A-57194, OCTOBER 10, 1934, 14 COMP. GEN. 298

A-57194, OCTOBER 10, 1934, 14 COMP. GEN. 298

CONTRACTS - PATENTS - SURETY BONDS WHERE IT IS NOT ADMINISTRATIVELY KNOWN OR CANNOT BE ADMINISTRATIVELY ESTABLISHED, WHAT PATENTS MAY BE INVOLVED IN THE MANUFACTURE OF EQUIPMENT FOR THE UNITED STATES UNDER CONTRACT, THE QUESTION MAY BE LEFT TO THE COURTS IN A SUIT BY THOSE OWNING THE PATENTS CLAIMED TO BE INFRINGED, BUT THE CONTRACT AS WELL AS THE SURETY BOND SHOULD BE IN SUCH TERMS THAT THE CONTRACTOR AND SURETY WILL BE LIABLE TO THE UNITED STATES FOR DAMAGES WHICH THE UNITED STATES MAY BE REQUIRED TO PAY BY REASON OF THE VIOLATION BY THE CONTRACTOR OF THE PATENT RIGHTS OF OTHERS.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF COMMERCE, OCTOBER 10, 1934:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF AUGUST 20, 1934, AS FOLLOWS:

THE DIVISION OF PURCHASES AND SALES OF THIS DEPARTMENT HAS AWARDED TO THE HYGRADE SYLVANIA CORPORATION ON PROPOSAL 26147, FOR RADIO TUBES, SCHEDULES 2, 3, 5, 9, 10, 12, 13, AND 14, AS THE LOWEST BIDDER MEETING REQUIREMENTS OF THE SPECIFICATIONS FOR THIS COMBINATION OF SCHEDULES, CONSIDERING THE 10 PERCENT DISCOUNT OFFERED, AND SCHEDULE II WAS AWARDED TO THE AMPEREX ELECTRONIC PRODUCTS AS THE LOWEST BID RECEIVED, BOTH AWARDS BEING MADE SUBJECT TO THE APPROVAL OF THE CONTRACTS BY THE SECRETARY OF COMMERCE. THE WESTINGHOUSE LAMP COMPANY HAS FILED WITH THIS DEPARTMENT A PROTEST AGAINST THE MAKING OF AN AWARD ON THIS PROPOSAL TO OTHER THAN A HOLDER OF A VALID PATENT LICENSE.

THE WESTINGHOUSE LAMP COMPANY CITES CERTAIN PATENTS IN CONNECTION WITH SCHEDULES 2, 3, 5, 9, 10, 11, 12, 13, AND 14, ON WHICH SCHEDULES THAT COMPANY AFFIRMS THAT IT IS THE LOWEST BIDDER UNDER THE PROPOSAL HOLDING VALID PATENT LICENSES UNDER THE PATENTS LISTED IN THEIR LETTER FOR THE MANUFACTURE AND SALE TO THE GOVERNMENT OF ALL OF THE TUBES UPON WHICH FORMAL BID WAS DULY SUBMITTED. THE FOLLOWING PERTINENT PAPERS ARE FORWARDED FOR YOUR CONSIDERATION IN CONNECTION WITH THIS PROTEST:

WESTINGHOUSE LAMP COMPANY LETTER, JUNE 20, 1934.

WESTINGHOUSE LAMP COMPANY SUPPLEMENTAL LETTER, AUGUST 6, 1934.

HYGRADE SYLVANIA CORPORATION LETTER, AUGUST 15, 1934.

ABSTRACT OF BIDS AND AWARD, JULY 5, 1934.

BUREAU'S RECOMMENDATION, JUNE 28, 1934.

BID OF HYGRADE SYLVANIA CORPORATION.

BID OF WESTINGHOUSE LAMP COMPANY.

BID OF AMPEREX ELECTRONIC PRODUCTS.

SPECIFICATIONS AND DRAWINGS.

PERFORMANCE BONDS WERE REQUIRED AND OBTAINED FROM EACH OF THE FIRMS TO WHOM AWARDS WERE MADE, AND THE GOVERNMENT'S INTERESTS ARE PROTECTED BY THE FOLLOWING CLAUSE, WHICH IS CONTAINED IN THE BIDS:

"THE CONTRACTOR SHALL HOLD AND SAVE THE GOVERNMENT, ITS OFFICERS, AGENTS, SERVANTS AND EMPLOYEES HARMLESS FROM LIABILITY OF ANY NATURE OR KIND, INCLUDING COSTS AND EXPENSES, FOR OR ON ACCOUNT OF ANY PATENTED OR UNPATENTED INVENTION, ARTICLE OR APPLIANCE MANUFACTURED OR USED IN THE PERFORMANCE OF THIS CONTRACT, INCLUDING THEIR USE BY THE GOVERNMENT, UNLESS OTHERWISE SPECIFICALLY STIPULATED IN THIS CONTRACT.'

AS THESE TUBES ARE URGENTLY NEEDED, YOUR DECISION AS TO THE APPROVAL OF THE CONTRACTS IN QUESTION IS RESPECTFULLY REQUESTED AT THE EARLIEST PRACTICABLE DATE.

IN VIEW OF THE PROTEST OF THE WESTINGHOUSE LAMP CO. CONTAINED IN ITS LETTER OF AUGUST 6, 1934, AGAINST THE AWARD OF THE CONTRACT TO OTHER THAN THE HOLDER OF A VALID PATENT LICENSE AND THE STATEMENT OF THE HYGRADE SYLVANIA CORPORATION IN ITS LETTER OF AUGUST 14, 1934, THAT SAID CORPORATION KNEW OF NO VALID PATENT OWNED BY THE HIGHER BIDDER WHICH WOULD BE INVOLVED IN THE EQUIPMENT TO BE FURNISHED UNDER THE CONTRACT, YOU WERE REQUESTED IN MY LETTER OF AUGUST 29, 1934, TO FURNISH A STATEMENT AS TO WHAT PATENTS WOULD BE INVOLVED IN THE MANUFACTURE OF THE EQUIPMENT TO BE DELIVERED UNDER THE PROPOSAL AND WHAT WAS THE ESTIMATE OF THE DEPARTMENT BASED UPON THE UNITS TO BE ACQUIRED, TOGETHER WITH INFORMATION AS TO WHETHER IT WAS THE OPINION OF THE DEPARTMENT OF COMMERCE THAT THE HYGRADE SYLVANIA CORPORATION AND AMPEREX ELECTRONIC PRODUCTS WOULD INFRINGE ANY OF THE PATENTS INVOLVED IN THE MANUFACTURE OF THE EQUIPMENT WHICH MAY NOT BE OWNED OR CONTROLLED BY SAID COMPANY, IT APPEARING THAT THERE HAD NOT BEEN FOLLOWED THE PROCEDURE STATED IN 13 COMP. GEN. 173, 176, OF REQUIRING IN THE SPECIFICATIONS THAT THE BIDDER STATE THE PATENTS INVOLVED IN THE EQUIPMENT WHICH THEY PROPOSE TO DELIVER AND WHETHER THEY OWNED OR HAD A LICENSE TO USE SUCH PATENTS. YOUR LETTER OF SEPTEMBER 12, 1934, HAS REPLIED IN PERTINENT PART, THAT:

AS MUCH AS THE DEPARTMENT WOULD LIKE TO COMPLY WITH YOUR REQUEST, IT IS UNABLE TO SUPPLY THE INFORMATION YOU DESIRE. THE DEPARTMENT IS IN NO POSITION TO SAY JUST WHAT PATENTS WILL BE INVOLVED IN THE MANUFACTURE OF THE EQUIPMENT OR TO ESTIMATE THE VALUE OF THE USE OF THOSE PATENTS. WITHOUT SUCH INFORMATION, NO OPINION AS TO THE INFRINGEMENT OF PATENTS COULD BE EXPRESSED.

IT IS SUGGESTED THAT THE QUESTIONS OF PATENT INFRINGEMENTS AND THE DAMAGES RECOVERABLE BY THE HOLDERS OF THE PATENTS INFRINGED ARE QUESTIONS WHICH COULD BE DETERMINED ONLY BY THE COURTS.

WHERE IT IS NOT ADMINISTRATIVELY KNOWN OR CANNOT BE ADMINISTRATIVELY ESTABLISHED WHAT PATENTS ARE INVOLVED IN THE MANUFACTURE OF THE EQUIPMENT, THE QUESTION MAY BE LEFT TO THE COURTS IN A SUIT BY THOSE OWNING THE PATENTS CLAIMED TO BE INFRINGED IN THE MANUFACTURE OF THE EQUIPMENT, BUT THE CONTRACT SHOULD BE IN SUCH TERMS THAT THE CONTRACTOR AND SURETY WILL BE LIABLE TO THE UNITED STATES FOR ANY DAMAGES WHICH MAY BE RECOVERED BY THE OWNER OF SUCH PATENTS IN A SUIT AGAINST THE GOVERNMENT. THE FIRST LINE OF THE PARAGRAPH TO BE INCLUDED IN THE CONTRACT WHICH IS QUOTED IN YOUR LETTER OF AUGUST 20, SUPRA, SHOULD BE MODIFIED TO REQUIRE THAT "THE CONTRACTOR AND ITS SURETY SHALL HOLD AND SAVE THE GOVERNMENT," ETC., WITH A CORRESPONDING PROVISION IN THE SURETY BOND. THAT IS TO SAY, THE LIABILITY WHICH THE SURETY ORDINARILY ASSUMES UNDER ITS BOND FOR THE FAITHFUL PERFORMANCE OF A GOVERNMENT CONTRACT SHOULD SPECIFICALLY INCLUDE LIABILITY FOR DAMAGES WHICH THE UNITED STATES MAY BE REQUIRED TO PAY BY REASON OF THE VIOLATION BY THE CONTRACTOR OF THE PATENT RIGHTS OF OTHERS. SEE WAR DEPARTMENT CONTRACT W-978-ENG-546, DATED NOVEMBER 2, 1933, WITH THE SPERRY GYROSCOPE CO.

IF THE PARAGRAPH IN QUESTION IS SO AMENDED, AND A SPECIFIC OBLIGATION TO THE SAME EFFECT IS INCLUDED IN THE BONDS, THIS OFFICE WILL MAKE NO OBJECTION TO THE USES OF APPROPRIATED MONEYS FOR PAYMENT UNDER THE CONTRACTS TO THE HYGRADE SYLVANIA CORPORATION AND AMPEREX ELECTRONIC PRODUCTS FOR THE RADIO TUBES IN QUESTION, IF THE CONTRACT BE OTHERWISE CORRECT.