United States: Board Of Contract Appeals Lacks Jurisdiction Over Software Company's License Breach Claim When Software Was Sold Via Reseller

The Civilian Board of Contract of Appeals (CBCA or Board) held it lacked jurisdiction over a software company's claim that the government breached its license agreement because that agreement was not a procurement contract under the Contract Disputes Act (CDA). Instead, the procurement contract was the contract between the software reseller and the government; that contract incorporated the software licensing agreement by reference but gave the software company no right to submit its own claim under the CDA. This decision makes clear that, in order to obtain relief for license agreement breaches, similarly situated software licensors must either submit a "pass-through" CDA claim, sponsored by its reseller with a government contract, or pursue a copyright claim in the Court of Federal Claims.

In Avue Technologies Corporation v. Health and Human Services and General Services Administration, CBCA 6360, 6627 (Jan. 14, 2022), the CBCA considered a claim submitted by a company that develops and licenses software solutions for managing human resources that another company resells to the federal government under a General Services Administration (GSA) schedule contract. That schedule contract incorporated by reference Avue's end user license agreement. The Food and Drug Administration (FDA) purchased the software off of the reseller's schedule contract, and Avue alleged it misappropriated proprietary data by downloading job descriptions from Avue's database, purchasing a less expensive database platform from a different company, and then populating that database with Avue's data. Avue submitted a CDA claim to the FDA alleging breach of that end user license agreement, which the Contracting Officer denied. Avue also filed a "protective" claim against GSA, on which GSA declined to issue a decision. On appeal, the Board consolidated its consideration of the two claims.

Before the Board, HHS (FDA's parent agency) submitted multiple motions to dismiss Avue's appeal of the FDA Contracting Officer's final decision, resulting in a series of decisions of great interest to the contracting community. First, HHS argued that Avue was akin to a subcontractor and therefore lacked standing under the CDA. The Board denied HHS' motion, finding Avue had made a "non-frivolous" claim that it had direct privity with the government under the software licensing agreement. Avue Techs. Corp. v. HHS and GSA, CBCA 6360, June 28, 2019, 19-1 BCA ¶ 37,375 ("These allegations of the existence of a contract suffice to take the claim out of the realm of subcontractor claims and into the world of claims within our CDA jurisdiction, provided the other jurisdictional requirements are met.").

Next, HHS argued that Avue's claim required interpretation of the schedule contract, rendering GSA the proper defendant. (GSA responded that no contract between Avue and GSA existed.) The Board refused to dismiss either agency defendant at that time, explaining that it had jurisdiction over one or the other and "pragmatic considerations" counseled against deciding the issue on a motion to dismiss, without any "case-management benefits" or "genuine prejudice to either respondent" of delaying the decision. Avue Techs. Corp. v. HHS. and GSA, CBCA 6360, Feb. 3, 2020, 20-1 BCA ¶ 37,503.

The agencies ultimately found success on moving for summary judgment on the consolidated appeals by arguing that even if Avue's licensing agreement was an independent contract between the government and Avue (which the Board declined to decide but hinted it was), it was not a "procurement contract" within the meaning of the CDA and therefore the Board lacked jurisdiction. The Board cited Federal Circuit precedent for the holding that a "'procurement contract' subject to the CDA must be a contract for 'the acquisition by purchase, lease or barter, of property or services for the direct benefit or use of the Federal Government.'" Avue (quoting New Era Construction v. United States, 890 F.2d 1152, 1157 (Fed. Cir. 1989). The government here agreed to purchase the software through a purchase order with a reseller that held a GSA schedule contract, not directly from Avue under its licensing agreement. The CBCA reasoned that "a claim by Avue in its own capacity for breach of the [license agreement] is not regardless of its viability, a claim by a contractor under a CDA procurement contract that our Board may resolve."

The Board also rejected Avue's arguments that CDA jurisdiction was proper because the licensing agreement was "related to" to a procurement contract, finding the fact that the government did not have a procurement contract with Avue to be dispositive. The CBCA explained: "No court or board of which we are aware has held that a party other than the prime contractor can establish CDA jurisdiction by relying on a separate agreement that relates to a CDA procurement contract. We will not be the first."

While the CBCA's ruled that the CDA provides no remedy to companies, seeking to sue in their own capacity that do not themselves have a procurement contract with the government, the Board highlight two other paths that such a software licensor could pursue in order to recover from the government:

• Via a "pass-through" CDA claim submitted by the prime contractor; or
• Suit in the Court of Federal Claims for copyright infringement under the Tucker Act, 28 U.S.C. 1491.

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