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Client
Advisory: Reminder to Protect
Unsolicited Proposals Submitted to Government Agencies
A recent decision of the United
States Court of Appeals for the Federal Circuit provides a
stark reminder that contractors must include appropriate restrictive
legends on each page of any unsolicited proposal
submitted to government agencies. In Xerxe Group, Inc.
v. United States, 278 F.3d 1357 (Fed. Cir. 2002), the
Court held that Xerxe's failure to include a restrictive legend
on every page of an unsolicited proposal - not just the title
page - resulted in dismissal of its claim that the government
violated the confidentiality provisions of the FAR.
The FAR provides separate
protections for proposals and confidential data submitted
other than as an unsolicited proposal. See, e.g.,
FAR 52.215-1(e). Although the Xerxe decision does not
address these provisions, any prudent contractor should include
appropriate restrictive legends on each page of
any material it believes may be confidential or proprietary.
Similar rules apply to production of software and other electronic
data to the government. For example, the Armed Services Board
of Contract Appeals held that where a contractor did not mark
its software with a restrictive legend before delivering the
data to the government, the contractor granted unlimited data
rights to the government. General Atronics Corp., ASBCA
No. 49, 196, 2002 WL 450441, March 19, 2002.
- Xerxe Disclosed Proprietary
Information to Government in
an Unsolicited Proposal
In 1998, Xerxe submitted
an unsolicited proposal to Patrick Air Force Base, Florida.
The Air Force rejected the proposal. The Air Force later
published a request for information ("RFI") proposing
the possible privatization of certain utility systems. Xerxe
objected to the RFI, claiming the government used proprietary
information disclosed in the Xerxe unsolicited proposal.
Later, Xerxe submitted a claim for $72 million in damages
for the government's failure to award Xerxe a contract and
for improperly using its proprietary information.
Xerxe filed suit in the Court
of Federal Claims alleging the government violated the FAR
by issuing a request that improperly disseminated its proprietary
information. Xerxe contended its proposal was a business
plan that included trade secrets, and as such was entitled
to the FAR protections. The Air Force responded that Xerxe's
proposal information was not subject to the proprietary
data provisions of the FAR because Xerxe failed to comply
with the notice requirements of FAR 15.608 and 15.609. The
Court agreed with the Air Force, and denied Xerxe's requested
relief.
- FAR Protection Requires
Marking Each Page of the Proposal
FAR 15.608(b), which governs
proprietary data protection of unsolicited proposals, provides
in relevant part:
Government personnel
shall not disclose restrictively marked information
(see 3.104 and 15.609) included in an unsolicited
proposal. The disclosure of such information concerning
trade secrets, processes, operations, style of work,
apparatus, and other matters, except as authorized
by law, may result in criminal penalties under 18
U.S.C. 1905.
48 C.F.R. § 15.608(b) (2001).
Thus, section 15.608(b) prohibits government personnel from
disclosing restrictively marked information in an unsolicited
proposal. FAR § 15.609, in turn, provides in relevant part:
- An unsolicited proposal
may include data that the offeror does not want disclosed
to the public for any purpose or used by the Government
except for evaluation purposes. If the offeror wishes
to restrict the data, the title page must be marked
with the following legend:
Use and Disclosure of
Data
This proposal must include
data that shall not be disclosed outside the Government
and shall not be duplicated, used or disclosed-in
whole or in part-for any purpose other than to evaluate
this proposal. However, if a contract is awarded to
this offeror as a result of--or in connection with--the
submission of these data, the Government shall have
the right to duplicate, use, or disclose the data
to the extent provided in the resulting contract.
This restriction does not limit the Government's right
to use information contained in these data if they
are obtained from another source without restriction.
The data subject to this restriction are contained
in Sheets [ insert numbers or other identification
of sheets ].
- The offeror shall
also mark each sheet of data it wishes to
restrict with the following legend:
Use or disclosure
of data contained on this sheet is subject to
the restriction on the title page of this proposal.
48 C.F.R. § 15.609(a), (b) (2001)
(emphasis added).
- Contractors Must Mark Every
Page of a Proprietary Proposal with an Appropriate
Restrictive Legend
FAR 15.609(a) warns offerors
to include the "Use and Disclosure of Data" paragraph
as a legend on the title page of the proposal. Where the offeror
wishes to restrict specific sheets of data from disclosure,
the offeror must include restrictive legends on each individual
sheet it seeks to protect. Although Xerxe complied with
Section 15.609(a) by marking the title page of its unsolicited
proposal, it did not comply with Section 15.609(b) because
it failed to include a restrictive legend on each sheet
of data it wanted restricted. Xerxe marked its cover letter
and "Company Profile and Capability Statement" with
the FAR 15.609(b) restrictive legend.
Guideline:
Contractors should ensure that
all confidential or proprietary data submitted to the government
is marked on each page with appropriate restrictive legends,
as required by the FAR.
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