B-167046, SEP. 29, 1969

B-167046, SEP. 29, 1969

BID PROTEST - SUBCONTRACTS - PROPRIETARY RIGHTS DECISION TO CRYOGENIC TECHNOLOGY, INCORPORATED, DENYING PROTEST AGAINST AWARD OF SUBCONTRACT UNDER PRIME CONTRACT BETWEEN JET PROPULSION LAB, CALIFORNIA INSTITUTE OF TECHNOLOGY AND NASA FOR HELIUM REFRIGERATION SYSTEMS. A REVIEW OF THE RECORD DOES NOT FURNISH ANY BASIS TO QUESTION THE FACTS THAT THE PRIME CONTRACTOR DID NOT AT ANY TIME RECEIVE ANY DATES OR OTHER MATERIAL FROM THE PROTESTANT WHICH CONTAINED PROPRIETARY OR RESTRICTIVE MARKINGS. ALSO THAT THERE NEVER WAS ANY AGREEMENT WRITTEN OR ORAL BETWEEN THE PARTIES REQUIRING THE PRIME CONTRACTOR OR NASA TO TREAT AS PROPRIETARY ANY COMPONENTS OF THE REFRIGERATION SYSTEM. WITH REGARD TO EFFECT OF REVERSE ENGINEERING, NASA REPORT INDICATES THAT THE PROCEDURES DID NOT REQUIRE ANY KNOWLEDGE OTHER THAN THAT WHICH COULD BE READILY ASCERTAINED BY EXAMINATION. CASES OF SEARS, ROEBUCK AND CO. V STIFFEL CO., 376 U.S. 225 AND COMPCO CORP. V DAY-BRITE LIGHTING, INC., ID. 234 ARE PRECEDENTS.

TO CRYOGENIC TECHNOLOGY, INCORPORATED:

REFERENCE IS MADE TO LETTERS OF SEPTEMBER 3, JUNE 4, MAY 28, 1969, AND OTHER CORRESPONDENCE, RELATIVE TO THE PROTEST BY YOUR CONCERN AGAINST THE AWARD OF A SUBCONTRACT UNDER REQUEST FOR PROPOSALS NO. EV-7 5751, DATED MARCH 21, 1969, TRANSMITTED TO OFFERORS UNDER LETTER DATED MARCH 24, 1969, ISSUED BY THE JET PROPULSION LABORATORY, CALIFORNIA INSTITUTE OF TECHNOLOGY, (JPL) UNDER PRIME CONTRACT NO. NAS 7-100 BETWEEN THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) AND JPL. THE LETTER OF SEPTEMBER 3, 1969, ADVISES THAT THE NAME OF YOUR CONCERN WAS CHANGED FROM 500 INCORPORATED TO CRYOGENIC TECHNOLOGY, INCORPORATED, ON JUNE 11, 1969.

THE REQUEST FOR PROPOSALS COVERED THE PROCUREMENT OF 19 CLOSED CYCLE HELIUM REFRIGERATION SYSTEMS FOR EVENTUAL INSTALLATION WITHIN THE DEEP SPACE NETWORK OF NASA. THE SOLICITATIONS WERE ISSUED TO FIVE FIRMS WHICH WERE ON A PRE-SCREENED SOURCE LIST.

YOUR PROTEST IS BASED ON TWO CONTENTIONS - FIRST, THAT THERE WAS AN INFRINGEMENT OF CERTAIN OF YOUR PATENTS IN THIS PROCUREMENT AND SECOND THAT JPL RELEASED CERTAIN PROPRIETARY DRAWINGS TO YOUR COMPETITORS.

NASA'S REPORT STATES THAT ORDINARILY NASA WOULD AVOID DIRECT INVOLVEMENTS IN DISPUTES OR COMPLAINTS AT THE SUBCONTRACTOR LEVEL WHERE THE PRIME CONTRACTOR ACTS IN GOOD FAITH. HOWEVER, AN EXCEPTION WAS MADE BY NASA IN THIS CASE SINCE PATENT RIGHTS AND ALLEGED INFRINGEMENT OF PROPRIETARY DATA WERE INVOLVED. CONSEQUENTLY, NASA HAS MADE A FULL INVESTIGATION WITH REGARD TO YOUR CONTENTIONS.

WITH RESPECT TO THE PROPOSALS RECEIVED AND NASA'S EVALUATION OF THESE PROPOSALS, NASA'S REPORT STATES AS FOLLOWS: "ON APRIL 30, 1969, AT THE OPENING OF BIDS THE FOLLOWING FIVE FIXED PRICE PROPOSALS WERE RECEIVED:

"NAME OF AMOUNT OF AMOUNT OF

PROPOSER PRIMARY PROPOSAL ALTERNATE PROPOSAL

-------- ---------------- ------------------ "AIR PRODUCTS $19,845.00

NO BID

COSMODYNE 23,483.00 NO BID

500 INCORPORATED NO BID $30,750.00

U.S. PHILLIPS 32,126.00 NO BID

AIRESEARCH 57,656.00 NO BID "THE ABOVE ARE UNIT PRICES FOR EACH OF THE 19 SYSTEMS.

** * * * * * "/THE BIDDERS WERE ASKED TO SUBMIT PRIMARY AND ALTERNATE PROPOSALS IN WHICH THE PRIMARY PROPOSAL WOULD INCLUDE THE FABRICATION AND TESTING OF A REFRIGERATION SYSTEM EXCLUDING THE EQUIPMENT KNOWN AS THE DRIVE UNIT DISPLACER, JPL DRAWING NO. 9443992. THE ALTERNATE PROPOSAL WAS TO INCLUDE A COMPLETE SYSTEM, INCLUDING THE DRIVE UNIT DISPLACER. FOR THE PURPOSE OF EVALUATING THE PROPOSALS, JPL PLACED AN ESTIMATED VALUE OF $5,000 PER UNIT ON THE DRIVE UNIT DISPLACER ASSEMBLY. THIS ESTIMATE WAS MADE AFTER REVIEWING A PREVIOUSLY ISSUED JPL PURCHASE ORDER TO ARTHUR D. LITTLE, INC., FOR THE SAME UNIT WHICH JPL PURCHASED AS A SPARE COMPONENT (PURCHASE ORDER NO. CS-378854 $4,830.00 PER UNIT). IN ADDITION, JPL HAS ESTIMATED THAT A SIMILAR DRIVE UNIT, MANUFACTURED TO JPL'S DOCUMENTATION, CAN BE PURCHASED ON A FIXED PRICE BASIS FOR CONSIDERABLY LESS THAN THE PRICE PREVIOUSLY PAID TO ARTHUR D. LITTLE FOR A COMPARABLE UNIT.) "THE RESULTS OF NORMALIZING THE PROPOSED PRICES (I.E., ADDING $5,000 PER UNIT TO EACH BID WHICH DID NOT INCLUDE A DRIVE UNIT DISPLACER) ARE AS FOLLOWS:

"CONTRACTOR NORMALIZED PRICE TOTAL FOR 19 UNITS

------------ ---------------- ------------------ "AIR PRODUCTS $24,845.00

$ 472,055.00

COSMODYNE 28,483.00 541,177.00

500 INCORPORATED 30,750.00 584,250.00

U.S. PHILLIPS 37,126.00 705,394.00

AIRESEARCH 62,656.00 1,190,464.00 "AS THE PROPOSED SUBCONTRACT IS IN EXCESS OF $100,000, IT HAS BEEN SUBMITTED FOR APPROVAL TO NASA UNDER THE TERMS OF THE NASA-JPL PRIME CONTRACT NAS 7-100, ARTICLE 6, SUBCONTRACTS *

THE FACTUAL ASPECTS OF THIS MATTER, AS STATED AND ANALYZED IN NASA'S REPORT ARE AS FOLLOWS: "* * * IN LATE 1965, JPL PURCHASED FROM 500 INC. TWO CRYODYNE MODEL 340 REFRIGERATION SYSTEMS DEVELOPED FOR SERVICE AT 15 TO 20 DEGREES KELVIN, AND JPL MODIFIED THEM FOR SERVICE AT 4.2 DEGREES K. IN 1967, JPL PURCHASED THREE ADDITIONAL CRYODYNE MODEL 340 REFRIGERATION SYSTEMS AND MODIFIED THEM IN THE SAME FASHION. THIS WORK WAS PERFORMED BY JPL UNDER CONTRACT NAS 7-100 WITH NASA AND ENTAILED JPL'S RESPONSIBILITY THEREUNDER TO UPGRADE THE EXISTING EARTH RECEIVING STATIONS IN NASA'S DEEP SPACE INSTRUMENTATION FACILITY. THEREAFTER JPL APPROACHED 500 INC. ON THE SUBJECT OF PURCHASING ADDITIONAL MODEL 340 REFRIGERATION SYSTEMS FOR CONVERSION BY JPL TO A 4.2 DEGREES K TYPE SYSTEMS; HOWEVER, 500 INC. REFUSED TO SUPPLY THESE ADDITIONAL SYSTEMS ON THE GROUNDS THAT IT WAS THEIR POLICY TO SUPPLY ONLY COMPLETE SYSTEMS WHICH NEEDED NO MODIFICATION.'IN DECEMBER, 1967, 500 INC. (THEN A SUBSIDIARY OF ARTHUR D. LITTLE, INC.) ENTERED INTO SUBCONTRACT NO. 952172 * * * WITH JPL FOR THE FABRICATION AND TESTING OF A PROTOTYPE REFRIGERATION SYSTEM BASED ON A COMBINATION OF THEIR MODEL 340 CRYODYNE SYSTEM AND THE ADAPTATION DEVELOPED BY JPL. UNDER THIS SUBCONTRACT, DETAILED DRAWINGS WERE SUPPLIED BY 500 INC. FOR A PORTION OF THE PROTOTYPE AND OUTLINE DRAWINGS WERE FURNISHED FOR CERTAIN OTHER PARTS OF THE SYSTEM INCLUDING THE DRIVE UNIT DISPLACER. JPL THEN PREPARED A COMPLETE DESIGN PACKAGE WHICH WAS DERIVED IN PART FROM REVERSE ENGINEERING OF THE DELIVERED HARDWARE AND IN PART FROM DESIGN INNOVATIONS ORIGINAL TO THE JPL ENGINEERS. THIS PACKAGE THEN WAS INCLUDED IN THE RFP OF THE SUBJECT PROTEST.''NOTE THAT THE RFP DOES NOT INCLUDE DETAILED DRAWINGS FOR THE DRIVE UNIT DISPLACER BUT HAS ONLY OUTLINE DRAWINGS ENCLOSED THEREIN. HOWEVER, IT IS CONTEMPLATED THAT THE DRIVE UNIT DISPLACER WILL EITHER BE SUPPLIED AS GOVERNMENT FURNISHED MATERIAL OR PROCURED COMPETITIVELY AT A LATER DATE.) "A. COPYING OF PROPRIETARY PRODUCTS OF 500 INC. THE FACTS AS ESTABLISHED BY 500 INC., AND NOT CONTROVERTED BY JPL OR NASA, DO NOT ESTABLISH ANY IMPROPER OR ILLEGAL CONDUCT IN THE PROCUREMENT ACTIVITIES RECITED. IT IS EMPHASIZED THAT JPL AT NO TIME RECEIVED ANY DATA OR OTHER MATERIAL FROM 500 INC. WHICH CONTAINED PROPRIETARY OR OTHERWISE RESTRICTIVE MARKINGS. FURTHERMORE, THERE HAS NEVER BEEN ANY AGREEMENT WRITTEN OR ORAL, BETWEEN THE PARTIES REQUIRING JPL OR NASA TO TREAT AS PROPRIETARY ANY COMPONENTS OF THE REFRIGERATION SYSTEM OR ANY DATA OR DRAWINGS RELATED THERETO. IT IS TRUE THAT PARTS OF THE SYSTEM PURCHASED FROM 500 INC. HAVE BEEN REVERSE ENGINEERED, BUT THESE PROCEDURES REQUIRED NO KNOWLEDGE OTHER THAN THAT WHICH COULD BE READILY ASCERTAINED BY AN EXAMINATION OF THE EQUIPMENT DELIVERED. * * *"

WITH REGARD TO THE PATENT INFRINGEMENT ASPECTS OF YOUR PROTEST, YOUR LETTER OF SEPTEMBER 3, 1969, ADVISES THAT NASA IS WILLING TO NEGOTIATE LICENSING AGREEMENTS WITH YOUR CONCERN UNDER PATENTS NOS. 2,906,101; 2,966,034 AND 3,312,239. REGARDING THE POSITION OF THIS OFFICE IN PATENT INFRINGEMENT CASES WE INVITE YOUR ATTENTION TO OUR DECISION IN B 166072, MARCH 28, 1969, TO THE LORVIC CORPORATION, WHERE IT WAS STATED AS FOLLOWS:

"* * * WHILE THIS OFFICE MAY IN SOME INSTANCES UNDERTAKE TO PREVENT ACTION WHICH WOULD CLEARLY SUBJECT THE GOVERNMENT TO LEGAL LIABILITY FOR VIOLATION OF A RECOGNIZED OBLIGATION, WE HAVE TAKEN THE POSITION THAT THE GOVERNMENT IS AUTHORIZED BY 28 U.S.C. 1498 TO UTILIZE OR PERMIT THE USE OF A PATENTED INVENTION UNDER A GOVERNMENT CONTRACT WITHOUT A LICENSE, SUBJECT TO PAYMENT OF REASONABLE COMPENSATION FOR SUCH USE. THE ACT OF JULY 1, 1918, 40 STAT. 705, AMENDING THE ACT OF JUNE 25, 1910, 36 STAT. 851, FROM WHICH THE CITED SECTION WAS DERIVED, WAS DESIGNED TO FURNISH PATENT HOLDERS ADEQUATE COMPENSATION FOR THE USE OF THEIR PATENTS BY OR ON BEHALF OF THE GOVERNMENT, AND AT THE SAME TIME TO PREVENT THE OBSTRUCTION OF GOVERNMENT ACTIVITIES BY DISPUTES OR LITIGATION BETWEEN PRIVATE PARTIES CONCERNING SUCH PATENTS. WE HAVE ACCORDINGLY HELD THAT COMPETITIVE PROCUREMENT OF THE GOVERNMENT'S NEEDS SHOULD BE ENCOURAGED, REGARDLESS OF A POSSIBLE PATENT INFRINGEMENT, AND IT IS OUR POSITION THAT NEGOTIATION OF A CONTRACT ON A SOLE SOURCE BASIS IS NOT AUTHORIZED MERELY FOR THE REASON THAT THE PROCUREMENT MAY INVOLVE PATENTED ARTICLES. SEE 38 COMP. GEN. 276; 39 ID. 760, 762; AND WELCH, PATENT INFRINGEMENT IN PROCUREMENT: GAO'S ROLE, 10 WM. AND MARY L. REV. 39.' IN THE CIRCUMSTANCES WE DO NOT THINK THERE IS ANY BASIS FOR QUESTIONING JPL'S ACTIONS WITH REGARD TO POSSIBLE PATENT INFRINGEMENT OR NASA'S APPROVAL OF SUCH ACTIONS. IT CAN ONLY BE SPECULATED WHETHER, AS URGED BY YOU, THE OVERALL COSTS TO THE GOVERNMENT WILL BE GREATER IF THE COSTS OF LICENSING AGREEMENTS AND THE COSTS OF REVERSE ENGINEERING ARE CONSIDERED. CONSEQUENTLY, WE DO NOT THINK THESE FACTORS CONSTITUTE A BASIS FOR QUESTIONING THE DECISION TO HAVE A COMPETITIVE PROCUREMENT FOR THE REFRIGERATION SYSTEMS. CF. 45 COMP. GEN. 13, 16.

SUBPARAGRAPHS 3 AND 4 OF PARAGRAPH V OF THE LETTER OF MAY 28, 1969, STATE THE FOLLOWING WITH REGARD TO YOUR CONTENTION THAT THE DRIVE UNIT DISPLACER AND THE CYLINDER ASSEMBLY UNITS, AMONG OTHERS, ARE PROPRIETARY TO YOUR CONCERN:

"3. IN THE MEANTIME, IN DECEMBER 1967, 500 AGREED TO ENTER INTO SUBCONTRACT 952172 WITH JPL FOR THE FABRICATION AND TESTING OF A PROTOTYPE CLOSED CYCLE REFRIGERATION SYSTEM, BASED ON THE MODEL 340 CRYODYNE SYSTEM AND THE ADAPTATION AND MODIFICATION BY JPL TO THE ORIGINALLY SUPPLIED SYSTEMS, AND FOR THE SUPPLY OF DETAIL DRAWINGS FOR THE NON-PROPRIETARY PORTION OF THE SYSTEM.'JPL SUBCONTRACT 952172, ARTICLE I, PARA A (2) XI RECOGNIZED THAT CERTAIN PARTS OF THE SYSTEM WERE PRODUCTS OF 500 FOR WHICH ONLY OUTLINE DRAWINGS WERE TO BE FURNISHED:

"DRIVE UNIT D3588077

DISPLACER ASSEMBLY D3592117

ADSORBER TRAP 3511016

CYLINDER ASSEMBLY "SUBSEQUENTLY, 500 SUPPLIED TO JPL OUTLINE DRAWING 9443801, CYLINDER ASSEMBLY, AND DRAWING 9443992, DRIVE DISPLACER ASSEMBLY.

"4. JPL RFP EV-7-5751, THE SUBJECT OF THIS PROTEST, WAS SENT TO 500 AND SEVERAL OTHER COMPANIES, MOST OF WHICH ARE DIRECT COMPETITORS OF 500, AND INCLUDED ALL THE DRAWINGS PREPARED BY 500. IN ADDITION, JPL MADE DETAILED DRAWINGS OF THE CYLINDER ASSEMBLY, AND FORWARDED THEM WITH THE RFP. FURTHERMORE, THE RFP INVITED CONTRACTORS TO SUBMIT AN ALTERNATE PROPOSAL FOR THE COMPLETE SYSTEM INCLUDING THE DRIVE DISPLACER ASSEMBLY, JPL DRAWING 9443992, OR ITS EQUIVALENT. IT SHOULD BE NOTED THAT THE EQUIVALENT PRODUCT MUST BE SUBSTANTIALLY IDENTICAL TO THE 500 PART IN ORDER FOR THE SYSTEM TO OPERATE.'

WE HAVE REVIEWED YOUR CONTRACT NO. 952172 WITH JPL. SUBPARAGRAPH (A) (2) (XI) OF ARTICLE I OF THIS CONTRACT PROVIDES, AS STATED BY YOU, FOR OUTLINE DRAWINGS FOR THE DRIVE UNIT, THE DISPLACER ASSEMBLY, THE ADSORBER TRAP AND THE CYLINDER ASSEMBLY. HOWEVER, THE FOLLOWING STATEMENT ALSO APPEARS IN SUBPARAGRAPH (A) (2) (XI) OF ARTICLE I:

"THE ACCEPTANCE OF OUTLINE DRAWINGS NOTED ABOVE DOES NOT CONSTITUTE A DETERMINATION OF THE PROPRIETARY NATURE OF THAT DATA OMITTED.'

PURSUANT TO OUR REVIEW WE FIND NO BASIS TO QUESTION NASA'S VERSION OF THE FACTS TO THE EFFECT THAT JPL AT NO TIME RECEIVED ANY DATA OR OTHER MATERIAL FROM YOUR CONCERN WHICH CONTAINED PROPRIETARY OR OTHERWISE RESTRICTIVE MARKINGS. NASA'S OTHER FINDING IN THIS REGARD, THAT THERE HAS NEVER BEEN AN AGREEMENT, WRITTEN OR ORAL, BETWEEN THE PARTIES REQUIRING JPL OR NASA TO TREAT AS PROPRIETARY ANY COMPONENTS OF THE REFRIGERATION SYSTEM OR ANY DATA OR DRAWINGS RELATED THERETO, ALSO IS UNCONTROVERTED.

WITH REGARD TO THE EFFECT OF REVERSE ENGINEERING AND WHAT CONSTITUTES PROPRIETARY DATA, IT WAS STATED IN B-155884, MAY 18, 1965, AS FOLLOWS:

"IN TWO RECENT CASES THE SUPREME COURT HAS HELD THAT A LEGAL RIGHT EXISTS TO COPY AN UNPATENTED ITEM WHICH WAS ORIGINATED BY ANOTHER. SEARS, ROEBUCK AND CO. V STIFFEL CO., 376 U.S. 225, AND COMPCO CORPORATION V DAY- BRITE LIGHTING, INC., ID. 234. THOSE AUTHORITIES WOULD SEEM TO DISPOSE OF YOUR CONTENTION THAT THE ANNOUNCEMENT OF THE SUBJECT RFP CONSTITUTED AN UNAUTHORIZED DISCLOSURE OF PROPRIETARY CONCEPTS OR DATA, IN THE ABSENCE OF ANY SPECIFIC RESTRICTION OR RESERVATION OF RIGHTS IN CONNECTION WITH YOUR PRESENTATION TO THE GOVERNMENT.'

SEE ALSO B-166071, SEPTEMBER 18, 1969. IN THE CIRCUMSTANCES WE FIND THAT THE ABOVE PRECEDENTS ARE DISPOSITIVE OF THIS ASPECT OF YOUR PROTEST.