Intellectual Property

Intellectual Property

Protect those STCs!

By Fred Workley

July 2000

As technical people, we constantly deal with data, like Supplemental Type Certificates (STC), but we don't spend a lot of time on how to protect the information, or intellectual property as is the case with STCs.

There are four types of intellectual property: patents, trade secrets, copyrights, and trademarks, and they must meet certain minimum standards before protection, in the form of exclusive rights, will be afforded. Legal wranglings can ensue if the property is not developed with these safeguards in place.

Patents

Patents protect mechanisms, electronic circuits, chemical compositions, formulas, and processes, and the protection for patents varies from country to country.

Generally, abstract ideas, business concepts, or formats, cannot be the subject of a patent. Patents for inventions are sometimes referred to as utility patents, whereas design patents are granted for internal business uses for both technical and commercial purposes. They apply to technical information used to manufacture, to carry out a process, or to produce a product.

Patents are intended not to reward routine advances that a normal, skilled mechanic or technician could make without exercising any ingenuity, but to reward advances that are unexpected in direction or result, and thus embody something more than the application of routine technical skills.

Trade secrets

Information that is not to be publicly known or not readily available from inspection or analysis of the available product or literature is known as a trade secret. While both technical and commercial information may be protected as trade secrets, technical information is more readily found to be the subject of protectable, confidential proprietary rights. Operating manuals that contain a business's collective know-how are covered under trade secrets. Trade secrets are not absolute property because if you let the knowledge reach an outsider through carelessness on your part then your rights to protect the trade secret will probably be lost.

Copyright

Copyright protects the work product of writers and artists, including the authors of technical articles, operational manuals, and computer programs. Copyright does not protect ideas or concepts, but rather the specific artistic expression of those ideas. An operating manual may, as mentioned above, contain trade secrets, and the writing, which records these secrets, could also be protected as a copyrighted work. Copyright "originality" is different from the novelty required for patent protection. In addition, the degree of originality typically required is not great.

Trademarks

Trademarks are symbols of a business or product. They brand the reputation and identity of the goods or services on which they are used or used with a product. They protect the right of the established business to be free from unfair competition by those seeking to trade using their name or reputation. At the same time, trademarks protect the public from deception or confusion that could be caused by the activities of the copycat.

Protecting STCs

Supplemental Type Certificates are intellectual property and need to be protected against misappropriation. One of the first things that must be done in the planning stage of a new installation is to obtain the Approved Data Package, which will be available from the holder of the STC. You must have an authorization letter from the STC holder. This is your permission by aircraft serial number to use the STC for installation purposes. The ownership of the intellectual property doesn't change, but you have permission to make the installation using the approved data package.

There still seems to be some questions about Supplemental Type Certificates (STCs) as intellectual property. There was a change mandated by public law that put in place procedural changes in the way the FAA processes STCs. The objectives of the changes were to stop or reduce the theft of the STC design owner's intellectual property.

The change requires the "owner" of the STC to supply each licensee with a formalized certificate evidencing the license agreement, and this certificate is then part of the required data for approval of the airworthiness certificate for the STC-modified aircraft. This STC is approved data that shows the specific aircraft on which it can be installed. The STC is then transferred with the aircraft records to subsequent owners.

An FAA Advisory Circular, AC21-40, states that major changes to type design require FAA approval for any given modification. The Supplemental Type Certificate is required for most major modifications that are not so extensive as to require a new Type Certificate. STCs are generally classified as "one-time only" or "multiple" if the modification can be duplicated.

Test of the law

The significant court case on this issue was a decision on Aug. 28, 1995, in an action brought by Bonaire Aviation (the plaintiff) of Blountville, TN against John Chapman, Chapman Aviation Ltd., Chapman Aircraft Services Ltd., and Robert Greenwood.

Bonaire Aviation had claimed that in an effort to protect its intellectual property, it was prosecuting a case against persons who had "stolen" its engine replacement STC.

The court, in Ontario, Canada, issued a decision (summary judgment) in favor of Bonaire Aviation based on its findings that there was a "pirating" of the STC and that the defendant knowingly participated in the unauthorized conversion of the STC.

Bonaire's action alleged conversion of a Cessna Model 185 aircraft by modification of the engine using data found in the Supplemental Type Certificate that was the intellectual property of Bonaire Aviation. Bonaire, the plaintiff, alleged that there had been an unauthorized modification as registered in Canada and owned by Greenwood. The modification used the "license" of Bonaire Aviation and was accomplished contrary to the express prohibition stated by Bonaire, the owner of the STC. Thus the unauthorized use of the STC, as described in jurisprudence, is "pirating" of the STC SA293350.

The plaintiff's facts stated that ownership of the STC was theirs, and an STC modifies a specific aircraft - in this case, a Cessna Model 185. The owner of the STC grants a "one-time license to use" the STC on a specific serial numbered aircraft. In this case, none of the defendants had obtained this license to use the STC directly from the STC's owner.

The defendant, Greenwood, in August 1993, approached Bonaire to purchase a license to use the Bonaire STC in a Cessna Model 185 aircraft registered in Canada. Although there was an initial contact by the defendant Greenwood with an agent of Bonaire, the agreement was not concluded. Greenwood never again approached Bonaire directly about use of their STC.

Greenwood subsequently purchased an engine conversion kit, including paperwork, from Carter Aviation Supply, Inc. of Tennessee, which he saw advertised in a trade newspaper.

Bonaire said that Carter Aviation Supply, Inc. had no right of authority to deal in any way with Bonaire's STC, which Carter had previously acquired for a "one-time-only" application to a specific aircraft owned by Carter.

The defendant Greenwood returned from Tennessee and delivered the engine kit and paperwork to the defendant, John Chapman. Chapman immediately questioned the validity of the documentation. I will note here that STCs issued in the United States are recognized in Canada by virtue of the bilateral treaties between the two countries. Greenwood and Chapman contacted Carter Aviation Supply, Inc. amongst others, to discuss the validity of the transfer of the STC.

Some additional facts of the case: In December 1993, the defendant Greenwood purchased a 550 Engine Kit from Harold A. Carter of Carter Aviation Supply Inc. for the sum of U.S. $21,199. He took delivery of the engine in Tennessee, together with an "unstamped" STC bearing SA293350. In other words, the STC did not specifically apply to one serial numbered aircraft.

On March 10, 1994, the 550 engine, originally received in December 1993, was exchanged with the same vendor for another 550 that was eventually installed in the Canadian aircraft. This time Greenwood obtained a copy of the "stamped" STC SA293359 from Carter Aviation. Mike Lloyd, acting on behalf of Bonaire as its authorized agent, expressly approved the transfer from the defendant Carter Aviation to the defendant Greenwood, and Greenwood had no notice of any alleged revocation of Lloyd's authority by the plaintiff until this action was started.

The president of Bonaire, upon hearing of the intended STC transfer, telephoned Greenwood and Chapman and advised them that they had no legal right to use Bonaire's STC. He also sent a follow-up letter to them confirming the lack of authorization and pointing out that no agent had authority to amend or to transfer a license on behalf of Bonaire. Subsequently, modification of the aircraft was done using the engine exchanged by Greenwood with Carter Aviation Supply and the paperwork for Carter's N-numbered aircraft.

Customer caveat

The law is interesting. A principal/owner may revoke an agent's authority at any time, and persons dealing with an agent, therefore, do so at their own peril. Unauthorized use of an STC is known as "pirating" the STC and is actionable as a tort of conversions.

How the courts decided

When a court is reviewing submitted information, they may not look favorably on any parties that fail to provide the evidence of persons having personal knowledge of contested facts. It is not sufficient for the responding party to say that more or better evidence will or may be available at trial. The respondent, in written depositions, must set out specific facts and coherent evidence, organized to show that there is a genuine issue for trial. In filing this affidavit, in response to a motion for summary judgment, the defendants are required to place before the court evidence setting out an organized set of facts. It must show that a real issue of dispute exists that, if tried on evidence, would probably be admitted in court.

Bonaire had not set out any facts in the material submitted to the court showing any connection between the defendant John Chapman and Chapman Aviation Ltd. The facts showed that he was merely an employee of Chapman Aircraft Service Ltd. The liability thus was that of the individuals involved.

There is no documentation or legal basis to support any proprietary right in the STC by the plaintiff once it is sold or that the proprietary right of the plaintiff, if any, is greaterhan that of the defendants. Thus, in this case, the court took a hard look at the merits of the actions of all parties. Previously, it was accepted that an essential element in an action for conversion that the property involved is specific personal property (a chattel).

However, the Canadian court said that ownership of intellectual property, namely the STC, belongs to Bonaire Aviation. Both of the defendants were aware that they had to purchase the right to use the STC. They had not done this. An unsupported, unauthorized transfer of a STC is a "pirating" of intellectual property. This case made an important distinction. The ruling said that the tort of conversion is not restricted to chattel, namely tangible property.

The court said that such a distinction would seem artificial in our modern hi-tech society but, more importantly, would deprive aggrieved citizens of a remedy to an obvious harm put upon them without sound justification. Thus in this case, the liability clearly fell upon the defendants Greenwood and Chapman who did not have permission to use the STC.

What the law says

The Federal Aviation Authorization Act of 1996 (Public Law 104-264, Section 403, Sept. 26, 1995) speaks to Supplemental Type Certificates. "If the holder of a Supplemental Type Certificate agrees to permit another person to use the certificate to modify an aircraft, aircraft engine, propeller, or appliance; the holder shall provide the other person with written evidence, in a form acceptable to the [FAA] Administrator, of that agreement. A person may change an aircraft, aircraft engine, propeller, or appliance based on a Supplemental Type Certificate, only if the person requesting the change is the holder of the supplemental type certificate or has permission from the holder to make the change."

As we have seen, intellectual property can have an impact on you personally. Also, it can impact the safety of aircraft and impose record keeping requirements on the owners. You, the installers, of Supplemental Type Certificates, need to know how to work within the system. Keep 'em Flying.

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