'Li?iUiiJLilN :73? 333 South Hope Street 43rd Floor Los Angeles, CA 900391?1422 Writer?s Direct Line: 213-617-4200 icoxne@sheppardmullin.com June 14, 2011 Our File Number: 2460022 VIA- FEDERAL EXPRESS Dr. Jane Lubchenco Administrator National Oceanic and Atmospheric Administration - 1401 Constitution Avenue, NW Room 5128 Washington, D.C. 20230 Charles F. Bolden, Jr. Administrator NASA Headquarters Suite 5K39 Washington, D.C. 20546-0001 Re: Northrop Grumman Systems Corporation ~?Demand?Under Federal Tort Claims Act In Connection With The National Polar-Orbiting Operational Environmental Satellite System Program Dear Dr. Lubchenco and Mr. 'Bolden: This firm represents Northrop Grumman Systems Corporation (?Northrop Grumman?) in connection with an administrative claim hereby made against the National Oceanic Atmospheric Administration and the National Aeronautics and Space Administration (collectively, pursuant to the Federal Tort Claims Act, 28 1346(b), 12671 et seq. (the Northrop Grumman demands full recovery of damages resulting from the?misappropriation of itstrade secrets by in violation of the California Uniform Trade Secrets Act Cal. Civ. Code 3426 et seq., as further explained below. SUMMARY This administrative claim for money damages arises from the government?s misappropriation and misuse of Northrop Grumman proprietary/trade secret information The NG 1? related to Northrop Grumman?s work on a governmentsatellite program known as the National Polar-Orbiting Operational Environmental Satellite System (hereina?er, on which Northrop Grumman was the prime contractor. In February .2010, the government announced plans to remove a signi?cant portion of the work from the NPOESS 213-520-1789 office 213-620-1398 fax SHEPPARD MULLIN RICHTER S: HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 201 Page ,2 program and place it in a new program known as the Joint Polar Satellite System (hereinafter, to be administered by Shortly after this announcement, personnel working for and at the direction of ASA management on NPOESS engaged in the unauthorized downloading and/or copying of NG IP from an electronic eRoom with the apparent .. intent of utilizing it on JPSS. thereafter awarded contracts to companies other than Northrop Grumman for the JPSS work, using Northrop Grumman IP itself in the process or disclosing the IP to its JPSS contractors for their consideration and/or use. ASA had no right to download. eRoom materials for use on programs other than NPOESS, to use the materials on JPSS, or to disclose the materials to its JPSS contractors. The actions constitute a violation of the CUTSA. For this CUTSA violation, the ?sum. certain? that Northrop Grumman hereby seeks is $332.1 million. STATEMENT OF FACTS The NPOESS Contract 7 In 2002, TRW Space and Electronics Group (later acquired by and hereinafter included in the de?nition of Northrop Grumman) was awarded an Acquisition and "Operations contract Contract?) to develop and produce NPOESS, which was to be the next generation civil and military satellite system for weather forecasting and tracking through use of polar-orbiting spacecraft. Unlike most government contracts, under which .a company contracts and interacts with a single government agency, the A850 Contract was subject to management by NOAA, NASA, and ?the Air Force through a tri-agency entity called the Integrated Program Of?ce housed within NCAA. NOAA had overall responsibility 'for the NPOESS program, as well as for satellite command, control and communications operations. NASA had primary responsibility for facilitating development and incorporation of cost-effective technologies. As the NPOESS prime contractor, Northrop Grumman was responsible for delivering the environmental data 'to be generated by complex sensors carried on the NPOESS satellites. Northrop Grumman's efforts included developing and producing NPOESS satellites; managing the work of subcontractors developing the complex sensors to be carried on the satellites; managing the work of the subcontractor responsible for developing the satellite ground system; and integrating the NPOESS components into a functioning whole. Northrop Grumman?s ability to perform this effort was based on the unique technical know-how, expertise, and trade secret information it had developed during over 740' years of satellite work and which made it one of very few companies in the marketplace capable of producing complex satellites and associated systems. The company?s expertise was cited expressly by the IPO as one of the reasons why Northrop Grumman was awarded the Contract. SHEPPARD MULLIN RICHTER ii: HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden. Jr. June 14,20? Page 3 . Northrup Grumman was also responsible under the A850 Contract to provide sensors and integration support for the Joint NPOESS Preparatory Project mission.- The - purpose of the NPP mission was to provide on-orbit testing and validation of the NPOESS sensors, algorithms and ground?based operations while existing civil and military meteorological satellites were still operational. Contract Data Delive? And Data Rights Provisions The A850 Contract was issued by the Air Force and, as such, incorporated DFARS Clauses 252227-7013, Rights in Technical Data Noncommercial Items (NOV 1995) 7013?); and 252227-7014, Rights in Noncommercial Computer Software andNoncommercial Computer Software Documentation (JUNE 1995) These provisions contain definitions of technical data, noncommercial computer software and noncommercial computer software documentation, and detailed manufacturing or process data, and specify the government?s rights in materials falling within the de?nitions when delivered to the government. Neither -7013 nor -7014 grants the government ownership of any technical data or computer software deveIOped under the contract, whether deliverable or not. Under .DFARS #7013, the govemrnent generally receives unlimited rights in delivered technical data developed exclusively with contract funds; government purpose'rights in delivered technical data developed with mixed government/contractor funding; and limited rights to delivered technical data developed exclusively at private eXpense and marked with a limited rights legend. Similar rights, based on the nature of funding, are established under DFARS Clause ~70 l4?for delivered noncommercial computer software and documentation. Most importantly for purposes here, the regulations do "not give the government the-right to use and possesstechnical data or noncommercial software/documentation not delivered pursuant to a contract. . The speci?c itemsto be delivered to the under the Contract were identi?ed in the Contract Data Requirements List attached asExhibit A?to the contract. Pursuant to the contract, CDRL items were'to be delivered to the via electronic data interchange Attachment 6 to the contract identi?ed those items which Northrop Grumman and its subcontractors believed would be incorporated into deliverables and would be delivered with limited rights. The data that isthe subject of this FTCA Claim does not appear on the CDRL attached to the A850 Contract and was not deliverable under that contract. Clauses 252227-7026 and 252227-7027 provide the govemment with a mechanism to order and require delivery of technical data and computer software notoriginally ?required to be delivered under a military contract. The A850 Contract did not incorporate either one of these provisions. Hence, the IPO did not have the ability to require delivery of NPOESS technical data or computer software not included on the A850 Contract CDRL list. SHEPPARD MULLIN RICHTER 5: HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 201i Page 4 Creation Of NPOESS eRoom, With ConditionslTo Preserve Con?dentialig In managing the A840 Contract, the IPO implemented an integrated management framework between the IPO and Northrop Grumman. In this regard, the contract stated that the IPO and Northrop Grumman would ?work together to ensure an environment of teamwork, trust and open communications to facilitate insight into each other?s decisions, and [would] consult each other on program decisions that impact the team?s ability to execute the program.? [Exhibit A at 29, To foster collaboration and open communication, Northrop Grumman established an electronic eRoom facility in which it housed the full panoply of information and data related to its work on the NPOESS program. As described in the Integrated Master Plan included in the Contract, the eRoom provided ?reliable, secure and immediate access to program technical data . . . as well as other documents for program use . . . (Emphasis added.) [Exhibit . The vast majority of material in the NPOESS eRoom was not deliverable under the NPOESS contract. The non?deliverable, material included Northrop Grumman proprietary/trade secret information relating to, among other things, program requirements, speci?catibns, plans, processes, design information, test data, analysis, operations concepts, schematics, interface control documents, software tools, and cost and schedule information. This fact was well known to and recognized by IPO personnel during Northrop Grumman?s performance of the NPOESS program effort. While personnel working for or at the direction of the IPO, including employees, were given access to eRoom materials during the course of and exclusively for the NPOESS program, that access was restricted in order to protect Northrop Grumman?s intellectual ?prOperty rights. All personnel seeking eRoom access, including NOAA/NASAemployees, were required to and did sign documentation acknowledging that eRoom access for other than job- related purposes was prohibited and that Northrop Grumman could terminate access privileges at any time. Additionally, IPO personnel, including employees, were required to utilize a login procedure. At the time of the events at issue here,'the login procedure speci?ed that the eRoom was available only for authorized purposes; that the eRoom and its contents were the exclusive property of Northrup Grumman; and that data in the eRoom was not to be distributed, or used, outside of the NPOESS program without further guidance. Nothing in the Contract or in the operation of the eRoom established the ownership to non-deliverable materials, a right to require delivery of those materials, or a right to use those materials outside the NPOESS program (either directly or by supplying .the materials to SHEPPARD RICHTER 8: HAMPTON LLP Dr. Jane Lubchenco Charles F. Boiden, Jr. June Page 5 subcontractors). A620 CDRL items were delivered to the IPO through a folder that was kept separate and isolated from all other materials in the eRoom. For years, the IPO agencies used that dedicated folder to obtain access to contract deliverables they knew full well that it was the vehicle by which Northrop Grumman made deliveries. Nothing in the contract permitted them unilaterally to take possession of materials outside that dedicated folder to use as they pleased. NPOESS Subcontractors? Limited Access To The eRoom In 2002, Northrop Grumman awarded subcontracts for NPOESS program work to, among other companies, Raytheon Intelligence and Information Systems (?Raytheon for. the NPOESS ground system; Raytheon Space and Airborne Systems (?Raytheon (collectively Raytheon IIS and Raytheon SAS .are "Raytheon Company") for the Visible/Infrared Imager Radiometer Suite to monitor and provide data on, among other things, day and night cloud imagery, sea surface temperatures, and ocean color; Ball Aerospace and Technology - (?Ball?) for the Ozone Mapping and Pro?ler Suite to monitor ozone levels and related data; and ITT Space Systems for the Cross-Track Infrared Sounder to provide detailed atmOSpheric temperature and moisture observations. Each subcontract ?owed down .DFARS Clauses --701 3 and --7014. To facilitate teamwork and communication, the NPOESS subcontractors were given access to the NPOESS eRoom. That access was subject to the access documentation process and login procedures described above and was limited to certain folders in the eRoorn based on each subcontractor?s speci?c sc0pes of work. Subcontractor access to and use of materials in the eRoom was also subject to subcontract provisions regarding the con?dentiality of data. [Exhibits Those provisions, among other things, required the companies to keep con?dential all information, drawings, specifications or data and return upon request all Northrop Grumman proprietary documents. 1 In fact, some of the eRoom material, such as ?nancial and/or management information, did not fall within the de?nitions of technical data, computer software, or computer software documentation under DFARS Clauses ?7013 and -7014 and hence would not in any case be subject to government rights, even if a deferred ordering/delivery clause had been included in the Contract. SHEPPARD MULLIN RICHTER (it LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June I4, 201 Page 6 Unlanul Downloading, Disclosure And Use Of Proprieta?/Trade Secret Material in February .2010, the White House announced that it had decided to remove work on civilian weather satellite requirements from the NPOESS program and instead place it in a newly~created Joint Polar Satellite System program to be operated by Shortly after announcement of this decision, the IPO engaged in unauthorized downloading of massive amounts of non-deliverable proprietary/trade secret material from the eRoom with the apparent intent of using that information on the IPSS program for the bene?t of When Northrop Grumman NPOESS program personnel became aware that the IPO had begun this unauthorized downloading, Northrop Grumman Contacted the government NPOESS contracting of?cer, Jeff Dedrick, by telephone, who acknowledged that the downloading was occurring but claimed that the material at issue was owned by the government. Subsequent facts, further discussed below, have led Northrop Grumman to believe that NPOESS eRoom information, including, but not limited to, information concerning its trade secrets, is being used by on the IPSS program and has been disclosed ?to its JPSS contractors, including, but not limited to, Hall, Raytheon Company, and ITT. Northrop Grumman made repeated demands to the IPO and cease using and disclosing NPOESS eRoom'non-deliverables on the IPSS program and/or to destroy information wrongfully obtained from the eRoom, to no avail. For example, Northrop Grumman, by letter dated December 16, .2010 to the General Counsel of NASA, raised its continuing concerns regarding the unauthorized and improper use and distribution of its proprietary material by NASA on the JPSS program and requested that NASA cease such unauthorized activities. By letter dated December .2 1 2010, Deputy General Counsel for NASA, Richard Sherman, wrote on behalf of in connection with the IPSS program, dismissing Northrop Grumman's concerns regarding its intellectual prOperty and thereby-refusing to protect Northrop Grumman's trade secrets from unauthorized disclosure and/or use. [Exhibit After December 2010, Northrop Grumman sought repeatedly to resolve the dispute with ASA concerning use of Northrop Grumman material on PSS and other programs without resort to formal dispute'resolution proceedings. Those efforts have not succeeded. Indirect Misappropriation Through NPOESS Subcontractors In addition tothe unauthorized downloading of Northrop Grumman proprietary/trade secret material from the eRoom, upon information and belief, has also wrongfully accessed, misappropriated and misused Northrop Grumman proprietary/trade secret material through separate contractual relationships it has entered into with Northrop Grumman?s subcontractors on the NPOESS program. Following the announcement that work on civilian weather satellite requirements would be removed from the NPOESS program and placed on the SHEPPARD MULLIN RICHTER Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 2011 Page 7 JPSS program, directly contracted with Northrop Grumman?s NPOESS- subcontractors for the JPSS program. Northrop Grumman sent periodic letters to its subcontractors reminding them of their contractual obligations to protect Northrop Grumman proprietary/trade secret information. Northrop Grumman Speci?cally reminded the subcontractors that: Northrop Grumman had developed substantial amounts of data during the course of the NPOESS program; Northrop Grumman was continuing to assert proprietary rights in the non-deliverable data so developed; the subcontractors were under an ongoing contractual obligation to protect such data from disclosure and misuse; and that the data was not to be used outside the NPOESS program without Northrop Grumman's permission. On March 21, 2011, Northrop Grumman sent such a letter to Raytheon 118, the NPOESS subcontractor for the NPOESS ground system with whom contracted directly for the PSS. ground system. [Exhibit On April 1, 2011, Raytheon IIS reSponded, disavowing its obligation to protect non-deliverable data in the eRoom and claiming that it had the right to use that data without restriction on the PSS program. [Exhibit Northrop Grumman responded on April 11, .201 1, through outside counsel, refuting the points made by Raytheon IIS and asking for written assurances that Raytheon 118 would comply with its obligations to protect the non- .rdeliverable data from misuse. [Exhibit Instead of providing such assurances, .Raytheon responded by letter on April 22, .2011 reassertirig its position and claiming that Northrop Grumman's efforts to protect its preprietary/trade secret material was an attempt to interfere with and prevent performance of Raytheon's JPSS contract with [Exhibit being fully aware of the restrictions on the ability of Raytheon Company and other former NPOESS subcontractors to disclose or use Northrop Grumman proprietary/trade secret material, has, based on information and belief, entered into contracts requiring the former NPOESS subcontractors to disclose and/or use that material. has, thereby, indirectly misappropriated Northrop Grumman's prOprietary/trade secret material. IS LIABLE TO NORTHROP GRUMMAN UNDER THE FTCA FOR MISAPPROPRIATION OF TRADE SECRETS Standards For Liability Under The FTCA And The California Uniform Trade Secrets Act The FTCA providesthat the government ?shall be liable [for] tort claims, in the same manner and to the same extent as a private individual under like .28 U.S.C. ?.2674. An claim can be based on the tort of misappropriation of trade secrets. .322, e. Jerome Stevens Pharmaceuticals, Inc. v. Food Drug Administration, .402 F.3d 1249, 1256 (DC. Cir. 2005); see also United States Marine, Inc. v. United States, 2010 WL 1403958 (ED. "La. April 1, .2010). In United States Marine,?the court, applying the Uniform Trade Secrets Act as adopted by Virginia, held that the govemrnent misappropriated a contractor?s drawings and SHEPPARD MULLIN RICHTER HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 20!] Page 8 data on a special operations Navy vessel by disclosing them to the contractor?s competitors, who constructed a similar vessel. The contractor had provided the drawings and data with a limited - rights legend on cover sheets, not on each page of material. The Court held that the contractor had adequately protected its materials, that the government knew it could not disclose the proprietary data without the consent of its owner, and therefore that the government was liable for damages. Under the FTCA, the law to be applied in establishing tort liability is that of the place where the act or omission occurred. See .28 U.S.C. 1346(b)(l). In this case, since the NPOESS eRoom was located in and managed from California, the tortious misappropriation would have occurred in California and, therefore, the law of California in this case, the Uniform Trade Secrets Act as adopted by California controls. The elements required to establish a CUTSA claim are similar to those required under the'Virginia Uniform Trade Secrets Act. Speci?cally, the CUTSA requires facts showing that the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff?s trade secret through improper means, and (3) the defendant?s actions damaged the plaintif Cytodyn v. Amer-immune, 160 Cal. App. 4th .288, 297 (2003). Those facts exist here. The eRoom And The Non-Deliverable Material Contained Therein Was Owned'By '7 Northrop Grumman . The eRoom and the non-deliverable material contained therein was owned by Northrop Grumman, and does not have any right to possess that material. As discussed earlier, nothing in the A850 Contract. gave NOAAJNASA a'right to require delivery of the eRoom non-deliverable material. In fact, Northrop Grumman had done exactly what a contractor should do in order to protect its proprietary rights. Namely,.Northrop Grumman did not make the material at issue a deliverable to the government, and did not include a deferred ordering clause in the Contract. .This distinction between. determining technical data rights and the govemment?s right to possess data is underscored in authority attributable to the government. In 1] 104,499 'Varian Associates, Inc. Reconsideration, Comp. Gen., B-23623842 (June .28, 1990), the GAO held that clauses governing rights in technical data such as ~7013 and -7014 have nothing to do with whether or not the government can compel delivery of the data. Initially, Varian is-correct that the technical data rights provisions of the DFARS do not govern the government?s rights to obtain data. Federal Acquisition Regulation ?35.011(a) speci?cally cautions agencies that contracts shall specify the technical data to be delivered under the contract, since the data clauses required in Part 27 [governing rights in technical data] do not require the delivery of any such SHEPPARD MULLIN RICHTER HAMPTON Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 2011 Page 9 data.? ([Italic] Emphasis in original.) Although not included in'the RFP at issue here, the clause set forth at DFARS ?252.227-7027 allows agencies to order technical data generated in the performance of a contract within 3 years after contract completion, specifying that the government?s right to use the data stems from the rights in data clause. It is, therefore, clear that DD Form 1423 is used to assist in de?ning delivery obligations, not in establishing the government?s rights to use delivered data. Thus the Navy?s initial argument?that raw data was not included as a deliverable on' the DD Form 1423, and as a result the contracting of?cer reasonably wascconeerned about the government?s rights in the raw data?is a separate issue from the extent of the government?s rights in data required to be delivered under the contract. [Bold highlighting provided] Similarly, a well re5pected government contracts treatise discusses the basic ways in which .a contractor can protect its proprietary rights, and cites to sections of a script prepared by the Department of Defense to explain its data policy. Specifically,.a contractor can withhold technical data containing proprietary information by not agreeing to make it a deliverable under the contract: [WJithholding of data from delivery to the DOD is still a signi?cant means for a contractor to protect its proprietary rights. This is possible-as a part of the DOD data requirements determination, if the government agency fails to call for the delivery of data or the parties agree that certain data will not be required to be delivered to the DOD during the performance of the contract and will not be subject to deferer ordering. This concept was enunciated in the movie made in 1964 by the Department of Defense to explain the data policy adopted by DOD at that time. This movie script is the only contemporary document available from the dra?ers of the DOD data policy and has been cited in the literature, Hinrichs, Proprietary Data and Trade Secrets Under Department of Defense Contracts, 36 Mil L. Rev. 61 (1967). The movie script explains the data policy in the following language: Bird. [T]he rights we get attach only to the technical data specified to be delivered. Therefore, the contractor can protect his interests by giving some thought to the data he agrees to deliver. In SHEPPARD MULLIN RICHTER 8: LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14,2011 Page 10 - other words, the speci?cation of data to be delivered is a matter requiring mutual agreement. Banner-man. Your answer suggests that the clause does not by itself require the contractor to furnish all the data that may be generated under a contract. Bird. Yes, that is correct. We can eXpect to obtain only that data speci?ed in the contract, and that data will be furnished with either limited or unlimited rights, according to the criteria in the clause. This discussion is still applicable under the current clauses used by DOD. This makes the decision of what data will be speci?ed for delivery and what data will be withheld by the contractor part of the bargaining process during the formation of the contract and, thus, subject?to the bargaining power of the parties. [Emphasis provided] Ralph C. Nash, Jr. and Leonard Rawicz, Intellectual Property in Government Contracts,1..Data Acquired Under Contracts, at 41-42 (Wolters Kluwer eds. .2011). See also Of?ce of the Under Secretary of Defense for Acquisition, Technology and Logistics, Intellectual Property: Navigating Through Commercial Waters, Issues And Solutions When Negotiating Intellectual Property With Commercial Companies (Oct. i5, 2001) at must ensure that the contract requires the delivery of all information that is necessary to accomplish each element of the acquisition strategy. It is important 'to realize that the standard clauses that establish the rights in technical data or computer software do not specify requirements?); (?Critical Need to Speci? Deliverables. The standard clauses address rights but do not include delivery requirements?). . Thus, where, as here, the government did not negotiate for the-material to be'a deliverable, no rights g. unlimited, or government purpose rights) attached to the undelivered material. Grumman owns the material, and the government has no right to possess it. SHEPPARD MULLIN RICHTER 5: HAMPTON Dr. Jane Lubchenco Charles F. Bolden, Jr. June I4, 20? Page 1 The eRoom Contained Northrop Grumman Trade Secrets Within The Meaning Of The CUTSA - . The CUTSA de?nes a ?trade secret? as information, including a formula, pattern, compilation, program, device, method, technique, or process, that: Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Cal. Civ. Code The non-deliverable material from the NPOESS eRoom are trade secrets within the scope of this de?nition. Northrop Grumman developed non-deliverable eRoom material based on its own ingenuity, sophisticated engineering and decades of experience in the satellite systems industry. The material constitutes sophisticatedinformation of both commercialand competitive value not readily ascertainable by the public or Northrop Grumman?s competitors. Northrop Grumman has consistently exercised efforts to maintain the secrecy and con?dentiality of such information, including, but not limited to, by (1) not making the material a deliverable under the NPOESS contract, (2) not including a deferred ordering clause in the Contract, and (3) controlling access to the NPOESS eRoom through access documentation and log-in restrictions limiting use and disclosure of the material. Examples of speci?c trade secret information present in the non-deliverable materials in the NPOESS eRoom include, but are not limited to, the following. -- Command Media Processes And Procedures To develop and produce Class A satellites such as the NPOESS satellites, and to be able to integrate all of the components of a system such as NPOESS into a functioning whole,:a company needs to have in place comprehensive, tested and proven processes and procedures. Those processes and procedures relate to, among other things, design processes, systems engineering,'program planning, software development and metrics, integration, con?guration management, controls g. weight, power), requirements compliance, quality procedures, mission assurance procedures,?nancial controls and procedures, and management processes. Northrop Grumman?s processes and procedures are embodied in its internal Command Media materials. Those materials are not program-speci?c and were developed not on the NPOESS program, but by Northrop Grumman, with Northrop Grumman funding, over the SHEPPARD MULLIN RICHTER HAMPTON Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 201 Page 12 course of its many years of work on satellites and other complex products and systems. These materials are proprietary, trade secret materials and are not available publicly. To perform NPOESS program work, Northrop Grumman incorporated some of the processes and procedures from its Command Media into NPOESS documents. These NPOESS documents, including, but not limited to, the NPOESS Integrated Systems Engineering Plan, Failure Reporting Analysis Corrective Action Procedure, and Software Design Interface Standard, were included in the non-deliverable data stored in the NPOESS eRoom. - Spacecraft-Related Data The eROom also contained trade secret, spacecraft-related data, the development of which was funded by Northrop Grumman, particularly in the spacecraft avionics area. To maintain its competitive advantage in the industry, Northrop Grumman limited subcontractor access to that information during the NPOESS program. This was particularly important in the case of Ball - which developed Spacecraft itself although ones far less complex than those developed by Grumman. Ball is now the spacecraft developer for the JPSS program. NPOESS non- deliverable information will be'relevant to Ball?s performance of its responsibilities under the JPSS contract and its ability to compete for work on complex satellites. unlawful download, use and/or disclosure of suCh information threatens serious harm to Northrop Grumman?s competitive advantage and the value of such'trade secrets. -- Communications Systems Data The eRoom also included trade secret information relating to Northrop-funded communications systems data. NASA presentations have indicated that NASA and Ball intend to add several new communications abilities to the .JPSS spacecraft (Ka band and .L-band communication) that were not part of Ball?s original NPP spacecraft but were part of Northrop Grumman?s NPOESS spacecraft. Non-deliverable information in the eRoomrequired for that effort would include, but not be limited to, information regarding communications architecture on the satellite, how to route data to multiple transmission points, and operations concept documents. The Ka band communications capability is particularly critical as it allows for communications activity in Northrop Grumman?s patented Safety Net architecture. I SHEPPARD MULLIN RICHTER HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June [4,2011 Page 13 .- Electromagnetic Interference Documents Another example of trade secret data relates to EMI control. Northrop Grumman is expert in solving EMI problems inherent in complex satellite/spacecraft systems and brought those capabilities and company knowledge to solve the dif?cult EMI issues facing the NPOESS program. Two sensors originally manifested for NPOESS, the (search and rescue) and ADCS sensors, are particularly sensitive to EMI. Northrop Grumman pmprietary and trade secret EMI information was included'amongst the non-deliverable eRoom material in documents including, but not limited to, the EMI Control Plan. Has Acguired, Disclosed, And/Dr Used Northrop Grumman Trade Secrets Through Improner Means NOAAMASA acquired Northrop Grumman trade secrets through improper means,2 the unlawful downloading of information ?'om the NPOESS eRoom and the wrongful accessing of such information through its direct contracts on the .JPSS program with Northrop Grumman?s NPOESS subcontractors. As discussed above, access and use of non-deliverable eRoom material was restricted by eRoom access documentation and log-in restrictions. The unauthorized downloading of'massive amounts of'non-deliverable material from the eRoom, ineluding Northrop Grumman?s trade secrets, with the apparent intent of using that information on the JPSS program for the bene?t of violated the'terms of the eRoom access documentation and log-in restrictions. As also discussed above, did not have a contractual right to delivery of that material, and hence did not have the right to use that material. Northrop Grumman believes that once improperly acquired Northrop I Grumman trade secrets, then disclosed the information to its JPSS .contractors, including, but not limited to, Bali, Raytheon Company, and ITT, and used such information on "the JPSS program.3 As discussed above, has no right to disclose or use non- I deliverable eRoom data without Northrop Grumman?s permission. 2 Pursuant to the CUTSA, ?improper means? includes ?theft, bribery, "misrepresentation, breach or inducement of a breach of a duty ?to maintain secrecy, or espionage through electronic or other means.? See Cal. Civ. Code 3 Signi?cantly, under the CUTSA, conduct constituting misappropriation can include either acquisition of a trade secret through imprOper means or disclosure or use of that trade secret without consent. See Cal. Civ. Code Therefore, even if subsequently discovered information-shows that does not intend to disclose or use Northrop Grumman's trade secrets on the JPSS program, the act of SHEPPARD MULLIN RICHTER HAMPTON Dr. Jane Lubchenco Charles F. Bolden, Jr. June 14, 2011 Page 14 Northrop Grumman Has Suffered Damages There is no question that the actions of have damaged Northrop Grumman. The agencies have misappropriated Northrop Grumman trade secrets, both directly and indirectly through JPSS subcontractors, for use on PSS, thus depriving Northrop Grumman of monies it otherwise would have been entitled to receive ?'om for use of its - intellectual pr0perty. Under the CUTSA, a plaintiff ?may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by that is not taken into account in computing damages for actual loss.? Cal. Civ. Code 3426.3. The Act further provides that if ?neither damages nor unjust enrichment caused by'misappropriation are provable, the court may order payment of .a reasonable royalty for no longer than the period of time the use could have been prohibited.? In this case, Northrop Grumman is entitled to recover its actual loss caused by misappropriation in the form of the profits it would have received for the . civilian weather satellite requirements work moved from the the IPSS 7 program. The resent value of the lost pro?ts sought by Northrop Grumman by this Claimis $332.1 million as determined by the following methodology: acquiring such information through improper means alone makes liable for misappropriation. This value includes only the actual loss caused by improper acquisition of materials from the NPOESS 'eRoom and/or disclosure and/or use of NG IP on the current JPSS program as Northrop Grumman explains below. If subsequently discovered facts reveal that has misappropriated NG IP in connection with other programs or on further additions to the IPSS program or has further disclosed NG IP to other contractors for their use on other programs or platforms (whether or not in connection with a contract), such acts of misappropriation shall be addressed at that time as separate claims under the TCA or other applicable statute. In addition, the stated value excludes actual loss associated with the Northrop Grumman SafetyNet Patent, material on which was also located in the NPOESS eRoom. Potential patent infringement claims relating to that patent are not within the scope of the present claim and will be pursued by Northrop Grumman as necessary in the appropriate forum. . . . SHEPPARD RICHTER HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June I4, 201] Page !5 Present value of pro?t based on JPSS contract award amounts as evidenced by NASA press releases and other news sources - $227.3 million;5 .2. Present value of program management responsibilities assumed by -- $24.6 millions; and 3. Present value of pro?t from contract effort which Northrop Grumman would have performed under which is contemplated by the Government to be included in and. for which the government has not yet, issued contracts to third parties - $80.2 million? CONCLUSION Both before and after Northrop Grumman became aware of misappropriation, Northrop Grumman consistently exercised efforts, more than reasonable under the circumstances, to protect and maintain the secrecy of its proprietary/trade secret information. Northrop Grumman attempted in good faith to resolve this dispute with the government, including seeking and receiving NOAA/NASA?sagrecment to temporarily abide by NPOESS eRoom access restrictions. Those discussions have been unsuccessful. As a result of misappropriation of Northrop Grumman?s proprietary/trade secret information, and pursuant to the FTCA and CUTSA, Northrop Grumman seeks damages of $332.] million, representing its actual loss in the form ofpro?ts lost, as described above. This demand is timely under the applicable statute of limitations because it has been less than two years since Northrop Grumman actually knew, or in the exercise of reasonable diligence should have known, of the misappropriation of its preprietary and/or'trade secret information. 5 The awards correspond to the following effort: ground segment (Raytheoni- $1,400 million; two VIIRS sensors (Raytheon) - $314 million; OMPS sensor (Ball) million; Sensor (ITT) 7- $98.6 million; spacecraft (Ball) $248 million. The total announced contract value was $2,143 million. The pro?t margin used was 13.5%, which was Northrop Grumman's pro?t margin on the NPOESS contract. 6 The program management dollar value was determined by taking 8% of all awarded contract values. The 8% was derived by calculating the ratio of NPOESS program management dollars to NPOESS contract dollars. The pro?t margin used was 13.5%, which was Grumman's pro?t margin on the NPOESS contract. '7 This effort includes production of a second JPSS satellite and operation of the JPSS ground system beyond the term speci?ed in the contract that has been issued to Raytheon. A pro?t margin of 13.5% was used for purposes of the calculation. SHEPPARD MULLIN RICHTER Ki HAMPTON LLP Dr. Jane Lubchenco Charles F. Bolden, Jr. June?l4, 201 Page l6 Please transmit thisclaim through the proper channels as expeditiously as possible. If . Northrop Grumman does not receive a satisfactory response to this administrative claim within six months from the date it is received, Northrop Grumman will commence its action in court. Please address any inquiries or communications regarding this matter to the undersigned. Si cerely, Joseph F. Coyne, for SHEPPARD, MULLIN, RICHTER LLP Counsel for NORTHROP GRUMMAN SYSTEMS CORPORATION cc: Lois J. Schiffer, Esq. (via Federal Express w/encls.) . General Counsel ,7 NOAA Michael C. 'Wholley, Esq. (via Federal Express w/encls.) General Counsel NASA ?Encis.