMATION WERE FURNISHED BY YOUR DEPARTMENT AND BY COUNSEL FOR COUSE AND A MEETING WAS HELD IN OUR OFFICE ON AUGUST 10, 1965, BETWEEN THE REPRESENTATIVES OF YOUR DEPARTMENT AND COUSE FOR THE PURPOSE OF RESOLVING SOME OF THE FACTUAL MATTERS IN DISPUTE AND REACHING A COMMON GROUND AS TO THE ISSUES PRESENTED.

IT WAS BROUGHT OUT AT THE MEETING ON AUGUST 10, 1965, THAT THE ONLY NEW QUESTION SUBMITTED IN THE CASE SINCE THE DECISION OF OCTOBER 14, 1964, WAS THAT OF THE LICENSE AGREEMENT WITH COUSE REFERRED TO IN THE "DEPARTMENT OF THE ARMY COMMENTS" FORWARDED WITH THE LETTER OF APRIL 2, 1965, REQUESTING RECONSIDERATION. THE PARTIES WERE IN AGREEMENT, HOWEVER, THAT THERE WAS NO NECESSITY FOR MENTIONING THIS LICENSE AGREEMENT AS IT HAS NO IMMEDIATE RELATIONSHIP TO THE PARTICULAR ITEM INVOLVED. THIS WAS CONFIRMED IN THE MEMORANDUM OF JUNE 21, 1965, SUBSEQUENTLY SUBMITTED WITH A LETTER DATED AUGUST 13, 1965, FROM YOUR DEPARTMENT.

IT WAS ALSO BROUGHT OUT AT THE MEETING THAT THE QUESTION PRESENTED HERE IS NOT WHETHER THE GOVERNMENT HAS ACQUIRED THE RIGHT TO USE PROPRIETARY DATE FURNISHED AS AN END ITEM UNDER THE TERMS OF A CONTRACT FOR RESEARCH AND DEVELOPMENT OR A FOLLOW-ON PRODUCTION CONTRACT. RATHER, THE FACTS AS HERETOFORE RELATED IN THE DECISION OF OCTOBER 14, 1964, DISCLOSE THAT COUSE DEVELOPED AND DESIGNED THE ITEM IN QUESTION, SOLELY AT ITS OWN EXPENSE, AND VOLUNTARILY SUBMITTED THE DESIGN AND DATA PERTAINING THERETO TO REPRESENTATIVES OF THE DEPARTMENT OF THE ARMY FOR CONSIDERATION AND EVALUATION, ALL FOR THE ONE PURPOSE--- AND THAT PURPOSE ONLY--- OF INDUCING THEM TO PURCHASE THE ITEM OFFERED AS A GOVERNMENT REQUIREMENT. CF. HEYMAN V. AR. WINARICK, INC. (2D C.A. 1963), 325 F.2D 584, UPHOLDING THE VIEW THAT A CONFIDENTIAL RELATIONSHIP ARISES WHEN A SELLER AND BUYER NEGOTIATE FOR A SALE WHICH RESTRICTS THE PROSPECTIVE PURCHASER FROM DISCLOSING OR USING VITAL DATA RECEIVED FROM THE WOULD-BE SELLER; THAT AN EXPRESS CONTRACT IS NOT REQUIRED, AND DAMAGES MAY BE RECOVERED FOR IMPROPER USE BY THE PROSPECTIVE PURCHASER.

THE BASIC ISSUE IN THIS CASE THEN IS SIMPLY THIS. WAS IT PROPER PROCUREMENT ACTION TO APPROPRIATE THE VITAL INFORMATION AND DATA SUBMITTED BY COUSE DURING THE NEGOTIATIONS INITIATED AND PURSUED FOR THE PURPOSE OF OBTAINING A CONTRACT TO MANUFACTURE AND DELIVER THE COUSE DESIGNED SHELTER, AND USE THIS INFORMATION AND DATA FOR THE PURPOSE OF NEGOTIATING AND AWARDING THE CONTRACT TO FAB-WELD CORPORATION, A COMPETITOR. IN THE DECISION OF OCTOBER 14, 1964, WE EXPRESSED THE VIEW THAT SUCH ACTION WAS INCONSISTENT WITH THE PRINCIPLES AND AUTHORITIES SET OUT AND REFERRED TO THEREIN BELIEVED TO BE FOR CONSIDERATION AND APPLICATION UNDER THE FACTS AND CIRCUMSTANCES DISCLOSED.

AS IN THE CASE CONSIDERED IN OUR DECISION OF AUGUST 27, 1964, B 153941, WHICH WAS CITED IN OUR DECISION OF OCTOBER 14, 1964, ON THIS MATTER, IT SEEMS EVIDENT THAT THE RESPONSIBLE PROCUREMENT PERSONNEL HAVE MISCONCEIVED THE RIGHTS OF COUSE AND THE OBLIGATIONS OF THE GOVERNMENT. WHILE IT MAY BE THAT THE SHELTERS COULD HAVE BEEN DESIGNED AND PRODUCED BY REFERRING TO EXISTING PATENTS AND WITHOUT REFERENCE TO THE DESIGN DATA AND INFORMATION SUBMITTED BY COUSE, THE RECORD CLEARLY SHOWS THAT THIS WAS NOT DONE. THE COUSE DESIGN AND THE PROPOSAL WITH VITAL INFORMATION FOR PRODUCING AND DELIVERING THE SHELTERS WERE SUBMITTED TO THE GOVERNMENT AND COUSE WAS LED TO BELIEVE THAT A CONTRACT WAS TO BE CONSUMMATED. THE NEGOTIATIONS DID NOT INCLUDE PROCUREMENT OF THE DATA AND INFORMATION IN QUESTION. CF. FRANKE V. WILTSCHEK (2D C.A. 1953), 209 F.2D 493, WHERE THE COURT REVIEWS THE AUTHORITIES AND TREND OF THE LAW TO PROTECT TRADE SECRETS GAINED UNDER A CONFIDENTIAL RELATIONSHIP AGAINST PROPER DISCLOSURE; ALSO SCHREVER V. CASCO PRODUCTS CORP. (2D C.A. 1951), 190 F.2D 921, CERT.DEN., 342 U.S. 913, HOLDING A BREACH OF THIS CONFIDENTIAL RELATIONSHIP IS UNFAIR COMPETITION.

THE FACT THAT THE SHELTER WAS DESIGNED BY COUSE IS NOT IN DISPUTE BUT YOUR DEPARTMENT CONTENDS THAT "THE BROCHURE AND OTHER INFORMATION OBTAINED FROM COUSE AND FURNISHED TO FAB-WELD BY THE GOVERNMENT CONTAINED NO MARKINGS OF ANY KIND PLACING RESTRICTIONS IMPOSED BY COUSE ON THE USE OF THAT INFORMATION, THIS IN SPITE OF LONG STANDING ASPR PROVISIONS SPECIFYING RIGHTS AND LIMITATIONS IN REGARD TO USE OF CONTRACTOR SUPPLIED DATA.' AS POINTED OUT ABOVE, THIS WAS NOT "CONTRACTOR SUPPLIED DATA" AND ASPR 3-506.2 EXPRESSLY PROVIDES THAT "NO INFORMATION CONTAINED IN ANY PROPOSAL * * * SHALL BE MADE AVAILABLE TO THE PUBLIC, OR TO ANYONE WITHIN THE GOVERNMENT NOT HAVING A LEGITIMATE INTEREST THEREIN * * *.'

FURTHERMORE, IT SEEMS ABUNDANTLY CLEAR THAT THE DATA AND INFORMATION WERE SUBMITTED BY COUSE UNDER CIRCUMSTANCES ESTABLISHING A RELATIONSHIP OF TRUST AND CONFIDENCE; THAT THE INFORMATION SUBMITTED INCLUDED "TRADE SECRETS" AS THAT TERM IS ORDINARILY UNDERSTOOD, AND THAT THE RIGHT TO PROTECTION AGAINST DISCLOSURE OF SUCH INFORMATION IS WELL ESTABLISHED. SEE THE AUTHORITIES CITED ABOVE AND CF. UNITED STATES V. UNITED STATES TARIFF COMMISSION (C.A.D.C. 1925), 6TH F.2D 491, 495; FERROLINE CORP. V. GENERAL ANILINE AND FILM CORP. (7TH C.A. 1953), 207 F.2D 912, 920-921; HEYMAN V. AR. WINARICK, INC. (2D C.A. 1963), 325 F.2D 584, 590-591; ALSO, FEDERAL COMMUNICATIONS COMMISSION V. COHN (D.C.N.Y. 1957), 154 F.SUPP. 899, 912, WHERE THE COURT REFERS TO THE PROVISIONS OF 18 U.S.C. 1905,"PROHIBITING OFFICERS OR EMPLOYEES OF FEDERAL AGENCIES FROM DISCLOSING CONFIDENTIAL INFORMATION RECEIVED BY THEM "IN ANY MANNER OR TO ANY EXTENT NOT AUTHORIZED BY LAW.'" IF THE GOVERNMENT INTENDED TO USE THE DESIGN AND RELATED DATA OTHER THAN FOR THE PURPOSE OF NEGOTIATING THE CONTRACT WITH COUSE IT WAS INCUMBENT ON THE GOVERNMENT TO MAKE THIS CLEAR TO COUSE.

IT IS ALSO URGED BY YOUR DEPARTMENT THAT THE DRAWINGS AND AT LEAST SOME OF THE OTHER INFORMATION SUBMITTED BY COUSE WERE NOT USED IN NEGOTIATING THE CONTRACT WITH FAB-WELD. HOWEVER, THE CIRCUMSTANCES SURROUNDING THE SUBMISSION OF THE COUSE DESIGN AND DRAWINGS, THE RELATIONSHIP OF THE SUBSEQUENT NEGOTIATIONS WITH FAB-WELD AND THE SIMILARITY OF THE ITEM OBTAINED FROM FAB-WELD LEAD TO THE LEGAL INFERENCE THAT THE MATERIAL SUBMITTED BY COUSE WAS USED IN AWARDING THE CONTRACT TO FAB-WELD AND THAT THE FAB-WELD SHELTER WAS PATTERNED AFTER THE COUSE DESIGN. SEE IN THIS CONNECTION THE CASE OF SMITH V. DRAVO CORP. (7 C.A. 1953), 203 F.2D 369, WHEREIN THE COURT STATED AT PAGE 377:

"DEFENDANT'S OWN EVIDENCE DISCLOSES THAT IT DID NOT BEGIN TO DESIGN ITS CONTAINER UNTIL AFTER IT HAD ACCESS TO PLAINTIFFS' PLANS. DEFENDANT'S ENGINEERS ADMITTEDLY REFERRED TO PLAINTIFFS' PATENT APPLICATIONS, AS THEY SAID, TO AVOID INFRINGEMENT. IT IS NOT DISPUTED THAT, AT THE URGING OF AGWILINES, DEFENDANT REVISED ITS PROPOSED DESIGN TO INCORPORATE THE FOLDING LEG AND SOCKET PRINCIPLES OF PLAINTIFFS' CONTAINERS. THESE EVIDENTIARY FACTS, TOGETHER WITH THE STRIKING SIMILARITY BETWEEN DEFENDANT'S AND PLAINTIFFS' FINISHED PRODUCT, WERE MORE THAN ENOUGH TO CONVICT DEFENDANT OF THE IMPROPER USE OF THE STRUCTURAL INFORMATION OBTAINED FROM PLAINTIFFS.

"AS A GENERAL RULE THE SIMILARITY STANDING ALONE IS AN ADEQUATE BASIS UPON WHICH TO FIND MISAPPROPRIATION. THUS, IN HOELTKE V. C. M. KEMP MFG. CO., 4 CIR., 80 F.2D 912, 924, THE COURT SAID:

" "THE SIMILARITY OF DEFENDANT'S DEVICE TO THAT OF COMPLAINANT IS STRONG PROOF THAT ONE WAS COPIED FROM THE OTHER.'"

CF. NASH V. ALASKA AIRLINES (S.D.N.Y. 1950), 94 F.SUPP. 428, WHERE THE COURT IN DRAWING A SIMILAR INFERENCE AT PAGE 430 EXPRESSED THE VIEW THAT THE SUBMISSION OF THE DESIGNS INVOLVED TO THE DEFENDANT AND HIS RETENTION THEREOF UNTIL AFTER THE USE IN ADVERTISING AND OTHER MATTERS OF AN ESSENTIALLY SIMILAR DESIGN CREATED AN INFERENCE THAT THE DEFENDANT USED THE PLAINTIFF'S DESIGN.

WE UNDERSTAND THAT NEGOTIATIONS WERE INITIATED AT A MEETING ON NOVEMBER 5, 1964, BETWEEN REPRESENTATIVES OF YOUR DEPARTMENT AND COUSE FOR THE PURPOSE OF CONSIDERING A POSSIBLE PATENT INFRINGEMENT LIABILITY AND TO DETERMINE WHETHER A LICENSE TO PATENTS AND TECHNICAL DATA RELATING TO THIS ITEM SHOULD BE PROCURED FROM COUSE. AT THE MEETING ON AUGUST 10, 1965, IT WAS DEVELOPED THAT DATA PACKAGES MAY BE PROCURED WHERE INFRINGEMENT OF A VALID PATENT IS INDICATED AND THAT UNDER THE ESTABLISHED PRACTICE OF YOUR DEPARTMENT SUCH PROCUREMENTS MAY BE MADE EVEN WHERE THE PROPRIETARY CHARACTER OF THE DATA PACKAGE IS NOT ENTIRELY FREE FROM DOUBT; FOR EXAMPLE, WHEN IT IS DETERMINED THAT SUCH PROCUREMENT WOULD RESULT IN A SAVINGS TO THE GOVERNMENT CONSIDERING THE COST WHICH NECESSARILY WOULD HAVE TO BE INCURRED TO PERFORM THE RESEARCH AND DESIGN WORK WITHOUT THE AID OF THE DATA PACKAGE AND THE TIME ELEMENT REQUIRED FOR THE PRODUCTION AND DELIVERY OF THE END ITEM. THE REPRESENTATIVES OF YOUR DEPARTMENT STATED THAT FORMAL ADVICE REGARDING THIS ASPECT OF THE MATTER WILL BE GIVEN TO COUSE. THIS DETERMINATION, OF COURSE, IS AN ADMINISTRATIVE RESPONSIBILITY AND DOES NOT PREVENT COUSE FROM PURSUING OTHER REMEDIES WHICH MAY BE AVAILABLE.

BASED ON A CAREFUL REVIEW OF THE MATTER IN THE LIGHT OF THE ADDITIONAL INFORMATION FURNISHED BY YOUR DEPARTMENT WE FIND NO REASONABLE BASIS FOR MODIFYING OUR DECISION OF OCTOBER 14, 1964, WHICH IS AFFIRMED.