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ITAR, EXPORT CONTROLS & INTELLECTUALPROPERTY: THE KEYS TO

US MARKET SUCCESS

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OUR CASE STUDY:PIERRE & THE TEXAS COWBOY

> Toulouse Super Composites (TSC) is the principalsupplier of the Landing Gear Doors in France forFrench 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 Dupontat Toulouse to discuss a business proposal.

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> J.R. Ewing asks TSC to design landing gear doors for a newregional jet, the “MA 878 Sonic Liner,” to be manufacturedat the Modern Aircraft factory in Dallas.

– The new doors must be lighter and stronger thanexisting commercial models and made out of the latest,state-of-the-art composites.

– TSC would use some of the advanced compositetechnology that it incorporates in the doors made for itsFrench customers.


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> Toulouse signs a supply contract for $50 million withModern Aircraft and plans to open its first office in theUnited States, a technical design office near the Dallascampus of Modern Aircraft.

> So far so good. Pierre Dupont is delighted with hisnegotiations with J.R. and Modern Aircraft and cannot waitfor the dollars to start flowing.

> Are there any concerns?


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> Are there any concerns?

– RTBC*: The Supply Agreement was 50 pages long, andPierre didn’t read all the details.

• He did not study a provision granting ModernAircraft an Exclusive, Royalty-Free License to all ofthe TSC composites to be used in the landing geardoors.

• Pierre also reads that he must indemnify ModernAircraft if the TSC products infringe on patents heldby other aircraft manufacturers or competitors. TSCitself relies on its 10 years of trade secrets inperfecting the doors and holds no patents.

*RTBC is an old English expression: It means READ THE BLOODY

CONTRACT!!


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> Pierre calls JR and asks, “Hey, can we change thoseprovisions?”

– JR’s Response:


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FORTUNATELY, PIERRE HAS A FRIEND:

> He calls Josh Brady: his IP/SoftwareLicensing 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 upPierre’s IP?

> Why should he havestopped and reviewed hisIP Portfolio before sellinginto the US?

> Did he do his diligenceand conduct an internalIP audit?

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THE TYPICAL US PATENT

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TRADE SECRET VS. PATENT

> IP and the SupplyAgreement

> How should TSC handlenew IP and existing IP underits agreements with UScompanies like ModernAircraft?

> How does he document hisbackground IP so ModernAircraft cannot claim aroyalty-free license touse it?

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ASK JOSH

> Why does he need a “Freedom to Operate” Assessment tomake sure his products avoid violations of third-party IPrights in the United States?

> How much does it cost?

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JOSH ON THE TOP 5

1. Stop and Review before selling or licensing intothe USA.

2. Do your due diligence. Conduct an internal auditand get legal advice on how your IP can beprotected in the U.S.

3. Register important trademarks, copyright yoursource code.

4. Avoid violating competitors’ IP. Americans like togo to Court.

5. Come up with your own IP Compliance andSecurity 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 theUSA

– TSC does the design work in France and resolves itscontract and IP issues thanks to Josh Brady.

– In 2017 Pierre opens that design and engineeringoffice in Dallas, staffs it, and starts earning revenuesin the USA.

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CORPORATE QUESTIONS

> Corporate Formation

– Pierre wants to know: How does he best repatriate hisprofits out of Texas and back to France?

– What about this LLC type company (Limited LiabilityCompany)?

– He has heard that an LLC pays ZERO TAXES. Is this toogood to be true?

– What about incorporating instead as Super CompositesUSA 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 the878 Sonic Liner is behind production and theLanding Gear is not ready.

– JR: “Show me the money”

– Who wins?

• Will the Texas Judge applyhis blue pencil and amendthe contract?

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OPERATIONAL ISSUES

> Global Mobility

– Pierre Dupont wants his two sons, Jean-Pierreand Francois , to fly over from France to helpfinalize and test the design for 2 months.

• Do they really need a work visa?

– Jean-Pierre just came back from a sales trip withAIRBUS to Iran.

• Any problems with using Visa Waiver?

– What about Pierre, Jr.: how can he best comeover and run the office for his father?

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JOSH: PROTECTING YOUR IP

> Employment Contracts and IP

– Pierre wants to hire Joe Smith as VP BusinessDevelopment: What confidentiality andnon-solicitation provisions should go into hiscontract to protect the IP?

– Can TSC USA enforce anon-compete?

– What state law applies?

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MORE IP ISSUES:

> IP Licensing

– What if TSC’s technology is based upon a license fromone 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 relyon the French trademark?

> What about its Logo

ToulouseSuper Composites

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THREE YEARS LATE: 2019 STORM CLOUDS?

> It is 2019

– JR has major cost overruns atModern Aircraft on the 878Sonic Liner.

– JR stops paying and doesn’t havethe 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 itdeveloped in the USA and sell it to other aircraftmanufacturers. Does TSC have issues?

> IP Contract Remedies

– What are Super Composites’ Remedies? Who owns allthat IP that went into the design if the contractis terminated and Modern Aircraft defaults onpayments?

> 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 muchfaster 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 afterModern Aircraft?

> Sure it can …..

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THE KING 350 AND TSC

> Leveraging its success providing landing gear doors forcivilian aircraft, TSC wins a contract with a prime U.S.Government contractor.

> TSC will design the landing gear doors for a King Air 350that has been enhanced with military intelligence,surveillance and reconnaissance capabilities (the “KA350ISR”).

> The aircraft manufacturer will be selling the aircraft to theU.S. Air Force.

> With this new contract, TSC has someexport compliance issues to consider.

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ITAR/EXPORT CONTROLS COMPLIANCE?

> How can Pierre determine if the aircraft is controlled by theInternational 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/specificationsof the KA350 ISR forpurposes of designingthe landing gear door?

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MORE ON ITAR

> Are French employees working in TSC’s Texas design centerand will they have access to the technical specifications ofthe KA350 ISR?

– Are there “Deemed Export” Issues? How best toresolve?

> Do employees travel between Texas and the French parentcompany to discuss the design features, or hold telephonediscussions? What if TSC uses the Server in France?

> What are the compliance requirements if TSC is asked toship spare parts to a U.S. air base in Germany?

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HOW TO SET UP PIERRE’S COMPLIANCEPROGRAM FOR ITAR & EXPORT CONTROLS?

> What are the major steps in implementingan export control compliance program?

– 5 takeaways on Export Controls

1. Management commitment to compliance.

2. Know the export control jurisdiction of theproducts, technical data or software.

3. Develop compliance procedures that focus onidentified risk areas.

4. Provide awareness training to employees.

5. Conduct compliance monitoring and periodiccompliance assessments.

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CONCLUSION ON ITAR: ROSANNE

> Compliance with the U.S. export controls is notcomplicated. It just takes an awareness of therequirements, commitment and operatingprocedures that will promote compliance.

Rosanne [email protected]

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 whenentering U.S. markets and establishing a competitiveposition. Get advice early on your IP before you signthat supply contract and invest in the USA. Set up yourIP Security Plan to maximize your profits and growth inone of the world’s most dynamic and advancedmarketplaces. Plan Ahead and you Can Succeed.

Joshua B. [email protected]

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 INBLACK 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. [email protected]

Eliot [email protected]

Rosanne [email protected]

williamsmullen.com/fdi

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