B-154529, OCT. 7, 1964

B-154529, OCT. 7, 1964

TO THE HONORABLE THOMAS G. MORRIS, HOUSE OF REPRESENTATIVES:

THIS REFERS TO YOUR LETTER OF JUNE 19, 1964, REGARDING THE POSSIBLE VIOLATION OF PROPRIETARY RIGHTS OF THE EBERLINE INSTRUMENT CORPORATION UNDER DEPARTMENT OF THE NAVY INVITATION FOR BIDS NO. 600-782-64, ISSUED ON MARCH 30, 1964.

THE INVITATION COVERS A QUANTITY OF RADIAC SET AN/PDR-56 WITH ACCESSORIES AND TECHNICAL DATA. BID OPENING WAS HELD ON APRIL 27, 1964, AND EIGHT BIDS WERE RECEIVED. NAVY PROPOSED TO MAKE AWARD TO GULF AEROSPACE CORPORATION, THE LOW RESPONSIBLE BIDDER AT $309 PER UNIT. EBERLINE INSTRUMENT CORPORATION, THE HIGH BIDDER AT $808.84 PER UNIT, PROTESTS THE PROPOSED AWARD UNDER THIS INVITATION.

BY LETTER OF APRIL 10, 1964 (BEFORE BID OPENING) EBERLINE ADVISED THE PURCHASING OFFICE THAT THE AN/PDR-56 PROCUREMENT INFRINGES AN EBERLINE PATENT, ON WHICH IT HAS NOT GRANTED ANY LICENSES. EBERLINE'S POSITION IS THAT IT IS IMPROPER FOR NAVY TO ADVERTISE FOR A DEVICE IN DEROGATION OF A FIRM'S PRIVATELY DEVELOPED PROPRIETARY AND PATENT RIGHTS.

NAVY REPORTS THAT THE PRESENT SPECIFICATION COVERING THIS ITEM, SPECIFICATION MIL-R-22938 (SHIPS) DATED JUNE 14, 1961 AND AMENDMENT NO. 2 DATED MARCH 8, 1963, WAS DEVELOPED OVER A NUMBER OF YEARS, DURING WHICH AN INITIAL PRODUCTION CONTRACT AND SEVERAL FOLLOW-ON CONTRACTS WERE AWARDED. ACCORDING TO THE NAVY REPORT, RESEARCH AND DEVELOPMENT WORK ON THE USE OF ZINC SULFIDE (ZNS) SCREENS FOR ALPHA DETECTION METERS WAS ACTUALLY STARTED IN FISCAL YEAR 1952 AT THE U.S. NAVAL RADIOLOGICAL DEFENSE LABORATORY (NRDL), NRDL LABORATORY MODEL RAS-10 ALPHA SURVEY METER USING THE ALPHA PARTICLE SCINTILLATION SCREEN DETECTION METHOD WAS PRODUCED IN 1958, AND DURING THE LABORATORY'S WORK THE EQUIPMENT SPECIFICATION, SHIPS-R-3366 DATED MARCH 18, 1959, WAS WRITTEN. THE BUREAU OF SHIPS' FIRST PRODUCTION PROCUREMENT OF THE ALPHA DETECTING RADIACMETER STARTED WITH A REQUEST FOR PROPOSALS ISSUED MAY 15, 1959, WHICH PROVIDED THAT A LABORATORY MODEL OF THE NRDL'S RAS-10 ALPHA SURVEY METER WOULD BE SUPPLIED THE SUCCESSFUL BIDDER FOR GUIDANCE PURPOSES IN PRODUCTION OF THE EQUIPMENT. NAVY FURTHER REPORTS THAT THREE BIDS WERE RECEIVED ON THIS INITIAL PROCUREMENT, INCLUDING A BID FROM EBERLINE WHICH WAS THE HIGHEST RECEIVED. CONTRACT NO. SR-75947 WAS AWARDED TO TRACERLAB, INCORPORATED, WALTHAM, MASSACHUSETTS, AS ANNOUNCED ON SEPTEMBER 24, 1959, AND EQUIPMENT UNDER THIS CONTRACT WAS DESIGNATED RADIAC SET AN/PDR-56. WE ARE FURTHER ADVISED THAT SINCE THE FIRST PRODUCTION CONTRACT, FOUR ADDITIONAL CONTRACTS HAVE BEEN AWARDED, AS FOLLOWS:

CONTRACT NOBSR-87630 FEBRUARY 27, 1962

CONTRACT NOBSR-89209 APRIL 4, 1963

CONTRACT NOBSR-91011 JULY 20, 1963

CONTRACT NOBSR-91015 SEPTEMBER 9, 1963

NAVY STATES THAT THE SPECIFICATION USED IN THE CURRENT INVITATION INCORPORATES THE LATEST IMPROVEMENTS. IT IS FURTHER STATED THAT NEITHER THE SPECIFICATION NOR THE INVITATION IS KNOWN BY NAVY TO REQUIRE THE USE OF ANY PATENTED ITEMS OR PROCESSES IN THE PRODUCTION OF THE RADIAC SET AN/PDR-56, BUT THAT THE SPECIFICATION AND INVITATION MERELY SPELL OUT THE PERFORMANCE REQUIREMENTS THE EQUIPMENT MUST MEET FOR NAVY ACCEPTANCE. THIS CONNECTION, NAVY REPORTS THAT ITS FIRST INTRODUCTION TO THE EBERLINE EQUIPMENT CAME IN 1960 OR 1961 WITH THE FIRM'S ALTERNATE PROPOSAL FOR RADIAC SET AN/PDR-60, WHICH PRESUMABLY REPRESENTS A MILITARIZED VERSION OF ITS PAC-LS AND PAC-LSA EQUIPMENT. THIS, OF COURSE, WAS AFTER THE USNRDL RAC-10 MODEL EQUIPMENT WAS PRODUCED AND DESIGN DRAWINGS ISSUED IN AUGUST 1958.

EVEN ASSUMING, NOTWITHSTANDING THE FOREGOING, THAT THE PROPOSED AWARD MIGHT RESULT IN THE VIOLATION OF A PATENT HELD BY EBERLINE, THERE IS FOR CONSIDERATION 28 U.S.C. 1498 PROVIDING, 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, INCLUDING 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.

REFERRING TO THIS STATUTORY PROVISION, WE STATED IN B-147509, JULY 27, 1962, AS FOLLOWS:

"IT HAS BEEN JUDICIALLY DETERMINED THAT THIS SECTION IS IN EFFECT AN EMINENT DOMAIN STATUTE; THAT ITS PROVISIONS RELIEVE THE CONTRACTOR ENTIRELY FROM LIABILITY OF EVERY KIND FOR THE INFRINGEMENT OF PATENTS IN MANUFACTURING ANYTHING FOR THE GOVERNMENT AND LIMITS THE OWNER OF THE PATENT TO A SUIT IN THE COURT OF CLAIMS FOR REASONABLE COMPENSATION, WHICH REMEDY IS EXCLUSIVE AND COMPREHENSIVE IN CHARACTER. ALSO, IT WAS HELD THAT IT WAS THE PURPOSE AND INTENT OF CONGRESS BY THE PROVISIONS OF THIS SECTION TO STIMULATE CONTRACTORS TO FURNISH GOVERNMENT NEEDS WITHOUT FEAR OF BECOMING LIABLE THEMSELVES FOR INFRINGEMENTS TO PATENT HOLDERS AND LICENSEES, AND TO MAKE IT POSSIBLE FOR THE GOVERNMENT TO PROCEED WITH ITS PROCUREMENT WITHOUT RESTRICTION OR DELAY CAUSED BY PATENT INFRINGEMENT CLAIMS OR CONTROVERSIES. FURTHER, IT WAS POINTED OUT THAT THE STATUTE WAS DESIGNED TO FURNISH PATENTEES AND LICENSEES AN ADEQUATE AND EFFECTIVE REMEDY AND TO SAVE THE GOVERNMENT FROM HAVING ITS PUBLIC WORKS TIED UP AND THWARTED WHILE PRIVATE PARTIES WERE CARRYING ON LONG DRAWN OUT LITIGATION. AND IT HAS BEEN REPEATEDLY EMPHASIZED BY THE SUPREME COURT OF THE UNITED STATES THAT IT IS THE PUBLIC INTEREST WHICH IS DOMINANT IN THE PATENT SYSTEM. SEE RICHMOND CO. V. UNITED STATES (1928), 275 U.S. 331, 343, AND THE OTHER AUTHORITIES CONSIDERED IN OUR DECISIONS OF AUGUST 25, 1958, B-136916, AND OCTOBER 6, 1958, 38 COMP. GEN. 276, AND THE CASES COLLECTED IN THE ANNOTATION 28 U.S.C.A. 1498.

"IN OUR OPINION, TO REJECT THE LOW BID FOR THE PURPOSE OF ENFORCING AND PROTECTING YOUR ALLEGED PATENT RIGHTS WOULD CONSTITUTE AN IMPROPER RESTRICTION OF COMPETITION TO THE DETRIMENT OF THE INTERESTS OF THE UNITED STATES WHICH THE PROVISIONS OF 28 U.S.C. 1498 WERE INTENDED TO SECURE, AND WOULD, IN EFFECT, LIMIT THE APPLICATION OF THIS STATUTE. IT IS OUR VIEW, THEREFORE, THAT YOUR CONTENTION THAT AWARD TO THE LOW BIDDER MIGHT RESULT IN THE INFRINGEMENT OF CERTAIN PATENTS AFFORDS NO JUSTIFICATION FOR QUESTIONING THE ADMINISTRATIVE ACTION IN THIS CASE.'

IT IS THEREFORE OUR VIEW THAT UNDER ADVERTISED BIDDING AN AWARD IS REQUIRED TO BE MADE TO THE LOWEST BIDDER MEETING THE SPECIFICATIONS WITHOUT REGARD TO POSSIBLE PATENT INFRINGEMENT. B-152438, SEPTEMBER 13, 1963; 39 COMP. GEN. 760, 62.

ACCORDINGLY, THERE IS NO LEGAL BASIS FOR QUESTIONING AN AWARD TO THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER UNDER THE SUBJECT INVITATION.