Megapulse, Inc. v. Lewis
217 U.S. App. D.C. 397, 672 F.2d 959 (1982)
Rule of Law:
A federal district court has subject matter jurisdiction under the Administrative Procedure Act (APA) and federal question jurisdiction to review an agency's decision to disclose proprietary data, even if the data was initially supplied under a government contract, provided the claim is based on a violation of property rights and the Trade Secrets Act, rather than a disguised breach of contract claim seeking monetary damages.
Facts:
- Megapulse, Inc. was founded by Dr. Paul Johannessen for the development, manufacture, and sale of long-range (Loran) navigation transmitter equipment embodying a pulsing circuit system known as a megatron, which he developed solely with private funding.
- In May 1970, Johannessen invited the Coast Guard to witness a demonstration of a Loran-C type transmitter utilizing the megatron.
- Beginning in August 1970, Megapulse and the Coast Guard entered into a series of agreements for the demonstration and development of megatron transmitter technology.
- Early contracts granted the U.S. Coast Guard rights to data for the demonstration model, subject to Megapulse’s patent rights, and the right to use and disclose technical data delivered under the contract.
- A final contract in December 1975 provided that all data first produced under the contract would become government property, but data not first produced remained Megapulse's property, with the government acquiring use rights unless the data were marked as 'limited rights data'.
- In November 1977, Megapulse submitted engineering drawings and specifications, marking a portion with a 'limited rights data' legend.
- In May 1979, the Coast Guard advised Megapulse that it would remove all restrictions against commercial use of its proprietary data in a forthcoming bid solicitation for Loran-C transmitters.
- Megapulse identified six specific drawings in the solicitation data package that reflected the essence of its proprietary technology, developed prior to its contracts with the Coast Guard, and claimed their unrestricted release would violate the Trade Secrets Act and deprive it of property without due process.
Procedural Posture:
- In May 1979, Megapulse, Inc. protested the Coast Guard's decision to remove data restrictions to the General Accounting Office (GAO).
- Simultaneously, Megapulse filed suit in the United States District Court for the District of Columbia to enjoin the Coast Guard's release of the data pending the GAO decision, but withdrew its motion after the government agreed to protect the data.
- On January 15, 1980, the GAO issued an opinion denying Megapulse's protest, finding Megapulse failed to meet its burden of showing no reasonable basis for the agency's determination.
- Following a May 28, 1980, GAO denial of Megapulse's request for reconsideration, Megapulse again filed an action for injunctive relief in the United States District Court for the District of Columbia, founding subject matter jurisdiction on 28 U.S.C. § 1331 (federal question) and 5 U.S.C. § 702 (APA).
- The Coast Guard notified Megapulse on October 2, 1980, of its intention to proceed with the solicitation by about December 1, 1980, which precipitated Megapulse's motion for preliminary injunction in the district court.
- The district court denied Megapulse's motion for preliminary injunction and granted the Government's motion for summary judgment, concluding it lacked subject matter jurisdiction.
- Megapulse, Inc. (appellant) appealed the district court's decision to the United States Court of Appeals for the District of Columbia Circuit, with the United States Coast Guard (appellee) as the opposing party.
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Issue:
Does a federal district court have subject matter jurisdiction to enjoin a government agency from releasing proprietary technical data, supplied under a government contract, when the contractor alleges the disclosure violates the Trade Secrets Act and infringes on its property rights, or is such a claim exclusively a contract dispute falling under the Tucker Act, which would limit jurisdiction to the Court of Claims and preclude injunctive relief?
Opinions:
Majority - Wilkey, Circuit Judge
Yes, a federal district court does have subject matter jurisdiction to enjoin a government agency from releasing proprietary technical data when the contractor alleges the disclosure violates the Trade Secrets Act and infringes on its property rights, provided the claim is based on truly independent legal grounds rather than being a disguised breach of contract claim. The court reversed the district court's finding of no subject matter jurisdiction, holding that the Supreme Court's decision in Chrysler Corp. v. Brown effectively countered the prior reasoning of International Engineering Co. v. Richardson. Chrysler established that a government agency's decision to disclose data is an “agency action” reviewable under Section 10 of the Administrative Procedure Act (APA), and a disclosure violating the Trade Secrets Act (18 U.S.C. § 1905) is “not authorized by law,” thus creating a private cause of action for an “aggrieved party” under the APA, with jurisdiction under 28 U.S.C. § 1331. The court rejected the government’s attempt to distinguish Chrysler based on whether data was provided pursuant to regulation or contract, asserting that the “agency action” stems from the official decision to disclose protected data regardless of its origin. While acknowledging the concern to preserve the Tucker Act's exclusive jurisdiction over contract claims exceeding $10,000 in the Court of Claims (which provides only monetary relief), the court clarified that not every case with some reference to a contract is “at its essence” a contract action. Megapulse's claims were characterized as based on an alleged governmental infringement of property rights and a violation of the Trade Secrets Act, specifically seeking to protect data that preexisted its contracts and not seeking monetary damages. The court found monetary relief in the Court of Claims inadequate for protecting such vital trade secrets, distinguishing it from International Engineering where data was deemed “useless.” Finally, the court rejected the argument that injunctive relief would equate to specific performance of a contract, asserting that if an action is not a “contract action” for Tucker Act purposes, its remedies are not contract-related, and injunctive relief is available to address statutory violations.
Analysis:
This case significantly clarifies the jurisdictional landscape for claims against the government involving proprietary data supplied under contract, particularly in light of the Chrysler decision. It limits the expansive reading of the Tucker Act, establishing that claims alleging statutory violations (like the Trade Secrets Act) or infringement of property rights are not automatically subsumed by contract law merely because a contract exists. By affirming district court jurisdiction for injunctive relief in such cases, it ensures that companies can seek adequate protection for their trade secrets against unauthorized government disclosure, encouraging future collaboration with the government without fear of losing critical intellectual property. This decision emphasizes the importance of carefully distinguishing between claims 'on the contract' and those with independent legal grounds, even when contract terms are relevant to the dispute.
