The U.S. government paid $45 million to Northrop Grumman Systems Corp. over claims that federal agencies misappropriated trade secrets related to a polar satellite program, The National Law Journal learned through a Freedom of Information Act request.
The payment, which was made in 2014 and has not been previously reported, was authorized by the U.S. Department of Commerce on behalf of the National Oceanic and Atmospheric Administration, Air Force and National Aeronautics and Space Administration.
The expenditure was listed without identification as a “miscellany” $45 million administrative tort payment in the federal government’s Judgment Fund database. Such payments are usually less than $10,000 for claims such as slip and falls. The Judgment Fund entry did not identify the recipient of the payment or list a case number.
The Commerce Department on May 4 responded to the NLJ’s FOIA request for information about the payment.
Represented by Sheppard, Mullin, Richter & Hampton, Northrop filed an administrative claim against the government in 2011 seeking $332 million in damages for lost profits. The company was the prime contractor on the $10 billion National Polar-Orbiting Operational Environmental Satellite System, used for civilian and military weather forecasting and tracking.
Northrop’s responsibilities included the development and production of the satellites and delivery of the environmental data they provided. The company said it relied on its “unique technical know-how, expertise and trade secret information it had developed during over 40 years of satellite work,” according to the complaint filed by Sheppard Mullin partner Joseph Coyne Jr.
The program was plagued by delays and cost overruns. The Government Accountability Office in 2006 U.S. Senate testimony blamed “issues with subcontractor and contractor performance, program management and executive-level oversight.”
In 2010, the government announced it was moving much of the work from the program to the new Joint Polar Satellite System.
Government workers soon began downloading and copying “massive amounts” of Northrop’s satellite-related intellectual property, Northrop alleged. That information was used to award contracts to other companies, “using Northrop Grumman IP in the process or disclosing the IP to its [Joint Polar Satellite System] contractors for their consideration and/or use,” Coyne wrote in 2011 to NASA and NOAA.
The rival contractors allegedly included Ball Aerospace & Technologies Corp., Raytheon Co. and ITT Corp.
Coyne was not immediately reached for comment Wednesday.
The extent to which the government has rights to technical data and software developed in connection with a government contract can be a point of contention.
Northrop asserted that the contract specified what items the government had limited rights to, and that “nothing in the contract permitted them unilaterally to take possession of materials … to use as they pleased.”
According to Northrop’s complaint, the government said it owned the material at issue. Under the terms of the settlement, the government did not admit liability.
Commerce Department lawyer Megan Rose, chief of the general litigation division in the office of general counsel, did not immediately respond to a request for comment.
Below: Read Sheppard Mullin’s claims against NASA and the National Oceanic and Atmospheric Administration over alleged government misappropriation of Northrop Grumman trade secrets.