Will intellectual property restrict future competition?
The competitive landscape for future parts pricing is being laid now with the contracts airlines sign in acquiring new aircraft. Some say OEMs are becoming more aggressive in restricting use of their intellectual property, either in these initial deals or as policy. For example, one OEM is rumored to be insisting that its technical data, and even work cards generated from this data, not be shared outside the airline, or warranty protection will be withheld.
“This is not a new issue, OEMs are very protective of their data,” notes Craig Fabian, VP of regulatory affairs at the Aeronautical Repair Stations Association. Part 14 of the Code of Federal Regulations requires provision of information to perform maintenance, and ARSA argues that includes provision to maintenance providers. But Fabian sayshas consistently qualified and limited this requirement.
“FAA says it is an economic issue, despite the fact that the design approval holder, or OEM, has to furnish complete instructions for continued airworthiness (ICA) to the aircraft owner and any other person who maintains the aircraft,” Fabian notes. “FAA says it is sufficient if the OEM gives instructions to remove and replace.”
Fabian says it would be a new issue if OEMs also limited distribution of airline work documents. “That is not in the spirit of the rule.” Many past controversies have involved OEM warranty coverage when parts manufacturing approval (PMA) spares are used. Now questions are arising about the monitoring of operating data by design approval holders. “Some OEMs may want to collect operating data from airlines and sell it back to them,” Fabian notes. He has heard that some customers of new aircraft are reluctant to agree. “Airlines own the aircraft and have responsibility for airworthiness. They must control that data.”
Help may be on the way. In 2011, FAA issued a draft "Policy Statement On Inappropriate Design Approval Holder Restrictions On The Use And Availability Of Instructions for Continued Airworthiness." Comments closed in December, and FAA's John Cerra says the agency was working to distribute a final version of the draft by our presstime. “It was a nice first step,” Fabian says. “But some of the ideas were not enforceable.”
Although PMA parts might be inspected according their own manuals, it has been normal in aviation to use OEM manuals for their inspection, notes Jason Dickstein, president of the Modification and Replacement Parts Association (Marpa). “It is a lot more convenient for carriers if the OEM manual applies to PMA parts as well,” Dickstein says. “And there is less chance of using the wrong manual. The FAA encourages it.”
Dickstein says OEM efforts to restrict use of technical data may bump up against either FAA policy or antitrust law. At least in one aerospace case, a court decided that generation of work cards from OEM manuals was fair use, not a copyright violation, of OEM intellectual property. The courts also observed that in attempting to prevent this use, an OEM might be close to infringing on antitrust law.
Generally, contracts are unenforceable if they conflict with public policy, and Dickstein argues that restrictions that attempt to monopolize the aftermarket would conflict with antitrust law.
The FAA's draft policy statement, which Dickstein expects to be finalized by the end of March, picked “the low-hanging fruit,” that is restrictions that conflicted with existing FAA policies. Marpa has been working with FAA on this statement and also with FAA, theand on harmonizing rules for ICAs. Dickstein believes a declared FAA policy will be much more helpful to airlines in resisting aggressive licensing requests from OEMs than the possibility of “calling in lawyers to litigate an antitrust violation.”
Marpa has also been working with Airlines for America (formerly the Air Transport Association) on comments for the FAA policy statement and says all participants are optimistic that things are headed in the right direction. “The nice thing about aviation is that, although we are all competitors, when you get people sitting down around the table, their first concern is safety.”