Avue v. HHS: Software Licensing Dispute Fails for Lack of Privity

In Avue Technologies Corp. v. Department of Health and Human Services, the Civilian Board of Contract Appeals (CBCA) dismissed two consolidated appeals filed by Avue Technologies Corporation. Avue alleged that the U.S. Food and Drug Administration (FDA) and the General Services Administration (GSA) breached obligations under a software license agreement incorporated into a Federal Supply Schedule (FSS) contract. The CBCA held that it lacked jurisdiction under the Contract Disputes Act (CDA), or alternatively, that Avue had no enforceable rights under a procurement contract.

Background of the Software Licensing Arrangement

Avue licensed a software platform, Avue Digital Services (ADS), designed to automate administrative and HR functions. It marketed ADS to federal agencies through Carahsoft Technology Corporation, which held an FSS contract with GSA. The GSA modified Carahsoft's contract in 2012 to include ADS and incorporated Avue's Master Subscription Agreement (MSA) as an end user license agreement (EULA).

In 2015, the FDA ordered ADS under Carahsoft's FSS contract. Carahsoft's quotation included a condition that the FDA accept Avue's MSA. However, the FDA contracting officer later stated that the MSA would not be incorporated into the contract. The FDA used the software during the initial contract year but declined to renew the subscription.

Alleged Breaches and License Dispute

Avue alleged that the FDA violated the terms of the MSA by downloading over 5,700 documents it considered proprietary and continuing to use the information after the subscription ended. Avue temporarily suspended access to ADS before restoring it at FDA's request. Later, FDA employees allegedly migrated and edited the downloaded content for use in a new platform without referencing Avue or ADS.

In 2018, Avue submitted a certified claim to the FDA seeking over $41 million in damages for unauthorized use of proprietary materials. The FDA responded that it had no contract with Avue. Avue also submitted a protective claim to GSA. Both agencies denied liability, leading Avue to appeal to the CBCA.

Board Proceedings and Jurisdictional Questions

Initially, the CBCA denied motions to dismiss, finding Avue's allegations non-frivolous and accepting Avue's argument that the MSA constituted a freestanding obligation. Avue argued that its EULA was incorporated into the FSS contract and created direct contractual obligations with FDA.

The CBCA postponed resolving jurisdictional issues to allow for full briefing on summary judgment. In 2022, the Board dismissed the case, concluding the MSA was not a procurement contract and therefore not governed by the CDA. On appeal, the Federal Circuit vacated that decision and instructed the CBCA to treat the question of Avue's enforceable rights under the MSA as a merits issue rather than one of jurisdiction.

Final Decision on Contractual Rights

On remand, the CBCA reviewed cross-motions for summary judgment. The Board assumed for argument's sake that the MSA was binding but found that Avue had no enforceable rights under a federal procurement contract. The Board emphasized that the FDA paid Carahsoft, not Avue, and that Avue was not a named party to the task order or the FSS contract.

While acknowledging that software licenses may become enforceable against end users, the CBCA found that the MSA did not meet the criteria of a CDA procurement contract. The Board ruled that the government did not directly acquire services from Avue and had no obligation to pay Avue under the terms of the MSA. As a result, Avue's claims could not be resolved under the CDA.

The appeals were dismissed for lack of jurisdiction or, in the alternative, denied on the merits due to the absence of a valid procurement contract under which relief could be granted.

Guidance for Government Contractors on Licensing Agreements

Our attorneys at Whitcomb, Selinsky, PC assist clients with navigating federal contract compliance, resolving contract disputes, and understanding CDA jurisdiction in government licensing arrangements.