The government’s disclosure of proprietary information to third parties may form the basis of a pre-award protest when an agency improperly incorporates the information in a solicitation. To be successful in such pre-award protests, the protester must provide clear and convincing evidence that its proprietary rights were violated. The protester must demonstrate that the proprietary information was marked as such or that it was disclosed to the government in confidence. Additionally, the protester must show that the preparation of the information involved significant time and expense and that it contains material or concepts that cannot be independently obtained from publicly available literature or common knowledge. Protest adjudicative forums, such as the Government Accountability Office (GAO), will not sustain a protest based on improper disclosure of proprietary information unless the protester satisfies both elements. That is, such a protest will be denied if the protester fails to appropriately mark proprietary information in its submissions to the government, or if the information consists solely of ideas or concepts that are obvious and not innovative or unique.
In B-416685.6, a bid protest decision issued on May 4, 2020, the GAO denied a protest alleging that the government improperly disclosed proprietary information from an unsolicited proposal in a solicitation because the information was not innovative or unique. The protest involved certain systems on the Navy’s UC–35C aircraft, which were similar to systems on an older UC–12W aircraft. In 2010, after delivery of six UC–12Ws, the Navy had discovered that the aircraft's engines exceeded the maximum allowable Internal Turbine Temperature (ITT). The Navy leased expensive spare engines to keep the aircraft operational before developing an engine aural tone warning system in the 2011-2012 timeframe to resolve the ITT issue. The new warning system provided an audible tone to alert the aircrew when engine temperatures approached the allowable limits. As a direct result of the aural tone system, the Navy no longer needed the expensive spare engines to keep the UC-12W aircraft operational.
In March 2018, the protester first submitted an unsolicited proposal to the Navy that provided a solution to prevent the UC–35C aircraft engines from exceeding their operating limits. The unsolicited proposal included a legend stating that the data it contained could not be disclosed outside the government. The proposal explained that the Navy could achieve significant cost savings by reconfiguring the engine trend monitors (ETMs) on the UC–35C to preemptively alert pilots when the engine approached the maximum allowable temperature. However, the Navy rejected the protester’s unsolicited proposal. Later in 2019, the Navy issued a statement of work (SOW) to its Contractor Logistics Support (CLS) provider to install an engine auditory alert system on the UC–35C that would replicate the UC–12W aural tone alert system. Subsequently, the protester filed its protest with the GAO, alleging that the SOW sent to the Navy CLS provider misused the contents of the protester’s unsolicited proposal, as it reflected the protester’s idea of using existing ETMs to provide a preemptive warning to UC–35C pilots.
The GAO disagreed with the protester. It began its analysis by noting that the protester had failed to provide any specific information from its unsolicited proposal that was incorporated into the Navy's SOW for its CLS contractor. Furthermore, to the extent that the protester’s unsolicited proposal included a solution to reconfigure the existing ETM on the UC–35C aircraft, such a solution was neither innovative nor unique but was common knowledge in the Navy’s possession at the time. The GAO pointed to the fact that the Navy had resolved the engine-temperature issues on the UC–12W aircraft in 2011-12 with a similar solution. The decision explained that the Navy could not have come up with a solution for the UC–12W aircraft in 2011-12 by utilizing information in the protester’s unsolicited proposal submitted in 2018. Therefore, the mere reformulation of a concept could not constitute proprietary information unless it provided a valuable contribution resulting from the protester’s independent efforts. As a result, the information was deemed not proprietary, and the protest was dismissed as the protester could not reasonably claim that the Navy had misused information from its unsolicited proposal.
The government may not disclose proprietary information received from contractors or prospective contractors to third parties. If a procuring agency improperly uses proprietary information in a solicitation, the procurement may be subject to a pre-award protest. In such protests, the protester must provide clear and convincing evidence that the information was marked as proprietary or confidential, and that significant time and expense were invested in its development. The protester must also show that the relevant material or concepts are not available from public sources or common knowledge. Accordingly, contractors should clearly mark any proprietary materials in their submissions and, when possible, document the time and expenses involved in their development. As demonstrated in the case above, material is not considered proprietary if it is a mere reformulation of existing concepts. However, if the government incorporates proprietary data in a solicitation and the protester can demonstrate improper appropriation by satisfying both criteria described above, the GAO may recommend resoliciting the requirement without the proprietary materials or, in some cases, even awarding the contract to the protester on a sole-source basis.
This Bid Protest Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.
