of DOD to preclude the reading of implied warranties into their contracts. Government procurement regulations and clauses should be amended to provide that all patent indemnification should be provided by specific contractual language and not by implication. Such language would tend to minimize the inclusion of contingencies for patent indemnity in bids in situations where the Government does not desire indemnity. ADMINISTRATIVE SETTLEMENT OF PATENT CLAIMS AND ACQUISITION OF PATENT RIGHTS Recommendation 6. Authorize all agencies to settle patent infringement claims out of available appropriations prior to the filing of suit. Recommendation 7. Grant all agencies express statutory authority to acquire patents, applications for patents, and licenses or other interests thereunder. Another way to facilitate appropriate monetary relief for the use of patented inventions by or for the Government is to widen administrative authority to settle claims for such use. Only the Department of Defense has clear authority in this area. We have concluded that this should be rectified and that there is a need for authority in all agencies to settle claims that could be brought under 28 U.S.C. § 1498. The granting of such authority would be a significant measure in ensuring the equitable treatment of patent owners. Agencies should also have clear authority to acquire patents or rights thereunder. This would allow agencies to follow procedures similar to NASA's "preprocurement licensing" approach rather than relying on after-the-fact suits or settlement. DISTRICT COURT JURISDICTION Recommendation 8. Give the United States District Courts concurrent jurisdiction with the Court of Claims for suits brought pursuant to 28 U.S.C. § 1498 subject to the jurisdictional amount under the Tucker Act. We find no sound reason for precluding the United States District Courts from jurisdiction over patent suits under 28 U.S.C. § 1498 where the amount in controversy is under $10,000. The Tucker Act has generally given the district courts jurisdiction, concurrent with that of the Court of Claims, in suits against the Government where the amount in controversy is under $10,000.62 We see no reason why a different standard should prevail with respect to patent litigation involving the United States. Inasmuch as we are recommending other changes in 28 U.S.C. § 1498, we believe an alignment of practice in this area with generally prevailing practice is worthwhile. It should, in a small way, better promote the possibilities of patent holders obtaining relief at a minimum cost. 62 In Part G, Legal and Administrative Remedies, we recommend raising the dollar level of Tucker Act jurisdiction with respect to contract matters. If that recommendation is adopted, we would also favor an increase in the jurisdictional amount for patent cases. CHAPTER 3 Technical Data To this point this part has concentrated on Government patent policy. In lieu of patent protection or where it is not available, there are other means by which persons attempt to protect their privately developed technological innovations and information related to their methods of production and doing business. One way is to keep them secret by restricting the access of others to them. While one may maintain secrecy, he generally has no legal right, as does a patent holder, to complain if others duplicate his work or copy his innovations. However, a doctrine of law has developed known as the law of "trade secrets" which provides relief to the holder of a "trade secret" against those who have used improper means to obtain his secret. For example, if A's competitor obtained information on a secret process by breaking into A's plant and stealing A's data on the process, A could bring an action in court for damages and to enjoin the use of this information. As one moves away from such blatant examples, the question of what constitutes an "improper means" becomes difficult to answer. One obvious area is the misuse of data that was supplied upon an agreement that it would only be used for specific purposes. Many companies have a vital interest in ensuring that data they have developed concerning products and processes does not fall into the hands of competitors. Where the data affords them a competitive advantage over their rivals, it can be of utmost importance. The interest of contractors in maintaining data as a trade secret collides with the needs of the Government when it orders goods or services from a contractor which may embody the items or processes to which such confidential data pertains. As stated in ASPR, "It is apparent that there is no necessary correlation between the Government's need for technical data and its contractors' economic interest therein." 1 Data problems do not stem only from the Government-contractor relationship. Often the real problems and potential inequities result from contractor-subcontractor relationships, since they may be actual or potential competitors even though they are also engaged in the performance of a Government contract. While we studied data practices and policies in detail, our recommendations are rather limited in scope. We found this to be a complex and evolving area, not subject to ready resolution. What is basically needed is a knowledge on the part of the parties of the underlying considerations involved and the ability to structure particular contract provisions to the the needs of the situation. Well trained personnel are needed to cope with difficult concepts and problems involved. Our recommendations in Volume I concerning personnel training and education will help to bring this about. Two major areas have evoked controversy and discussion in the technical data area over the years. First are the various issues concerning data rights and data requirements in connection with data ordered under Government contracts. Second is the treatment of data submitted with proposals. These two facets of data policy are discussed separately below. DATA UNDER GOVERNMENT CONTRACTS The Government's policy with respect to data required under Government contracts involves 1 ASPR 9-202.1 (c). two separate but interrelated questions: the quantity and types of data to be ordered, or "data requirements"; and, the rights of the parties to ordered data, or "data rights." This chapter covers only data rights, but it should be recognized that a data requirements policy minimizing the amount of data ordered could greatly ease the problems pertaining to rights in data. Generally, data problems do not arise unless the data ordered is of a type that might reveal "trade secrets." Hence, differences between the parties normally arise only where detailed engineering and manufacturing drawings and information are required. If the contract calls only for data suitable to allow maintenance and normal repair, the contract provisions regarding the rights in data are normally of little consequence. Background DEFINITION As used in this report, "technical data" means information, in any recorded form, of a scientific or technical nature.3 For the purposes of our discussion, technical data does not include financial, administrative, cost and pricing, or management data, or other information incidental to contract administration. WHY THE GOVERNMENT NEEDS DATA The Government may need to acquire data under contract for its own direct purposes, to achieve lower costs in procurement by obtaining competition, to inform the public, or to make new products and processes available to the public. The Government has extensive needs, which 2 See Part A for a discussion of data requirements. 3 As stated at ASPR 9-201 (Rev. 7, 1969 ed.) technical data "may, for example, document research, experimental, developmental, or engineering work; or be usable or used to define a design or process or to procure, produce, support, maintain, or operate material. The data may be graphic or pictorial delineations in media such as drawings or photographs; text in specifications or related performance or design type documents; in machine forms such as punched cards, magnetic tape, computer memory printouts, or may be retained in computer memory. Examples of technical data include research and engineering data, engineering drawings and associated lists, specifications, standards, process sheets, manuals, technical reports, catalog item identifications, and related information. . . ." may well exceed those of commercial customers, for many kinds of technical data. Millions of separate pieces of equipment and parts, of commercial and noncommercial types, must be acquired, operated, and maintained, often at points remote from the source of supply. Various kinds of technical data are needed for training personnel, overhaul and repair, cataloging, standardization, inspection and quality control, packaging, and logistics operations. Data resulting from research and development contracts must be obtained, organized, and disseminated to many different users. Finally, when competition among the Government's suppliers is to be obtained to encourage economy in Government procurement, the Government must make technical data available in various forms. The Government's requirements for technical data vary considerably from agency to agency. To illustrate, DOD is both R&D and supplyoriented while NASA is primarily R&D oriented. As a result, DOD has a substantial interest in data for reprocurement, while NASA's interest in data focuses on reliability and quality control rather than reprocurement. Looking at a different aspect, DOD uses data essentially for its own direct purposes, and is generally not concerned with developing data, items, or processes primarily for the general public. In contrast, NASA and other agencies such as the Department of Transportation acquire data not only for their own direct purposes (as in space exploration and air traffic control respectively), but also with the intent that the public benefit directly. They acquire data relating to the development of aircraft and mass transportation systems with the intent that improved items and systems become readily available to the public. The various other agencies, each with its own mission or missions, use data in varying ways. CONTRACTORS' INTEREST IN PROTECTING TECHNICAL DATA Commercial organizations have an economic interest in technical data (particularly data disclosing details of design or manufacture) which they have developed at their own expense. Such data is closely guarded because its disclosure to competitors could jeopardize the competitive advantage gained through develop ing the data. As long as the data is not available to others, an originating contractor may be the sole source or, at least, competitively advantaged, in providing the product or service to which the data is related. The willingness of many prospective contractors and suppliers to accept Government contracts is dependent on the willingness of the Government to protect information resulting from private development. Most contracts can be performed without involving patent rights, but there is a greater likelihood the contract will involve the use of technical data which has previously been developed by the contractor at his own expense and maintained as proprietary information. Since disclosure without limitations on use destroys its competitive value, it is important to the contractor that the type and quantity of such data to be delivered be limited, that there be contractual limitations placed on the use thereof, and that effective protective measures exist to assure its integrity. The data owner's desire to maintain the competitive value of his data and the Government's desire to enhance its procurement ability are the opposing considerations which lead to problems. LEGISLATIVE BACKGROUND There is limited statutory coverage of matters relating to technical data. • Acquisition of "Proprietary Data" and "Trade Secrets." Similar to the situation in the case of patent rights, only a limited number of agencies have been specifically authorized to acquire rights in trade secrets, either on a general or a special basis. These include the Department of Defense, the Department of the Interior, and the Environmental Protection Agency. However, most other agencies have not been given express authority in this regard, though authority probably could be implied. 5 • The Taking of Rights in Data Developed Under Government Contracts. A variety of statutes require that information developed under contracts of specific agencies or programs of that agency be made available to the public. These were noted in Chapter 2 at 410 U.S.C. § 2386 (1970). 16 U.S.C. § 778 (e) (1970). 42 U.S.C. 1857b-1 (b) (4) (1970). footnote 11. However, most agencies have not been given any legislative guidance in this area. • Judicial Remedies. Unless an action can be framed under 28 U.S.C. § 1491 or 1346, which confer jurisdiction in the Court of Claims and United States District Courts for actions sounding in contract, there is generally no remedy for the violation of "trade secrets" by the Government (although Government employees divulging such secrets could be held criminally accountable under 18 U.S.C. § 1905). On the other hand, while the holder of a trade secret may not have a remedy against the Government except on a contract basis under 28 U.S.C. § 1491 or 1346, he may have rights against a Government contractor who is using his "trade secret." Since there is no statutory provision comparable to the anti-injunctive provisions of 28 U.S.C. § 1498, it would seem that a Government contractor could be enjoined from using another's improperly obtained "trade secrets." 8 • Administrative Remedies. Except for a remedy under the Foreign Assistance Act R and to a limited extent under the Invention Secrecy Act, there do not appear to be any statutes expressly providing an administrative remedy for trade secret violations. Some relief has been obtained from the General Accounting Office under 31 U.S.C. § 74. However, none of the executive agencies (with the possible exceptions of DOD,10 NASA," and the AEC 12) have express authority to settle such claims. Remedies for violations of "trade secrets" are discussed more fully in Part 2 of this chapter. AGENCY POLICIES AND PRACTICES The general lack of statutory coverage and the lack of administrative attempts to bring A few specific exceptions are found at 22 U.S.C. § 2356 (a) (1970), 10 U.S.C. § 2273 (b) (1970), 42 U.S.C. § 2223 (1970), and 35 U.S.C. §§ 181-88 (1970). See also the discussion at pp. 131–132, infra. $ 22 U.S.C. § 2356 (1970). 935 U.S.C. §§ 181-88 (1970). 10 10 U.S.C. § 2386 (1970). 11 42 U.S.C. § 2458 (1970). 12 42 U.S.C. § 2187 (b) (3) (1970). uniformity in this area have resulted in a diversity of approaches by the various agencies. The discussions below focus on the required clauses for use in research and development and other contracts where the data is required as an incidental aspect of the contract. Agency policies respecting contracts where the production of data is the primary aim of the contract (e.g., films or historical works) are not discussed here. National Aeronautics and Space Administration In NASA's R&D contracts, the contractor is permitted to withhold data concerning standard commercial items and proprietary data concerning items developed at private expense and not sold or offered for sale, if, in lieu thereof, adequate identification of the item concerned in a "form, fit, and function" format is delivered to NASA. This is substantially dif ferent from the DOD approach discussed below. Unlike a DOD contractor, a NASA contractor may not place restrictive markings on the data he delivers. His option, instead, is to withhold delivery of proprietary data. Such withholdings sometimes result in what are known as "swiss cheese" drawings. Department of Defense The Department of Defense until 1964 followed an approach similar to that now used by NASA. In 1964, DOD altered its data rights policy substantially, since it found it was not getting the full data packages needed. DOD clauses now require that all data ordered under the contract be delivered to the Government. However, the rights of the Government in the data vary depending on the type of data involved. In general, the Government takes "unlimited rights" in most data. But where engineering or manufacturing-type data is called for which pertains to "items, components, or processes developed at private expense" the Government may only have "limited rights." In addition, agreements may be made as to whether specific data will be 13 See NASA PR 9.203-1 (Rights in Data Clause). The Office of Saline Water has a prescribed data clause 18 similar to NASA's in that it allows contractors to withhold "proprietary data," provided that the contractor identifies the source of the data and, in the case of standard commercial items to be included in the final product, provides form, fit, and function type information. Unlike most other data clauses, the clause requires that the data be in such form as to allow others to make and 14 See ASPR 9-203 (b) (Rights in Technical Data Clause). 15 AECPR 9-7.5006-13 (1971). 16 AECPR 9-9.5008-7 (1971). 17 DOTPR 12-9.6302. 18 41 CFR 14R-9.202. |