Small software maker wins $24.8 million judgment vs. Lockheed

By Andrea Shalal-Esa

WASHINGTON (Reuters) - Command Technology Inc, a privately held firm that developed electronic maintenance manuals for Lockheed Martin Corp's F-16 fighter jet, has won a $24.8 million judgment against the Pentagon's biggest supplier for unfair competition.

Groton, Connecticut-based Command makes similar software for many other U.S. weapons systems, but sued Lockheed after being shut out of the work on the 4,500 F-16 fighter jets that have been sold to the U.S. military and two dozen other countries.

A jury in the Circuit Court of Maryland for Montgomery County, where Lockheed is based, found after a week-long trial that Lockheed competed unfairly and injured Command, according to a verdict sheet filed late Monday with the court.

The jury also found Lockheed "torturously interfered" with Command's economic relationships.

Lockheed unfairly flunked the Connecticut firm's software product during testing it conducted on behalf of the U.S. Air Force, but then worked with another software maker, InfoTrust Group Inc, to develop its own rival product, Command said in its complaint.

Given declines in weapons orders, Lockheed and other arms makers are intensely competing for work on upgrading and servicing existing weapons systems. The companies generate about two-thirds of their revenues on big arms programs from the maintenance, spare parts, upgrades and sustainment of weapons systems after they are fielded.

The judgment against Lockheed came just hours after the Pentagon approved work by Britain's BAE Systems on upgrades for 134 F-16 fighters operated by South Korea, in a deal that could open the door to future orders from other countries.

Robert MacGill, a lawyer with Barnes & Thornburg who is representing Command, said the company was pleased the jury's verdict.

Command said in court papers that Lockheed tried to block its product from the lucrative F-16 market because the smaller company's software threatened to dislodge Lockheed as the primary provider of maintenance and sustainment for the weapons it builds, and billions of dollars of associated sales.

Opening the maintenance system to outside vendors would have resulted in "dramatic savings" for taxpayers, Command said.

Lockheed said it was disappointed by the judgment and suggested it would appeal the ruling.

"We are disappointed in the jury's decision and believe that it will not stand after post-trial review by the circuit court or on appeal," said spokesman Gordon Johndroe.

The U.S. Air Force declined to comment.

The case stems from a 2005 decision by the U.S. Air Force to switch to digital maintenance manuals for the F-16 and other weapons, and the engines that power them.

Command argued that Lockheed and other "original equipment manufacturers" have tried to restrict the ability of military users to view the technical data associated with warplanes and other weapons systems.

That in turn allowed those companies to charge the U.S. Air Force and other militaries for the data and the ability to view it electronically, Command said.

Command said it provided one part of Lockheed with proprietary information to allow it to test its C2Web platform, but the company used the data to develop competing products that were structured to preserve Lockheed's profits.

For instance, Command said its product allowed mechanics who were servicing the planes to choose parts made by other vendors, while the Lockheed system forced users to choose parts made by the company.

It said Lockheed, BAE Systems and other suppliers "interfered with, impaired and delayed the deployment" of Command's product by "falsifying testing procedures and records" and encouraging the Air Force to reject use of the C2Web platform.

Lockheed falsely led other possible users to believe the C2Web system could not be used for the F-16 fighter, Command said.

Command has also sued InfoTrust Group Inc and other companies that work with Lockheed. InfoTrust, in turn, has sued Lockheed, according to Command's law firm.

Command argued that Lockheed and other companies were positioning their products to be used on the $392 billion F-35 fighter jet program, also run by Lockheed, shutting Command out of work on the estimated 3,000-plus jets to be built under that program.

Air Force Lieutenant General Chris Bogdan, who runs the F-35 program for the Pentagon, has tried to inject more competition into the maintenance of the F-35 program, given concerns about the high cost and slow progress of Lockheed's work on the jet's computer-based maintenance system.

In its lawsuit, Command said Lockheed was also trying to erode its existing business relationships with the militaries of Oman, Israel, Poland and the United Arab Emirates, by arguing that its software could not publish technical data on the F-16.

(Reporting by Andrea Shalal-Esa; Editing by Chris Reese and Leslie Gevirtz)