Teaming Agreements and Proprietary Information: A Cautionary Tale

Are you taking adequate steps to protect your proprietary and confidential information from misuse by teammates?

If your teaming agreement or non-disclosure agreement requires you to mark proprietary information with a “protected” legend, the answer may be “no.”  Although many standard teaming agreements and non-disclosure agreements require protective legends in order to protect confidential information, contractors sometimes fail to apply the appropriate legend.  And when that happens, at least according to a recent decision of the U.S. Court of Federal Claims, the contractor may have no basis to complain that the teammate stole its confidential information.

The court’s decision in Your Recruiting Company Inc. v. United States and Golden Key Group LLC, No. 12-509C (2012), involved a National Science Foundation award of a task order under the GSA Schedule to Golden Key Group LLC.  Your Recruiting Company, Inc., or YRC, filed a bid protest with the Court of Federal Claims, claiming that Golden Key had used content that it had obtained from YRC without permission, and that the stolen material was relied upon by the NSF in making the award to YRC.

Prior to submitting their separate offers on the NSF procurement, YRC and Golden Key had previously teamed together on a joint proposal to the GSA.  As is typical in a teaming relationship, the parties executed a nondisclosure agreement.  The NDA stated that “[a]ll written proprietary information disclosed to the other party shall be marked with the legend ‘Proprietary Information.'”  In addition, the NDA stated that “Proprietary Information shall also include all data or other information disclosed to the other that a party could reasonably expect to be protected as confidential.”

During the preparation of the joint proposal, a YRC employee emailed an document entitled “Staffing Plan Docs YRCI” to a Golden Key employee.  The YRC employee also emailed additional documents to Golden Key.  None of the documents were labeled as proprietary, although the emails did include a boilerplate warning at the bottom to the effect that the email was intended only for the designated recipient and may include privileged, proprietary or confidential information.

After the GSA proposal was submitted, the parties teamed on other efforts, then went their separate ways.  Golden Key subsequently submitted a proposal to the NSF containing a section that was “virtually identical” to the staffing plan information the YRC employee had emailed to Golden Key.

After the NSF made award to Golden Key, YRC filed a GAO bid protest, alleging in part that the information in question was proprietary and that Golden Key had falsely represented to the NSF that the language originated with Golden Key.  The GAO issued a decision characterizing the issue as a private dispute between the parties.  YRC then filed a complaint with the Court of Federal Claims.

The court rejected YRC’s claim that Golden Key had stolen proprietary information, stating that the YRC employee “had authority to send the controverted material to Golden Key, and it was not labeled as proprietary.”  The court continued, “[t]he parties had adopted a protocol for labeling legitimately private information, and it was not utilized.”  Further, “it is baseless to assert that the boiler plate language at the bottom of the covering emails” served to mark the information as proprietary.

As for the NDA’s provision that information could be deemed proprietary without a legend if a party would reasonably deem it confidential, YRC had “made no serious effort to prove that Golden Key should have known from the circumstances of the transmission and use of the material that YRC expected it to be treated as protected.”  Moreover, the information in question was incorporated into the parties’ joint proposal, and “YRC has not shown that Golden Key should be presumed to have no rights in that proposal.”

The court ruled in favor of the government and Golden Key.

The Your Recruiting Company bid protest decision demonstrates that the failure to follow a provision in a teaming agreement or NDA requiring marking of proprietary information may be fatal to future attempts to claim that the information is confidential.  Because many standard teaming agreements and NDAs contain such marking requirements, small government contractors would be well-advised to ensure that appropriate protective legends are placed on any confidential information that is transmitted to a teammate.

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