B-156709, JUL. 6, 1965

B-156709, JUL. 6, 1965

TO VELOCITY STEAM PRODUCTION ENGINEERING, INC.:

REFERENCE IS MADE TO YOUR LETTERS OF MAY 5 AND 21, 1965, PROTESTING AGAINST AWARD OF A CONTRACT TO SOUTHERN MACHINERY COMPANY FOR TRAPLESS AUTOMATIC CONTROL LAUNDRY SYSTEMS UNDER DEFENSE SUPPLY AGENCY REQUEST FOR PROPOSALS DSA-4-65-1976, ON THE GROUND THAT DIFFERENT STANDARDS WERE EMPLOYED IN THE EVALUATION OF PROPOSALS SO THAT A PROPER EVALUATION COULD NOT BE MADE, AND BECAUSE THE SYSTEM TO BE UTILIZED BY THE CONTRACTOR WILL INFRINGE YOUR PATENTS.

THE SUBJECT REQUEST FOR PROPOSALS CALLED FOR EITHER THE " "VELOCITY STEAM SYSTEM" AS MANUFACTURED BY VELOCITY STEAM PRODUCTS ENGINEERING INC., "THE ARBOGAST VAPOR DENSITY CONTROL SYSTEM" AS MANUFACTURED BY SOUTHERN MACHINERY COMPANY OR A SYSTEM EQUAL TO THESE TWO SYSTEMS.' THE AIR FORCE, WHICH WAS THE REQUISITIONING AGENCY, HAD PREVIOUSLY PURCHASED THE VELOCITY STEAM SYSTEM ON A SOLE-SOURCE BASIS. HOWEVER, BECAUSE CIVIL ENGINEERING AND PROCUREMENT COMPONENTS IN THE AIR FORCE OBJECTED TO THE HIGH COST OF THE SYSTEM AND ITS PURCHASE ON A SOLE SOURCE BASIS, AN EFFORT WAS MADE TO LOCATE OTHER SOURCES OF SUPPLY WHICH MIGHT BE ABLE TO PROVIDE EQUIPMENT OFFERING SIMILAR RESULTS SO THAT PROCUREMENTS MIGHT BE LET TO COMPETITIVE BIDDING WITH THE POSSIBILITY OF REDUCING THE COST TO THE GOVERNMENT. WAS LEARNED THAT THE MARINE CORPS HAD UTILIZED BOTH THE ARBOGAST AND THE VELOCITY STEAM SYSTEMS IN ITS LAUNDRY AT PARRIS ISLAND AND HAD FOUND THE ARBOGAST SYSTEM SATISFACTORY. ON THE BASIS OF THE MARINE CORPS EXPERIENCE WITH BOTH SYSTEMS AND ITS OWN EXPERIENCE WITH THE VELOCITY STEAM SYSTEM, THE AIR FORCE DRAFTED A STATEMENT OF WORK AND GENERAL REQUIREMENTS FOR THE NEW SYSTEMS IT PROPOSED TO PURCHASE. THIS STATEMENT WAS INCLUDED IN THE DEFENSE SUPPLY AGENCY REQUEST FOR PROPOSALS IN ADDITION TO THE STATEMENT IN THE REQUEST FOR PROPOSALS QUOTED ABOVE INDICATING THAT EITHER SYSTEM OR A SYSTEM EQUAL TO EITHER SYSTEM WOULD BE ACCEPTABLE.

YOUR COMPANY AND SOUTHERN MACHINERY COMPANY WERE THE ONLY TWO FIRMS WHICH SUBMITTED PROPOSALS TO THE GOVERNMENT. EACH COMPANY OFFERED ITS OWN SYSTEM. BECAUSE THE PROPOSAL FROM YOUR COMPANY CHARACTERIZED THE EQUIPMENT AS "SPECIAL," AND THE AIR FORCE HAD NOT DETERMINED THAT ANY OTHER EQUIPMENT OTHER THAN THE MANUFACTURER'S STANDARD EQUIPMENT WOULD BE ACCEPTABLE, YOU WERE REQUESTED TO EXPLAIN THE MEANING OF THE TERM "SPECIAL.' YOU EXPLAINED THAT YOU DID NOT MEAN TO OFFER ANYTHING OTHER THAN YOUR STANDARD EQUIPMENT. THEREFORE, SINCE THE REQUEST FOR PROPOSALS INVITED OFFERS ON THE BRAND-NAMED SYSTEMS AND EACH OF THE PROPONENTS INDICATED AN INTENTION TO COMPLY THEREWITH AND NEITHER PROPONENT INDICATED AN INTENTION TO DEVIATE FROM THE REQUEST FOR PROPOSALS REQUIREMENTS, NO DIFFERENT METHOD OF EVALUATION SEEMS TO HAVE BEEN EMPLOYED FOR ONE PROPONENT THAN WAS EMPLOYED FOR THE OTHER.

MOREOVER, SINCE THE INVITATION PROVIDED FOR PROPOSALS ON THE ARBOGAST SYSTEM AND THAT WAS THE SYSTEM OFFERED BY THE LOW PROPONENT, AND NO EXCEPTION WAS TAKEN TO ANY OF THE REQUIREMENTS IN THE REQUEST FOR PROPOSALS, THE ACCEPTANCE OF THE LOW PROPOSAL HAS RESULTED IN A VALID AND BINDING CONTRACT. HENCE, THERE IS NO LEGAL BASIS FOR CANCELLATION OF THE EXISTING CONTRACT. THE FACT THAT YOU ALLEGE THAT THE SUCCESSFUL CONTRACTOR WILL INFRINGE YOUR PATENTS IN COMPLYING WITH THE STATEMENT OF WORK DOES NOT CHANGE THE SITUATION. THE CONTRACT CONTAINS A PATENT INDEMNITY CLAUSE WHICH REQUIRES THE CONTRACTOR TO SAVE THE GOVERNMENT HARMLESS FROM ANY PATENT INFRINGEMENT LIABILITY. IN ADDITION, OUR OFFICE HAS HELD IN A NUMBER OF DECISIONS THAT IT WOULD BE IMPROPER TO REJECT A LOW OFFER SIMPLY BECAUSE OF PROBABLE PATENT INFRINGEMENT. 38 COMP. GEN. 276, 39 ID. 760 AND 40 ID. 294. SEE, ALSO, B-148135, APRIL 30, 1962, COPY ENCLOSED, WHEREIN THE SAME CONCLUSION WAS REACHED IN CONNECTION WITH ALLEGED PATENT INFRINGEMENT IN A CONTRACT AWARDED ON A NEGOTIATED BASIS.

HOWEVER, IF YOUR PATENTS WILL BE INFRINGED, YOU ARE NOT WITHOUT RECOURSE. STATUTORY PROVISIONS CARRIED IN 28 U.S.C. 1498 PROVIDE, IN PERTINENT PART, THAT WHENEVER AN INVENTION COVERED BY A PATENT OF THE UNITED STATES IS USED OR MANUFACTURED BY OR FOR THE UNITED STATES WITHOUT LICENSE OF THE OWNER OR LAWFUL RIGHT TO USE OR MANUFACTURE THE INVENTION, WHICH INCLUDES USE OR MANUFACTURE FOR THE UNITED STATES BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION AND CONSENT OF THE GOVERNMENT, THE OWNER'S REMEDY SHALL BE BY ACTION AGAINST THE UNITED STATES IN THE COURT OF CLAIMS FOR THE RECOVERY OF HIS REASONABLE AND ENTIRE COMPENSATION FOR SUCH USE AND MANUFACTURE. ASIDE FROM REDRESS TO THE COURT OF CLAIMS, A PATENT OWNER MAY FILE AN ADMINISTRATIVE CLAIM FOR PATENT INFRINGEMENT. IN THAT CONNECTION, 10 U.S.C. 2386 AUTHORIZES THE USE OF FUNDS APPROPRIATED FOR A MILITARY DEPARTMENT FOR RELEASES, BEFORE SUIT IS BROUGHT, FOR PAST INFRINGEMENT OF PATENTS.

THE DEFENSE SUPPLY AGENCY HAS ADVISED US THAT IF YOU CONSIDER THAT YOUR PATENTS ARE INFRINGED, YOU SHOULD ASSERT A CLAIM FOR INFRINGEMENT TO THE PATENT COUNSEL, HEADQUARTERS, DEFENSE SUPPLY AGENCY, CAMERON STATION, ALEXANDRIA, VIRGINIA 22314.

REGRESS TO THE COURT OF CLAIMS OR TO THE DEFENSE SUPPLY AGENCY APPEARS TO BE THE ONLY COURSE OPEN TO YOU IN THE CIRCUMSTANCES OF THIS CASE.