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Jason Dickstein

Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.
Jason Dickstein has written 321 posts for MARPA

DRAFT Materials Advisory Circular – Extension of the Comment Period

Many of our members have been communicating with us about their concerns over the proposed Materials AC. We had previously asked the PMA community to send us their comments and concerns so we could assemble them into a single missive to deliver to the FAA.

We’ve heard from a number of you that the large volume of material and the highly technical nature of the proposed AC has made it slow going to put together your comments.  With this in mind, MARPA asked the FAA last week for a extension of time to file comments on this draft.

We received the answer today, granting that extension.

Dear Mr. Ryan Aggergaard,

This e-mail is in response to your request to grant a 90 day extension to comment on the FAA public draft Advisory Circular 33.15-3, titled “Parts Manufacturer Approval (PMA) Metallic Part Material Compliance Using Comparative Test and Analysis Method for Turbine Engines or Auxiliary Power Units”.

The FAA will consider comments after the comment period has closed if it is possible to do so without incurring expense or delay.

We have determined there will be no incurring expense or delay, and will grant the MARPA members and the MARPA Technical Committee an extension from July 20, 2016, to October 18, 2016.

Please feel free to contact us if you have any questions or concerns.

Sincerely,

Judith Watson

Please do not wait until October to review this AC and develop your comments.  The earlier you can provide your comments and concerns to the FAA (and to MARPA), the better able we will be to address them in a positive and productive way with the FAA.

EASA is Moving

By Monday, the European Aviation Safety Agency (EASA) will have a new location. The new location is closer to the main Koln train station (same side of the river). As of June 6, 2016 EASA will be operating from their new Headquarters located at:

Konrad-Adenauer-Ufer 3
D-50668 Cologne, Germany

The post-office box as well as all telephone numbers remain the same:

Postfach 10 12 53
D-50452 Cologne, Germany

Tel: +49 221 8999 000
Email: info@easa.europa.eu

GECAS Says it has No Safety or Technical Issues with PMA

GECAS’ Gilberto Peralta turned some heads at CCMA yesterday when he said that he sees no safety or technical issues with PMAs.  He explained that his only objections to PMAs are commercial.

Peralta is the GECAS General Manager for Latin America and the Caribbean.  ALTA representatives confirmed that GECAS is the most significant leasing company in South America.  Peralta was part of the CCMA panel discussing the technical and commercial aspects of PMA parts.

He explained that GECAS’ standard lease agreement excludes PMAs, and therefore he expects that the lease terms will control the use of PMAs.  He explained that the reason for this term is because of a fear that air carriers will not accept a leased aircraft with installed PMAs. Several operators in the audience suggested that their only impediment to accepting PMAs is the anti-PMA lease terms.  David Linebaugh of Delta, who was also part of the same panel, suggested that this is a chicken-and-the-egg situation, in which operators and lessors blame one another for erecting walls against PMA when they really all just need to get out of the way of progress.

The audience asked Peralta whether GECAS would accept use of PMAs during the term of the lease if those PMA parts were removed and replaced in pars manufacture under a production certificate (“OEM” parts).  Peralta explained “I don’t know what you do with the the aircraft during the lease term,” and expressed that his concern was only with the condition of the aircraft at the time of return.  He added that he would expect the lessee to take responsibility for such PMA part failures.  Mike Garcia of HEICO, who was also part of the panel, explained that HEICO offers a generous warranty to support its parts (so operator liability should not be an issue); but he also noted that HEICO has never experienced an airworthiness directive or service bulletin on any of its articles.

FAA Deputy Associate Administrator John Hickey was also on hand as part of the same panel.  He noted that the FAA has issued a very small number of airworthiness directives against PMA parts,  but that the FAA issues “two hundred, three hundred, even four hundred ADs per year” against PC holders products and articles.  He noted that the PMA community has an excellent safety record, and that the FAA has rigorous design approval and production approval processes intended to ensure that FAA approved designs – and the parts created under them – remain compliant with the FAA’s regulatory safety standards.

New Trade Secret Law and Whistleblower Protection – How to Protect Your Business

Yesterday, we wrote about the new trade secret law, which provides a federal cause of action for trade secret infringement.  The new law, known as the Defend Trade Secrets Act of 2016 (DTSA), is identified as Public Law 114-153.

It is very normal for aerospace manufacturers to have (or at least claim) trade secrets, and to seek to protect them through agreements with their employees.  Such agreements often include confidentiality clauses.  They may address trade secrets like product design functions, as well as trade secrets like customer lists and financial data.  Provisions of the new law will impose some affirmative burdens on employers, and if you fail to meet those obligations then you could undermine your company’s intellectual property rights.

WHISTLE BLOWER PROTECTION

The DTSA provides whistleblower protection to certain employees who disclose trade secrets to the Government (including in a court filing).  The whistleblower immunity applies if the employee discloses a trade secret, but does so in one of these contexts:

  • A confidential disclosure to a Federal, State, or local government official, either directly or indirectly, or to an attorney (but only for the purpose of reporting or investigating a suspected violation of law); or
  • A disclosure made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

NEW NOTICE REQUIREMENTS

But there is an even more important clause for employers to understand.  There is an additional clause in the law that requires employers to provide notice of the whistle blower immunity.  This clause says:

(3) NOTICE.—

(A) IN GENERAL.—An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.

(B) POLICY DOCUMENT.—An employer shall be considered to be in compliance with the notice requirement in subparagraph (A) if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law.

(C) NON-COMPLIANCE.—If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided.

(D) APPLICABILITY.—This paragraph shall apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection.

(4) EMPLOYEE DEFINED.—For purposes of this subsection, the term ‘employee’ includes any individual performing work as a contractor or consultant for an employer.

This imposes an affirmative duty on employers to notify their employee of the immunity in the DTSA.  This needs to be done in the confidentiality agreement that governs the use of the trade secrets.  So if your employees each sign a confidentiality agreement (or employment agreement that includes confidentiality obligations) at the time of hiring, then this should be modified to reflect the requirements of the law.  This new language should be reflected in every contract addressing confidentiality provisions that is entered into on or after May 12, 2016 (today).

Old and existing contracts (those entered-into before May 12, 2016) do not need to be modified to reflect this new language, unless they are updated in any way.  So if you make any sort of update to a pre-existing contract that addresses confidentiality, then please make sure the modifications also include the new immunity notice language.

There is an option to publish a policy document including the appropriate notice, and then to cross reference that document in the agreements with the employees, consultants and contractors.  If you do this, then you should be specific about the revision level of the policy document, to make sure that it includes the appropriate language.

Failure to provide notice can limit the company’s ability to collect certain damages and attorneys fees, to which the company might otherwise be entitled.  Eliminating the chance of recovering attorneys fees can make a valid lawsuit economically undesirable.

APPLIES TO CONTRACTORS AND CONSULTANTS, TOO

The definition of employee for these purposes includes contractors and consultants!

So your consulting agreements and other agreements with independent contractors need to reflect this new disclosure language as well.  This may be especially important when working with contractors who normally sign a non-disclosure agreement.

 

New Trade Secrets Law Provides Useful Language for MARPA Members

The President has signed into the law the new Defend Trade Secrets Act (DTSA).  The new law provides a federal private right of action for trade secret infringement – previously, such private actions were brought under state law.

For MARPA member, there is an important safe harbor – the DTSA specifically explains that trade secret infringement is limited to obtaining information by improper means, and limits the scope of “improper means” by excluding some normal methods used by PMA applicants, like reverse engineering and independent derivation:

the term ‘improper means’—

(A) includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and
(B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition

This is a valuable restatement of the common-law safe harbor.

But MARPA members are also holders of their own trade secrets, and this change permits MARPA members to sue in federal court when their trade secrets are infringed.

The existing statutes provide a definition of trade secret that will continue to control the new private right of action:

the term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—

(A) the owner thereof has taken reasonable measures to keep such information secret; and

(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the [public]{another person who can obtain economic value from the disclosure or use of the information};

18 U.S.C. 1839(3).  The square-bracketed [] language is the old text and the curly-bracketed language {} is the new replacement text that has been added by the new law.

This standard continues to provide important guidance to those who wish to retain their trade secrets – it is especially important to take reasonable measures to keep the information secret.  And where information cannot be kept secret, because it is already in the public domain or because it is required by law to be disclosed, then the possessor of that information may not have a trade secret, if there are no reasonable measures that may be taken to maintain secrecy.

The extent of the security measures taken by the owner of the trade secret need not be absolute, but must be reasonable under the circumstances, depending on the facts of the specific case.  The owner’s reasonable efforts can include advising employees that the information is a trade secret, limiting access to the information to those with a specific “need to know,” requiring employees or business partners to sign confidentiality agreements, and keeping secret documents secured (like in a safe).

For PMA applicants, this new law underscores the importance of documenting the processes associated with the development of PMA design data.  A PMA company that possesses that sort of development-process-documentation, and can offer it as a defense to an allegation of trade secret misappropriation, should be a more defensible position.

Congress Proposes FAA Reauthorization that Poses Both Challenges and Opportunities for the PMA Community

Today, Congress published proposed legislation (known as the AIRR Act) to reauthorize the FAA.  The biggest headline in that bill is air traffic control privatization.  But there is plenty in this bill that could affect the PMA industry.

Typically, FAA Reauthorization Bills affect higher-level elements of the law and the FAA is more likely to directly affect PMA Manufacturers; but the AIRR Act has a large number of elements that could affect the PMA community:

Sec. 302. Safety Oversight and Certification Advisory Committee. Congress is establishing an advisory committee that will be responsible for advising the Secretary of Transportation on policy-level issues related to FAA safety certification and oversight programs and activities.

Sec. 311. Aircraft certification performance objectives and metrics. The FAA shall establish metrics for progress toward increasing certification efficiency, increasing accountability, “achieving full utilization of FAA delegation and designation authorities,” implementing risk management and systems safety principles, increasing transparency, training personnel in auditing systems and maintaining the leadership of the United States in international aviation and aerospace.  All of these foci could be good for the PMA community.

Sec. 312. Organization designation authorizations. Establishes a new provision in the US Code for ODAs. ODAs shall have a procedures manual, shall be entitled to full delegation of functions approved in the manual, but shall be subject to regular FAA inspection. ODA holders shall cooperate fully with the FAA oversight activities. FAA shall establish an ODA Office to coordinate ODA policy and oversight.

Sec. 314. Type certification resolution process. Requires FAA to set policies and timelines for resolving type certification issues, and for elevating them when they cannot be resolved at the lower levels of the FAA.  [*** It would be nice to see this provision expanded to all design approvals, including PMAs ***]

Sec. 315. Safety enhancing equipment and systems for small general aviation
airplanes. Requires FAA to streamline the installation of safety enhancing equipment and systems for small general aviation airplanes in a manner that reduces regulatory delays and significantly improves safety. This is something that the FAA has been working on already so they should be prepared to meet Congressional deadlines.

Sec. 317. Additional certification resources. If the FAA needs to travel to a foreign country to help expedite the process of acceptance or validation of a US certificate, then the US applicant can reimburse the FAA for travel expenses (which makes it easier for the FAA to contribute to such efforts). The FAA will have to keep metrics on this, including how often requests from US applicants to enter into such an arrangement were denied.

Sec. 351. Promotion of United States aerospace standards, products, and services abroad. This section gives the FAA promotion responsibilities, which were taken out of the law a number of years ago. This limited promotion authorization is focused on international promotion, like promoting United States aerospace safety standards abroad, and facilitating and vigorously defending approvals of United States aerospace products and services abroad. It will also reiterate our commitment to working with bilateral partners.

Sec. 352. Bilateral exchanges of safety oversight responsibilities. Includes a requirement for the FAA to accept foreign airworthiness directives (ADs) issued by bilateral partners. This could impose an unworkable burden on smaller US companies to track foreign AD proposals, because it will mean that the US companies will have to comment on the foreign AD, because it will have no reasonable opportunity to comment on a US version if the FAA is required to accept foreign ADs.  Because ADs can sometimes be worded to exclude PMA alternatives, it is important that the PMA community have some redress with respect to proposed ADs.

Sec. 353. FAA leadership abroad. This will require the FAA to better support US companies in foreign acceptance or validation projects. one clear element of this will be through increased US engagement with foreign authorities.

Sec. 615. Air transportation of lithium cells and batteries. The government will establish a committee, and try to make sure that people actually comply with lithium battery shipping requirements.

Reauthorization is often a slow process, but the last reauthorization bill was a six month extension that went into effect October 1, 2015. That means that the new reauthorization bill is needed by April 1, 2016. It is possible that this ATC privatization may be contentious (General Aviation groups contend that it is an effort to shift the expense of maintaining the system into their pockets) and that could slow down the progress of the AIRR Act. If the AIRR Act cannot be passed by April then we could see another temporary reauthorization (e.g. for another six months). But it is possible that the AIRR Act could move on a fast track, and become law, later this Spring.

FAA Reiterates That ICAs are Not Proprietary Data

The FAA has published an update to Advisory Circular (AC) 120-106A,on the Scope and Recommended Content for a Contractual Agreement Between an Air Carrier and a Contract Maintenance Provider.  This advisory circular provides guidance on the terms of the relationship between an air carrier and its contract maintenance providers.

The new revision expands on the guidance and includes elements that are important to the PMA community as well.

FAA Policy Statement PS-AIR-21.50-01 is an important FAA policy statement that precludes Design Approval Holder’s from using their monopoly over the Instructions for Continued Airworthiness to exact additional anti-competitive concessions.  A reason for this was because those anti-competitive concessions could undermine safety, as well as inhibiting third party development of safety improvements.

My mention of PS-AIR-21.50-01 is not the non-sequitur it might seem to be.  That guidance is now directly referenced in AC 120-106!  Section 5 of the guidance discusses elements of the contractual agreement between the air carrier and the maintenance provider.  Subsection 5(b)(4) recommends a contract clause on proprietary data, but makes it clear that this means the air carrier’s own data, and stresses that the ICAs are not proprietary data.

4) Proprietary Data. Many times, air carrier general maintenance manuals are designed for in-house maintenance. These manuals may contain proprietary or other confidential information that an air carrier may not want to share with an MP. In many cases, the MP also works on competitors’ aircraft. This has a tendency to make air carriers reluctant to share this information, and therefore they do not. The proper handling of proprietary data issues should be addressed in the contractual agreement between the air carrier and the MP.

NOTE: The proprietary or other confidential information referred to in this paragraph refers only to that information developed by an air carrier for purposes of its in-house maintenance. Proprietary or confidential information does not refer to other data to which the MP is entitled, such as instructions for continued airworthiness (ICA) under 14 CFR part 21, § 21.50(b), and in accordance with FAA Policy Statement PS-AIR-21.50-01, Type Design Approval Holder Inappropriate Restrictions on the Use and Availability of Instructions for Continued Airworthiness. Such data that is required to be made available under the regulations may not be restricted by design approval holders (DAH) with respect to an air carrier’s approved maintenance manuals, through restrictive language in the ICA, or through restrictive access or use agreements.

Some manufacturer have used ICA restrictions to preclude use of PMAs, and PS-AIR-21.50-01 helps to address those restrictions in a positives and pro-competitive manner.

Some air carriers find themselves getting conflicting information about whether ICAs are proprietary data.  We’ve written in the past about why ICAs cannot be proprietary data (e.g. they are required to be made available and this federal requirement preempts state-law trade secret protections).  Because they cannot be proprietary data, one shouldn’t use a license of that information to perpetrate anti-competitive restrictions.  This recently-published NOTE helps to emphasize the point.

Small Business Standards for Aerospace R&D, Adjusted

The Small Business Administration has adjusted the size standards for small businesses that perform research and development in the aerospace field (including businesses that are required to deliver manufactured product as part of a research and development contract).

Research and Development in the Physical, Engineering, and Life Sciences is currently categorized under NAICS 541712.  This NAICS code has three sub-industries or “exceptions.” The SBA feels that the small business standard for these companies should be consistent with that of peer companies that manufacture parts.  SBA is therefore modifying the titles of the three exceptions, and the size thresholds associated with them.

NAICS code NAICS industry title Current size standard (number of employees) New size standard (number of employees)
541712 Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology) 500 1000
except Aircraft Engine and Engine Parts 1000 1500
except Other Aircraft Parts and Auxiliary Equipment 1000 1250
except Guided Missiles and Space Vehicles, Their Propulsion Units and Propulsion Parts 1000 1250

This rule change becomes effective on February 26, 2016. Full details of this change are available in the Federal Register.

US Names Denied Aviation Parties from Gambia and UK

The U.S. Bureau of Industry and Security has issued an order denying the export privileges of:

  • Ribway Airlines Company Limited (from The Gambia),
  • Af-Aviation Limited (from Wolverhampton, UK),
  • Andy Farmer (from Wolverhampton, UK),
  • John Edward Meadows (from East Sussex, UK), and
  • Jeffrey John James Ashfield (from East Sussex, UK).

This is a temporary denial order that is only valid for 180 days, unless extended.  Although published in today’s Federal register, the order is actually dated January 19, 2016. The Order prohibits the denied parties from engaging in export transactions, and it includes a prohibition against third parties exporting from the U.S. to any of these denied parties.

Absent a license that authorizes sales to these denied parties, sales of US-origin FAA-PMA parts to such denied parties may violate the temporary denial order.

MARPA members with a history of doing business with any of these parties should ensure that their future transactions remain consistent with U.S. law.  While the Order remains effective, those who are approached by any of these denied parties should exercise caution in their dealings.

Congress Considers Permanent Deduction for Investments in Equipment Like Production Equipment and Test Equipment

Earlier this year, MARPA joined with other trade associations to express support for H.R. 636, the America’s Small Business Tax Relief Act of 2015, sponsored by Rep. Pat Tiberi.

The legislation seeks to make permanent the higher thresholds for section 179 expensing.  This is the tax law that allows a small business to treat certain capital investment as expenses (which means that it can be fully deducted in the year of the expense, instead of depreciating it over a period of years).  It started at just $25,000 and over the years, has been ‘temporarily’ extended on a recurring basis at increasingly higher levels (it has been set annually at $500,000 since 2010).

Industry has come to rely on this expensing provision in order to immediately deduct investments in equipment like production equipment and test equipment.  This allows small manufacturing companies to better invest in modern production and test equipment.

This issue was discussed at the Annual Conference in October.

The section 179 expensing provision has been an important tax issue for many years. Because it has been around for many years, many manufacturing companies rely on the deduction provision as the basis for their own investment decisions.

The section 179 expensing provision has not yet been extended for 2015.  This means that your 2015 limits on section 179 expensing are $25,000 (not $500,000) and the ability to use the provision begins to phase-out when the business invests $200,000 and fully phases out at $225,000.  If it were extended as proposed, then it would apply to up to $500,000 in equipment investment, and would not phase out until the annual investment amount exceeded $2,000,000.

There is a very good chance that permanent Section 179 expensing at $500,000 could be included in the year-end tax extenders package, which Congress expects to debate and pass very soon. This would be a huge victory for small businesses, and the culmination of a lot of work by many trade associations and lobbyists to raise the profile of this issue and get it addressed by Congress.

If this is an important issue to your business, then you may wish to send letters or emails to your own members of Congress (House and Senate) expressing your opinion on the permanent extension of Section 179 expensing at $500,000.

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