itar, export controls & intellectual property: the...
TRANSCRIPT
ITAR, EXPORT CONTROLS & INTELLECTUAL PROPERTY: THE KEYS TO FDI SUCCESS
IN THE US MARKETSUCCESS
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OUR CASE STUDY: PIERRE & THE TEXAS COWBOY
> Toulouse Super Composites (TSC) is the
principal supplier of the Landing Gear Doors
in France for French military jets and civilian
aircraft.
> TSC sells only outside the USA.
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OUR CASE STUDY: PIERRE & THE TEXAS COWBOY (cont.)
> In 2016, JR Ewing, CEO of Modern Aircraft,
Inc., a Dallas, Texas company, calls up
Pierre Dupont at Toulouse to discuss a
business proposal.
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> J.R. Ewing asks TSC to design landing gear doors for
a new regional jet, the “MA 878 Sonic Liner,” to be
manufactured at the Modern Aircraft factory in Dallas.
– The new doors must be lighter and stronger than
existing commercial models and made out of the
latest, state-of-the-art composites.
– TSC would use some of the advanced composite
technology that it incorporates in the doors made for
its French customers.
OUR CASE STUDY: PIERRE & THE TEXAS COWBOY (cont.)
555
> Toulouse signs a supply contract for $50 million with
Modern Aircraft and plans to open its first office in the
United States, a technical design office near the Dallas
campus of Modern Aircraft.
> So far so good. Pierre Dupont is delighted with his
negotiations with J.R. and Modern Aircraft and cannot
wait for the dollars to start flowing.
> Are there any concerns?
OUR CASE STUDY: PIERRE & THE TEXAS COWBOY (cont.)
666
> Are there any concerns?
– RTBC*: The Supply Agreement was 50 pages long,
and Pierre didn’t read all the details.
• He did not study a provision granting Modern
Aircraft an Exclusive, Royalty-Free License to all
of the TSC composites to be used in the landing
gear doors.
• Pierre also reads that he must indemnify Modern
Aircraft if the TSC products infringe on patents
held by other aircraft manufacturers or
competitors. TSC itself relies on its 10 years of
trade secrets in perfecting the doors and holds
no patents.
*RTBC is an old English expression: It means READ THE
BLOODY CONTRACT!!
OUR CASE STUDY: PIERRE & THE TEXAS COWBOY (cont.)
777
> Pierre calls JR and asks, “Hey, can we change those
provisions?”
– JR’s Response:
OUR CASE STUDY: PIERRE & THE TEXAS COWBOY (cont.)
888
FORTUNATELY, PIERRE HAS A FRIEND:
> He calls Josh Brady: his IP/Software
Licensing Lawyer
– [See Josh’s TOP 5 in the handout]
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KEY QUESTIONS FOR MARKET SUCCESS
IP Questions for Josh
Brady:
> What elements make up
Pierre’s IP?
> Why should he have
stopped and reviewed
his
IP Portfolio before selling
into the US?
> Did he do his diligence
and conduct an internal
IP audit?
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THE TYPICAL US PATENT
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TRADE SECRET VS. PATENT
> IP and the Supply
Agreement
> How should TSC handle
new IP and existing IP
under its agreements
with US companies like
Modern Aircraft?
> How does he document
his background IP so
Modern Aircraft cannot
claim a royalty-free
license to
use it?
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ASK JOSH
> Why does he need a “Freedom to Operate”
Assessment to make sure his products avoid
violations of third-party IP rights in the United
States?
> How much does it cost?
131313
JOSH ON THE TOP 5
1. Stop and Review before selling or licensing
into the USA.
2. Do your due diligence. Conduct an internal
audit and get legal advice on how your IP
can be protected in the U.S.
3. Register important trademarks, copyright
your source code.
4. Avoid violating competitors’ IP. Americans
like to go to Court.
5. Come up with your own IP Compliance and
Security Plan.
You can read the full article at: williamsmullen.com/news/fdi-
usa-news-december-2015 p.5. Or see the Top 5 Handout.
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PROGRESS! NOVEMBER 2017:
> Toulouse Super Composites (TSC) opens its
facility in the USA
– TSC does the design work in France and resolves
its contract and IP issues thanks to Josh Brady.
– In 2017 Pierre opens that design and engineering
office in Dallas, staffs it, and starts earning
revenues in the USA.
151515
CORPORATE QUESTIONS
> Corporate Formation
– Pierre wants to know: How does he best repatriate
his profits out of Texas and back to France?
– What about this LLC type company (Limited
Liability Company)?
– He has heard that an LLC pays ZERO TAXES. Is
this too good to be true?
– What about incorporating instead as Super
Composites USA Inc.?
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LEGAL LIABILITY
> Liquidated Damages for Late Deliveries of Software
– Toulouse falls 100 days behind on the delivery of
the prototype. JR says: pay me my penalty of
$2,000 a day. Pierre argues that there was no
damage to JR since the 878 Sonic Liner is behind
production and the
Landing Gear is not ready.
– JR: “Show me the money”
– Who wins?
• Will the Texas Judge apply
his blue pencil and amend
the contract?
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OPERATIONAL ISSUES
> Global Mobility
– Pierre Dupont wants his two sons, Jean-
Pierre and Francois , to fly over from France
to help finalize and test the design for 2
months.
• Do they really need a work visa?
– Jean-Pierre just came back from a sales trip
with AIRBUS to Iran.
• Any problems with using Visa Waiver?
– What about Pierre, Jr.: how can he best
come over and run the office for his father?
181818
JOSH: PROTECTING YOUR IP
> Employment Contracts and IP
– Pierre wants to hire Joe Smith as VP
Business Development: What confidentiality
and
non-solicitation provisions should go into his
contract to protect the IP?
– Can TSC USA enforce a
non-compete?
– What state law applies?
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MORE IP ISSUES:
> IP Licensing
– What if TSC’s technology is based upon a license
from one of its Suppliers, 3D Technology, supplier in
France?
– How does this complicate things?
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THE FUNDAMENTAL BUSINESS ISSUE:
PIERRE
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TRADEMARKS: THE KEY TO BRANDING
> Trademarks
– TSC wants to do business with Gulfstream,
Boeing, Bombardier, and Lockheed Martin: Can it
register “Toulouse” or “TSC ” in the USA?
– Does it have to register, or can it use the name
and rely on the French trademark?
> What about its Logo
Toulouse
Super Composites
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THREE YEARS LATE: 2019 STORM CLOUDS?
> It is 2019
– JR has major cost overruns
at Modern Aircraft on the 878
Sonic Liner.
– JR stops paying and doesn’t
have the same old bounce in
his step. JR looks years
older.
– Now Pierre is really worried.
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MORE QUESTIONS?
> New Patents or Trade Secrets
– Toulouse wants to patent the modified design that it
developed in the USA and sell it to other aircraft
manufacturers. Does TSC have issues?
> IP Contract Remedies
– What are Super Composites’ Remedies? Who owns all that IP that went into the design if the contract is terminated and Modern Aircraft defaults on payments?
> Resolving the Dispute
– Arbitration, Mediation, Federal or State Court?
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WHAT IF THERE IS A DISPUTE?
> Problem: JR proposes arbitration before onearbitrator in Texas or local state court in Dallas.
> Problem: local jury or arbitrator and expensive.
> Consider alternative dispute resolution solutions:
– Mediation.
> Your Solution: Propose U.S. District Court (Federal).
– WHY?
> Also, it is often far less expensive and much faster to resolve disputes before the Federal U.S. District Courts.
– Will compel mediation
– Will help compromise disputes
– The 6 month rule
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PIVOT?
> Can Pierre Pivot?
– Can Toulouse move on after Modern Aircraft?
> Sure it can …..
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THE KING 350 AND TSC
> Leveraging its success providing landing gear doors
for civilian aircraft, TSC wins a contract with a prime
U.S. Government contractor.
> TSC will design the landing gear doors for a King Air
350 that has been enhanced with military intelligence,
surveillance and reconnaissance capabilities (the
“KA350 ISR”).
> The aircraft manufacturer will be selling the aircraft to
the U.S. Air Force.
> With this new contract, TSC has some
export compliance issues to consider.
272727
ITAR/EXPORT CONTROLS COMPLIANCE?
> How can Pierre determine if the aircraft is controlled
by the International Traffic in Arms Regulations
(“ITAR”)?
> Is the landing gear door ITAR controlled?
> Is TSC required to register with the Department of
State?
> Does the company have drawings/specifications
of the KA350 ISR for
purposes of designing
the landing gear door?
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MORE ON ITAR
> Are French employees working in TSC’s Texas
design center and will they have access to the
technical specifications of the KA350 ISR?
– Are there “Deemed Export” Issues? How best to
resolve?
> Do employees travel between Texas and the French
parent company to discuss the design features, or
hold telephone discussions? What if TSC uses the
Server in France?
> What are the compliance requirements if TSC is
asked to ship spare parts to a U.S. air base in
Germany?
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HOW TO SET UP PIERRE’S COMPLIANCE PROGRAM FOR ITAR & EXPORT CONTROLS?
> What are the major steps in implementing
an export control compliance program?
– 5 takeaways on Export Controls
1. Management commitment to compliance.
2. Know the export control jurisdiction of the
products, technical data or software.
3. Develop compliance procedures that focus
on identified risk areas.
4. Provide awareness training to employees.
5. Conduct compliance monitoring and periodic
compliance assessments.
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CONCLUSION ON ITAR: ROSANNE
> Compliance with the U.S. export controls is
not complicated. It just takes an awareness
of the requirements, commitment and
operating procedures that will promote
compliance.
Rosanne Jacuzzi
+1.202.293.8134
williamsmullen.com/practice/itar-export-controls-ofac-sanctions
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CONCLUSION ON IP: JOSH
> A well-defended IP portfolio is a key to success
when entering U.S. markets and establishing a
competitive position. Get advice early on your IP
before you sign that supply contract and invest in
the USA. Set up your IP Security Plan to maximize
your profits and growth in one of the world’s most
dynamic and advanced marketplaces. Plan Ahead
and you Can Succeed.
Joshua B. Brady
+1.703.760.5249
williamsmullen.com/practice/intellectual-property
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Consult IP Counsel Early and Often
>Why?
– Identify risks early
– Develop mitigation strategies early
– Example:
• One-hour phone call with IP counsel: < $400
• Defend U.S. patent infringement: > $$$$ !!!!
>When?
– Before deciding to compete?
– Before developing/launching a product?
– Before signing a software license?
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CONCLUSION– Williams Mullen.
> CELENA, WE NEED
> graphic with ARTWORK AND BIZ IS NOT
COMPLICATED IN BLACK ON THE BOTTOM.
> and then put in lingo from the one page Ad copy.
DOING BUSINESS IN THE U.S. DOESN’T HAVE TO BE COMPLICATED
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QUESTIONS?
Joshua B. Brady
+1.703.760.5249
Eliot Norman
+1.804.420.6000
Rosanne Jacuzzi
+1.202.293.8134
williamsmullen.com/fdi