Ervin & Associates, Inc. v. United States

MEMORANDUM OPINION

■ This government contracting case raises an important issue concerning the scope of the Federal Acquisition Regulation (“FAR”) “Rights In Data-General” Clause that neither the United States Court of Federal Claims nor the United States Court of Appeals for the Federal Circuit has had an occasion to consider. Since 1987, civilian federal contracts have included a standard “Rights In Data-General” Clause, which provides the federal government (“Government”) with virtually “unlimited rights”1 in technical data and computer software. See generally 48 C.F.R. § 27.000-27.601 (2003); Lionel M. Lavenue, “Database Rights and Technical Data Rights: The Expansion of Intellectual Property for the Protection of Databases,” 38 Santa Clara L. Rev. 1 (1997). In fact, the “Rights In Data-General” Clause “does not provide any rights to the contractor, instead, these rights tend to limit rights that a contractor may have in data by requiring the license of the technology to the [Government — effectively, a compulsory license. Indeed, in contrast to a patent or copyright, for which the [Government may demand a license, the data rights regulations specifically require conditions under which a contractor must grant the [G]overnment specific, non-exclusive license rights. Notably, the data rights regulations define these conditions and requirements for the [Government to take data rights in computer software and technical data independent of any rights in patent or copyright.” Lionel M. Lavenue, “Technical Data Rights in Government Procurement: Intellectual Property Rights in Computer Software and the Indicia of Information Systems and Information Technology,” 32 U.S.F.L. Rev. 1, 29-30 (Fall 1997).2

*270Therefore, “to fully protect and leverage intellectual property assets, companies that do business with the Government must be knowledgeable of these statutes and regulations as well as the underlying intellectual property laws. Failure to do so could give a company’s competitors rights to use their intellectual property, or could cause the company to pass up unique opportunities for government investment in development.” Nancy 0. Dix, Fernand A. Lavellee, and Kimberly C. Welch, “Fear and Loathing of Federal Contracting,” 33 Pub. Contract Law J. 1, 13 (Fall 2003). This case concerns an experienced and respected government contractor, Ervin and Associates, Inc. (“Ervin”), that has found itself in this exact situation.

RELEVANT FACTS3

The court has presented an inclusive and lengthy discussion of the relevant facts because this case is the first in which the United States Court of Federal Claims has addressed the scope of the FAR “Rights In Data-General” Clause and also is the first of seven actions, discussed herein, to reach a final judgment.

A. HUD’s Office Of Multifamily Housing.

From 1993 through 1997, the relevant period in this case, the United States Department of Housing and Urban Development (“HUD”) managed a portfolio of approximately 16,000 HUD-insured and HUD-held loans worth $50 billion, secured by over two million multifamily apartment projects located throughout the United States. See J. Ervin Decl. at H 6; PPF at f 1. Each year, owners of these loans were required to submit an audited annual financial statement (“AFS”) in hard copy to HUD. See J. Ervin Decl. at 117; PPF at H 2. The length of an individual AFS form varied, but generally comprised 30 pages of financial and other business information. See J. Ervin Decl. at U 8; PPF at If 3. Prior to 1994, review of AFS forms was performed manually by HUD staff who determined whether an AFS complied with HUD regulations. See J. Ervin Decl. at 119; PPF at If 3. A nonconforming AFS would result in a follow-up letter to the project owner. Id. Overall AFS compliance was the responsibility of the Office of Multifamily Housing (“OMH”), which was supervised by a Deputy Assistant Secretary (“DAS”). See J. Ervin Decl. at 116; PPF at 1157.4

B. On July 21, 1993, HUD Issued A Request For Proposals Regarding The AFS Forms.

On July 21, 1993, HUD issued a Request for Proposals No. DV100C000018266 *271(“RFP”), seeking a contractor to collect and review AFS forms and provide draft followup letters to HUD. See DefApp. at 1-100.

The RFP’s Statement of Work (“SOW”) required that the successful contractor annually would review over 16,000 AFS forms and develop a “trend analysis” comparing the forms for the current year to those of the two previous years. See Def.App. at 8-14; DPF at 11113-4. The SOW also required that the successful contractor survey the Independent Public Accountants that audit HUD partnerships and provide HUD with a “plan to automate the financial statement that is compatible with HUD’s automatic systems considering fully the capability of the IPA[s].” Def.App. at 12. The purpose of this plan was to allow the AFS forms to be delivered to HUD electronically. See Def. App. at 12; DPF at 115. In addition, the initial SOW incorporated by reference several HUD handbooks that provided information regarding HUD requirements for review and analysis of the AFS forms. See DefApp. at 8, 365-553; DPF at HH 6-14.

The initial RFP was a cost-reimbursement plus fixed-fee contract with a closing date of August 20, 1993. See DefApp. at HH1, 4-7; DPF at 112. The term was for one year with four option years. See Def.App. at 11111, 4-7; PPF at H19; DPF at If 2. The RFP included, or incorporated by reference, over seventy standard FAR contract clauses. See Def. App. at 65-100. HUD made six amendments to the initial RFP.

The first amendment extended the closing date to August 27, 1993. See DefApp. at 101-16; DPF at 1130. On September 20, 1993, HUD issued a second amendment that changed the contract from cost-reimbursement to one for an indefinite quantity “fixed unit rate” and again extended the closing date. See Def.App. at 117-52; PPF at 111127-28; DPF at 111131 — 35. Contract Line Number (“CLIN”) 0007 also was added to require the input of certain data elements into HUD’s Field Office Multifamily National System (“FOMNS”). Id.; see also Def.App. at 120-23.

On September 23, 1993, HUD issued a third amendment that added pricing for CLIN 0008, “Automation and Procedures” to the base year of the contract. See DefApp. at 147-60; PPF at 1129; DPF at HH 36-37. In response to a question from a prospective offeror, HUD clarified that “[t]here is no system development required by the contractor.” DefApp. at 156; PPF at 1129; DPF at H 37. In addition, the third amendment specifically requested best and final offers (“BA-FOs”) from five companies that previously had submitted offers technically acceptable to HUD. See Pl.Ex. 78; PPF at H 30. At this stage, the RFP still retained its initial requirements of “trend analysis” and review of all 16,000 AFS forms each year. All of these initial offers, however, were priced at a level that exceeded the funds that HUD allotted for this project, requiring HUD to change the SOW. See DefApp. at 149; Pl.Ex. 78; PPF at Vil 30-31.

On December 7, 1993, HUD issued a fourth amendment eliminating the CLIN 0001 (“Trend Analysis Report”) and 0008 (“Automation and Procedures”) requirements. See DefApp. at 161-99; PPF at 1132; DPF at 1138. Most important was the change in the number of AFS forms required to be reviewed from 100% to 30% of HUD’s portfolio. Id. A new round of BAFOs again was requested. Id. A fifth amendment followed that extended the closing date until December 29, 1993. See DefApp. at 200-07; DPF at 1139. On December 23, 1993, HUD issued a sixth and final amendment clarifying that completeness checks were required for all AFS forms, but the number of reviews was reduced from 100% to 30% of HUD’s multifamily portfolio. See Def.App. at 207(a)-09; DPF at H 40.

C. Ervin’s August 27, 1993, September 24, 1993, and December 29, 1993 “Technical Proposals” In Response To HUD’s July 21, 1993 Request And Amendments Thereto.

In 1989, Ervin began a business to provide acquisition, management, disposition, and financing services to owners and lenders with multifamily loan portfolios. See J. Ervin Decl. at U10; PPF at II4. The company’s founder-, John Ervin, previously was employed by the National Housing Partnership (“NHP”), a large owner and manager of sub*272sidized multifamily properties, where he was Executive Vice President for Asset Management and worked on computerized database systems used to manage a multifamily project portfolio. See J. Ervin Decl. at UU 3, 4, 10; PPF at UU 5, 66. John Ervin alleges that he negotiated an agreement with NHP to acquire rights to the “multifamily computerized database systems,” used to manage NHP’s 500-plus multifamily project portfolio. See J. Ervin Deck at U10; PPF at U 7.5 Ervin hired Brian Hunt, a NHP computer programmer, and Velda Frisco, a NHP Financial Analyst. See J. Ervin Deck at U10; PPF at U 7. Ervin then began to develop and expand the centralized computer database systems that it acquired from NHP to create the Ervin Multifamily Information Systems (“EMFIS”). See J. Ervin Deck at UU 11-12; PPF at U 8 and n.3. In 1990, HUD awarded Ervin a Co-Insurance Contract. See S. Er-vin Deck at U 4; Def.App. at 588-59; PPF at UU22, 214; DR at UU22, 214; see also PI. Cross-Mot. at 4 (“Between 1989 and 1993, Ervin won and performed several contracts for HUD and others, each of which required Ervin to review and analyze AFSs.”). In addition, Ervin attracted other institutional customers, including NHP, Wellington, Volunteers of America, and the SCA Foundation, all of which used Ervin’s services to compile information regarding certain projects and their financial performances. See J. Ervin Deck at U13.

In response to HUD’s July 21, 1993 RFP, Ervin assembled a team of experts, including an accounting firm and a computer equipment and systems provider. See J. Ervin Deck at U15; PPF at U 21. On August 27, 1993, Ervin submitted a “Technical and Management Proposal” to HUD that described the EMFIS as a “series of currently existing interrelated database systems which contain data elements and text and are linked together to create sophisticated analysis for the portfolio of loans for which we [currently] assist HUD.” Def.App. at 588-89; see also PPF at U 22 (emphasis added). Ervin’s proposal stated that: “[t]he approach we intend to use to meet all of HUD’s requirements is initially based on the concept that each of the similarities that are included or should be included in each of the 16,000 annual financial statements are susceptible to the pre-programmed standardized test[s] that can be performed by a computer exactly the same way each time.” Def.App. at 595-96; see also PPF at U 23.

Although HUD’s fourth amendment eliminated the requirement for a trend analysis report and clarified that it would not require the selected contractor to develop a computer system, Ervin, nevertheless, believed HUD eventually would need a comprehensive computer database of financial statement data for all of its multifamily loans in the future and would allocate funds for these additional databases. See J. Ervin Deck at U19; PPF at UU 33, 35. Therefore, Ervin’s December 29, 2003 BAFO represented that Ervin would deliver to HUD reviews of all information entered into its database for each of HUD’s 16,000 properties. See Def-App. at 987-88, 993; PPF at U 36; DR at U 36. Ervin’s BAFO touted the company’s “ability and desire to provide incremental value at no incremental cost.” DefiApp. at 979.

For example, Ervin represented that:

We will be in a position to provide the HUD field offices with a comprehensive computerized review and draft findings letter on all 16,000 annual financial statements at no additional cost to HUD.... Since we are proposing to provide a full computerized review on all 16,-000 financial statements at no additional cost to HUD, we also propose to complete a full inventory of all financial statement information instead of only the abbreviated review of the basic financial statements ____Since all important financial information will have been input and be available on the system we would expect to provide a ratio and trend analysis (on hard *273copy and diskette) for each and every project.

Def.App. at 982-83 (bold in original, other emphasis added).

Ervin further stated that:

Our approach, which is based on helping HUD to obtain an increasingly better understanding of all aspects of the portfolio each successive year, demands that we continue with some lev.el of trend analysis (we will obviously share this analysis with HUD). By utilizing this centralized process approach not only will we become more efficient allowing the computer to do more and better work each year and produce a more consistent result, but we will also be much more effective for HUD. We will take this approach not because we are forced to under the contract terms, but because it makes good business sense for both HUD and for us. We further understand that the additional knowledge we can gain (and provide to HUD) through this process can make all of the other multifamily real estate services we offer to HUD more valuable. Because of this long term perspective we are more than willing to invest our best resources in building a truly superior and comprehensive system.

Def.App. at 985-86 (emphasis added).

In addition, Ervin promised:

Since our approach relies heavily on computer technology and ongoing use of information, we would expect to input more raw information initially into the computer system than others might. Although this might take slightly more time initially, it will improve the quality of the [financial statement] reviews and provide a greater level of information that will subsequently be used for portfolio level analysis and more sophisticated project level analysis.

Def.App. at 987-88. With the capability to analyze information from all the AES forms, “Ervin’s pre-programmed tests could perform statistical comparisons between or among multiple projects” and “financial analysis at the portfolio or regional level.”6 Hunt Deel. at H 7; see also PPF at H11.

HUD received 13 proposals in response to the initial RFP. See Pl.Ex. 13; PPF at H 26. Five, including Ervin’s, were found to be technically acceptable. Id. Ervin’s proposal was priced at $39,428,625, which was close to the average between $38 and $39 million. Id. Ervin’s initial BAFO price, submitted in response to HUD’s third amendment, was $37,197,500, compared to an average of more than $42 million for all competitors. See Pl.Ex. 78; PPF at H 30. Ervin’s final BAFO was priced at $12,328,000, compared to an average price of approximately $22 million. See J. Ervin Deck at If 20; Pl.Ex. 78; PPF at 1138.

Ervin contends that the almost $25 million difference between its initial BAFO, priced at $37.2 million, and the second BAFO, priced at $12.3 million, related “almost exclusively to HUD’s elimination of the trend and portfolio analyses requirement and the elimination of the effective requirement for database systems. Based on this scope reduction any database improvements made by Ervin would be owned by Ervin.” J. Ervin Deck at 1120 (emphasis added).

D. On February 14, 1994, The AFS Contract Was Awarded To Ervin.

On January 21, 1994, a Source Evaluation Board recommended awarding the contract to Ervin. See Pl.Ex. 13. On February 4, 1994, a Contracting Officer (“CO”)7 adopted that recommendation. See Pl.Ex. 78; PPF at H 40. On February 14,1994, HUD executed the AFS Contract Award. See Def.App. at 1044-90; PPF at 1143. The AFS Contract Award included HUD’s RFP, as amended, but prominently noted on the cover sheet that Ervin’s “technical proposals, dated August 27, 1993, as amended September 24, 1993 and December 29, 1993, are hereby *274incorporated by reference and made part of this contract.” Def.App. 1044; see also PPF at 1143. On February 10 or 18, 1994 (the date is unclear), John Ervin signed the AFS Contract Award (“AFS Contract”). See Def. App. at 1044-90.8 The AFS Contract Award was made in accordance with accepted practices of negotiated procurement on GSA’s Standard Form 26, utilizing Block 17. Id.9

A Government Technical Monitor (“GTM”),10 Ms. Beverly Miller, and a Government Technical Representative (“GTR”),11 Mr. Ken Hannon, were assigned to oversee and monitor the AFS Contract, under DAS Dunlap’s supervision. See Pl.Ex. 6 at 8; PPF at 111159, 62. Shortly after the AFS Contract was finalized, responsibility for its implementation was transferred from HUD’s Office of Procurement and Contracts, which provides administrative support, to the Program Support Division and assigned to Dolores Ammons-Barnett as the first CO for the AFS Contract. See Pl.Ex. 8 at 8, 46^47; PPF at 1Í1T 50-53. In addition, contract specialist George Chabot was assigned to the AFS Contract. See Pl.Ex. 14; PPF at 1155.

After the AFS Contract was awarded, John Ervin “confirmed verbally” with GTR Hannon that Ervin had HUD’s “permission to enter data from all 16,000 AFSs” into its databases. J. Ervin Decl. at H 22; PPF at 1169. Shortly after beginning to work on the AFS Contract, HUD informed Ervin that it did not have funding necessary to develop the software necessary for Ervin to load AFS data into HUD’s FOMNS, as required by the terms of the AFS Contract. See J. Ervin Decl. at 1122; Pl.Ex. 3 at 105-06, 109-10; PPF at II77; DR at 1177. Instead, Ervin worked with HUD to create an “extract file” to transfer AFS data from the EMFIS to HUD’s FOMNS database by disk and eliminate the need for this supplemental software. See Hunt Decl. at 1115; PPF at 1178. GTM Miller testified that Ervin was “willing to work around it with us” and was “very cooperative,” and that as a result, she had a “very high opinion” of him. Pl.Ex. 3 at 111-12; see also PPF at U 79; DR at 1179.

HUD also awarded Ervin other contracts after the AFS Contract. In May 1994, Ervin was performing work for HUD under an “existing asset management contract to provide due diligence services for multi-family *275properties 'to be sold through its upcoming Note Sale Program.” J. Ervin Decl. at H 23. In August 1994, HUD’s San Francisco Region awarded Ervin a “Delegated Processing” contract. See J. Ervin Decl. at 1124; PPF at 1181. This was followed by similar contracts awarded by five other regional HUD offices in Atlanta, Boston, Philadelphia, Kansas City, and Seattle. Id.

E. The AFS Contract Referenced The FAR “Rights In Data-General” Clause.

The AFS Contract referenced the “Rights In Data-General” Clause. See 48 C.F.R. § 52.227-14; see also Def.App. at 1080. The “Rights In Data-General” Clause provides the Government with “unlimited rights” in the following categories of data:

Except as provided in paragraph (c) of this clause regarding copyright12, the Government shall have unlimited rights13 in-

(i) Data14 first produced in the performance of this contract;

(ii) Form, fit and function data delivered under this contract;

(in) Data delivered under this contract (except for restricted computer software15) that constitute manuals or instructional and training material for installation, operation, or routine maintenance and repair of items, components, or processes delivered or furnished for use under this contract; and

(iv) All other data delivered under this contract unless provided otherwise for limited rights data16 or restricted computer software17 in accordance with paragraph (g) of this clause.18

48 C.F.R. § 52.227-14(b)(l).

In addition to the “Rights In Data-General” Clause, the AFS Contract also contained *276an additional provision affecting data rights that specified: “If additional software and computer applications are developed to present the data specified under the contract, then such will be considered property of the Department {e.g., computer generated 93484, 85, or 86.).” Def.App. at 1056.19

F. In 1994, Third Parties Requested HUD For Access To AFS Data And/Or The EMFIS.

1. The Grubman & Co. Request.

In July 1994, HUD received a Freedom of Information Act (“FOIA”) request from Grubman & Company (“Grubman”) for a list of the Certified Public Accountants that submitted AFS forms to HUD. See Pl.Ex. 23; J. Ervin Decl. at H 25; PPF at 1197; DR at 1197. Grubman stated that it learned Ervin had compiled this information after being awarded the AFS Contract. Id. HUD denied the FOIA request, stating that the information requested was:

not a contract, and was not requested, nor paid for by HUD. Therefore, the Department takes no exception to the release of this data if Ervin and Associates wishes to do so. You may wish to contact Ervin and Associates for a copy of the list.

PLEx. 23; see also J. Ervin Decl. at 1Í 25; PPF at 1198. Grubman then sent a copy of HUD’s response to Ervin, but Ervin declined to release the data. See Pl.Ex. 24; J. Ervin Decl. at H 26; PPF at K 99.

2. The Kerry Co. Request.

In August 1994, DAS Dunlap informed John Ervin that HUD was hiring Kerry Company (“Kerry”) as a subcontractor to provide “Special Workout” services. See J. Ervin Decl. at H 27; PPF at II107. Subsequently, Mr. Bill Hill, then a Director in HUD’s Office of Multifamily Housing, directed Ervin to provide Kerry with access to databases concerning the AFS forms, but Ervin refused. See J. Ervin Decl. at 1(29; Pl.Ex. 3 at 263; PPF at 11108. Hill then requested a “special extract” of data claiming that the purpose was to help HUD review certain troubled projects. See Hunt Decl. at If 16; see also PPF at 11109; DefApp. II at 114. Ervin provided the “special extract.” Id. Unknown to Ervin, HUD provided this data to Kerry. See J. Ervin Deck at 1129; PLEx. 28; PPF at H 109.

3. The Coopers & Lybrand And Hamilton Securities Request.

On September 21, 1994, two employees of Coopers & Lybrand (“C & L”), a subcontractor of Hamilton Securities (“Hamilton”), requested that Ervin provide C & L copies of the hard-copy AFS forms collected under the AFS Contract. See Oleniacz Decl. at 114; PLEx. 3 at 295; PPF at H100. C & L stated that it needed the AFS forms in connection with work that it was performing under a different HUD contract and asked for a separate computer terminal and password to the EMFIS. See Oleniacz Deck at 115; PPF at H101. Ervin agreed to provide hard copy of AFS forrado C & L, but refused to allow C & L access to the EMFIS or databases. See Oleniacz Decl. at 6; PPF at H102. On December 1, 1994, DAS Dunlap sent Ervin a letter requesting that Hamilton be provided with access to hard-copies of certain AFS data maintained in the EMFIS, but warned Ervin that: ‘Tour failure to comply with the terms of this letter could result in termination of the Contract based on failure to comply with the [SOW.]” PLEx. 26; see also PPF at H104; but see DR at 11109 (HUD contends that the December 1, 1994 letter refers to a HUD contract other than the AFS Contract).

*2774. Discussions Between Ervin And HUD Concerning Third Party Requests.

On January 31, 1995, Ervin’s General Counsel met with HUD’s Deputy General Counsel to discuss third party requests that HUD received for access to the EMFIS and AFS databases. See Oleniacz Decl. at 118; PPF at 11110; DR at H110. Ervin’s General Counsel recalls that HUD agreed that Ervin could not sell data from AFS databases to third parties and that third parties would not obtain access to data in the AFS databases under FOIA “because the data was Ervin’s and ... Ervin was under no obligation to provide it.” Oleniacz Decl. at H 8.

On February 8, 1995, John Ervin met with DAS Dunlap. See J. Ervin Decl. at 1130; PPF at 11 111. Ervin claims that DAS Dunlap informed Ervin that HUD planned to hire an employee to create a database at its headquarters. Id. She also informed Ervin of a congressional request originated from NHP for AFS data maintained in the EM-FIS. Id. Ervin told DAS Dunlap that “the Databases belonged to Ervin and thus could not be released.” Id. According to John Ervin, however, DAS Dunlap stated that “she did not want HUD to own any of the data that Ervin had compiled because, in her view, if HUD owned the data, HUD would be required to release it to third parties under FOIA.” Id. HUD asserts that the meeting was initiated because DAS Dunlap was concerned that Ervin was attempting to sell AFS data, which he was warned was “sensitive and proprietary to the property owners[.]” DR at 11 111.

On February 14, 1995, John Ervin sent an e-mail to GTM Miller to advise HUD that:

Throughout this contract, we have done, and continue to do, everything possible to ensure that whatever data needed by HUD is available to HUD. However, as you know the data that has been provided in the past (which was not a requirement of the contract) has only been provided with the mutual understanding that it not be released outside the Department and/or not used for any other purposes other than those which were intended.

As you know, our contract with the Department is for the purpose of reviewing financial statements. Although we have compiled certain data to allow us to do this more effectively, these compilations are not a requirement of the contract. The information was not requested by HUD, nor has HUD paid for us to complete it. Accordingly, the Department has no control over this information and is therefore unable to release it[.]

Additionally, our investment in the systems, approaches and methods used to compile this information represents an invaluable competitive advantage that is proprietary to Ervin and Associates. It is not appropriate [that] it be released to our competitors.

Pl.Ex. 29; see also J. Ervin Decl. at H 31; PPF at 11112.

Shortly thereafter, Ervin received a copy of a February 24, 1995 e-mail that GTM Miller sent to Kevin East, a Special Assistant to DAS Dunlap, wherein it was stated:

Kev: Remember the afs data you received from Ervin? ... We are experiencing some problems with people asking for data that we cannot give to them____The only data available is through FOMNS, e.g., the profit and loss and selected balance sheet items. Any other information, although Ervin may have it and it may belong to HUD, HUD has no data base to put it into and therefore, we don’t have it. Ervin is under no obligation to provide data other than what is required under the contract.

Pl.Ex. 30; see also Pl.Ex. 7 at 83; J. Ervin Decl. at 1132; PPF at 11113.

In a deposition in a related case, GTM Miller was asked about this e-mail and testified that:

Mr. Ervin was under no obligation to provide us with that data. He did so willfully and gave it to us for a specific purpose. We shouldn’t abuse that purpose by giving it to someone other than — to use it for other than the purpose we said we would.

Pl.Ex. 3 at 231; see also PPF at H114. She also recalled Ervin “objecting to HUD providing any other contractor with data[.]” PI. Ex. 3 at 263; see also PPF at H114.

*278G. In 1995, HUD Decided To Develop An In-House “Data Warehouse.”

In early 1995, HUD decided to develop a database for multifamily housing that would include AFS data. See J. Ervin Decl. at U 30, 34; PPF at U1Í111, 115-116. This project was known within HUD as the “Data Warehouse.” Id. HUD hired Ms. Kathy Palmer and assigned her to lead the project. Id. DAS Dunlap assigned Ms. Palmer and GTM Miller to evaluate all of HUD’s multifamily computerized systems, known as the Information Strategy Plan (“ISP”). See Pl.Ex. 2 at 12, 152; Pl.Ex. 6 at 99-100; PPF at UU116, 196-97. An ISP Report, issued in September 1995, evaluated Ervin’s systems and, despite giving Ervin an excellent rating, recommended “replae[ing Ervin’s systems] with a new, HUD-owned Asset Management system.” Pl.Ex. 57; see also PPF at U198.

1. HUD Requested Ervin To Provide Data Downloads For The Data Warehouse.

On February 27, 1995, DAS Dunlap convened a meeting with various HUD officials including Mr. Kevin East, GTR Hannon, and Ms. Palmer. See Pl.Ex. 7 at 68-71; Pl.Ex. 32; PPF at U117. Hannon testified that: “[W]e had reported that Ervin contended that all data collected under the contract was theirs, and I was reporting to Helen [Dunlap] that on several occasions when that issue had come up we told them that the data was not theirs, it belongs to the government. And this was a report to Helen telling her that this was their contention[.]” Pl.Ex. 7 at 69; see also PPF at U117; DR at U117. At DAS Dunlap’s direction, GTM Miller subsequently asked Ervin representatives to meet with Ms. Palmer. See Pl.Ex. 31 at 7; PPF at 11118. DAS Dunlap instructed GTM Miller to direct Ervin to provide AFS data for the Data Warehouse. See Pl.Ex. 31 at 7, 1198; PPF at U118.

On March 7, 1995, John Ervin and Brian Hunt met with Ms. Palmer at HUD headquarters, at which time Ervin was asked to provide a download “to populate and test HUD’s Data Warehouse.” J. Ervin Decl. at 1134; see also Hunt Decl. at 1117; Pl.Ex. 31 at 7; PPF at 11119. Ms. Palmer represented that this request was made at the direction of DAS Dunlap. Id. Ms. Palmer also warned Ervin that if it failed to comply, its contracting relationship with HUD “would be at risk.” Id. Ms. Palmer then provided Ervin with a list of data elements to be extracted from the EMFIS databases and loaded into the Data Warehouse. See Pl.Ex. 6 at 496-98; PPF at 11120. HUD does not contest that Ervin provided HUD with “AFS data” acquired under the AFS Contract nor that the data in the Data Warehouse “would have been similar to the AFS data available from FOMNS.” DR at UU 120, 123; see also Def. App. at 98,134.

At first, Ervin did not provide the data download requested. See J. Ervin Decl. at U 36; PPF at U121. DAS Dunlap then sent an e-mail to John Ervin complaining, “I don’t know what we are waiting for but could you please coordinate with Bev [Miller]. Helen.” Pl.Ex. 66; see also J. Ervin Decl. at U 35; PPF at U121. On March 28, 1995, in an email copied to John Ervin, GTM Miller advised Mr. East and GTR Hannon that:

Ervin has agreed to do this work as the Assistant Secretary has deemed it necessary for you to do your analysis. This is not a part of the contract. This is something that Ervin is doing at Housing’s request to assist you in your work.

Pl.Ex. 65; see also J. Ervin Decl. at U37; PPF at U122; DR at U122.

At the time, however, HUD had not provided Ervin with a Task Order 2 covering the first option year of the AFS Contract, which would authorize payment for the analysis of 1994 AFS forms. See J. Ervin Decl. at UU 36, 38; PPF at U125. Nevertheless, Ervin continued to perform work and by August 1995 had more than $2.4 million in outstanding invoices due from HUD, some of which were five months overdue. Id. HUD informed Ervin that it could not pay the outstanding invoices until Task Order No. 2 was issued obligating the necessary funds. Id. Ervin feared that if it did not provide the requested data downloads, DAS Dunlap would withhold the $2.4 million due or terminate the AFS Contract. Id.

*279On June 27, 1995, Ervin delivered a high capacity Syquest disk cartridge containing a download of 1993 AFS data to HUD for use to test the Data Warehouse. See Hunt Decl. at f 18; PPF at 11123; DR at 11123. Through GTM Miller, Ms. Palmer subsequently requested that Ervin provide a download of additional data. See Hunt Decl. at IT 19; PPF at 11124. Brian Hunt warned GTM Miller that this request was not a requirement of the AFS Contract and that this data should not be released outside of HUD. Id. Nevertheless, on July 20, 1995, Ervin delivered a Syquest disk containing this additional data to HUD. See Hunt Decl. at 1119; PPF at 11124. HUD takes the position that the AFS Contract required Ervin to provide “downloads of AFS Data.” DR at 11124; see also Def.App. at 1053-54.

2. Third Parties Were Provided With Access To The Data Warehouse.

According to John Ervin, GTM Miller and Ms. Palmer assured him that the-data downloads that Ervin provided HUD would only be used to test the Data Warehouse and would not be provided to Ervin’s competitors. See J. Ervin Decl. at 1139; PPF at 11126. Ervin believed that it would not be competitively harmed by providing the data, so long as it was used only by HUD personnel. Id. But Ervin later learned that DAS Dunlap issued a memorandum to HUD personnel on June 28,1995 establishing “[procedures for providing databases to Hamilton,” including the Data Warehouse. Pl.Ex. 34; see also PPF at 11127. It was not until several months after Ervin provided data downloads to HUD that Ervin learned that several of its competitors had access to the Data Warehouse. See J. Ervin Decl. at 1153; PLEx. 28 at f 61; PPF at 11127.

Through an e-mail from GTM Miller dated October 27, 1995, Ervin learned that HUD had provided “Ervin’s data” to Ernst & Young (“E & Y”). See Pl.Ex. 47; PPF at 11171. John Ervin sent an e-mail to A Sullivan, immediate supervisor of the GTR and GTM, objecting to HUD’s actions: “Routinely giving the fruits of our investment to other contractors destroys our competitive advantage and threatens to put us out of business.” Pl.Ex. 47; see also DR at 11171; PPF at 11171.

HUD does not dispute that it gave E & Y access to AFS data housed in the Data Warehouse. See DR at 11170; Pl.Ex. 10 at 103; Pl.Ex. 28 at 61; PPF at 11170. In addition, HUD acknowledged that it provided AFS data stored in the Data Warehouse to Kerry and Hamilton. See DR at 11173; PLEx. 28 at 61; PPF at II173. Ervin alleges these contractors had access to the Data Warehouse during 1995 and 1996. See Ex. 48; PPF at 11174; but see DR at 11174 (HUD disputes the timeframe).

3. HUD Aso Requested Ervin To Provide AFS Data To Enable HUD To Perform The LLR Analysis While Finalizing Task Order 2 Under The AFS Contract.

The Multifamily Loan Loss Reserve (“LLR”) is an amount that HUD sets aside on its balance sheet each year for potential claims on mortgage assignments. See PLEx. 6 at 84; DR at 11128; PPF at 11128. Prior to 1995, the LLR analysis had been performed by C & L under contract using a random sample of multifamily projects. See PLEx. 10 at 20-21; PPF at 11129. In 1994, Ervin voluntarily provided HUD with an extract of data from its databases to evaluate C & L’s work. See Hunt Decl. at If 20; PPF at 11130.

Ms. Judy May was the HUD employee assigned to work on the LLR analysis for fiscal year 1994. See PLEx. 10 at 8, 14-15, 18-21; PPF at ff 131-34; DR at ff 131-34. Ms. May identified several limitations in C & L’s methodology and discussed with GTM Miller the need for a download of AFS data to perform the LLR analysis. See PLEx. 10 at 23-24, 72; PPF at ff 135-36; DR at ff 135-36.

In an e-mail later forwarded to several HUD employees, the need for this data was described by GTM Miller as follows:

The data for FOMNS is minimal! It is basically the HUD 92410, Statement of Profit and Loss, and a few select Balance Sheet items ( ... necessary to calculate surplus cash). Warehouse already is capable of receiving some of this; however, warehouse has many other data elements *280not included in FOMNS. Also, keep in mind that the Comptroller’s office (Judy May) will need many more data elements than FOMNS or warehouse in order to do Loan Loss Reserve. We should be sure that we know what exactly we want before we make an agreement with Ervin. Also, we need to know what we need to do [to] expand the warehouse to capture this data.

Pl.Ex. 80; see also PPF at U138.

In July 1995, at a meeting with GTM Miller and Brian Hunt, Ms. May requested a download from Ervin’s database for the purpose of conducting the LLR analysis. See Hunt Decl. at H 21; PPF at H139. Brian Hunt replied that the AFS Contract did not require Ervin to provide the data and that Ervin would need to be further compensated. Id. GTM Miller told Brian Hunt that she was under pressure from superiors to obtain the data and that a contract modification would take months. See Hunt Decl. at 1122; PPF at U140. Moreover, Ms. May implied that if the download was withheld in order to seek a contract modification, Ervin’s relationship with HUD would be “severely damaged.” Id.

On July 6,1995, CO Ammons-Barnett sent Ervin four unexecuted copies of the Task Order 2 to pay Ervin for the first option year under the AFS Contract. See Pl.Ex. 41; PPF at H147. Ervin claims that this was a “draft” that “added two new requirements: ... financial data electronically to complete the 1994 Loan Loss Reserve calculations for the FHA Audit” and “information required for entry into the FOMNS and/or other [HUD] automated data systems.” Id. HUD’s position is that the SOW “always included the contractor providing HUD with its AFS data, for use as the Government saw fit[.]” DR at 11147; see also DefApp.. at 1044,1055.

Ervin objected to producing this information without additional compensation insisting that the “creation of the Database was not a requirement of the AFS Contract.” J. Ervin Decl. at H 46; see also PPF at 11150. Brian Hunt also informed Contract Specialist Chabot of Ervin’s objections. See Hunt Decl. at 1124; PPF at H150.

On August 2, 1995, Brian Hunt sent GTM Miller revised Task Order 2 for review but deleted the requirement “to provide data for the LLR analysis or other HUD automated data systems.” Hunt Decl. at 1125; compare Pl.Ex. 41 with Def.App. at 1098-1120; see also PPF at 11151.

In an August 3,1995 e-mail to GTM Miller, Brian Hunt stated that:

Our intention is to initiate a task order that will, among other things, provide for Loan Loss Reserve Analysis, including the database that has been requested by Judy May. However, so as not to cause any inconvenience or delay for the Department, we will proceed in good faith with the development of the requested Database.

Pl.Ex. 37; see also PPF at H141.

In August 1995, Ervin was informed that Lar Gnessin would be replacing Ken Hannon as GTR and “it would be his job to renegotiate the AFS [c]ontraet.” Ervin Decl. at 1150; see also PPF at U155. Ervin recalled that GTR Gnessin advised Ervin that DAS Dunlap assigned him to “fix” the AFS contract, which Ervin took to mean a contract modification would be forthcoming. See Ervin Decl. at 1151; PPF at U 156.

On August 18, 1995, GTM Miller forwarded an e-mail to Ervin, which included her response to an inquiry from Ms. May asking whether Ervin would be providing support services for preparation of the LLR analysis: “The Ervin contract does not call for providing support services. We may be able to work something out, but we will need more $$$ I think.” PI. Ex. 45; see also PPF at 11157.

On August 21, 1995, a revised Task Order 2 was forwarded from HUD to Ervin for execution and was signed by Ervin that same day. See Def-App. 1098-1102; PPF at H 152.

Ervin spent several weeks in August and September of 1995 assembling data for the LLR analysis in the requested format. See Hunt Decl. at 1126; PPF at 11158. On September 21, 1995, Ervin had a Syquest disk containing a copy of Ervin’s database of 1993 and 1994 AFS data hand-delivered to GTM Miller. See Hunt Decl. at If 27; PPF at *281If159. This time a cover letter was binder-clipped to the disk, however, which stated:

In accordance with our previous discussions, attached is a Syquest removable disk cartridge which includes 1993 and 1994 Annual Financial Statement data for use in HUD’s Risk Ranking process. As we have discussed, this type of support is not provided for in our contract, but we are releasing it to you in good faith so HUD is not delayed in meeting its critical objectives.

[W]e are providing [the Database] on the condition that it not be made available directly or indirectly to any other contractor who is in competition with Ervin and Associates.

Pl.Ex. 46; see also Hunt Decl. at 1127; PPF at 11159.

HUD never responded to Ervin’s letter. See Hunt Decl. at 1128; PPF at H161. Thereafter, Ms. May downloaded data from the Syquest disk into her office computer at HUD. See Pl.Ex. 10 at 144; PPF at H 162. She then allegedly transferred the data to a disk that was provided to the Data Warehouse. Compare PPF at 11162 with DR at H162 (disputing that May transferred this data from her computer to the Data Warehouse). Ms. May then made the AFS data available to HUD contractors, but always asked GTM Miller’s permission before doing so. See PI. Ex 10 at 90-91; PPF at 1Í163.

On September 27, 1995, GTM Miller forwarded Ervin an e-mail from Ms. May that reported:

I received two files from Ervin— each with approximately 15,000 records and 13,000,-000 bytes of data____ Much of the data that I have received from Ervin is already available through the Warehouse, and the Warehouse provides a wide array of support to the user. Kathy Palmer is eager to develop and make available whatever queries or reports that users need. Kathy has also volunteered to respond to all requests for data from within and outside of HUD[.]

Pl.Ex. 42; PPF at 11164; DR at 11164.

This e-mail “caused Ervin to suspect that Judy May was ignoring the restrictions in Ervin’s September 21, 1995 letter.” Hunt Decl. at If 29; see also PPF at H165. On September 27, 1995, Brian Hunt responded by e-mail to GTM Miller:

Bev: I just wanted to followup with you and to ensure that you received the letter that I sent to you regarding the use of the data (it was delivered with actual data).

Pl.Ex. 42; see also Hunt Deck at H 29; PPF at H165; DR at If 165.

GTM Miller advised Brian Hunt that she forwarded the e-mail both to Ms. May and her immediate supervisor, William Hill. See Hunt Deck at H 30; PPF at If 166. Ms. May later testified that a HUD employee brought the Syquest disk to her and that “[a] letter was transmitted with [the] data that attempted to put conditions on it. I personally never understood the letter, and I left the matter to Bev [Miller] to handle.” Pl.Ex. 10 at 81-84; see also PPF at 11167.

Ervin claims that HUD never informed Ervin that it considered the databases to be HUD’s and “therefore was not bound by Ervin’s restrictions.” Hunt Deck at 1131; see also Pl.Ex. at 5 at 608, 612; PPF at 11168.

On September 27, 1995, six days after Er-vin provided the LLR download, HUD paid over $2.1 million of Ervin’s outstanding AFS Contract invoices, which were between three and six months past due. Compare J. Ervin Deck at H 49; PPF at H168 with DR at Hit 105-06, 168 (objecting to Ervin’s attempt to link the LLR download to AFS Contract payments).

H. On November 25, 1995, Ervin Registered “Certain Aspects Of Its System” With The Copyright Office And The Dispute With HUD Escalated With Ervin Filing Two Lawsuits On June 5, 1996.

Several months after July 1995, Ervin learned that HUD provided data downloads to E & Y, and Ervin refused to provide any additional data from “its Database” without a contract modification or new Task Order. See J. Ervin Deck at 1153; Pl.Ex. 28 at If 61; PPF at 1111127, 175; DR at 11175. On November 20, 1995, Ervin filed a copyright registration on “certain aspects of its system.” *282PPF at H17. Ervin states that the “copyrighted features included the particular manner used to process individual AFSs ... and the programs used for running competitive queries in multiple projects and assessing the performance of these projects.” J. Ervin Decl. at 1114. Ervin states that it applied for the copyright because it suspected that HUD was attempting to duplicate its computer system. See J. Ervin Decl. at H 14; PPF at 1118.

In an e-mail to DAS Dunlap on November 30,1995, GTR Gnessin reported:

I spoke with John Ervin last evening about h