B-157485, NOV. 26, 1965

B-157485, NOV. 26, 1965

TO BLOCK ENGINEERING, INC.:

REFERENCE IS MADE TO YOUR TELEGRAM DATED AUGUST 16, 1965, PROTESTING THE AWARD OF A CONTRACT BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) UNDER REQUEST FOR PROPOSAL (RFP) NO. 651-42668 206, DATED APRIL 23, 1965, TO ANY CONCERN OTHER THAN RADIO CORPORATION OF AMERICA (RCA), FOR WHICH YOUR COMPANY IS A PROPOSED SUBCONTRACTOR. IT IS THEREIN ALLEGED THAT AN AWARD TO ANY CONTRACTOR BUT RCA WOULD BE A VIOLATION OF BOTH YOUR PROPRIETARY RIGHTS AND PATENT POSITION ON THE INTERFEROMETER SPECTROMETER TO BE PROCURED BY THE ABOVE-MENTIONED RFP.

THE REQUEST FOR PROPOSAL, CALLING FOR PROPOSALS ON A QUANTITY OF INFRARED INTERFEROMETER SPECTROMETERS (IRIS), WAS MAILED TO 45 PROSPECTIVE CONTRACTORS ON APRIL 23, 1965.

THE MAIN SPECIFICATION TO WHICH OFFERS WERE TO BE RESPONSIVE IS SPECIFICATION S-653-P-5, DATED FEBRUARY 24, 1965. THIS IS A PERFORMANCE SPECIFICATION WHICH DEFINES THE REQUIREMENTS FOR THE DESIGN, DEVELOPMENT, FABRICATION AND TESTING OF THE INTERFEROMETER SPECTROMETER TO BE DEVELOPED AND INSTALLED IN THE NIMBUS "B" METEOROLOGICAL SATELLITE. FURTHER, THE RFP AND SECTION 3 OF SPECIFICATION S-653-P-5 REQUIRED THE CONTRACTOR TO PERFORM A STUDY TO COVER THE BASIC DESIGN OF THE INSTRUMENT TO BE CONSTRUCTED, THE CONSTRUCTION OF AN ENGINEERING MODEL TO VERIFY THE PERFORMANCE OF THE DESIGN SELECTED, FOLLOWED BY A PRE-PROTOTYPE VERSION, A PROTOTYPE MODEL, AND FINALLY THREE FLIGHT MODELS OF THE DEVELOPED INSTRUMENT. INCLUDED IN THE SPECIFICATION AS A REFERENCE DOCUMENT IS A GODDARD SPACE FLIGHT CENTER (GSFC) REPORT (X-650-65-75) PREPARED IN CONJUNCTION WITH THE UNIVERSITY OF MICHIGAN ON AN IRIS EXPERIMENT WHICH CONTAINS DETAILED INFORMATION CONCERNING THE INSTRUMENT USED. BY LETTER DATED MAY 8, 1965, YOUR COMPANY ADVISED THE CONTRACTING OFFICER OF NASA AT GODDARD SPACE FLIGHT CENTER, GREENBELT, MARYLAND, THAT THE INTERFEROMETER SPECTROMETER CALLED FOR UNDER SUBJECT RFP IS EMBODIED IN TWO PATENTS BELONGING TO YOUR COMPANY, AND A MEETING WITH NASA PERSONNEL WAS REQUESTED "IN ORDER TO DISCUSS APPROPRIATE ACTION TO BE TAKEN, INCLUDING A POSSIBLE SOLE SOURCE PROCUREMENT TO BLOCK ENGINEERING, INC., ON SUBJECT RFP.' THE CONTRACTING OFFICER INFORMED YOU BY LETTER OF JUNE 1, 1965, THAT IN LIGHT OF THE RFP REQUIREMENTS NO NEED FOR A MEETING COULD BE SEEN, SINCE "IT IS PREMATURE AT THIS TIME TO CONSIDER WHETHER YOUR PATENTS MIGHT BE INFRINGED," AND THAT "A SINGLE SOURCE PROCUREMENT TO YOUR COMPANY COULD NOT BE CONSIDERED AS REQUESTED SINCE A PATENT POSITION, IN ITSELF, IS INSUFFICIENT JUSTIFICATION.'

PROPOSALS ON SUBJECT RFP WERE TO BE SUBMITTED BY MAY 21, 1965, AND WERE SO SUBMITTED BY SIX PROSPECTIVE CONTRACTORS. BASED ON SCORES ESTABLISHED BY A SOURCE EVALUATION BOARD, THREE OF THE SIX PROPOSALS RECEIVED WERE ELIMINATED FROM CONSIDERATION FOR THE AWARD OF THE CONTRACT BY A TECHNICAL ADVISORY COMMITTEE OF NASA. THE THREE REMAINING PROSPECTIVE CONTRACTOR'S PROPOSALS AFTER ORAL DISCUSSIONS WERE RATED AS FOLLOWS:

TABLE

ON THE BASIS OF TECHNICAL ACCEPTABILITY ON THE BASIS OF PRICE

NO. 1 PERKIN-ELMER NO. 1 TEXAS INSTRUMENTS

NO. 2 TEXAS INSTRUMENTS NO. 2 PERKIN-ELMER

NO. 3 RCA NO. 3 RCA

AFTER REVIEWING THE EVALUATION AND THE RELATIVE DIFFERENCE BETWEEN PRICE AND TECHNICAL ACCEPTABILITY IT WAS DECIDED THAT TEXAS INSTRUMENTS OFFERED THE GOVERNMENT THE OPTIMUM COMBINATION OF TECHNICAL ACCEPTABILITY AND PRICE. RADIO CORPORATION OF AMERICA WAS NOTIFIED BY LETTER DATED AUGUST 12, 1965, OF ITS ELIMINATION FROM CONSIDERATION OF THE AWARD AND THE SELECTION OF TEXAS INSTRUMENTS FOR NEGOTIATIONS.

AWARD OF THE CONTRACT WAS MADE TO TEXAS INSTRUMENTS ON SEPTEMBER 14, 1965, PRIOR TO RESOLUTION OF YOUR PROTEST OF AUGUST 16, 1965, IN ACCORDANCE WITH PARAGRAPH 2.407-9 (B) (2) OF THE NASA PROCUREMENT REGULATION BASED UPON THE WRITTEN DETERMINATION OF THE CONTRACTING OFFICER THAT THE PROCUREMENT WAS URGENTLY REQUIRED; THAT DELIVERY OF THE IRIS INSTRUMENTS WOULD BE UNDULY DELAYED BY FAILURE TO MAKE AWARD PROMPTLY; AND THAT A PROMPT AWARD WOULD BE IN THE BEST INTEREST OF AND OTHERWISE ADVANTAGEOUS TO THE GOVERNMENT. IT IS ADMINISTRATIVELY REPORTED THAT ANY SLIPPAGE IN THE DELIVERY SCHEDULE COULD EITHER SET THE IRIS PROGRAM BACK TWO YEARS OR DELAY LAUNCHING OF THE NIMBUS B SATELLITE AT INCREASED COSTS OF ONE MILLION DOLLARS A MONTH.

PRIOR TO THE SUBMISSION OF YOUR PROPOSAL ON THE IRIS PROCUREMENT BLOCK SOLD A MODEL 14 INTERFEROMETER SPECTROMETER TO THE UNIVERSITY OF MICHIGAN FOR USE BY THE UNIVERSITY IN PERFORMING A VARIETY OF TASKS RELATING TO SATELLITE METEOROLOGY UNDER NASA CONTRACT NASR-54 (03). ACCORDING TO PERSONNEL AT THE UNIVERSITY OF MICHIGAN THIS BLOCK INTERFEROMETER WAS SUBJECT TO TESTING, MODIFICATION AND CALIBRATION, AND RESULTED IN MANY INTERCHANGES OF INFORMATION BETWEEN UNIVERSITY AND BLOCK PERSONNEL DURING THE PERIOD JULY 1961 TO JUNE 1963. IN EARLY 1964 A JOINT EFFORT BY THE MEMBERS OF THE GODDARD SPACE FLIGHT CENTER AND THE UNIVERSITY OF MICHIGAN RESULTED IN WHAT IS REPORTED TO BE THE DEVELOPMENT OF A NEW INTERFEROMETER SPECTROMETER OF GREATER SENSITIVITY, FINER PRECISION, GREATER ACCURACY AND OF FINER FREQUENCY RESOLUTION THAN THE BLOCK 14 INSTRUMENT. THIS NEW INTERFEROMETER SPECTROMETER IS THE INSTRUMENT REFERRED TO IN GSFC REPORT X -650-65-75 WHICH WAS SENT WITH THE RFP PACKAGE. IN COMMENTING ON THE POSSIBLE INCORPORATION OF PROPRIETARY DATA BELONGING TO BLOCK INTO GSFC REPORT X-650-65-75, ONE OF THE AUTHORS OF THE REPORT, L. W. CHANEY OF THE UNIVERSITY OF MICHIGAN, STATED IN HIS LETTER TO YOUR COMPANY PRESIDENT (SEPTEMBER 3, 1965), THAT:

"ONE, I HAVE NEVER HELD ANY CONFIDENTIAL CONVERSATIONS, NOR EXCHANGED ANY CONFIDENTIAL INFORMATION OF ANY KIND WITH EITHER YOU OR ANY MEMBERS OF YOUR STAFF. SECOND, THE IMPLICATION THAT I WOULD USE YOUR INFORMATION WITHOUT YOUR CONSENT IS COMPLETELY FALSE. ALL THE INFORMATION CONTAINED IN THE CITED REPORT EITHER ORIGINATED AT GSFC, THE UNIVERSITY OF MICHIGAN, OR WAS OBTAINED FROM THE OPEN LITERATURE.'

IT IS ALSO NOTED THAT THE RECORD CONTAINS NO ALLEGATION BY YOUR COMPANY THAT ANY PROPRIETARY DATA WAS SUBMITTED IN CONFIDENCE DIRECTLY TO NASA REGARDING YOUR INTERFEROMETER SPECTROMETER. IN OUR DECISION B 154079, OCTOBER 14, 1964, WE POINTED OUT THAT THE STARTING POINT IN DISCUSSING A CONFLICT INVOLVING THE USE OF TRADE SECRETS DISCLOSED IN CONFIDENCE, IS THE CONFIDENTIAL RELATIONSHIP BETWEEN THE PARTIES. THE EXISTENCE OF AN EXPRESS NONDISCLOSURE AGREEMENT NEED NOT BE SHOWN BUT SUCH AN AGREEMENT MAY BE IMPLIED FROM THE CIRCUMSTANCES SURROUNDING THE DEALINGS. INDICATED ABOVE THE RECORD OF THIS CASE DOES NOT ESTABLISH THE EXISTENCE OF A CONFIDENTIAL RELATIONSHIP BETWEEN YOUR COMPANY AND THE UNIVERSITY OF MICHIGAN. ASSUMING, WITHOUT DECIDING, FOR THE PURPOSE OF DISCUSSION THAT SUCH A RELATIONSHIP DID EXIST THERE IS STILL THE COROLLARY QUESTION AS TO WHETHER THE GOVERNMENT IS BOUND IN ANY WAY BY SUCH A CONFIDENTIAL RELATIONSHIP.

THE RESTATEMENT OF THE LAW-TORTS (1939) IN SECTION 758 READS IN PART AS FOLLOWS:

"ONE WHO LEARNS ANOTHER'S TRADE SECRET FROM A THIRD PERSON WITHOUT NOTICE THAT IT IS SECRET AND THAT THE THIRD PERSON'S DISCLOSURE IS A BREACH OF HIS DUTY TO THE OTHER, OR WHO LEARNS THE SECRET THROUGH A MISTAKE WITHOUT NOTICE OF THE SECRECY AND THE MISTAKE,

(A) IS NOT LIABLE TO THE OTHER FOR A DISCLOSURE OR USE OF THE SECRET PRIOR TO RECEIPT OF SUCH NOTICE, AND

(B) IS LIABLE TO THE OTHER FOR A DISCLOSURE OR USE OF THE SECRET AFTER THE RECEIPT OF SUCH NOTICE, UNLESS PRIOR THERETO HE HAS IN GOOD FAITH PAID VALUE FOR THE SECRET OR HAS SO CHANGED HIS POSITION THAT TO SUBJECT HIM TO LIABILITY WOULD BE INEQUITABLE.'

(SEE ALSO TRADE SECRETS BY ELLIS, SECTION 56, AND CHADWICK V. COVELL, 151 MASS. 190, 23 N.E. 1068 (1890).)

THE RECORD INDICATES THAT THE FIRST TIME NASA HAD NOTICE OF YOUR ALLEGED PROPRIETARY RIGHTS IN SPECIFICATION S-653-P-5 WAS WHEN YOUR PROTEST WAS RECEIVED ON AUGUST 16, 1965. THIS WAS AFTER NASA HAD IN GOOD FAITH PAID VALUE FOR THE INFORMATION RECEIVED BY WAY OF ITS CONTRACT WITH THE UNIVERSITY OF MICHIGAN.

BASED ON THE ABOVE-CITED RULE FROM THE RESTATEMENT OF THE LAW AND THE FACTS AS SHOWN BY THE RECORD THERE APPEARS TO BE NO LEGAL BAR TO PREVENT NASA FROM USING WHATEVER INFORMATION IT HAS OBTAINED BY VIRTUE OF ITS CONTRACT WITH THE UNIVERSITY OF MICHIGAN.

A REVIEW OF THE PROVISIONS OF RFP NO. 651-42668-206 INDICATES THAT THE GENERAL PROVISIONS OF THE CONTRACT INCLUDE, AS ARTICLE 22, THE AUTHORIZATION AND CONSENT (SEPTEMBER 1962) CLAUSE, WHICH IN SUBSTANCE GIVES THE GOVERNMENT'S AUTHORIZATION AND CONSENT TO THE CONTRACTOR TO USE AND TO MANUFACTURE ANY INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES IN THE PERFORMANCE OF THE CONTRACT. THIS ARTICLE SHOULD BE READ IN CONJUNCTION WITH TITLE 28, UNITED STATES CODE, SECTION 1498, WHICH PROVIDES IN PART AS FOLLOWS:

"/A) WHENEVER AN INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES IS USED OR MANUFACTURED BY OR FOR THE UNITED STATES WITHOUT LICENSE OF THE OWNER THEREOF OR LAWFUL RIGHT TO USE OR MANUFACTURE THE SAME, THE OWNER'S REMEDY SHALL BE BY ACTION AGAINST THE UNITED STATES IN THE COURT OF CLAIMS * * *.

"FOR THE PURPOSES OF THIS SECTION, THE USE OR MANUFACTURE OF AN INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES BY A CONTRACTOR, A SUB-CONTRACTOR, OR ANY PERSON, FIRM OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION OR CONSENT OF THE GOVERNMENT, SHALL BE CONSTRUED AS USE OR MANUFACTURE FOR THE UNITED STATES.'

IN OUR DECISION, OF OCTOBER 6, 1958, TO THE SECRETARY OF THE AIR FORCE, 38 COMP. GEN. 276, WE EXPRESSED THE VIEW THAT SECTION 1498 APPEARS CLEARLY TO CONSTITUTE A MODIFICATION OF THE PATENT LAW BY LIMITING THE RIGHTS OF PATENTEES INSOFAR AS PROCUREMENT OF SUPPLIES BY THE GOVERNMENT MAY BE CONCERNED, AND BY VESTING IN THE GOVERNMENT A RIGHT TO THE USE OF ANY PATENTS GRANTED BY IT UPON PAYMENT OF REASONABLE COMPENSATION FOR SUCH USE. WE THEREFORE HELD THAT IT WOULD BE IMPROPER TO REJECT A LOW BID MERELY BECAUSE THE BIDDER WAS NOT LICENSED TO MANUFACTURE A PATENTED ARTICLE. WE HAVE CONTINUED TO ADHERE TO THIS POSITION AND HAVE HELD THAT, EVEN UNDER NEGOTIATED PROCEDURES SUCH AS INVOLVED HERE, A LOW OFFER SHOULD NOT BE REJECTED SOLELY BECAUSE OF POSSIBLE PATENT INFRINGEMENT. SEE FOR EXAMPLE 39 COMP. GEN. 760, AND B-148135, APRIL 30, 1962.

THE RECORD OF THIS CASE INDICATE THAT BY LETTER OF MAY 8, 1965, YOUR COMPANY FIRST ADVISED THE CONTRACTING OFFICER OF A POSSIBLE PATENT INFRINGEMENT. THE CONTRACTING OFFICER'S REPLY OF JUNE 1, 1965, DENIED YOUR REQUEST PARTIALLY ON THE BASIS THAT IT WAS TOO PREMATURE TO CONSIDER THE QUESTION OF PATENT INFRINGEMENT DUE TO THE NATURE OF THE WORK TO BE PERFORMED. ON THE BASIS OF OUR PRIOR DECISIONS, HOWEVER, EVEN IF YOUR COMPANY'S POSITION AS TO THE ALLEGED PROTEST INFRINGEMENT IS CORRECT THIS WOULD NOT PREVENT THE AWARD OF THE CONTRACT.

FOR THE REASONS STATED, WE SEE NO PROPER BASIS UPON WHICH TO QUESTION THE VALIDITY OF THE CONTRACT AWARDED TO TEXAS INSTRUMENTS AND YOUR PROTEST MUST THEREFORE BE DENIED.