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WESTECH GEAR CORP. v. DEPARTMENT OF THE NAVY

February 15, 1989

WESTECH GEAR CORP., Plaintiff,
v.
DEPARTMENT OF THE NAVY, Defendant


Harold H. Greene, United States District Judge.


The opinion of the court was delivered by: GREENE

HAROLD H. GREENE, UNITED STATES DISTRICT JUDGE

 Plaintiff has instituted this suit to obtain a declaratory judgment and injunctive relief prohibiting the Department of the Navy from reverse engineering a ram tensioner obtained from plaintiff. Currently before the Court are the parties' cross-motions for summary judgment.

 Background

 Westech seeks a declaratory judgment that the Navy's reverse engineering efforts have been instituted in violation of law, in that defendant (1) failed to assert its rights in the ram tensioner data by removing the restrictive legends from the Westech drawings in its possession, thereby thwarting appeal of the determination; (2) failed to follow the steps set out in Department of Defense Federal Acquisition Regulation (DFAR) 17.7201-2 prior to reverse engineering; and (3) disclosed confidential information in violation of 18 U.S.C. § 1905.

 As an initial matter, it must be determined whether a determination of the merits of this dispute is properly before this Court or, more appropriately, in the United States Court of Claims. Plaintiff alleges that the proper method of challenging its right to ownership of the design and manufacture of the ram tensioners was for defendant to remove the restrictive legends from its drawings, and then to afford plaintiff an opportunity to contest that determination within the administrative procedures established for contract disputes. Generally, contract claims by the government against a contractor must be made by final decision. 41 U.S.C. § 605(a). Upon receipt of a proper final decision, the contractor is entitled to appeal that decision to the agency board of contract appeals, 41 U.S.C. § 606, or to the United States Claims Court. 41 U.S.C. § 609(a)(1), (3). Plaintiff takes exception to defendant's failure to comply with these administrative procedures prior to embarking on its course of reverse engineering, and urges the Court to remand the case back to the agency for appropriate action.

 It is the Court's view, however, that this dispute is not founded upon a contract between the parties, but rather arises as a controversy over proprietary rights. The classification of a particular action as one which is or is not at its essence a contract action depends both on the source of the rights upon which the plaintiff bases its claim, and upon the type of relief sought (or appropriate). Megapulse, Inc. v. Lewis, 217 U.S. App. D.C. 397, 672 F.2d 959, 968 (D.C.Cir. 1982). Plaintiff does not claim a breach of contract, it seeks no monetary damages against defendant, and its claim is not properly characterized as one for specific performance. Plaintiff's position is ultimately based, not on breach of contract, but on an alleged governmental infringement of property rights and the Trade Secrets Act. Therefore, the Court finds that this is not essentially a contract action requiring conformance with the administrative procedures of Title 41 of the United States Code, and that there has been no procedural violation as to the manner that plaintiff has been accorded, or denied, review. The correct method for obtaining review of defendant's decision to reverse engineer ram tensioners is that which plaintiff has pursued -- to come before the United States District Court alleging an abuse of discretion under 5 U.S.C. § 706(2)(A) -- and it is on that basis that the Court will analyze defendant's actions.

 The parties vigorously dispute the question whether Westech or the Department of the Navy can in fact lay claim to the rights to the subject ram tensioners. Defendant insists that all contracts for development and modification of the tensioners included provisions granting the government full rights in their design. Plaintiff counters that defendants received only Class B drawings of the ram tensioners, from which manufacture of the product is not possible, *fn3" and that it therefore retained rights in the product's design. For purposes of this lawsuit, however, resolution of this question is not necessary.

 Reverse engineering occurs when an entity starts with a known product and, working backwards, divines the process which aided in its manufacture. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476, 40 L. Ed. 2d 315, 94 S. Ct. 1879 (1974). As long as only the use of the goods themselves is involved, rather than design information in which someone else may have proprietary rights, reverse engineering in no way violates any rights another party may have in a trade secret. *fn4" Furthermore, because plaintiff did not obtain patent protection of its design, it is not entitled to a monopoly position in the manufacture of the ram tensioners, nor the concomitant right to prohibit others from their manufacture. See e.g., Anti-Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 300 (9th Cir. 1979). The doctrines embodied in this country's intellectual property laws would thus provide no assistance to plaintiff in its claim against defendant, even if it were established that it were the sole owner of the design rights to the ram tensioner. For that reason, the question of design right ownership need not be resolved in the context of this lawsuit.

 The focus of inquiry thus shifts to the propriety of defendant's actions in determining that reverse engineering of the ram tensioner was appropriate, given the statutory and regulatory framework guiding the Department of the Navy. Department of Defense Federal Acquisition Regulation Part 17, Subpart 17.72 governs the acquisition of component parts through special contracting methods. *fn5" Its prefecatory language sets forth the departmental policy of providing incentive to industry creativity by "honoring the rights in data resulting from private development and by limiting the demands for such data to that which is essential for government purposes," DFAR 17.7201-1, and goes on to permit acquisition of necessary items either by competition, or if competitive acquisition is impossible, by a series of alternative procedures. DFAR 17.7201-2. One of those alternative procedures is to engage in reverse engineering.

 Plaintiff does not dispute defendant's ultimate authority to order reverse engineering of an item. Its contention is, rather, that defendant erred in undertaking reverse engineering in this instance, because authority so to act exists as a last resort, and defendant here failed to take advantage of other alternative methods of procurement. Therefore, contends plaintiff, defendant's action was arbitrary and capricious and contrary to law. Additionally, plaintiff argues that the determination to reverse engineer the ram tensioners was procedurally flawed in that it was made by someone other than the contracting officer, *fn6" and that the reverse engineering process was begun prior to a formalized finding of need as required by the regulation.

 Because this question arises in the context of a motion for summary judgment, the Court must construe the facts in the light most favorable to the party against which the motion is directed. The Court will first consider defendant's motion for summary judgment. For purposes of this discussion then, the Court will construe the facts in the light most favorable to plaintiff, and will assume that design rights to the ram tensioners ...


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