THOMAS C. WHEELER, Judge.
Plaintiff Demodulation, Inc. ("Demodulation") filed a complaint in this Court on April 14, 2011 against the United States seeking approximately $50 million in damages for breach of contract, misappropriation of trade secrets, and patent infringement. The twelve patents at issue relate to various uses of microwire. Microwire, a glass-coated amorphous metal filament, is thinner than a human hair and is used in electronic surveillance systems. Microwire is useful in such systems because it broadcasts a distinct signal when struck by radio frequency waves and thus, the signal may be detected from several kilometers away without the need for a physical connection.
On February 26, 2015, counsel for the Government moved for partial summary judgment as to Counts One, Two, and Five of Demodulation's Third Amended Complaint. In its motion, the Government argues that it should be granted summary judgment on Count One because Demodulation was not in privity of contract with the United States for any of the three express contracts referenced in the Third Amended Complaint. The Government maintains that the Cooperative Research and Development Agreement ("CRADA"), No. Y-1207-0104, was entered into between two private parties, Babcock & Wilcox Technical Services Y-12, LLC ("B&W Y-12") and Demodulation, and the two confidentiality agreements were entered into by two individuals who had no authority to bind the Government. On Count Two, alleging breach of three implied-in-fact contracts, the Government asserts that it should be granted summary judgment because Demodulation did not identify any implied-in-fact contract, let alone any that were breached by the United States. Further, Demodulation only referred to one of the implied-in-fact contracts in its complaint, thereby waiving its right to complain about the other two implied-in-fact contracts it alleges the Government breached. Finally, the Government argues that, with respect to Count Five, misappropriation of trade secrets, insofar as it is based upon a contract theory, summary judgment should be entered in favor of the United States because Demodulation did not assert any contract that was breached by the United States.
On April 20, 2015, Demodulation filed its opposition to the Government's motion and cross-moved for partial summary judgment on Count One, arguing there is no dispute that the Government was a party to the CRADA and breached the terms of the CRADA. As for its remaining claims in Count One, Demodulation opposes summary judgment, asserting that the Government was a party to the confidentiality agreements and that the two individuals who signed the agreements had the authority to bind the Government. On Count Two, Demodulation argues that summary judgment should not be granted because the unauthorized work the Government performed on Demodulation's samples and the unauthorized disclosure of its proprietary information to Technology Service Corporation ("TSC") demonstrate that the Government breached its implied-in-fact contract with the U.S. Naval Sea Systems Command Crane Division ("NAVSEA-Crane"). Demodulation does not address the other two implied-in-fact contracts, claiming that the Government moved only for summary judgment as to the NAVSEA-Crane contract. Finally, Demodulation argues that Count Five must survive summary judgment because there is adequate evidence of the Government's unauthorized disclosures and use of Demodulation's trade secrets by third parties, which are protected under New Jersey state law as property.
The Court notes that it dismissed all of Demodulation's trade secret claims in
Whether the Government was a party or otherwise in privity to the CRADA is a legal issue that is appropriate for resolution through summary judgment. The Court finds that Demodulation was a subcontractor with B&W Y-12 and that the Government was not a party to the contract between B&W Y-12 and Demodulation, or otherwise in privity with Demodulation. A subcontractor cannot maintain a direct appeal against the Government unless the contract provisions clearly indicate that the parties intended to give the subcontractor the right to a direct appeal against the Government, that the prime contractor was the purchasing agent for the Government, or that the Government was so involved with the day-to-day activities of the prime contractor that the prime contractor was an agent for the Government.
Before the litigation in this case commenced, Demodulation held twelve patents for various uses of amorphous metal wire, all of which have now expired.
On March 23, 2007, Demodulation entered into the two-year CRADA at issue here. The parties to the CRADA were B&W Y-12 ("the Contractor") under its U.S. Department of Energy ("DOE") Contract and Demodulation ("Participant"). Under the CRADA, Demodulation and B&W Y-12 agreed to use Demodulation's fundamental sensor technology to "develop sensor systems for detection, monitoring and tracking of material and assets." GA 177, 191-92. B&W Y-12 was the management and operating contractor for the National Nuclear Security Administration's ("NNSA's") Y-12 facility located in Westwood, New Jersey. Pl.'s Appendix ("PA") 69, Dkt. No. 111. DOE and the NNSA own the Y-12 facility. The CRADA was signed by Mr. Willie Wilson, Senior Contracts Manager for B&W Y-12 on February 12, 2007, and Mr. James O'Keefe, President and Chief Executive Officer of Demodulation on March 23, 2007. GA 191. The Government was to provide funding for the CRADA through its contract with B&W Y-12 and the CRADA also specified that formal reports would go to DOE. B&W Y-12's contract with the Government also mandated that any CRADA entered into by B&W Y-12 first had to be approved by a DOE contracting officer. PA 574.
The CRADA contemplated that various reports would be produced, including a final report that would contain a list of "Subject Inventions." Subject Inventions are "any invention of the Contractor or Participant conceived or first actually reduced to practice in the performance of work under th[e] CRADA." GA 177. The CRADA also contained specific provisions for dealing with Proprietary Information. Proprietary Information is defined as "information which embodies (i) trade secrets or (ii) commercial or financial information which is privileged or confidential under the Freedom of Information Act (5 U.S.C. § 552(b)(4)), either of which is developed at private expense outside of this CRADA and which is marked as Proprietary Information." Any "information produced in the performance of [the] CRADA" was marked as "Generated Information" unless it was marked as "Protected CRADA Information" by a party to the CRADA and "which would have been Proprietary Information had it been obtained from a non-federal entity."
A key provision in the CRADA is the disputes clause providing for the resolution of any dispute that arose between the parties to the CRADA. GA 189-190. The disputes clause provides:
Demodulation claims that there is no genuine dispute of material fact regarding its claims for breach of the CRADA and that it is clear the Government is a party to the CRADA. Pl.'s Compl. ¶ 34; Pl.'s Opp. to Def.'s Mot. for Partial Summ. J. at 18 ("Pl.'s Opp."), Dkt. No. 111 ("[A]ll CRADAs are contracts with the [F]ederal Government that support Tucker Act jurisdiction" and that B&W Y-12 was merely "standing in the shoes of the United States Government."). According to Demodulation, all rights and obligations of the CRADA remained with the Government at all relevant time periods. Thus, Plaintiff claims that at a minimum, the Government was in privity of contract with B&W Y-12 and Demodulation. The Government argues, on the other hand, that the CRADA was merely an agreement between two private parties and it was not a party to the contract or in privity with either party. Thus, the Court has no subject matter jurisdiction to hear the claim under the Tucker Act, 28 U.S.C. § 1491. Def.'s Mot. for Partial Summ. J. at 19-21, Dkt. No. 94 ("Def.'s Mot.").
The Court agrees with the Government's assertion that it is not a party to the CRADA between B&W Y-12 and Demodulation. The Government and B&W Y-12 had a contract for B&W Y-12 to run the Y-12 National Security Complex ("Y-12 facility"). PA 560. B&W Y-12 then entered into a contract with Demodulation for research activities at the Y-12 facility. Thus, the CRADA between Demodulation and B&W Y-12 is a subcontract between two private entities. PA 69; GA 188 ("It is understood and agreed that this CRADA is entered into by the Contractor under the authority of its prime contract with DOE.") (emphasis added). The Government is not a signatory of the CRADA.
The Tucker Act confers jurisdiction on the Court and allows the Court to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the Contract Disputes Act ("CDA"), including a dispute concerning the termination a of contract. 28 U.S.C. § 1491(a)(2). Generally, however, subcontractors cannot seek and collect damages from the Government because they are not in contractual privity with the Government.
In most cases, the subcontractor "has no right of direct action against the Government, but must go through the prime contractor." The subcontractor may recover against the Government indirectly if the prime contractor sponsors or certifies the subcontractor's claims or if a prime contractor includes its liability to a subcontractor in its damages against the Government.
In
Here, like in
The second exception, the purchasing agent exception to the general bar on direct appeals by subcontractors, is also inapplicable here. The second exception provides that the Government may be in privity of contract with a subcontractor when "the prime contractor is a mere Government purchasing agent."
B&W Y-12 was not acting as a purchasing agent for the Government here. Rather, B&W Y-12 was simply the manager and operator of the Y-12 facility owned by NNSA. Def.'s Reply to Demodulation's Opp., Dkt. No. 128 ("Def.'s Reply"). Further, the CRADA did not state that the Government would be liable to Demodulation. The Government was only funding the CRADA through its contract with B&W Y-12; it was not purchasing anything from Demodulation. The Government is mentioned in the CRADA primarily because it maintained some rights and benefits in the contract and was the initial arbiter of disputes between B&W Y-12 and Demodulation. The mere mention of the Government in the CRADA, however, does not make it a party to the contract.
Finally, B&W Y-12 is not the Government's agent, and thus, the third exception does not apply. B&W Y-12 was responsible for administering the CRADA, not DOE. GA 188. While Demodulation and B&W Y-12 had to submit annual reports on their progress to DOE, GA 186, the agency was not controlling the day-to-day activities that would put the Government in privity with Demodulation,
Accordingly, because the Government was not a party or in privity of contract with Demodulation under the CRADA, the Court lacks subject matter jurisdiction over Plaintiff's claim for breach of the CRADA. Defendant's motion for partial summary judgment on Plaintiff's claim for breach of the CRADA is GRANTED. Demodulation's cross-motion on whether the Government breached the CRADA is DENIED.
The remainder of the Government's motion for partial summary judgment is moot because the Court dismissed all of Demodulation's trade secret claims in
For the foregoing reasons, the Court GRANTS the Government's motion for partial summary judgment on Count One regarding the CRADA. The Court DENIES Demodulation's motion for partial summary judgment on the same. The Government's motion for summary judgment on the trade secret claims in Counts One, Two and Five is MOOT. All that remains are Demodulation's patent infringement claims in Count Three on the twelve patents it previously held for various uses of microwire.
IT IS SO ORDERED.