Federal Contract Ruling Limits Claims of Licensors

Companies who use resellers to market software or other licensed products to federal agencies should be aware of a recent Civilian Board of Contract Appeals decision.  In Avue Technologies Corporation v. Health and Human Services and General Services Administration, decided January 2022, the Board held that it lacked jurisdiction over a claim that a federal agency breached its license agreement with a software developer.

In the case, Avue Technologies Corp. alleged that the U.S. Food and Drug Administration breached its license agreement by misappropriating proprietary data from Avue’s database, purchasing a less expensive database platform from a different company, and then populating that database with Avue’s data.  The Board held that its jurisdiction over federal contracts is based on the Contract Disputes Act and Avue's license agreement with the FDA was not a "procurement contract" under the CDA.  Rather, the license agreement was an ancillary contract incorporated in the actual procurement contract, i.e., the General Services Administration schedule contract through which the FDA purchased the software from Avue's reseller.

In certain circumstances, the ruling limits the options of software licensors who want to assert a claim against a federal agency licensee.  Based on Avue, a licensor who utilizes a reseller cannot bring a breach of contract claim against its federal customer at the boards of contract appeals despite having executed a license agreement with the federal agency.  Instead, the licensor must either submit to the agency a "pass-through" claim sponsored by its reseller or pursue a copyright claim in the U.S. Court of Federal Claims.

Understanding the Avue decision and its implications is critical for software companies and other licensors who sell to federal customers through GSA schedule contracts or other reselling vehicles.  If you have concerns about this or other government contracting issues, please contact Bill Speros or another attorney at our firm.